COST MINIMIZATION STRATEGIES IN A MANUFACTURING COMPANIES

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COST MINIMIZATION STRATEGIES IN A MANUFACTURING COMPANIES

CHAPTER ONE

INTRODUCTION

1.0 Background of the Study

The desire of every national producer is to minimize the resource invested to achieve a desired objective thus at any point in time he should be devising ways of minimizing the cost of achieving the desired benefit. This situation is equally relevant to organization of any kind whether profit oriented on nonprofit oriented and therefore make it imperative for every organization especially the profit-oriented ones not to stop at controlling the use of resources to conform with established standards but should also make spirited attempts to continuously minimize cost without impairing the quality of their products. The need for manufacturing companies to be conscious of the above need has been magnified by the fact that Nigeria economy is experiencing an era of astonishing rate of inflation despicable how exchange rate requiring reports of grossly low capacity utilization and the inter play of some other very powerful extraneous variable which makes the business environment very inclement. These are the cries of mangers. Sectioning through the streets of industry and commerce saying Nigeria is passing through a difficult period, everything possible must be done to everyone in position to do so , to assist the economy in making a quick recovery. One way of heading these glariot calls by mergers off companies is the adoption of cost minimization strategy aimed at improving efficiency.

Origin and History of Lever Brothers Nigeria Plc

Lever brothers Nigeria Plc (Rc 113) is the longest surviving manufacturing outfit in Nigeria. The company was incorporated as a private company in 1923 to manufacturing soaps based on local palm oil. Over the years the company diversifies and expanded its operation to the production and marketing of personal wash product mainly toilet soaps, non-soapy detergents foods and personal predicts including toothpaste, body creams lotion body care hair product. In particular and through selective acquisition the company has strengthened its froth in foods and personal products through its merger with Lipton Nigeria Limited in 1988 and lately in 1995 through a merger with unilever Nigeria Limited which a merger with unlived Nigeria Limited which effectively transferred to LBN the stewards business following the recent acquisition of seaward and in order to ensure sustained focus in management the company now has four manufacturing sites for its operations from the original sites viz, Apapa , the primes and largest site, produces soaps such as sunlight they , Oxbare Luk, Breeze, ife buoy, and Astral and some personal product mainly tooth paste and Vaseline range. The second site Abia is devoted to the production of non- soapy detergent powders and bars. Here, the company makes such popular bran as omo Rin, and ox powder. The third and of the plants. Commission in 1983 is the utra modern foods factory in Agbare where the company production Royco, Blue Band, plant, lree, lop and Beaden, among others and of course the fourth the organ site where popular personal products brands like elide, pears, and lotus etc. are produced. It is intended that the company shall consolidate all the personal products production including tooth. Paste, ponds and Vaseline range at this site ultimately,

The company is fully committed to backward integration and self-sufficiency and has made considerable progress in its effort towards local souring sad development of raw materials, the tea plantation on the man bill plateau underscores the company unrelenting derive for self-sufficiency the first crop of the end of 1991 and processing factory for the tea leaves has been completed on sit. the company has also butt at large palm kernel will at its Aba factory to improve supply vegetable oil essential raw material in soap and edible production. It is also making investment in oil palm plantation in order to improve its local sourcing. Lever brothers Nigeria plc rang of quality products is distributed sad sold at uniform prices all over the country through an established and tested distribution network using appointed distributors, supervised by a well-trained sales forces.

The company has direct staff strength of about 2,250 employees in its four manufacturing sites and various distribution points throughout the country of this numbers only five are expatriates. These reflect the extents to which the company has gone at training and developing management resources? the objective is to bring in expert vites who willing and able to work in Nigeria and who will contribute help and train Nigerians. They (expatriate) give LBN and international favour and are in exchange for the company mangers working overseas to obtain international experience. Expatriates are therefore brought into meet the company specific needs. The company also provides indirect employment for over six thousand people. Lever brothers Nigeria Plc has been decanted to the production of top quality brands for Nigeria for over seventy years.

