CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Inventories occupy the most strategic position in structure of working capital of most business enterprises. It constitutes the largest component of current asset in most business enterprises. In the sphere of working capital, the efficient control and management of inventory has paired the most serious problem to the health institutions. The turnover of working capital is largely governed by the turnover of inventory, that is the rate of working capital is largely governed by the amount of inventory which is largely provided by the government. It is therefore quite natural that inventory which helps to maximize profit occupies the most significant place among current and profit assets.

The American usage of the word ‘inventory’ is synonymous with the British use of the word ‘stock’, this synonym is evident in the definitions of inventory and stock by the Oxford Dictionary. The Oxford English Dictionary defined inventory as follows:

1. A list, catalogue, detailed account

2. A lot or stock of goods, etc which are or may be made the subject of an inventory.

3. The aggregate of goods and some specified kind of goods which a trader has on hand as provision for the possible future requirement of customers.

The American Institute of Certified Public Accountants (AICPA) defined inventory thus, the term inventory in used to designate the aggregate of those terms tangible personal property which are held for sale in the ordinary course of business, in the process of production for such sale or currently consumed in the production of goods and services to be available for sale.

According to the Nigerian Accounting Standard Boards (NASB) stock includes those finished goods and livestock waiting sale, work-in-program, raw materials and supplies to be consumed in the production of goods and rendering of services.

Many understand the word inventory as a stock of goods, but the generally accepted meaning of the word ‘goods’ in the accounting language is the stock of finished goods only. In a manufacturing organization, however, in addition to the stock of finished goods, there will be stock of partly finished goods; there will be stock of partly finished goods, raw materials and stores. The collective name of these entire items is ‘inventory’.

Inventory management is aimed at maintaining a minimum investment in operations to maximize profitable operations. To maintain a large stock of investment to ensure a smooth and efficient operation of the firm.

The effect of inventory management on government health institutions like UNTH Enugu cannot be over emphasized; this is because asset of many institutions represents considerable percentage of the total invested capital. The control, accounting and management of an efficient inventory management system is of a special interest to both management, suppliers and other users of accounting information.

Therefore, poor inventory management leads to expiration of drugs, loss of quality sequel to poor storage system with resultant reduction in efficacy of the drug. This might even lead to death of some patients. There may be stock out and lot more effect of poor inventory control and management.

Inventory control is concerned with the acquisition, control, handling and use of inventories so as to ensure the availability of inventory whenever needed, providing adequate provision for contingencies, deriving maximum economy and minimizing wastages and losses.

Hence, inventory control refers to a system, which ensures the supply of required quantity and quality of inventory at the required time. Inventory control can make or break a company. This explains the usual saying that inventories are the grave yard of business.

1.2 STATEMENT OF THE PROBLEM

A large proportion of the government health institutions are faced with similar problems. These problems hinder the growth and development of institutions in this country. The problems include

1. Unsatisfied clients/patients arising from poor qualify drugs.

2. High rate of obsolescence, wastages and theft of drugs.

3. Poor quality of inventory control leading to out of stock of essential drugs in the hospital.

1.3 OBJECTIVES OF THE STUDY

1. To ensure an effective and efficient management and control of inventory (drugs) in government health institution leading to effective service delivery.

2. To reduce obsolescence and wastages of drugs.

3. To reduce out of stock syndrome prevalent in government hospitals.

1.4 RESEARCH QUESTIONS

1. To what extent has effective management and control of inventory aid in effective and efficient service delivery of hospitals?

2. How far do effective inventory management reduce obsolescence and wastages of drugs experienced in hospitals?

3. To what extent do good inventory management help in reducing out of stock syndrome prevalent in government hospitals?

1.5 FORMULATION OF HYPOTHESES

Ho: proper management and control of inventory does not have a significant effect on effective and efficient service delivery of hospitals.

Hi: Proper management and control of inventory has a significant effect on effective and efficient service delivery on hospitals.

Ho: Proper management and control of inventory does not reduce obsolescence and wastages experienced in hospitals.

Hi: Proper management and control of inventory reduce obsolescence and wastages experienced in hospitals.

Ho: There is no relationship between inventory control and stock out experienced n hospitals.

1.6 SIGNIFICANCE OF THE STUDY

The significance of the study is mainly attributed to the need for measuring result of inventory operations for a particular period such as month of year. This study will point out the importance of inventory control and management in government health institutions.

This study will also create an opportunity for existing and prospective employers and employees to benefit from the use of modern inventory control and management techniques that will be recommended. To students, it will improve their theoretical and practical knowledge of inventory management and control in government health institutions.

1.7 SCOPE OF THE STUDY

The management and control of inventories cover physical control, accounting control and management policies and procedures relating to inventory. This study is based on government health institutions but due to time, the school system and financial constraints, this research has selected a sample from eth population of health instructions.

The study sample selected for this study is University of Nigeria Teaching Hospital (UNTH) in Enugu, and the study shall cover their ordering method, procurement method, storage and issue of drugs including the cold chain system and the inventory management and control techniques that aid in the achievement of the organizational goal.

1.8 LIMITATION OF THE STUDY

The absence of any previous empirical study on the management and control of inventories drugs in the program of UNTH is a significant limitation to this study.

These absences of an existing body of study on this area in the institution posses a special problem of the absence of previous reference or primary data from the scratch through questionnaire administration and designed to supplement available secondary data. However, financial constraints are expected to present a very serious limitation to the study since it would limit the researcher’s data material and the presentation of existing evidence.

1.9 DEFINITION OF OPERATIONAL TERMS

Inventory – Stock of materials or product. In this, inventory refers to drugs.

Inventory Management – The official system designed by the management of a company to monitor control and manage the stock of inventories and assets under its possession.

Inventory Control – Supervision of the supply and storage and accessibility of items in order to incur on adequate supply without excessive supply.

Cold Chain System – A popular term for continuous maintenance of low temperature required for biological example vaccines from the time of manufacture to shipping, warehouse and storing before administration.