CHAPTER 1 INTRODUCTION 1.1 Background of the Study

Inventory management is a critical management issue for most companies – large companies, medium-sized companies, and small companies. Effective inventory flow management in supply chains is one of the key factors for success. The challenge in managing inventory is to balance the supply of inventory with demand. A company would ideally want to have enough inventories to satisfy the demands of its customers- no lost sales due to inventory stock-outs. On the other hand, the company does not want to have too much inventory staying on hand because of the cost of carrying inventory. Enough but not too much is the ultimate objective (Coyle, Bardi, and Langley, 2003). The role of inventory management is to ensure faster inventory turnover. It increases inventory turnover by ten (10) and  reduces costs by 10% to  40%. The so-called inventory turnover is not yet right to sell products on the shelves based on the principle of FIFO cycle(http://www.academia.edu/).

Inventory management  is  necessary at  different  locations  within  an  organization or  within multiple locations of a supply chain, to protect (the production) from running out of materials or goods.  Adequate  inventories  kept  in  manufacturing  companies  will  smooth the  production process. The wholesalers and retailers can offer good customer services and gain good public image by holding sufficient inventories. The basic objective of inventory management is to achieve a balance between the low inventory and high return on investment (ROT). (Johson et al, 1974). Inventory levels have been seen as one of the most interesting areas for improvement in organization materials management (Kumar Ordamar, Zhang, 2008).

Inventory plays a significant role in the growth and survival of an organization in the sense that ineffective  and  inefficient  management  of  inventory will  mean  that  the  organization  loses customers and sales will decline. Prudent management of inventory reduces depreciation, pilferage, and wastages while ensuring availability of the materials as at when required (Ogbadu, 2009).  Inventory management is critical to an organization’s success in today’s competitive and dynamic market. This entails a reduction in the cost of holding stocks by maintaining just enough inventories, in the right place and the right time and cost to make the right amount of needed products. High levels of inventory held in stock affect adversely the procurement performance out of the capital being held which affects cash flow leading to reduced efficiency, effectiveness and distorted functionality ( Koin, Cheruiyot , and Mwangangi , 2014). From the foregoing therefore, the study is determined to examine the relationship between inventory management and organizational productivity in coca-cola Company Port Harcourt.

1.2 Statement of Problem

Inventory is a vital part of current assets mainly in manufacturing concerns. Huge funds are committed to inventories as to ensure smooth flow of production and to meet consumer demand.

However, maintaining inventory also involves holding or carrying costs along with opportunity cost.  Inventory  management,  therefore,  plays  a  crucial  role  in  balancing  the  benefits  and disadvantages associated with holding inventory. Efficient and effective inventory management goes a long way in successful running and survival of a business firm, when organizations fail to manage their  inventory effectively they are  bound to  experience,  stock out, the  decline  in productivity and profitability, customer dissatisfaction. Thus the study seeks to investigate the effect of inventory management on the organizational performance of the selected manufacturing firms.

1.3 Objectives of the study

The main objective of the study is to examine the relationship between inventory management and organizational productivity in Coca-Cola Company, Port Harcourt Rivers State. The specific objectives were to

1. To ascertain the extent at which inventory control affects productivity of selected in Coca-Cola Company, Port Harcourt Rivers State.
2. To determine the nature of the relationship between demand management and customer satisfaction of Coca-Cola Company, Port Harcourt Rivers State.
3. To determine the effect of Just-in-time on growth of Coca-Cola Company, Port Harcourt Rivers State.

1.4 Research Questions

With the above objectives in focus, the study seeks to find answers to the following questions:

1. To what extent does inventory control affects organizational productivity of selected in Coca-Cola Company, Port Harcourt Rivers State?
2. To what extent does demand management affects organizational productivity of Coca-Cola Company, Port Harcourt Rivers State?
3. To what extent does Just-in-time affects organizational productivity of Coca-Cola Company, Port Harcourt Rivers State?

1.5 Research Hypotheses

These hypotheses were proposed for the study:

HO: There is no significant relationship between inventory management and organizational productivity in coca-cola company Port Harcourt.

HA: There is significant relationship between inventory management and organizational productivity in coca-cola company Port Harcourt.

1.6 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 in form of literature.

The findings may provide information to managers in different organizations especially on knowing how to compare actual organizational productivity and inventory management.

The findings may also be beneficial to other upcoming researchers to investigate further about the impact of inventory management on organizational productivity of other organizations other than coca- cola plant-port Harcourt.

The study may further encourage government to set up educational institutions to provide training on how to manage inventory in organizations.

1.7     Scope/Limitations of the Study

The scope of this study is delimited into the followings:

Content Scope: The specific areas of organizational productivity the study investigated include; efficiency,  effectiveness and market share.  Whereas, the areas of inventory management includes inventory control, demand management and just-in-time.

Geographical scope: This study covers an examination of strategic contributions of inventory management and organizational productivity in coca-cola company Port Harcourt.

Unit of Analysis: This is a macro study because it is interested in ascertaining the survival of an organization in this direction. Hence, it is a micro level study.

The major limitation of the study is the short time frame the research lasted, coupled with the tight academic time table, which prevented a very comprehensive study. The fund available to the researcher was also limited and therefore the study was limited to a small portion of the survey population.

Another limitation is the difficulties, encountered by the researcher in obtaining all needed information and materials from the right source and computation of data for the project.

1.8 Definition of Terms

Inventory:  Is the amount of goods, materials or part carried out in stock or store house for example, work in progress (W.I.P), raw materials, financial goods resale more items.

Productivity: The effectiveness of productive effort, especially in industry, as measured in terms of the rate of output per unit of input.

Organization: An organized body of people with a particular purpose, especially a business, society, association, etc.

Inventory management: Inventory management is a science primarily about specifying the shape and placement of stocked goods. It is required at different locations within a facility or within many locations of a supply networks to precede the regular and planned course of production and stock of raw materials.