THE EFFECT OF MATERIAL HANDLING ON THE PROFITABILITY OF A MANUFACTURING COMPANY

CHAPTER ONE

1. 1. Background of the Study

Material Management, as practiced in business today, can be defined as “a confederacy of traditional material activities bound by a common idea. The idea of an integrated management approach to planning, comersion flow and distribution of products materials form the raw materials state to the finished state. (Iornum, 2007).

The above definition implies that material management is generally concerned with the flow of materials from the source of supply through the production line to the final consumers. This means that material management includes such function as the primary responsibilities of purchasing plus other major procurement responsibilities like Inventory Control, traffic, receiving, warehousing as well as production planning and control.

Cater Douglas also defined material handling as the aggregate of those ordinary courses of business which are in the process of production of goods or services to be available for sale.

Material are significant portion of most firms of assets which accordingly requires substantial investment in order to keep these inventories from becoming unnecessarily large, material must be managed effectively. In modern business greater emphasis have being put in material handling. It concern in material management is to provide materials in the right condition at the right time. It implies that the handling procedures should be able to:

1. Retain appropriate stock level
2. Ensure proper use of stock
3. Ensure that inventory is fully amounted for

Jonny Ater – defines material handling as the movement and protection of materials goods and products through the process of maintaining, distribution, consumption and disposal. Material handling should be controlled and carried out properly if a huge standard of efficiency and cost effectiveness is to be achieved.

B.K Bharabo defines material handling as the art and science of moving, packing and storing of material in any form.

1. 1. Statement of the Problem

Material handling in manufacturing organization is an important aspect of production process. Many companies engage diverse strategies to achieve organizational goal through material handling.

The control of material handling as it affects Kaduna Refining and Petrochemical Company (KRPC) is the unavailability of material in store and proper reconciliation of possible loss to business through interruption of production or failure to met orders with the handling cost of stock. Here in Nigeria, a cursory look at our economic problem will appear to suggest the non-adaptation of materials management which is a product of our industrial philosophy that has made our manufacturing sector over important dependent. Though, the organization (KRPC) under the study has advanced stores and way of obtaining their materials, but lack proper personnel to handle the material is a problem.

1. 1. Objectives of the Study

The following are aimed at realizing the following objectives:

1. Analyzing the impact of material handling in KRPC.
2. To know the importance of material handling in an organizational performance are as a whole.
3. To provide useful recommendation as related to the study.
4. To give future research room to improve on where the present research stops.

1. 1. Statement of Hypothesis

H0:    Material handling has no effect on the profitability of a manufacturing company.

H1:    Material handling has effect on profitability of a manufacturing company.

1. 1. Significance of the Study

The significance of the study is to assess the impact of material handling in KRPC and also to suggest and make recommendation to the problem that they may likely occur is material handling is not properly managed in an organization. The research is of significance to me for the following reasons:

1)      It will provide a broad idea to the production company on how they can effectively manage their material handling and minimize losses.

2)      It will idea for organization and enterprises in the aspect of material handling.

3)      It is highly pointed out that the cost material handling involves 40% to 50% of total production cost. Therefore, considerable attention must be taken in the material handling.

4)      Material handling also reduce accidents, greater job satisfaction, increase production and saves time.

1. 1. Scope of the Study

This research work is based on the existing literature. Secondary data and equally information from primary source is obtained. The secondary data formed relevant to the subject matter which are standard textbooks, journals, internet and the company’s management guide.

The primary data collected include questionnaire, observation are obtained by sampling from the total population of the entire staff of KRPC management. The aspect to be covered in this study are how organizational material handling objectives are to be achieved.

1. 1. Limitations of the Study

A study of this nature would normally en tail investigation into a variety of issues. This research work has covered a wide area than this but a lot of constraints hinders the wide range of the study. As a result of this, certain limitations will be imposed on the area to be covered which includes:

1. Financial Constraints which involves need for transportation.
2. Limited time. The time given is too limited for the research work which affect the researcher.
3. Inaccessibility of data to provide the necessary information were difficult. Some of the staff that cooperated were  not in better possession of the facts and figures necessary in this work.
4. Limited area of study, there are many sections in the organization for all firms of materials. However, the researcher’s intension is to concentrate only on the material stores for the project.

This problems apparently posed serious limitations to this project and the researcher has to work with the data available.

1. 1. Historical Background of the Case Study (KRPC)

The decision to construct the third Nigerian National Petroleum Corporation (NNPC) Refinery in Kaduna was taken in 1974 along with that of the second (NNPC) refinery located at Warri. However, it was decided that work would commence on the construction of refinery whenever the project of consumption petroleum projects justified it.

By early 1975, the view of the fuel shortages experienced then, the federal government decided that work on the third refinery should be advanced. It was envisaged that refinery that refinery in order to meet up with the fuel demand then, based on the feasibility studies carried out which took into the consideration the consumption of the various petroleum products within the Northern Zone and adequate means of disposal for the surplus products. A Crude Oil Capacity of 42,000 barrel per stream a day (BPSD) could be easily justified.

Hence, the refinery was designed for a capacity of 60,000 barrel per stream daily it was much later that the Federal Government decided that the capacity for any refinery in Nigeria should not be below 100,000 BPSD. However, this would have led to the production of large quantity of heavy fuel and on one hand the practical and viable solution is reprocessing of the heavy fuel. In order to do this, the whole project plan has to be modified so that what initially was planned to be a simply hydro-skimming type of refinery was now developed into integrated refinery.

The refinery would now be able to produce wider variety of petroleum products some of which should be lubricating base oils. Hence, it became necessary to import suitable paraffin base crude oil from Venezuela, Kuwait or Saudi Arabia.

Products from KRPC are to include fuel such as diesel, kerosene, premium motor spirit (PMS) and sulphor and those from the lubricating oil complex are base oil, asphalt and wakes. The lubricating out complex of KRPC is the first of its kind in West Africa and one of the largest in Africa. The consulting firm King Willkinson of Hague, Holland in conjunction NNPC engineers, developed the plan for the refining. The contract for construction of KPRC was awarded to Chiyoda Chemical Engineer and Construction Company of Yohohama, Japan in 1977. The project was completed and commissioned in 1980. However, the lube plants and petro chemical plants were commissioned in 1983 and 1988 respectively.

1. 1. Definition of Terms

Materials: They refer to goods in different firms for different purposes such as raw materials for production, maintenance, processing of finished goods.

Stock Taken: This is a complete process of verifying the physical quantity or balance with a view to ascertain the actual balance in the store.

Material Handling: It is a part of material management that concern with the safety of material in transit, the regularity in delivery and also the flow of the materials.

Store: This is a place were materials are kept for safety.

Safety Stock: Extra inventory held to serve as a butter against possible stock out situation.