Materials Management: An Effective Tool for Optimizing Profitability in the Nigerian Food and Beverage Manufacturing Industry

By Asaolu, Taiwo Olufemi; Agorzie, Claudius Jamike et al. | Journal of Emerging Trends in Economics and Management Sciences, February 2012 | Go to article overview

Materials Management: An Effective Tool for Optimizing Profitability in the Nigerian Food and Beverage Manufacturing Industry


Asaolu, Taiwo Olufemi, Agorzie, Claudius Jamike, Unam, James Monday, Journal of Emerging Trends in Economics and Management Sciences


Abstract

Materials play a key role in manufacturing firms as it represents the major component of manufacturing cost and profitability. The accumulation of, and need for materials in the form of inventories, is a significant variable for managers to concentrate on, monitor and control. This study therefore examined the effect of Materials Management on the profitability of Nigerian Food and Beverage (F&B) Manufacturing firms using a case study of Nigerian Bottling Company (NBC) Plc. Data was collected through a structured questionnaire, relevant publications and interview with key individuals in the company. The results showed that there was significant increase in the company's profitability as a result of efficient management of materials, which was aided by inter-departmental coordination among materials related departments, inventory management, good relationship with vendors, and state-of-the-art facilities/ICT. However, the major constraints to Materials Management in the company included epileptic public power supply and poor transportation network. This study advocated that priority should be given to Materials Management in F&B Manufacturing Industry in order to achieve significant cost saving, improvement in production efficiency, and increase in profitability and competitiveness. Recommendation was made for government to provide adequate infrastructural supports to boost Materials Management in Nigerian F&B Manufacturing Industry.

Keywords: materials management, inventory management, materials cost, production costs, profitability

Corresponding Author: James Monday Unam

INTRODUCTION

Every organization invests a considerable amount of capital on materials. In many cases, the cost on materials exceeds fifty percent of the total cost of goods produced. Such a large investment requires considerable planning and control so as to minimize wastage which invariably affects the performance and profitability of organizations. Materials are the lifeblood and heart of any manufacturing system. No industry can operate without them. They must be made available at the right price, at the right quantity, in the right quality, in the right place and at the right time in order to co-ordinate and schedule the production activity in an integrative way for an industrial undertaking. A manufacturing firm will remain shaky if materials are understocked, overstocked or in any way poorly managed (Lee et al., 1977 and Banjoko, 2000).

Materials Management encompasses all operations management functions from purchasing of raw materials through the production processes to the final delivery of the end products. It brings together under one management responsibility for determining the manufacturing requirement, scheduling the manufacturing processes and procuring, storing and dispensing materials (Wild, 1995, Ondiek, 2009). Thus, Materials Requirements Planning (MRP), purchasing, procurement of materials, inventory management, storage, materials supply, transportation and materials handling are the activities of Materials Management (Monday, 2008). Materials Management came to limelight at the advent of liberalization and globalization which posed intense competition on the business environment. Before that time, the concept was treated as a Cost Centre since Purchasing Department was spending money on materials while Store was holding huge inventory of materials, blocking money and space (Ramakrishna, 2005). With the process of liberalization, there has been a drastic change in the market which has forced manufacturing companies to devise strategies to minimize production costs in order to remain competitive. Since then, Materials Management has been recognized as a source of opportunities to reduce production costs and can be treated as a Profit Centre. Today, there are dramatic evolutions in the market environment and every organisation must strive to keep itself in business. Major competition has shifted from the market to the production floor where manufacturing costs can be reduced and profitability boosted for firms to compete favourably. …

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