1.1 STATEMENT OF PROIBLEM

Some companies embark on cost minimization strategies with full awareness of the benefit obtainable therefrom and therefore give a strong recognition and support to such strategies. They strive as much as possible to carry out their operations or project at the minimal costs. Therefor we they adopt and implement several strategies or techniques of minimizing or reducing their cost of operation and or production. This study will endeavor to find solution to the enumerated problem below as well as others.

(1) Does LBN minimize cost of production or operation?

(2) How are cost minimization effected?

(3) What are the strategies or techniques used for cost minimization?

(4) Is cost minimization a viable means of enhancing the performance of manufacturing firm?

(5) What are the problem encountered in minimizing cost and ways minimizing the impact of such problem or possible prevent them.

(6) How effective are the strategies adopted

1.2 RESEARCH QUESTIONS

To accomplish the objective enumerated above answers are hopefully going to be provide to the following question.

(i) Does LBN has know cost minimization strategies apart from the generally accepted cost minimization techniques?

(ii) Does the level of employees motivation related to the effectiveness of cost minimization strategy?

(iii) Are the strategies effective?

(iv) What are the problems associated with cost minimization implementations?

(v) What measures do they adopt to reduce the impact of the problem identified (iv) above?

(vi) What other alternative measure do they adopt?

1.3 RESEARCH HYPOTHESIS

In order to made conclusion and recommendation the following hypothesis will be tested.

(i) There is no significant difference in material costs before and after embarking on cost minimization stately.

(ii) There is no significant difference in labour cost before and after embarking on cost minimization strategy.

(iii) There is no significant difference in overhead cost before and after embarking on cost minimization strategy.

1.4 PURPOSE OF THE STUDY

It is a know fact that there are many cost minimization strategies available for adoption by firm and industries. Over the years authorities on costing matters have published dissertation on means and ways of minimizing cost of production or sand operation in manufacturing industries. Theses have subsequently been recognized by the management of the various enterprise. But the question is how many of these firm put these strategies and techniques into practice?

This study therefore will evaluate some of the existing cost minimization strategies and techniques (if any) as at effects the lever brothers Nigeria (LBN) Plc, the extent of their implementation how effective they are whether they are achieving the goals for which they are adopted as well as analysis their cost benefit to justify their acceance an important and veritable cost monition tools.

1.5 SIGNIFICANCE OF THE STUDY

The finding are recommendation of this study will, no doubt be of immense importance to the management of lever brothers Nigeria (LBN) Plc and will equally go long way to guiding similar firms in the manufacturing industries on the proper cost minimization strategies they should adopt that will be appropriate their daily activities, new mangers and prospective mangers should equally be acquainted with not just the cost minimization strategies already familiar with but also one suggested by more experienced mangers which may not be found in textbook.

1.6 SCOPE AND LIMIATION

For the purpose of this study emphasis will be solely placed on level brother Nigeria (LBN) Plc this is influenced by the fact that LBN is the longest surviving manufacturing grants in Nigeria having been operation since 1923. It was a general consensus that it was against management policy to give out internal document to any outsider for any reason unless under special circumstances.

Therefore, the analysis will be made based on the questionnaire result fact gathered during interview and discussions as well as personnel observation made during the work. Finally we are equally limited financially such that we may not cover major network (4) manufacturing sites for its operation spread across the country (Nigeria) we will therefore be concentrate its manufacturing sites at Aba Abia state and the commercial lactation at port Harcourt River state.

Limitations of study

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

DEFINITION OF TERMS

Cost: In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore.

Minimization: the act of reducing something to the least possible amount or degree or position. minimisation. reduction, step-down, diminution, decrease – the act of decreasing or reducing something.

Strategies: a plan of action designed to achieve a long-term or overall aim.

Manufacturing: Manufacturing is the production of products for use or sale using labour and machines, tools, chemical and biological processing, or formulation.

Company: Is a commercial business.

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