THE EFFECT OF MATERIAL AND STOCK CONTROL ON THE PROFITABILITY IN KADUNA REFINING AND PETROCHEMICAL COMPANY (KRPC), KADUNA
This research is on the effect of material and stock control on profitability (a case study of Kaduna Refining and Petrochemical Company). The study used both primary and secondary source of data collection. Questionnaires were used to elicit the view of the respondents on whether material and stock control has effect on the profitability of Kaduna Refining and Petrochemical Company. Frequency and percentage were used in analyzing the data collection, and chi-square was used to test the hypothesis formulated. Some of the problems facing KRPC are those of procurement of raw materials, inventory management and control. These come about as a result of inability of the company (KRPC) to calculate the economic order quantity and the various control levels use in the management of stock. The major purpose of this research on material and stock control are to analyzing the effect of material and stock control in KRPC to know the importance of material stock control in KRPC and to give future research room to improve on where the present research stop. Seventy (70) samples were used and two (2) hypotheses tested. The research among other things made the following findings: the KRPC is such a large company that every major section of its operation is now fully computerized and the stores staff are given periodic training.
TABLE OF CONTENTS
Title page - - - - - - - - - - i
Declaration - - - - - - - - - - ii
Approval page - - - - - - - - - iii
Dedication - - - - - - - - - - iv
Acknowledgements - - - - - - - - v
Abstract - - - - - - - - - - vii
Table of Contents - - - - - - - - - viii
1.1 Background of the Study - - - - - - - 1
1.2 Statement of the Problem - - - - - - - 2
1.3 Objective of the Study - - - - - - - 3
1.4 Statement of Hypothesis - - - - - - - 3
1.5 Significance of the Study - - - - - - - 4
1.6 Scope of the Study - - - - - - - - 4
1.7 Limitations of the Study - - - - - - - 5
1.8 Historical Background of the Case Study - - - - 5
2.0 Introduction - - - - - - - - - 9
2.1 Techniques of Inventory Management - - - - - 9
2.2 Inventory Recording Technique- - - - - - 13
2.3 Reasons for Holding Stock - - - - - - 16
2.4 Cost Associated with Inventory Control - - - - 17
2.5 Types of Inventory Control System - - - - - 18
2.6 Types of Warehouses - - - - - - - 22
2.7 Categorization of Inventories in KRPC - - - - 24
2.8 Inventory Management Techniques and the Performance of Organizations 26
2.9 Concept of Performance - - - - - - - 34
2.10 Performance Indicators - - - - - - - 35
2.11 The Challenges face by Company in Managing their Inventories 38
3.1 Research Design - - - - - - - - 48
3.2 Research Population - - - - - - - 48
3.3 Sample Size and Sampling Techniques - - - - 48
3.4 Method of Gathering Data - - - - - - 49
3.5 Justification of the Method Used - - - - - 49
3.6 Method of Data Analysis - - - - - - - 49
3.7 Justification of Instrument Used - - - - - 50
DATA PRESENTATION AND ANALYSIS
4.0 Introduction - - - - - - - - - 51
4.1 Background information of the respondents - - - - 52
4.3 The relationship between inventory management and performance of KRPC 62
4.4 Challenges faced by the KRPC in Managing inventories - - 66
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.0 Introduction - - - - - - - - - 69
5.1 Summary - - - - - - - - - 69
5.2 Conclusion - - - - - - - - - 74
5.3 Recommendations - - - - - - - - 76
5.4 Suggested Areas for Further Researcher - - - - 77
References - - - - - - - - - - 78
Appendix - - - - - - - - - - 79
1.1 Background of the Study
Material management, as practiced in business today, can be defined as “a confederacy of traditional material activities bound by common idea. The idea of an integrated management approach to planning, conversion flow and distribution of products materials form the raw materials state to the finished state (Iornum, 2007).
The above definition implies that materials management is generally concerned with the flow of material from the source of supply through the production line to the final consumers. This means that the material management include such function as the primary responsibilities of purchasing plus other major procurement responsibilities like inventory control, traffic, receiving, warehousing as well as production planning and control.
Later Douglas also defined material as aggregate of those ordinary causes of business which are in the process of production of goods or service to be available for sale. Material are significant portion of most firms of assets which accordingly requires substantial investment in order to keep these inventories from becoming unnecessarily large, material must be managed effectively. In modern business greater emphasis have being put in material handling. It concern in material management is to provide material in the right condition at the right time. It implies that the handling procedures should be able to appropriate stock level, ensuring proper use of stock and ensure that inventory is fully amounted for.
Jonny Ater – defines material handling as the movement and protection of material goods and products through the process of maintaining, distribution, consumption and disposal. Material handling should be controlled and carried out properly if a huge standard of efficiency and cost effectiveness is to be achieved.
1.2 Statement of the Problem
Material and stock control in organization is an important aspect of production process. Many companies engage diverse strategies to achieve organizational goal through material and stock control. The control of material as it affects Kaduna Refining and Petrochemical Company (KRPC) is the unavailability of material in store an proper reconciliation of possible loss to business through interruption of production or failure to meet order with the handling cost of stock.
