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 ‘invent the word ‘stock’, this definition is synonyms of inventory and
is stock by the Oxford Dictionary. The Oxford English Dictionary defined
inventory as follows:
- A list, catalogue, detailed account
- A lot or stock of goods, etc which are or may be made the subject of an inventory.
- 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’ i 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.
The
aim of a sound inventory control system is to ensure the best balance between
two much and too little. Too much inventory carries financial rises and too
little reacts adversely on continuity of sequence.
In health institutions
such as UNTH Enugu, inventory control is more than just procurement and usage.
The proper controls and processes can save millions in health care cost by
enabling health institutions to efficiently order and store just the right
amount of supplies needed for patient care while tackling cost, tier pricing
and patient charges associated with supplies.
Inventory management
and control helps facilities identify, control and manage their inventories by
keeping accurate records of all inflow, outflow and movement of inventory
(drugs) in a user friendly environment. The proper tracking data allows for
accuracy in patient charges and on audit trail to identify cist charges.
The intention of this
research work therefore aimed at studying the management and control of
inventories (drugs) in government health institutions with special reference to
University of Nigeria Teaching Hospital, Enugu.
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.
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