IMPORTANCE OF STOCK CONTROL TO BUSINESS ORGANIZATIONS

CHAPTER ONE

INTRODUCTION

1.0     HISTORICAL BACKGROUND OF THE STUDY

For many  years now a lot of manufacturing company does not know   the important of stock methods and even   when they know, it is not consciously  handle or put in the  care of professional. Infact, they belief that the stock control methods is not the ultimate things the organization desire this means the contribution on effective stock control  can make to the success of an organization still not very widely appreciated and hence it is of great significant to reflect the  impact and  effective and efficient stock control would have on an organization  as well as the profitability level of the company.                        

The fundamental point about stock control is that by the very nature of it’s operation, every items of the store receives individual attention. The stock is the key element of working capital which has the power to influence the future of the company either positively or negatively and the effect is said to prevail over the other when it is not highly controlled. Where an organization materials are not systematically controlled, it can result to unnecessary trying up capital in stock and losses through breakage, pilferage, deterioration, theft, obsolesce etc. Beside, any organization which of stock out control stock is always faced with the problem of stock out in which may cause hold up in production service and sales, the staff become idle mean while salaries still have to be paid. Effective and efficient stock control will go along way in preventing loses and waste as such increase the point level of the organization.

Infact a slide percentages increase in efficiency a stock control will amplifies the profitability level. Since stock is often regarded as a life wire or life given element of an organization, the control of stock therefore is highly significant and should start   right from the time the need is identified to purchase order expediting. Receipt and inspecting storage and issue so that services will be rendered in the most effective manner and  at the lower possible cost. The achievement of the potential benefits that are there in an efficient stock control system will only be possible if any one when store personal are well trained in their profession make available necessary material handling equipment and  above all ensure an effective secure o the stock card, store house,  store personnel  as well as the keys to every entrance.

In September, 1969 the federal military government decided to merge the (ECN) Electricity Corporation of Nigeria and (NDA) Nigeria Dams Authority into a single body to avoid duplication for resources in the two organizations.

A year later, a Canadian firm of consultants (Shansimont Ltd) was appointed to look into the technical detail of the merger. The report was submitted in 1974.consequently a decree merging the two organizations in the National Electric power authority (NEPA) is to develop in efficient, coordinated and economical system of electricity for all parts of the federation.

The national grib connected the facilities resulting from the merger, the grib interconnection includes generating at Kainji, Lagos (Ijora) Ughali (Delta) Afarm and Oji River.

In addition there were  diesel generator installation at Ibadan, Benin,Warri, Aba, Enugu, Zaria, Kaduna, Owerri, Abeokuta and Oshogbo further, diesel generation  supplied  system in population centers isolated from the grib include Gusau, Sokoto, Bauchi, Yola, Maidugari, Potiskum and Mubi. The grib was fact two major sub-system since the connection between the western system and Onitsa and was yet to be effected, a 330Kva transmission was in operation in the western system between Kainji and Lagos.        

March 2005, witnessed major milestone in the electricity  power sector reform process with the signing  into  law  of the (EPSR) act in March, 2005 and the mergence of Power Holding Company of Nigeria Plc in place of National Electric Power Authority as well as the subsequent Electricity Regulatory Commission (NERC) on  31st  October, 2005. The visible results of the ongoing transformation of the company include staff re-orientation anchored on customer service delivery. The new  focus in the unbundled units has resulted in improved   revenue collection and customer services  delivery  with a  land mark collection of  seven billion Naira (N7,000,000,000) in October 2005.

In the last  three  months we have consistently on a daily basis achieved pack generation of  over 3000-  mw  to the national  grid we are optimistic  that with this improvement in generation availability and the federal government  commitment to built it new power station that will add 6000 Mw new capacity there  quest to meet the 10,00 Mw target by 2010 was  not reality. The National Electric Power Authority central Kaduna was established in 1976 now Power Holding Company of Nigeria (PHCN) made up of the following.

1.     Administration

2.     receipt and packaging

3.     issue and  storage

4.     Account

5.     stock control

At inception, there were about twenty (20) staff but since then, there has been an increased manpower section namely inspection and audit section the principal objective of establishing a central issue to fifteen (15) states at the Northern state.

Since national electric power authority has three central store which the country made up of central store Oshodi, Issuing material to western states of the country and central store port-Harcourt for eastern states of the country.                                                                                         

Organizational structure

1.1     STATEMENT OF GENERAL PROBLEM

Every organization is it big or small keeps stock to order to provide necessary basic raw materials for daily operation and also to provide a reservoir for absorbing the effect of variation in delivering and consumption also to maintain ready availability of supplies within the organization which may be required at short notice. But most organization does not consider the necessity of some basis consideration for keeping such items.

When good are held in stock there is great deal of administrative work involved i.e. control of receipt issues and the general custody of all the stock items in order to prevent theft and pilferage and sometimes equipment for loading and off loading such materials have to be bought all these costs must be taken into consideration. Otherwise the organization may end up tiring down it’s working capital when could be invested elsewhere and generate more profits for the organization concern.

In PHCN control store Kaduna the store is responsible for providing the standard material such as transformers, underground cable copper wires, fuses etc to the sixteen Northern states PHCN districts.

