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.
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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.
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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.
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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. The problems include
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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?
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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.
Hi: There is 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.
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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.
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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.
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1.10 HISTORY OF UNTH
The UNTH Ituku Ozalla, Enugu, has come a long way. The hospital began in the
20th century as a standard hospital for Africans built by the colonial administrators.
It later metamorphosed into a general hospital on attainment of Nigeria’s
independence in 1960.
However, at the end of the Nigerian civil war in 1970, the then government of east
central state transformed it into a specialist hospital with effect from July 1, 1970.
At this time, the hospital has a total of 50 doctors, 10 wards and 300 beds and a
chest bay of 60 beds. There are also 350 nurses working in the hospital. Today, the
situation has changed drastically. The bed capacity of the hospital in the permanent
is over 500 beds and the number of its personnel both professional and non
professional has increased tremendously.
By decree number of 23 of 1974, the Federal Ministry Government took over the
hospital, but left the management in the hands of the council of the University of
Nigeria Nsukka. The University of Nigeria Teaching Hospital became independent
in July 1976 with the appointment of autonomous management board.
The physical constraints of the old site of the hospital mad eit impossible for
needed expansion to be implemented. It was also appreciated that the old site was
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developed and used as a general hospital, and therefore, could not longer cope with
the challenges of a teaching hospital.
Consequently, the approval of the then Federal Ministry Government for the
construction of a new complex for the teaching hospital was ought and it came as
welcome relief. Today, this site, which is the permanent site of the UNTH at Ituku
Ozalla is permanent and gully functional. It is located 21 kilometers from Enugu
capital city along Enugu, Port-Harcourt Express way.
All services rendered at the old site has now been moved into the permanent site
with effect from 8the January, 2007. The hospital covers an area of about 200,
acres while the entre parcel of land about 306 hectares (747acres).
There is now a room for expansion and this is hoped to assist in solving the
accommodation needs of the hospital once and for all.
The new hospital complex is also better equipped under the Federal Government
assisted by VAMED engineering equipment programme which has elevated it and
some other teaching hospitals in the country to an international standard.
The UNTH has broad objectives of services, teaching and research. The hospital
tries to achieve these through provision of in-patient and out-patient services to its
clients through her highly trained staffs, provision of adequate clinical materials
for service and training as well as equipment of research, provision of teaching
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facilities for training her students and other persons in the health delivery team and
conduct and promotion of research in all matters pertaining to health.
Altogether, there are 41 main departments in the hospital with three outpost. They
are:
– Comprehensive Health Centers at Obukpa near Nsukka Enugu State
– Abagana in Njikoka Local Government Area of Anambra State.
– Isuochi in Abia State.
There are 9 training school/programmes in the hospital they have school of
nursing, midwifery, medical laboratory science, nurse anesthetists, community
health, post ophthalmic nursing, pre-operative nursing, cardiothoracic nursing and
medical records. These schools operate currently at the old site but plans are
already on the ground to provide structure for them in the new site as soon as
possible.
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