ABSTRACT
The study examined the contributions of Materials Management
to organizational effectiveness, determined all the areas covered in the
materials management functions, ascertained the level of attention given to the
materials management functions in the telecom industry, and found out how
appropriate materials management strategies could lead to cost savings and
profitability. To realize the stated objectives of the study, the researcher
sought to answer six research questions. Three hypotheses were formulated to
guide this study. Correlation co-efficient and Chi-square were used to test the
Null hypothesis. The researcher prepared and distributed a total of fifty five
(55) questionnaires comprising of twenty four (24) open ended/close ended
questions each. Out of these, fifty (50) ere received and analyzed. At the end
of the study, it was found that effective and efficient materials functions
contributes to the improvement of performance, leads to a significant
reductions in the total materials cost, and helps to enhance the profitability
of the telecom industry. It was recommended that the organizational structure
of the Telecom industry should be redesigned to consolidate the existing
Materials Management department, The Materials Manager should be given the free
hand to carry out his functions, He should be made to report to an officer not
below the rank of General Manager, The process of competitive bidding should be
made more transparent, and various cost reduction strategies should be used
where necessary.
CHAPTER ONE
1.0 INTRODUCTION
Materials are all the things we use for
production of goods and services. e.g. raw materials, spare parts, stock items.
The management of materials refers to all the functions of the various
departments that coordinate materials in and out of the organization.
Materials Management is the branch of
logistics that deals with the tangible components of a supply chain.
Specifically, this covers the acquisition of spare parts and replacements,
quality control of purchasing and ordering, the standards involved in ordering,
shipping and warehousing situation, the demand for raw materials, components,
sub assemblies, is dependent on the production plan for the final product. It
is therefore, possible to determine how many parts or components will be needed
in each future time period in the planning horizon. Materials management method
also known as materials planning, uses this information about dependence of
demand in managing inventories and controlling the production lot sizes of the
numerous parts that go into the making of a final product.
The management objectives of material
management is to avoid inventory stock-out and overstocking, so that production
runs smoothly according to plan, and investment in raw materials and
work-in-process inventories are achieved at a reduced cost.
Materials Management systems in part or in
whole, are used in manufacturing firms both large and small. The reason is that
it provides a logical and ready understandable approach to the problem of
determining the number of parts, components and raw materials needed to produce
each end product. Material management also provides the time schedule
specifying when each of these materials, parts and components should be ordered
or produced.
Materials Management and
the need for it to be more efficient became more pronounced because materials
now account for three quarters of the total amount of money invested by many
manufacturing service Industries. Telecommunications firms manufactures
recharge cards and other accessories as well as procure generators and other
items used for its numerous base-stations, which enables it to provide quality
services to its millions of customers. Materials in this case must be
effectively managed or taken care of to avoid incurring losses and
administrative costs, which affect the organizational profitability.
According to Monk (1987), as production
activities became highly automated and use less direct labour was required, the
materials proportion of the product cost tends to increase. For this reason,
effective and efficient materials management procedures are used to control the
flow of materials.
Another factor in the success of any
business as a whole in attaining efficiency is the application of the concept
of materials management activities under one department, headed by a materials
manager. It also assigns materials management activities to all major departments
in the organization that contribute to materials cost. This if carried out
effectively, forces control and coordination between purchasing, production
control and all other functional units that contribute to materials cost.
Efficient performance of the materials
management functions is vital to the smooth operation of the organization. It
is the basic responsibility of the materials management function to plan,
organize and control the flow of material distribution of finished goods. All
the major
departments under materials management should strive to perform their own
functions diligently so as to create and develop awareness for the critical
area of operations and the need to be responsive to timing.
Despite the significance of materials
management, its functions have been continuously neglected, both in the public
and the private sectors of the economy. This normally stems from the wrong
notion of non-professionals. To a non-professional, materials management is
simply the functional responsibilities of all the units of the organization
together, without each having a specified or defined function or role to play,
thereby creating disorganization, confusion and inefficiency in its management.
An effective and efficient management of materials goes beyond the profit
earning contributions to the organization. Materials management functions
should be unified and coordinated to enable the entire process achieve its
target of minimum cost.
According to Monk (1987), for there to be a
good materials management system in any organization, it is necessary that
there should be an officer at a very senior level who takes responsibility over
the control of materials from the point of leaving the suppliers, passing
through the organization and finally reaching the customers. He ensures that
the right materials are available at the right time, at the right place and in
the right quantity and quality. This will help avoid holding excess stock and
its attendant costs. Apart from this an efficient materials management helps in
the effective utilization of storage space and avoids shortage “out of stock
syndrome” which might cause production stoppage especially when the process is
automated.