Sometimes one has to consider the genial problems associated with unreliable deliveries of stock by supplier  it is impossible to rely8 total on supplies to deliver every order on  schedules this is obvious for the  fact that supplier  may be held  up by weather transport delay etc.                             

Stock in the store represent solid cash and as such, it must be carefully protected and checked to similar ways as cash. Must be protected against fraud, theft and also high storage costs because  stock have  to be stored in certain conditions depending on the items involved e.g. warm, dry and cool these must be taken into account in  order to prevent trust or evaporation deterioration which can lead to reduction in  value of the materials concerned. While there is no standard system. In stock control which can be universally recommend every stock control system must be designed to meet the particular needs of the organization concerned.

In Nigeria and indeed in many of the developing countries of the world, co-operative have not been accorded a complete management function. Clerk have carried out stock control as on element of this noble profession in a routine manager and business are facing a continuity of  sequence of profits, it is on this note that topic for this  project work,  has been chosen to critically examine stock control to PHCN Kaduna central store.

Many people have the believe even among the elite that store managers or controlled only stay in the store, without any contribution to the overall company’s objective the function of stock control include receiving, inspection and proper storage of equipment, issue material to user department at the right time and place notifying the procurement department of stock mentioned function are properly co-ordinated and carried out the cost involved in operating the store will be surpassed. Stock control or management made use of techniques. Modern methods and equipment to increase the efficiency and reduce most of the cost associated with material storage cost involved in running a store numerous some of them are; operation expenses of  store house, wages, depreciation, rates, repairs, insurance stock  checking, recording and interest in  value of stores in stock etc the need to reduce these cost bearest minimum to achieve store  objective by contributing to company profit makes it worthwhile for the reach work to be embarked upon.

1.2     RESEARCH QUESTION

Those question opposed by the researcher are made to help the organization in other to find solution to the problems.

-      Are stock control importance to the profitability of organization?

-      To what extent can stock control reduce cost in an organization?

-      Who control the stock?

OBJECTIVES OF THE STUDY

1.           A good and effective store keeping to minimize wastages deterioration, obsolescence and guard against pilferage.        

2.           proper authorization and recording of stock issue for cost  centre absorption

3.           Constant checking by its store keeper of all documents and ensure correct completion and authorization before issuing, receiving or up dating stores.

4.           Carryout periodic and annual taking to check all physical quantities of materials for control proposes.

5.           Carryout continuous/perpetual inventory system more regularly on daily, weekly or monthly to correct the discrepancies of periodic stock taking.

6.           Material in store should be correctly positioned with the appropriates store card properly maintained.

1.5     RATIONALE FOR THE STUDY

The rationale behind the research work includes first fulfilling one of the requirement for the work of National Diploma in Department of cooperative, economic and management, the study will make the researcher to have an insight into the practice aspect of stock control or management in a public utility agency such as PHCN central Kaduna research is usually made to identify problems and come up with solution to problem on the area of study or prove upon what has been in essence. This project therefore, is to carryout assessment on stock control system with it’s application and the necessary solution to such problems.

The researcher also can provide valuable suggestion and advice on problems facing the store department. This will help the organization to obtain the benefit of adoption of recommend stock control method and technique to improve service and profit level of the organization.

1.4     DEFINITION OF TERMS

          1.       Stock: materials or good kept in the store

2.       Control:  Checking to see that accurate quantity and quality is maintained.

3.       Stock control: this is means by which materials of the right quality and quantity is made available as at when required with due regards to economy in stooge and ordering cost purchases price and working capital.

4.       Stock taking: This is a complete process of verifying the quantity balance of the entire range of items held in stock.

5.       Stock checking: is any   others checking on physical quantity balance of the entire range of items held in stock.

6.       Storage: It is a means of holding and protecting commodities for future use and the system by which such commodity are held and controlled for efficient retrieval.

7.       Store: Is the place where all goods produced or brought  by the organization are kept and issued out needed in some organization the store house is collected where.

8.       Stock levels:  are the level employed that stock are not allowed to raise or fall between the level e.g. maximum and researcher levels.

9.       Maximum Stock Level: is the amount expressed in unit of issues above which other stock should not  be allow to raises. 

10.     Redundant: when the quantity of an item in stocks more than necessary to provide an adequate service to production or operational activities the excess over the normal holding is said to be redundant.

11.     Obsolescent: An items is said to be obsolescent when it is going out and use but not just completely un-usable.

12.     Obsolete: an item is regarded as being obsolete when it is no longer usable by the organization concern because of a  charge in operation practice or method of production.

13.     Discrepancy:  Is the different between stock records and physical quantity offer stock taking.

14.     Storage: It is a means of holding and protecting commodities for future use, and system by which such commodities are handled and controlled for efficient retrieval.

15.     Material: Are components, spare parts, raw materials, that are kept  in  store house.

16.     Minimum stock level: Is the amount expressed in units of issue below when of any given commodity should not be allow to fail.

17.     Buffer stock: A situation where stock is held to meet unexpected demand.

18.     Stock out: A situation where the store house is temporarily of stock.

19.     Salvaging: this is a process of saving materials for advantageous use or disposal of a company’s property which is no longer economically useful to it’s owner in it present condition.

20.     Lend time: is a period of time between ordering and replenishment when the goods are available for use.

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