DEPATRMENT OF BUSINESS MANAGEMENT
FACULTY OF COMMERCE
NAMEGUMINDOGA RUTH D
An evaluation of the effectiveness of OK Zimbabwe’s inventory control system.
This chapter outlines the background to the study undertaken, an outline of the problem statement, and the objectives of the study and research questions. It also looks at the limitations and delimitations as well as the significance of the study on the effectiveness of the inventory control system in improving the performance of an organisation.
1.2BACKGROUND OF THE STUDY
OK Zimbabwe has been in existence since 1942, and has established itself as a customer-oriented retail organisation providing access to a broad range of retail products and allied services developed in response to its customers’ requirements for convenience and value. After the introduction of the Multi-currency system in February 2009, OK Zimbabwe like other companies was left without adequate capital for stocking its stores. This problem was exacerbated by the problem of stock pilferage, which threatens the viability of the organisation. OK Zimbabwe in the past years has put in place internal controls that manage the movement of stocks as they are ordered, received and sold.the following are the inventory control measures that were installed inorder to manage stocks: OK uses points of sale type of control method to order new stock for their organisation which involves updating the inventory each time there is a sale. That is according to business dictionaries the inventory figure is updated as soon as the organisation transfers ownership to the buyer. The organization has also installed a closed-circuit television (CCTV) which is the use of videos for surveillance for the shop areas that monitoring of stocks in the warehouse and shopfloor. OK has also employed security guards as a measure to control stocks in the shop floors hence avoiding stock pilferage. OK Zimbabwe is a publicly owned company where shareholders have a stake in the company and need confidence that their money is being put to good use. Accounting regulations clearly state that stock must be verified and this is done through stocktakes. A stocktake is merely a spot check to confirm the value of stock we have on a particular day. This confirmation is made between ledger stock that is available in the system and the actual or physical shelf stock. The company will be trying to establish the authenticity of the stock in the system. The company alao has internal security which is the audit department,its purpose is to make sure that controls and company policy in managing stocks is being adhered to. This research has mainly been influenced by problems OK has been having in stock management. This has been evidenced by stock pilferage that it has been experiencing for that past years but with the above inventory control systems put in place. For the past years OK has moved from conducting stocktakes quarterly per year to having monthly stocktakes. The company across countrywide branches has been having stock discrepancies between the physical stock and that inputted in the system. Inventory control challenges are usually shown by the recorded stock and physical stock discrepancies. The following tables show stocktake discrepancies from different OK Harare branches: OK JULIAS NYERERE WAY FEBRUARY 2012 STOCKTAKE
Item description| Counted qty| Mach 4 qty| Discrepancy qty| Extended Discrepancy Selling value ($)| Colgate dental cream toothpaste 100ml| 7727.00| 9135.00| -1408.00| -1450.24| Sparletta cherry plum 300ml| 0.00| 1536.00| -1536.00| -798.72| Cremora coffee creamer 1kg| 78.00| 594.00| -516.00| -2688.36| Lux shake me up soap 100g| 30.00| 600.00| -570.00| -324.90| Gloria self raising flour 2kg| 0.00| 26.00| -26.00| 494.00| Sunlight w/powder...