ASSESSING THE IMPACT OF INFORMATION TECHNOLOGY ON INVENTORY CONTROL IN OIL AND GAS SECTORS

CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF STUDY

The American institutes of accountants defines the term inventory as “the aggregate of these items of tangibles properties which are held on sales in the ordinary course of business, are in process of production for such sale or one to be currently consumed in the production of goods or services to be available for sale”. Advanced accounts.

Inventories are the significant portion of most forms of assets which accordingly requires substantial investment in order to keep these inventories from becoming unnecessarily large, inventories must be managed efficiently. In efficient procedures regarding inventory and some   items of stocks, other overstock, necessitate excessive investment. Inefficiencies ultimately will have an adverse effect upon profits, thus the effect of   inventory control in flexibility and level of investment required in categories represent two sides of the same coin. These are various principles of inventory control which will be viewed from the content of a profit oriented organization form which a base can be formed for the title of the project.

 In the modern business worlds, greater importances have been put to the control of inventory. Its concern in the management of inventory control must be to provide right goods in right condition at the right time. It implies that, the control procedure should be able to;

1. retain appropriate stock levels
2. Ensure proper use of stock in business operation.
3. Ensure the inventory is duly accounted for.
4. Safe guarding of stock against loss or misuse the management needs to ensure that adequate control procedures for purchasing and controlling of inventory in a way that optimum balance is obtained between efficient control and economy.

1.2 STATEMENT OF THE PROBLEM

Using information technology in inventory control is one of the most recent aspects of the modern business method. A lot of establishments engage diverse strategies to achieve accountability goal. The control problem of inventory control as it store and proper recondition of possible loss to a business through interruption of production or failure to meet other with the holding cost of stock large enough to give security against loss.

In examine the concept of control to know weather the present inventory control of company does not provide for reliability for the control designed. It can therefore be seen that for us to fully discuss inventory control in KRPC. It is essential to examine and evaluate the following as they exit in the oil and gas sectors

1. accounting system
2. stock taking procedure
3.  Management supervision.

The complexity of modern business techniques and the increase in the size of business units encourage the adoption and practicalization of inventory control.

For inventory control to operate efficiently and effectively there should be a perpetual inventory to facilitate regular checking and it obviates closing down of stock taking. The balance of any account in stores ledger should give an accurate balance with the bin lard or stock control record. In most private organization there is tendency to say that there can be no effective system of control, its inventory control as the stock keeper control many division with only few staff to assist him through the oil and gas sector (KRPC) understudy, has advance information technology on inventory control, but lack of proper personnel to handle the programmers is still a bottleneck for proper recondition, we shall examine whether or not there is a provision for control which ensure profit maximization in the company.

1.3. OBJECTIVES OF STUDY

The study is aimed at realizing the following objectives:

1.  Real sizing the impact of information technology on inventory control in KRPC
2.  To know the importance of information technology organizational performance as a whole.
3.  To provide useful recommendations where necessary to where the study is related.
4. To give other and future researchers to improve where this present research stop.

1.4. STATEMENT OF HYPOTHESIS

Ho: the usage of information technology on inventory control does not have a positive impact on material usage.   

Hi: the usage of information technology on inventory control has   a positive impact on material usage.

1.5. SIGNFICANCE OF THE STUDY

The significance of the study is to asses the impact of information technology in inventory control in KRPC and also to suggest and make recommendation to problems that may likely occur if information technology has not been used to control inventory in oil and gas sector.

1.6. SCOPE OF THE STUDY

The scope is limited to all aspect of inventory control in a production industry and will serve as a useful guide to users and researcher who would want to know on KRPC a well as inventory control.

  This research work covers the following:-

1. The concept of inventory control.
2. The concept of information technology
3. Method of inventory control
4. The effect of information technology on inventory control

1.7  LIMITATION OF THE STUDY

A study of this nature would normally entail investigation into a variety of issues to be able to achieve a comprehensive study of the problem; a lot of constrains would be encountered in form of collection of data. Lack of adequate information and scarcity of researcher’s infrastructures. As a result of this, certain limitation will be imposed on the area covered.

Firstly, the study will be confirmed to KRPC who does not have library section, which would have ease the researcher’s effort by providing information containing its comprehensive details of it’s operational background from it’s inception.

Secondly, inaccessibility of data (collection of data) to provide the necessary information were difficult to acquire especially the financial figures, some of the employees who co-operated were not in better possession of the facts and figures necessary in this project.

Thirdly, limited area of study, there are many section in the organization, and a lot of forms of inventory, however, the researcher’s intension is to concentrate only on the material store for the project. These problems apparently pose serious limitation of this project and the researcher has to work with data available.

Finally, there are hardly many writers on the subject matter, therefore text books on this topic are scarce, so the information was gathered from books of accounting, purchasing, internet also due to using such as liquefied petroleum gas (LPG), petrol, automotive gas oil or diesel oil, kerosene, fuel oil and sculpture and those from the lubricating oils complex historical base oils, asphalt and waxes.

1.8. HISTORICAL BACKGROUND OF KRPC

The decision to construct the third Nigeria National in 1974 along with second (NNPC) refinery located in warri, however, it was decided that work would commence on the construction of their refinery wherever the projection of the consumption of petroleum products justifies it.

By early 1975, in view of fuel shortages experienced then, the federal government decision that work on the third refinery should be advanced. It was built so that it could meet up with the fuel demand then.

Based on feasibility studies curried out, which took into consideration the consumption of various petroleum products within the Northern zone, and the adequate means of disposal for the surplus products. A crude oil capacity of 42,000 barrels per stream day (BSPD) could be easily justified. Hence, the refinery was designed for the capacity of 60,000 barrels per stream day (BSPD). It was much later that the federal Government decided that the capacity for more barrels per stream day (BSCD) which would have led to the production of large equinity of heavy ends and no one practical and variable solution is reprocessing the heavy fuel. In order to do this, the whole project plan had to be modified so that what initially was planned to be a simply shydrosking type of refinery developed into integrated refinery. The refinery would now be able to produce a wider variety of petroleum products, some of which should be lubricating base oil. Hence, it becomes necessary to import suitable paraffin base crude oil from Venezuela, Kuwait, or Saudi Arabia.

Products from Kaduna refinery are to include fuels.       

1.9  DEFINATION OF TERMS

INVENTORY, MATERIAL, STORES: - these are words that are used inter-changeably and they refer to goods in different forms, for different purpose, such as for production, maintenance, processing of finished goods.

STOCK: - these are the list of stock (inventory). One item in this list referred to stock or material.

KRPC: - is an acronym of Kaduna refinery and petrol chemical company

NNPC: - is also an acronym of Nigerian national petroleum co-operation (NNPC)

STOCK TAKEN: - is a complete process of verifying the physical qualities, or balance with a view to ascertain the actual balance in the store.

STOCK MANAGEMENT: - Are the activities involving store handling, store security and store maintenance.

INFORMATION TECHNOLOGY: - is the theory and practice of using computers to store and analyse information.

STOCK OUT: - This occurs when there is insufficient stock to Meet production requirements.

STOCK TURNOVER: -This is the ratio which cost of inventory is used per annum the average stock of inventory.