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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.
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.
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. The problems include
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?
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.
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.
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.
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 made it
impossible for needed expansion to be implemented. It was also
appreciated that the old site was 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 fully 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 entire parcel of land about 306 hectares (747 acres).
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 inpatient and outpatient 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 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, perioperative 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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