ABSTRACT

The focal point of the study was conducted to assess the inventory control system of pharmaceutical companies. The main purpose of management of inventory is basically to try and balance the conflicting economics of not wanting to hold too much inventories or stocks. However, most managers ignore the saving potential that arise from proper management of inventories, trying to treat inventories as a necessary evil and not as an asset that require to be managed. As such, some firms do not or ignore to control their inventory holding, this usually leads to under stocking and causing the firm to stop or slow its production. This study sought to examine the effect of inventory management on the performance of Pharmaceutical companies. This study employed a descriptive research design. The workers of the organization were considered as the respondents of the study. With the complexity in managing a large population, a sample of 40 workers were randomly selected to constitute the respondents of the study. Data was collected from these respondents with the use of questionnaires, interview and observation. The collected data was analyzed in tables and bar charts. With the use of Excel, the collected data were summed and analyzed with the use of the regression method. The analysis shows that there is a positive relationship between inventory management and organizational performance. Specifically, inventory control and inventory cost can enhance the organizational performance in customer management, budget management and more efficient use of warehouse space. This study concludes that, the management of Pharmaceutical companies should invest in inventory management practices in order to boast its performance.

KEY WORDS: Inventory control system, Pharmaceutical companies.

CHAPTER ONE

1.1 Background of the Study

Inventory management refers to keeping or maintaining the firm’s stocks at a level that a firm will only incur the least cost consistent with other management’s set objectives or targets (Kwadwo, 2016). Inventory management is about ensuring that all input materials of production available to the firm are maintained at a level where production is not interrupted as well as ensuring that operational cost is kept at a minimal level without affecting operation efficiency (Eneje, Nweze, & Udeh, 2012). Inventory management entails planning, organizing, controlling and directing. All these coordinated efforts are meant to ensure achievement of efficiency in all operations of the firm. Inventory management as explained by (Lavely 1996.), as the active control program that permits to govern its running of the various departments in a firm. This includes the production, research and development (R&D), purchasing, marketing, human resource, accounting and finance. The main aim of inventory management is to ensure that organizations hold inventories at the lowest cost possible while at the same time achieving the objective of ensuring that the company has adequate and uninterrupted supplies to enhance continuity of operations (Mpwanya,2005). A study carried out by (Bhausaheb & Routroy,2010) shows that companies are keen in managing their inventory so as to reduce costs, improve the quality of service, enhance product availability and ultimately ensure customer satisfaction. Results of a study carried out by (Rosenfield & Simchi-levi, 2010) shows that inventory management has a huge financial implication on both the customer satisfaction and financial performance of an enterprise. 

Generally, when you are unaware of what you have, you cannot easily identify what you need. An effective inventory management can help the organization easily identify the gap between the available, and the unavailable needs inventory management is the most significant asset of every organization. This then implies that, any inventory problems can cause a direct failure on the results of the organization. 

A pharmaceutical company, or drug company, is a commercial business licensed to research, develop, market and/or distribute drugs, most commonly in the context of healthcare. This means any company whose primary business is the research, development, marketing and distribution of pharmaceutical or biopharmaceutical products, limited to the top 20 in global sales. And is involved in the manufacture, production and or supply of pharmaceutical drugs, creams or other health products which must be prescribed by a medical practitioner. Pharmaceutical companies are entities that develops, manufactures, markets, distributes, imports, offers for sale or sells pharmaceutical products. 

1.2 Problem Statement

Inventories are vital to the successful functioning of manufacturing and retailing organizations. They may consist of raw materials, work-in-progress, spare parts/consumables, and finished goods. It is not necessary that an organization has all these inventory classes. But, whatever may be the inventory items, they need efficient management as, generally, a substantial share of its funds is invested in them. Different departments within the same organization adopt different attitude towards inventory. This is mainly because the particular functions performed by a department influence the department’s motivation. For example, the sales department might desire large stock in reserve to meet virtually every demand that comes. The production department similarly would ask for stocks of materials so that the production system runs uninterrupted. On the other hand, the finance department would always argue for a minimum investment in stocks so that the funds could be used elsewhere for other better purposes, (Vohra,2008).Inventory represents an important decision variable at all stages of product manufacturing, distribution and sales, in addition to being a major portion of total current assets of many organizations. Inventory often represents as much as 40% of total capital of industrial organizations (Moore, Lee and Taylor, 2003). It may represent 33% of company assets and as much as 90% of working capital, (Sawaya and Giauque 2011). Since inventory constitutes a major segment of total investment, it is crucial that good inventory management be practiced to ensure organizational growth and profitability. According to (Temeng et al, 2010), historically, however organizations have ignored the potential savings from proper inventory management, treating inventory as a necessary evil and not as an asset requiring management. As a result, many inventory systems are based on arbitrary rules. Unfortunately, many organizations invest less in inventory and are not able to meet customer demands because of poor distribution of investment among inventory items (Temenget al, 2010).

