Raw Material Management Problem In The Nigerian Manufacturing Sector

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Introduction The importance of raw material to

efficient operation of a manufacturing organization cannot be over underlined

In the form of

right quality

availability of the raw material

right quantity

of the ensuing output

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Conti…RMM is critical to the overall performance Nearby demand and other forces like

competitor’s actions

RMM is to determine on the bases of efficient management and effective planning which include

economic orderquantity (EOQ) re-order level

minimum/maximum stock

levels

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Functions of Material Management

Organized and operated on an integrated basis and is also presumed to be responsible for material forecasting, planning, inventory control, scrap control and disposal

information regarding purchases and inventories within the framework of the financial policies

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Conti… RMM efforts towards achieving efficiency in

the

procurement, transportation, stocking and utilization of inputs of a manufacturing

organization

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Conti… Effective and efficient functioning of the

material management has direct bearing on the total performance of the organization

Holding the right stock level could improve the

level of available working capital

Could be profitably

employed in other areas

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Literature Review

RELATIONSHIP BETWEEN INVENTORY AND RAW MATERIALInventory refers to totality of stocks, being held by a business enterprise at a particular time. It includes

1) Raw materials,2) In-progress or semi finished goods,3) Finished goods.4) Other stocks such as: tools, spare parts and

production consumables.

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Conti… Raw materials are component parts of the

stock of inventories carried by a manufacturing firm at a given time.

Every organization has inventories of some type and the economics and techniques of inventory management are critical for efficient operation, profitability and survival; especially in a highly competitive

environment

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Relationship Between Inventory And Raw Material

Inventory control is a method of recording and reporting the movement of raw materials within a company:

from material stock room

any of the manufacturing

processesfinished

product stage

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Classification Of Inventory Management System The use of inventory management system in

RMM practice is commanding today;

Mantho (1994) classified Inventory Management computer based activities into three broad areas:

1Inventory record

keeping

2Inventory

decision-making

3 Material requirement

planning (MRP) system:

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Inventory management effected by the these variables..

Highinflation

rates& more buying

low availability of traditional materials

High costs of labor leading

to less making

Rapid development

of micro processors

increasing # of suppliers entering the procurement

market software in decision making support systemsNew technological

innovations lead

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Important Elements In Raw Material ManagementThe key elements for efficient material management

Purchasing

Inventory Control

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Conti… Another important issue in material management

is the matter of

The proper documentation is provide timely and reliable information for planning, follow-up and control.

M• Maintaining good

systems and procedures

D• Strict discipline in

documentation

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Material Management Problem: The manager becoming interested in inventory

further spare parts operation, management became interested in the first place

Over- stocking as identified above is not the only problem in material management.

Under-stocking could lead to a bigger problem

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Conti…

In (2008) made a study of 40 small and medium enterprises (SMEs) in Bangalore, India of manufacturing industry sector.

For low inventory management practices

Material Management practices were poor

formal practices for managing inventories was also inadequate.

lack of appreciation for Inventory Management (IM) among the entrepreneurs

lack of qualified staff

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Conti…

Todd (Article writer) Prescribed rules;A. The implementation should be considered as a

planned and strategically business improvement.

B. Implementation should deliberate on people not the systems.

C. Determine a long-term vision of future to provide a focus for real business benefits.

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D. The project must have a full time project manager reporting to a multi-disciplined executive management.

E. An educational plan must be constructed in line with software and computer system plans.

F. Before the system goes to live, the base data must be audited and achieve an acceptable level of accuracy.

Conti…

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Raw Material Management Problem In The Nigerian Manufacturing Sector

The people give inadequate attention to trace down the problems to find right solution at right time

Problems faced by firms are followed as:

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Conti… The inefficient use of

production time, labor and other resources due to delays and disturbances during

production

Effects1) Inability to fulfill customer order2) Low Marketshare3) Low capacity utilization4) loss of revenue

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Conti…2) Poor liquidity position of many manufacturing concerns

i. To hold too much stock than necessary So e.g(firm need 50 tons material but place order for 90 tons)

Effects(of extra 40 tons stock)• capital is locked• Maintenance charges, godowns expenses,• And org. will never regain if this extra stock

become obsolete or useless

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Conti…3) All slow-moving stock items should be identified;

• Slow Moving Stock: items which are consumed from date of reception from 60-180 days

To reduce • Maintenance cost• Unlock capital

• In this way, liquidity positions of manufacturing organizations will be better.

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Conti…4) Employment of illiterate employees should be reduced as they can misplace and dislocate important files , documents and inventory items

In areas where higher stock management education is not required, (like stock keeping and records) employee should be given adequate orientation and training.

There should also be training and retraining of employees to ensure that they are kept abreast of developments in the field.

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5) The use of electronic data processing devices will remove the problem of inability to use inventory models.

Conti…