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

20

th

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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