MATERIALS MANAGEMENT AND ORGANIZATIONAL PERFORMANCE OF MANUFACTURING FIRMS IN PORT HARCOURT

MATERIAL MANAGEMENT AND ORGANIZATIONAL PERFORMANCE OF MANUFACTURING FIRMS IN PORT HARCOURT

The general objective of this study is to examine the issue of material management and the effect it has on organizational performance in Rivers state.

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CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Organizational performance is a socially constructed phenomenon that is subjective, complex, and particularly hard to measure in most business organizations Au (1996); Anspach (1991). It explains the extent to which an organization achieves its objectives making sure its resources are being properly used.

The concept of organizational performance holds a central position in the management of private and public organizations. It can be judged by many different constituencies, resulting in interpretations of “successful performance”. This research examines organizational performance from a single constituency perspective, that of “material management”. From this perspective, successful organizational performance can be equated with the successful management of materials.

In the process of liberation and opening up of the global economy, there has been a drastic change in the business environment, resulting in manufacturing organizations exposed to intense competition in the marketplace. In Nigeria for instance, materials constitute a major cost component for any manufacturing firm. Sturkhart (2007), states that the total cost of installed materials or the value of materials maybe 60% or more.  In many cases, the cost of materials exceeds 50% of the total cost of goods produced.

Previous research has shown that manufacturing firms have tottered over the years due to a lack of adequate management commitment to timely funding of materials procurement coupled with unethical practices of some executives (Oba, 2008). According to a survey carried out in 2017 by Manufacturers Association of Nigeria (MAN), about 272 firms shut down operations across the country due to high manufacturing costs created by exorbitant price in cost of production among other reasons while some reduced their production, staff strength and remuneration of workers. Frank Jacob, the President, Manufacturers Association of Nigeria (MAN), said that industrial capacity utilization hovered around 20percent during the year. The few surviving manufacturing firms are faced with stiff competition in the current markets. This has led to the need for coming up with a better method of managing and measuring how material resources are utilized by various jobs or products, and therefore be able to eliminate any wastage in the value chain.

The empirical analysis of this study intends to fill this gap by examining the relationship between material management and organizational performance of manufacturing firms in Rivers state using automation and energy. Indicators to organizational performance adopted for this study will be based on output and sales volume.

1.2 OPERATIONAL FRAMEWORK

Figure 1: Operational Framework

1.3 Statement of the Problem

The materials purchased by many organizations are not properly managed in order to ascertain the strategized objectives of an organization. Thus, it is doubtful whether organizations make use of effective planning, organizing, controlling and coordinating of their material at their disposal before properly implementing them in order to achieve the desired goals and the different banners practiced in the process of importing and transporting material purchased by the purchasing managers and the side effects of ineffective management of materials in an organization.  Manufacturing firms in Rivers State is beset with quite a few challenges; chief among them is automation and power supply.  Manual, material management and control procedures are unsatisfactory: they are labor-intensive, inaccurate, and error-prone. The result is waste and surplus of materials, delays, decrease in productivity and lack of up-to-date, real-time information regarding the status of purchase orders (PO), the levels of inventory, the actual vs. planned usage of materials, and others. Most firms rely on “emergency” power generators to run seamless operations, adding to costs.  These and similar gaps in the manufacturing firms attract the researcher to assess & review the material management practice in manufacturing firms. This research finding will be expected to introduce modern material management using automation and energy. Base on the above, that this research seeks to examine the issue of material management and the effect it has on organizational performance based on reorder level and reorder quantity using manufacturing firms in Rivers state as the case study.

The characteristics of efficient & effective material management will be recommended after the data analysis and presentation of the study.

1.4 Research Objective

The general objective of this study is to examine the issue of material management and the effect it has on organizational performance in Rivers state. While the specific objectives are as follows;

1. To determine the extent of reorder level and organizational performance.
2. To ascertain the relationship between EOQ and organizational performance.
3. To determine the effect of reordering quantity on organizational performance.
4. To proffer useful suggestions and ideas on how to effectively manage materials in an organization (Sander 2002).

These objectives are intended to be addressed in this study.

1.5 Research Questions

1. To what extent does the reorder level relate to output?
2. To what extent does the reorder level relate to sales volume?
3. To what extent does reorder quantity relates to output?
4. What is the extent of the connection between reorder quantity and sales volume?

1.6 Research Hypothesis

H0₁:  There is a relationship between the reorder level and output level.

H0₂: There is a relationship between the reorder level and sales volume.

H0₃:  There is a relationship between reorder quantity and output level.

H0₄: There is a relationship between reorder quantity and sales volume.

 1.7 Significance of the Study

There are two basic significances of this research:

1. The Practical Significance:

The result of this study will be of immense benefit to entrepreneurs, supervisors, and managers of manufacturing firms. It will help them to understand the vital importance of material management to organizational performance.

2. The Theoretical Significance:

This research will benefit undergraduate and postgraduate with interest in this area. This research will also contribute significantly to the stock of knowledge particularly in the manufacturing sectors in Nigeria.

1.8 Scope of the Study

The Content Scope: This study will be restricted to organizational performance and its dimensions. It will also x-ray organizational performance with its measures.

Geographical Scope: This study will cover 20 manufacturing firms in Rivers State.

Unit of Analysis: The unit of analysis is at the organizational level.

1.9   Limitation of the Study

This research is restricted to Rivers State therefore; the results may not be given a holistic view of manufacturing firms in Nigeria.

1.10 Definition of Terms

Organizational Performance: This comprises the actual output or results of an organization as measured against its intended outputs.

Material Management: This is the planning, directing, controlling, and coordinating those activities which are concerned with materials and inventory requirements, from the point of their inception to their introduction into the manufacturing process.

Reorder Level: The reorder level is a stock balance when a new purchase order should be issued to replenish inventory stock.

Reorder Quantity: This is the magnitude of the number of units to be ordered in a new purchase order for the fresh supply of a particular inventory.

Output: The amount of something produced.

Sales Volume: is the number of units sold within a reporting period.