INVENTORY MANAGEMENT PRACTICES IN SOME AGRO·ALLIED INDUSTRIES IN OLD ONDO STATE: AN ECONOMIC ORDER QUANTITY APPROACH.

Abstract

The effects of inventory management practices of some agio-allied industries in old Ondo State were investigated using an Economic Order Quantity (EOQ) Approach. The industries were categorised into small, medium and large scale sizes. Research questions on methods of inventory acquisition. methods of storing the acquired inventory and the ratio of the proportion borne by raw materials to the total The data collected on sources of inventory acquisition, storing methods, order working capital were drawn. While standardized questionnaires supplemented with oral interview and personal observations administered on the stratified sampled agroallied industries were employed to elicit the information needed to answer the research questions. The data collected on sources of inventory acquisition, storing methods, order quantity stocked for production per annum, number of purchases made per year, ordering costs, holding costs and ratio of the proportion borne by raw materials inventories to the total working capital were analysed using methods of contents analysis and simple percentage calculations. The Economic Ordering Quantity (EOQ) models were used to test the validity of inventory management of one company ,from each of the category of industries. The study revealed that the small scale industries relying on direct purchase (25%), direct production and supply contracting (25%) and medium scale employing supply contracting (40%), supply contracting and credit lease back (200 /0). etc have been achieving some measures of successes. Similarly, the large scale relying on direct purchase (12.5%), direct purchase and just-in-time( 12.5%), etc have been achieving some measures of successes. The study showed that the application of the EOQ models will not only lead to substantial reduction in the level of investment in raw materials the agro-allied industries are using but will as well lead to freeing excess money tied up in raw material purchases. The results showed that reduction in the total inventory costs of 89.5% for company C-3, 12% for company E - 1 and 78.4% for company K-2 by using model I were possible, While a reduction of 81,5% for company C-3, 81.1250. 0 for company E-I and 76% for company K - 2 were equally obtained by using EOQ model 2