Suffice it to say at this point that
effective and efficient use of materials has been the bane of both the public
and private sectors.
But the realization of the fact that
materials cost between 50-70% of the entire expenditure in the public sector
and the realization in the private sector that materials costs account to a very high extent to the
profitability or otherwise of any organization. Further being aware that an
item well bought is an item well sold, has changed the entire perception
organizations have about the management of materials. This reason formed the
basis for the passage into law of the public procurement act of 2007 by the
National Assembly and its subsequent passage of the same law by some states and
the setting up of the Bureau of public procurement popularly known as “Due
process office”, to supervise procurement activities in the various levels of
government. The private sector on its part, having realized the profit centre
of materials are now reorganizing and restructuring their systems to
accommodate a functional purchasing/procurement, materials/supply chain
department, to manage the entire materials activities of their organizations.
Thus, this department is usually headed by a manager or director depending on
who he/she reports to in the organizational structure.
According to Lee and Dobler (1977), the
paramount objective of materials management is to reduce cost. More precisely,
the total costs associated with the acquisition and management of materials.
They also referred to materials management as a confederacy of traditional
materials activities bound by a common idea, and of an integrated, management
approach to planning, acquisition, conversion, flow and distribution of
production materials from the raw materials state to finished product state. From
the above definition, for materials management to be efficient, it cannot be
performed in isolation.
Materials management may
be said to be an activity, integrated, coordinated and concerned with such
widely dispersed functions of management as budgeting, purchasing, production
scheduling, receiving inventory, manufacturing maintenance and materials
quality control. An effective and efficient materials management system is
concerned with the whole process from a need for material services, right
through to the supply of them to the users and in many cases, the product
thereby being made available to the customer. It encourages the final disposal
of scraps, obsoletes and decisions such as ‘make or buy’, value analysis and value
engineering, standardization, optimum specification, product development and
new product pricing, quality of materials and continuity of supply. The
implications are that materials management must be prepared to play a number of
different roles. The fortunes of a company may be affected adversely, depending
on how well these roles are played. So the materials manager is required to
cope with technological development, new material and process as well as
economic conditions. In line with the above reasoning, Compton (1981), averred
that the materials manager is essentially a leader, an organizer and an
administrator and must have a sound management training, as this would enable
him to effectively and efficiently manage the organization towards achieving set
goals and objectives.
1.1 BACKGROUND OF THE PROBLEM
In Nigeria, being a developing country,
management of various aspects of our live have been haphazard. So also is our
industry which has been operating in an environment characterized by risks and
uncertainties resulting from the downturn present in the economy.
This was the situation
in the telecommunication industry which was originally weighed down by
monopolistic tendencies whereby only Nigeria Telecommunications Ltd (NITEL) was
solely in charge in the rendering of all Telecommunications Services within the
country. The fact that NITEL was able to sustain its services to the entire
country was as a result of government patronage and yearly budgetary
allocations as well as not having any form of competition. Thus, the need to
attain effectiveness and make profit from its operations was absent.
The liberalization of the telecommunication
sector and the subsequent entry of other firms such MTN Nig Ltd, Econet (now
Zain Nig Ltd), Glo Nig Ltd, visafone, etisalat etc, whose objectives are to
attain effectiveness and efficiency in the rendering of quality services to
numerous customers and make reasonable returns on investment a sine quo non,
has now brought the need to manage every material well so as to enhance the
achievement of set goals.
1.2 STATEMENT
OF PROBLEM
Materials management as perceived has not
been widely recognized in Nigeria by all and sundry, as a management activity
which is capable of enhancing the effectiveness of organization as well as
contributing to its overall profitability. This belief has inspired the
researcher into conducting this work on the materials management effectiveness
in the telecommunication industry.
Against this backdrop, the problem of
effective management of materials in the telecommunication industry is as
follows:
i)
Wrong interpretation of materials management
concept.
ii)
The profit potential of materials management has
not been fully realized.
iii)
There is the lack of separate materials
management department in the telecommunication industry.
iv)
There us the problem of use of non-professionals
to handle materials management functions.
v)
Materials management has not been given its
rightful place as a management activity in the telecommunication industry.
1.3 PURPOSE
OF STUDY
The purpose of this study is to highlight
the essentials of materials management effectiveness in the telecommunication
industry.