Problems of inventory management and control have been around for a very long time. The need to give out goods when they are readily available and then store it for times of shortage is perhaps the fundamental stock holding problem, which was tackled long ago by man. In an agricultural organization like CDC, inventory is conducted to ensure that the required machines are in place, which ones needs adjustments and replacements, which goods are ready to be given out, which will be ready with time, etc.

Based on the above analogy, the researcher was then motivated to carry out a study on assessing the inventory control system of pharmaceutical companies in Cameroon.

1.3 Research Questions

The main research question of this project is “What is the inventory control system of Pharmaceutical companies?”

The specific research questions are 

How is FIFO applied in pharmaceutical industry?

How is WACC applied in pharmaceutical industry? 

1.4 Objectives of the Study

The researcher’s reasons in undertaking the study of the inventory management and control in pharmaceutical industry.

The choice is aimed at representing all other Pharmaceutical companies and to attribute the findings to other institutions and organizations.

A well-planned and effectively controlled inventory can contribute substantially to a firm’s profit because inventories are the life-wire of all organizations. It is however necessary to visualize the purpose of this research as follows:

1. To ensure correct quality of stock required.
2. To ensure constant supply and flow of material to the operations.
3. To ensure that the materials are available at the correct time they are needed.
4. To ensure a continuous or steady supply of information for control of production about what to produce in order to keep established level of the organization finished stock.
5. Control of obsolescence of stock ensuring that all stocks held by the organization are being used at a regular rate and therefore have not been superseded by a new or redesigned item.

The success of the company as a pharmaceutical one has a great influence on the researcher to know the secret behind this success, since inventory control is concerned with the success over failure of any company.

The loopholes to be filled in the management of stores and inventory need to be taken care of.

The researcher feels that through this medium he can suggest the right professional techniques suitable for stores and inventory management and control in all sectors of the economy.

Review of contributors towards the situation of the case study will be narrated to see the attitude of the nation and individuals towards this discipline.

Finally this study will help the organization to recognize the problems and how to resolve them.

1.5 Hypothesis

In order to identify the effect of the independent variable on the dependent variable, the following hypotheses are developed.

Main hypothesis:

There is an effect of inventory management on the organizational performance

Specific hypothesis

• Inventory control have an effect on the organizational performance
• Inventory costs have an effect on the organizational performance.

1.6 Significance of the Study

Apart from being an essential requirement for the award of a degree in management. This work will be of great importance to the researcher, the organizations, school and other individuals.

  This piece of work is of significance to the organization in that it will help the organization to have an understanding of the creative ideas of inventory management. This concerns how to carry out inventory control, how to reduce cost and generally how to ensure there is no interruption of the production process in order to enhance the organizational performance.

In the same line, the school also an organization will benefit as mention in the above point. There is the aspect of stock also in school in the machines, number of classrooms available for the lessons, other equipment required for the classes, etc. without an idea of the number of students available, the requirements to achieve the objectives, the school can easily end up wasting resource on insignificant things. Therefore, this piece of work will go a long way to widen the minds of the academic institutions on inventory management by enhancing their performances. 

This project is also significant to the researcher in that, it will widen his knowledge in the field of research and more specifically on the evaluation of the relationship between two variables while identifying how a change in one variable can cause a change in another variable taking the case of inventory management and organizational performance. 

Significantly, this piece of work can as well serves as a literature review material for future researches. This implies that, this work can or will be used as a comparative tool to facilitate the results of other research works.