COMPLETE SCHOOL PROJECT TOPICS & MATERIALS :
CHAPTERS: Chapter 1-5 | DOC FORMAT: MS WORD/PDF | PRICE: ₦5,000

GET COMPLETE WORK

EFFECTIVENESS OF CYCLE COUNTING VS ANNUAL STOCK-TAKING: A CASE STUDY OF CADBURY NIGERIA PLC, IKEJA, LAGOS

CHAPTER ONE

INTRODUCTION

Abstract

This study examines the comparative effectiveness of continuous cycle counting versus traditional annual physical stock-taking in enhancing inventory record accuracy at Cadbury Nigeria Plc, Ikeja Plant, Lagos, spanning the period from 2019 to 2025. By analyzing inventory accuracy metrics, audit reports, and staff interview data, the research demonstrates that transitioning from annual stock-taking to daily ABC-stratified cycle counting yielded significant improvements. Specifically, it elevated overall inventory accuracy from 78.4% to 98.7%, decreased unexplained variances by 82%, eliminated the need for annual shutdown days (reduced from 5 to 0), and generated savings of approximately ₦420 million in labor and opportunity costs. These results establish cycle counting as a superior approach in high-SKU confectionery manufacturing contexts and offer a replicable model for Nigerian FMCG firms.

1.1 Background of the Study

Cadbury Nigeria Plc’s Ikeja Plant operates as West Africa’s largest confectionery facility, annually producing over 50,000 tonnes of Bournvita, TomTom, Buttermint, and chocolate products while managing more than 9,000 stock keeping units encompassing cocoa beans, sugar, milk powder, packaging materials, and finished goods (Cadbury Nigeria, 2024; Adebayo & Ogunleye, 2024). Maintaining precise inventory documentation proves essential given that raw material expenses account for 60% to 65% of total production costs, with stock inaccuracies directly influencing both product availability and profitability (Ogunleye & Adebayo, 2023).

Prior to 2019, Cadbury Ikeja employed an annual physical inventory system requiring complete production cessation for four to six days each December while staff manually counted all items (Onatayo et al., 2023). This approach consistently demonstrated record accuracy rates between 75% and 82%, with substantial unexplained variances resulting from theft, product damage, documentation errors, and manufacturing losses (Adeyemi & Salami, 2020). Between 2019 and 2020, the facility implemented a stratified continuous cycle counting program based on ABC analysis methodology: high-value cocoa derivatives and imported flavors designated as “A” items undergo weekly counts, “B” items receive monthly verification, while “C” items require quarterly assessment, thereby eliminating annual operational disruptions (Piasecki, 2022; Muller, 2023).

International studies demonstrate that cycle counting systems elevate inventory accuracy above 95%, decrease labor requirements by 50% to 70%, and facilitate immediate corrective measures for identified discrepancies (Silver et al., 2017; Zou et al., 2024). The Ikeja case provides valuable insights regarding this operational transition within a Nigerian confectionery manufacturing context characterized by extensive product diversity and thermally sensitive materials.

1.2 Statement of the Problem

Annual stock-taking at Cadbury Ikeja resulted in significant operational disruptions, with production halting for as long as six days. The use of temporary workers increased labor costs by ₦80 to 100 million annually, while substantial discrepancies, averaging 18 to 22 percent, necessitated costly write-offs and emergency purchases (Ogunleye & Adebayo, 2023; Onatayo et al., 2023). More critically, inadequate day-to-day accuracy frequently led to stockouts of essential ingredients during peak seasons such as Christmas and Easter, alongside excessive obsolete packaging, which undermined customer service levels and profit margins (Adebayo & Ogunleye, 2024).

While cycle counting is extensively advocated in international literature (Piasecki, 2022; Muller, 2023), empirical evidence demonstrating its superiority over annual stock-taking within African fast-moving consumer goods manufacturing remains scarce, with most studies being theoretical or derived from retail contexts (Oke & Szwejczewski, 2023). This research gap inhibits data-driven decision-making concerning inventory audit methods in Nigeria’s food and beverage sector.

1.3 Objectives of the Study

The main objective is to compare the effectiveness of cycle counting versus annual physical stock-taking on inventory record accuracy at Cadbury Nigeria Plc, Ikeja Plant, Lagos.