The researcher also seeks to achieve other
objectives including:
i)
To determine the relationship between Materials
Management effectiveness and organization profitability.
ii)
To determine all the areas that are covered in
the Materials Management function.
iii)
To ascertain the level of attention given to the
materials management function in the Telecommunications Industry.
iv)
To ascertain whether the right persons are
allowed to handle the materials management function.
v)
To ascertain how appropriate materials
management strategies can lead to cost reduction.
To demonstrate that a research is
worthwhile, it must be relevant to the society being studied. This study is
relevant in respect of the following:
i)
Researchers: It will
serve as a reference point for would be researchers who will be
interested in this area of study.
ii)
Organizations: It will
help both public and private organizations to be conscious of the extent
to which materials management effectiveness can lead to costs reduction and the
achievement of profit objectives.
iii)
Society: It will enable
government to make appropriate policies and laws on materials management
activities.
iv)
Telecommunication Industry: It will
also be useful to firms in the Telecommunications Industry who may have
interest in the progress of their firm and the need to engage the services of
professionals in this area.
1.5 SCOPE
OF STUDY
Considering the fact that there are a great
number of telecommunication firms in Nigeria coupled with the fact that the
concept of materials management activities covers a very broad area, the
researcher therefore, focuses the study on the four major telecommunication
firms namely: MTN, Zain, Glo and Starcomm since all of them are fully
established in Delta State.
1.6 LIMITATION
OF STUDY
The researcher encountered a number of
constraints which hindered an in-depth research on the topic.
First, is the conservative attitude of workers
towards releasing necessary information about their organizations. This is
probably because
they want to hide certain information from their competitors.
This
conservative posture is also reflected in their websites.
Secondly, is the time factor. The time is
relatively short and did not allow for a very detailed investigation to
properly carryout the study in order to obtain sufficient information needed by
the researcher.
Thirdly, is the unavailability of adequate
and related texts in the library. This might be attributed to the reason that
materials management, though old, is still an emerging phenomenon in Nigerian.
Finally, is the financial constraints which
limited the extent of the researcher’s travel for literature and constant
visits to the case study companies for on-the spot observation required for
this type of study.
1.7 OBJECTIVES
OF THE STUDY
The aims of the study are:
i)
To determine the contributions of materials
management to organizational effectiveness
ii)
To determine all the areas that are covered in
the materials management functions.
iii)
To ascertain the level of attention given to the
materials management in the telecommunication industry.
iv)
To ascertain how appropriate materials
management strategies can lead to cost savings and profitability.
1.8 RESEARCH
QUESTIONS
To
realize the stated objectives of this study, the researcher seeks to answer the
following:
i)
What are the areas covered in the materials
management functions in the telecommunication industry?
ii)
What effect does materials management have on
organizational effectiveness in the companies under study?
iii)
How can effective and efficient materials
management activities contribute to cost savings?
iv)
Is materials management given its rightful place
as a management activity in the telecommunication industry?
v)
Whether the use of non-professional will have
any effect in the operation of materials management functions?
vi)
Is there any relationship between the
rank/position occupied by the head of materials management and its general
effectiveness?
1.9 HYPOTHESES
1)
Null (Ho): There
is no significant relationship between materials management and
organizational effectiveness (profitability) Alternative (HI): There
is a significant relationship between Materials Management and
organizational effectiveness recognize.
2)
Null (Ho): Telecommunication
industry does not neglect the services of qualified professional
materials manager.
Alternative
(HI): Telecommunication Industry does recognize the
services of qualified professional materials managers.
3)
Null (Ho): Telecommunication
industry has not given materials management its rightful place as a
management activity. Alternative (HI): Telecommunication
industry has given materials management its rightful place as a
management activity.
The following are the definition of terms
which are unavoidable in this research work. It is very important that these
terms are defined in order to clarify issues.
1.
Non-Professionals:- persons
that are not qualified in terms of education and experience to undertake
materials management functions.
2.
Inventory Control: The
operation of continuously arranging, receiving and issuing so that stock
level is adequate to support the current rate of production/consumption.
3.
Ltd: This is the short form
of writing limited which means limited by guarantee.
4.
Management Activity: Those
activities that are carried out at a high level such as planning,
directing, organizing, staffing and coordinating.
5.
Sourcing: Identification
or development of suitable sources of supply of materials.
6.
Profitability: Ability
to contribute to the profit objectives of the organization.
7.
Competitive Tendering: Inviting
prospective suppliers through advertisement to bid or make an offer to
undertake a piece of work or supply goods at a stated price.
8.
Outsourcing: Sub-letting
certain jobs to firms that has the core competencies to handle such jobs
on behalf of the owner of the jobs.
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