EVALUATION OF OPTIMAL INVENTORY LEVEL AND PLANT CAPACITY IN A CEMENT PLANT

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Inventory can be referred to as items kept in stock to process or resell. Inventory is also the current amount of a product that a business has in stock. Keeping a high inventory level allows an organization to easily meet customer demand. However, it might cost the organization a lot of money. Inventory management is a discipline primarily about specifying the shape and placement of stocked goods. It is required at different locations within a facility or within many locations of a supply network to precede the regular and planned course of production and stock of materials.

The concept of inventory, inventory or work in progress extends from manufacturing systems to commercial and service projects, generalizing the definition as "any work in the production process - all the work done or that has already taken place before the completion of production. "In the context of a manufacturing production system, the inventory refers to all the work done: raw materials, partially finished products, finished products before the sale and exit of the system. In the context of services, inventory refers to all work done before the sale, including partial information about the process.

The scope of inventory management refers to the balance between renewal time, inventory maintenance costs, asset management, inventory forecasting, inventory valuation, inventory visibility, inventory price forecasting, future, physical inventory, available physical space, quality management, replacement, return and defects. The balance of these competitive requirements leads to optimal inventory levels, which is an ongoing process as business needs change and respond to the larger environment.

Inventory management involves a retailer seeking to acquire and maintain an appropriate merchandise mix while controlling orders, shipping, handling and associated costs.

It additionally involves systems and processes that determine inventory necessities, set targets, propose replacement techniques, report on the present and planned inventory standing, and manage all monitoring and reporting functions.

Material management includes monitoring equipment going into and out of warehouses and reconciling inventory balances. It may also include ABC analysis, batch tracking, cycle count support, and so on. Inventory management, the primary objective of which is to determine / control stock levels within the physical distribution system, is to balance the need for product availability with the need to minimize handling and handling costs.

The average cement industry in Nigeria spends 30 to 35 percent of the inventory value on handling inventory storage, according to Piertrel (2016). Keeping a low level of inventory reduces company costs and minimizes losses from deteriorating items. The inventory level and sales rate of a product can be used by a typical inventory manager to determine the optimal time for either manufacturing more products, if they are managing a manufacturer's warehouse, or to order more if the products are being stored as stock at a retail store.

Concrete is known as one of the main materials in any construction project and the required concrete with a desired quality and quantity is of special importance.

About 71 million tons of Portland cement and 2.0 million tons of masonry cement were produced in the United States (production was 98 plants in 35 states) in 2012. The total value of sales was around $ 7.5 billion. Most of the cement was used to make concrete, with a value of at least $ 41 billion. About 70% of cement sales went to ready-mix concrete producers. Approximately 4,000 companies and government agencies produced sand and gravel for construction, with an estimated value of $ 6.4 billion, from some 6,500 operations in 50 states. It is estimated that around 43% of the construction of sand and gravel was used as concrete aggregates.

The above statistics clearly show the direct effect of sand, gravel and cement on the cost of concrete production. Therefore, the control of inventory for this material, plant capacity and the planning of concrete production can lead to an optimal production of concrete, to an optimal use of the material, to an energy saving in the production of this material, reduced loss of materials, increased sales of concrete produced, reducing the costs of order and storage of this material.

Therefore there is a need for carrying out and evaluation of optimal inventory level and plant capacity in a cement plant, and this study provides a basis on that.

1.1.1 AshakaCem

The Ashaka Cement Plant in the Northeast region also aims to provide creative and qualitative solutions to the needs of small and large projects. Over the last three decades, the Ashaka cement plant has contributed significantly to the economic growth and development of northeastern Nigeria and is well positioned to continue to impact the region's ecosystem.

AshakaCem Plc was incorporated in August 1974 and commenced production in 1979 as a cement producing and selling company with the name Ashaka Cement Company limited. AshakaCem Plc is a subsidiary of Lafarge Africa Plc. The company produces Portland limestone cement. The company is also involved in coal mining and milling operations.

The company was initiated by the defunct Nigerian Industrial Development Bank (NIDB) Limited, the Nigerian Bank for Commerce and Industry (NBCI), Northern Nigeria Investment Limited (NNIL) and the Government of the then North-Eastern state (now Adamawa, Bauchi, Borno, Gombe, Taraba and Yobe States). Current annual cement production of the plant is 1MMT with plans for expansion.

1.2 Statement of problem

One of the major problems in managing construction materials and equipment is tracking them in the supply chain and knowing their location on large job sites. Fortunately, location can now be automatically estimated within metres using new emerging technologies.