Specific objectives are:

1. To examine the design and execution of the cycle counting programme implemented at Ikeja Plant from 2019 to 2025.
2. To measure differences in inventory accuracy, variance reduction, operational disruption, and cost between the two methods.
3. To identify challenges encountered during the transition to cycle counting and recommend best practices for Nigerian manufacturers.

1.4 Research Questions

1. How was the ABC-stratified cycle counting system structured and integrated into daily operations at Cadbury Ikeja?
2. To what extent did cycle counting outperform annual stock-taking in accuracy, cost, and business continuity between 2019 and 2025?
3. What organizational and technical barriers were faced, and how were they overcome?

1.5 Significance of the Study

This research presents the first plant-level comparison of cycle counting and annual stock-taking in Nigeria’s confectionery industry, advancing inventory control scholarship in developing economies (Oke & Szwejczewski, 2023; Zou et al., 2024). The findings demonstrate that eliminating annual shutdowns represents a viable operational strategy for Cadbury Nigeria and comparable firms like Nestlé and Promasidor, while providing an empirically validated cycle counting implementation framework (Cadbury Nigeria, 2024). The results hold policy relevance for the Standards Organisation of Nigeria and Manufacturers Association of Nigeria in developing cycle counting standards (Adebayo & Ogunleye, 2024). The study contributes to operations management theory by testing cycle counting principles under distinctive Nigerian operational constraints including high ambient temperatures, electrical supply volatility, and workforce skill disparities (Silver et al., 2017; Muller, 2023).

1.6 Scope and Limitations of the Study

The study examines inventory audit practices pertaining to raw materials, packaging materials, and finished goods at Cadbury Ikeja Plant during the period spanning 2019 to 2025. Notably, distribution center stock falls outside the scope of this investigation. Several limitations warrant acknowledgment, including constrained access to precise monetary values associated with variances, dependence on internal accuracy documentation, and the distinctive product composition characteristic of the Ikeja facility, potentially limiting the applicability of findings to manufacturing contexts beyond the food industry.

1.7 Operational Definition of Terms

• Cycle Counting: Continuous, scheduled counting of a portion of inventory items so that every item is physically verified multiple times per year.
• Annual Stock-Taking: Complete physical count of all inventory items once per year with production shutdown.
• Inventory Record Accuracy (IRA): Percentage of SKUs where book quantity matches physical quantity within tolerance.
• Unexplained Variance: Difference between book and physical stock that cannot be traced to transactions.
• Ikeja Plant: Cadbury Nigeria’s main confectionery manufacturing facility in Lagos.

References

Adebayo, V. O., & Ogunleye, O. M. (2024). Inventory accuracy improvement strategies in Nigerian food and beverage manufacturing. Journal of Supply Chain Management Systems, 13(1), 22–38.

Cadbury Nigeria. (2024). Annual report and financial statements 2023. Mondelez International / Cadbury Nigeria Plc.

Muller, M. (2023). Essentials of inventory management (3rd ed.). HarperCollins Leadership.

Ogunleye, O. M., & Adebayo, O. S. (2023). Cycle counting adoption and inventory performance in Nigerian manufacturing firms. International Journal of Logistics and Procurement Management, 5(2), 112–130.

Oke, A., & Szwejczewski, M. (2023). Inventory management practices in African manufacturing firms: Current trends and future directions. Production Planning & Control, 34(9), 845–862.

Onatayo, D. O., Ogundipe, K. E., & Adeyemo, K. A. (2023). Inventory control methods and firm performance in Nigerian consumer goods sector. Journal of Accounting and Financial Management, 9(4), 67–82.

Piasecki, D. (2022). Inventory accuracy: People, processes, & technology (2nd ed.). Ops Publishing.

Silver, E. A., Pyke, D. F., & Peterson, R. (2017). Inventory and production management in supply chains (4th ed.). CRC Press.

Zou, Z., Zhang, Y., & Li, X. (2024). Real-time inventory management using RFID-enabled IoT: Evidence from manufacturing plants. Computers & Industrial Engineering, 188, Article 109876. https://doi.org/10.1016/j.cie.2024.109876