THE EFFECT OF
INVENTORY CONTROL IN MANUFACTURING COMPANY, A CASE STUDY OF——————

 CHAPTER ONE

United wire
production limited, Kaduna
is Liability Company. The company was incorporated in March 1977, and started
commercial production in October 1979, and has been in full products since
January, 1980. United wire products limited in currently set up to produce
different sizes of wire, Nail, Barbed wire chain link fencing wire. In 1981-82
the company underwent an expansion exercise involving the introduction of two
new product lines soft building wire welding electrodes. it is the only company
in the northern states producing welding electrodes. In 1985, a Gal vanishing
plant was added to the product line of the company. The company at that time
was first to manufacture Galvanized wire which is a raw material required for
the production of barbed wire, chain link fencing wire and galvanized welded
mesh. The successes recorded above have not only made the company the leading
wire manufactures in other states but also one of the leading in the country as
a whole.

United wire production limited face a dilemma in today’s
competitive marketplace, where on one hand, customers demand customized
products and services and require that their orders are filled quickly, but on
the other hand they do not want to pay a premium for this customisation and
availability (Graman and Magazine, 2006)

. Therefore,
organisations are exploring ways toward postponement strategy in response to
constantly changing demands Yang et al.(2010). Graman and Magazine (2006)
argued that today, the cost of holding inventory, extensive product
proliferation and the risk of obsolescence, especially in rapidly changing
markets, make the expense of holding large inventories of finished goods
excessive and that high demand items naturally have safety stock assigned to
them, but in many organisations there are so many very-low-demand items that
keeping any stock of these items is unreasonably expensive, so they argue that
companies must now provide good service while maintaining minimal inventories.
Therefore, inventory management approaches are essential aspects of any
organisation.

In traditional
settings, inventories of raw materials, work-in-progress components and
finished goods were kept as a buffer against the possibility of running out of
needed items. However, large buffer inventories consume valuable resources and
generate hidden costs. Consequently, many companies have changed their approach
to production and inventory management. Since at least the early 1980s,
inventory management leading to inventory reduction has become the primary
target, as is often the case in just-in-time (JIT) systems, where raw materials
and parts are purchased or produced just in time to be used at each stage of
the production process. This approach to inventory management brings
considerable cost savings from reduced inventory levels. As a result,
inventories have been decreasing in many firms (Chen et al., 2014),
although evidence of improved firm performance is mixed (Kolias et al.,
2011).

The role of
inventory management is to ensure faster inventory turn over. It increases
inventory turn over by ten (10) and reduce costs by 10% to 40%. The so called
inventory turn over is not yet right to sell products on the shelves based on
the principle of FIFO cycle (Kenneth lysons and Michael gilligham, 2003).

Inventory is classified basing on
the business undertaking from organization to organization. Common criteria
used and are nature of inventory for example manufacturing, sale or retail,
purpose for which inventory is being held in stock or function and the related
usage in the supply chain. Typical classifications are raw materials (items in
unprocessed state awaiting conversion e.g. timber, steel and coffee seeds),
components and sub-assembles. These are for incorporation into the end product
e.g. side mirrors, glasses for car assembling company and monitors or keyboards
for a computer  assembling company),
consumable (all supplies in an undertaking which are classified as indirect and
which do not form part of saleable product. (Divided into production,
maintenance, office and welfare). Proper classification of inventory and its
control improve the financial position of a business (David Jessop and Alex
Morrison 2004).

Inventory management involves the planning, ordering and scheduling of
the materials used in the manufacturing process. It exercises management over
three types of inventories that is raw materials, work in progress and finished
goods. Purchasing is primary concerned with management over the raw materials
inventory, which includes; raw materials or semi-processed materials,
fabricated parts and MRO items (Maintenance, Repair and Operations) (Garry,
1997).

However, Lau and Snell (2006) argued that inventory management is
primarily about specifying the size and placement of stocked goods. Inventory
management is required at different locations within a facility or within
multiple locations of a supply network to protect the regular and planned
course of production against the random disturbance of running out of materials
or goods for improved performance. The scope of inventory management also
concerns the fine lines between replenishment lead time, carrying costs of
inventory, asset management, inventory forecasting, inventory valuation,
inventory visibility, future inventory price forecasting, physical inventory,
available physical space for inventory, quality management, replenishment,
returns and defective goods and demand forecasting.

The overall objective of the study was to
find out the
effect of inventory control in manufacturing company, a case study of united
wire production limited kaduna