For years, different steps in a supply chain have operated, almost independently. The high coordination between steps improves the performance of the supply chain. One of the challenges in managing the supply chain is to control the capital tied up in the raw material, the work in progress and the finished products, that is, the total investment in inventories. Efforts to link production management with various stock maintenance processes result in better planning of supply chain activities and better material management. These improvements resulted in better levels of customer service and lower inventories.

Taking into account the size, type and location of the site, one can decide if the concrete is manufactured on site or if it is transported from the ready-mix concrete (CMR) plants to the site through a cost-benefit analysis. However, it is imperative to create an intelligent system such as an inventory control system for raw materials for the production of concrete in batch processing plants. A batch processing plant is a set of equipment that is applied to prepare the concrete according to the desired mixing plan and also the delivery of the heavy material to the transport equipment before or after mixing the material in question. In general, it includes components such as cement silos, aggregates and water tanks, material transfer systems, weighing equipment, control equipment and other components such as heaters, chillers that are added if necessary. The high consumption raw material in the RMC plant that constitutes the almost total value of the shop's inventory includes sand, gravel and cement. The quantity and size of raw material reservoirs (cement silos, aggregates, water reservoirs and additives) depend on the demand for material and concrete in the plants and projects. To estimate the optimal terrain required for the storage of this material in batch processing plants, it is necessary to have the optimum order (demand) of this material in different periods. The analysis of the optimal input and output values ​​of this material requires the implementation of an inventory control system of the batch processing plant.

1.3 Objectives of the study

Ø Main objective

The main objective of this study is to evaluate the optimal inventory level and plant capacity in a cement plant.

Ø Specific Objectives

The following specific objectives were drafted by the researcher to help serve as a guide in executing the study.

1 To bring forward an understanding of optimal inventory level.

2 To examine the challenges of optimal inventory level faced by AshakaCem Plc.

3 To determine the optimal time and quantity of an order with mathematical models.

4 To make plans for products and plant capacity in AshakaCem Plc.

1.4 Research questions

Against the backdrop of the recent problems faced in cement industries with regards to inventory level and plant capacity, the following technical questions were coined.

1 What is optimal inventory?

2 What are the challenges of optimal inventory level faced by AshakaCem Plc?

3 What are the optimal time and quantity of an order with mathematical models?

4 What are the necessary plans for products and plant capacity in AshakaCem Plc?

1.5 Significance of the study

No research related to raw material inventory control in cement processing plants has been conducted particularly to estimate the required reservoirs for storage of materials based on optimal order quantity which necessitated this study. The presence of additional and excessive reservoirs for material increases aggravates supply costs, repair and maintenance cost, and non-optimal occupation of the plant land space. Inventory level control is a very important factor which specifies the health level of the supply chain and also the effects of the financial health of the balance sheet. Since 1990, supply chain management has been considered by academic researchers and field practitioners very much. Therefore, this study will help in providing knowledge to a wide range of individuals including researchers, field workers, academicians and so on.

1.5 Scope of the study

This study, “evaluation of optimal inventory level and plant capacity in a cement plant” is carried out on the basis of proffering solutions to the inventory challenges faced by cement companies. This study is therefore limited to AshakaCem Plc, Gombe, Gombe State, Nigeria.

1.6 Definition of terms

Inverntory: Inventory can be referred to as the items you keep in stock to process or resell. Keeping a high level of inventory allows you to easily meet customer demand

Cement: Cement is defined as a binder, a substance used for construction that sets, hardens, and adheres to other materials to bind them together. Cement is seldom used on its own, but rather to bind sand and gravel together. Cement mixed with fine aggregate produces mortar for masonry, or with sand and gravel, produces concrete.

Cement Mill: A cement mill can be defined as the equipment used to grind the hard, nodular clinker from the cement kiln into the fine grey powder that is cement.

Capacity Factor: The capacity factor can be defined for any electricity producing installation, such as a fuel consuming power plant or one using renewable energy, such as wind or the sun.

1.7 Organization of study

This research work is organized in five chapters.

Chapter one gives a general introduction to the aforementioned topic. The chapter comprises of background of the study, statement of the problem, objectives of the study, research questions, significance of the study, scope, and definition of terms.

Chapter Two gives a breakdown of a review of related literature.

Chapter three of this study is the research methodology which will also outline the model employed in the study.

Chapter four is the results and discussion will shows data interpretation.

Chapter five comprises of conclusion and recommendation.