Here in Nigeria, a cursory look at our economic problem will appear to suggest the non-adoption of materials management which is a product of our industrial philosophy that has made our manufacturing sector over important dependent. Though the organization (KRPC) under the study has advance store and way of obtaining their materials but lack proper personnel to handle the material problem.
1.3 Objective of Study
The following are aimed at realizing the objective:
i) Analyzing the impact of material and stock control in KRPC
ii) To know the importance of material and stock control in KRPC
iii) To provide useful recommendation as related to the study
iv) To give future research room to improve on where the present research stops.
1.4 Statement of Hypothesis
H0: Material and Stock Control has no effect on the profitability of a KRPC.
H1: Material and Stock Control has effect on profitability of a KRPC
1.5 Significance of the Study
The study findings may be significant in the following ways; It is hoped that study findings may be used as basis for further research and investigations inform of literature. The findings may provide information to managers in different organizations especially on knowing how to compare actual performance and inventory management. The findings may also be beneficial to other upcoming researchers to investigate further about the impact of inventory management on organizational performance of other organizations other than KRPC. The study may further encourage government to set up educational institutions to provide training on how to manage inventory in organizations.
1.6 Scope of the Study
The study is interested in trying to understand the techniques of material management and stock control used at Kaduna Refining and Petrochemical Company (KRPC), relationship between inventory management and profitability KRPC and the challenges faced by KRPC in managing inventories and materials.
The study considered information relating to the period of four years that is 2006-2009. This range of years was considered as output at KRPC has been showing a decline despite of the many techniques used in the process of material management and stock control. Furthermore, the time was enough to provide more information for the study upon which conclusions and recommendations are based.
1.7 Limitation of the Study
The study was limited by funds as it was not be enough to cater for transport and secretarial services. Being the first research, the researcher lacked enough experience and skills during the process of this research. However, the researcher tried hand in hand with the help of his supervisor to make the required information for the whole research process in time.
The study was also faced with a problem of not finding all respondents in the time of the study due to them being too busy with the organization work. The researcher however made appropriate timetable with the top company managers that suited all the respondents during the process of data collection for reliable and valid information
1.8 Historical Background of the Case Study
The Kaduna Refinery and Petrochemical Company (KRPC) was commissioned in 1980 as NNPC Refinery Kaduna. It was however incorporated as a wholly owned limited liability company of NNPC on the 3rd November, 1988 under the Companies Act 1968, it is the third refinery in the company, it was established to cope with the growing demand for petroleum products especially in the northern part of the country. The refinery was designed to process both Nigerian and imported crude oil into fuels and lubes products, in December 1985, the fuel’s section of the refinery was successfully de-bottle needed from 50,000 BPSD to 60,000 BPSD, bring the total refinery installed capacity to 100,000 BPSD.
In March 1988, the 300,000 MT per annum petrochemical plants was commissioned. The petrochemical plant, being a downstream plant of the refinery derives its entire raw materials including utility supplies, from the refinery. In an attempt at commercialization of NNPC in the same year, it became necessary to merge the two plant (Refinery and Petrochemical Plants) to form a single subsidiary company of Nigerian National Petroleum (NNPC) known as the Kaduna Refinery and Petrochemical Company Limited (KRPC) as it is today, KRPC occupies an area equipment to approximately 1.8km square KRPC is made up of two main division namely, Operation and Services, each headed by an Executive Director who reports to the Managing Director. However, there are department that report directly to the Managing Director are regarded as the Managing Director’s Division. Managers heading the department report to their executive directors and these under the Managing Director report directly to him.
Kaduna Refining and Petrochemical Company is a subsidiary of Nigerian National Petroleum Corporation (established in 1971 known as Nigerian National Oil Corporation [NNOC] by then).
The federal government’s decision to construct the third NNPC Refinery in Kaduna was taken along with that of Warri location as far back as 1974. The whole idea were to supplement the plant at Port Harcourt and to discourage the wastage of foreign exchange used in the importation of petroleum products, KRPC thus was established for the purpose of refining crude oil into high value petroleum products and exploitation of other related profitable business in cooperate interest of the organization and the whole nation in general, However, KRPC did not start operation until 1979.
The activities of KRPC are divided into refinery and petrochemical units with each unit leaving its own activities and producing different output from the other unit.
The KRPC undertakes the refining of the following products i.e. dual purpose kerosene (for domestic use) motor gasoline, base fuel, lube oil, waxes, surplus, Naphtha, black wax, asphalt, Liquefied Petroleum Gas (LPG) and petrol.
Petro – Chemical (Laboratory) Product
The following listed are petro-chemical products made at the KRPC Liner Alkene/Benzene Petro – Chemical plant, Kaduna.
1. Solvent (For End Users): Insecticides, plants, vanishes, degasses, mental cleansing, polishes for shoes, filer and furniture.
2. Benzene: Aromatic solvent paints and leagues, pharmaceutical industrial chemicals and Aviation Gasoline.
3. Tins and Drums: Are also manufactured and other users of tins and drums are containers of their products.
4. Heave Alkylate: Transformer oil, lubrication oil, Greases and Tremolo fluids.
The vision of the organization, is to be pride of the nation; and the mission is to refine crude oil into high value petroleum and petrochemical product and also manufacturing, packaging products efficiently.