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CAPACITY PLANNING AND PERFORMANCE IN THE NIGERIAN BREWING INDUSTRY

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CAPACITY PLANNING AND PERFORMANCE IN THE NIGERIAN BREWING INDUSTRY

ABSTRACT

The study investigated the influence of capacity planning on the performance of brewery firms in South Eastern States of Nigeria. The specific objectives of the study were to determine the extent to which capacity planning enhanced the level of performance in the brewing industry in South Eastern Nigeria. The study examined the nature of the relationship between capacity requirement planning and materials requirements planning, to ascertain the extent to which capacity planning sustains organizations competitive advantage, thereby determining the relationship between capacity planning and capacity building, determining the steps toward developing a capacity planning that affects the profitability in the brewing firms in the area studied. The research design adopted in the study was a combination of the survey, oral interview and model modifications. Hypothesis 1,3 and 5 were  tested using Z test of population proportions and 2 and 4 using Spearman’s Rank Correlations revealed that capacity planning to a large extent enhanced the performance in the brewing industry in Southeastern Nigeria, that there was a significant capacity planning to a large extent (p< 0.05) enhanced the performance in the brewery industry in the area studied. Capacity requirement had positive relationship (p< 0.05)with materials requirements planning. Capacity planning to large extent (p< 0.05) sustained the organizations competitive position. There was significant positive relationship (p< 0.05) between capacity planning and capacity building. The steps of the capacity plan positively (p< 0.05) affected profitability. Positive relationship between capacity requirements planning and materials requirements planning, that capacity planning to a large extent sustained the organizational competitive advantage, that there is a positive relationship between capacity planning and capacity building, that the 12 steps of the capacity plans were developed that positively affected the profitability in the brewing industry in the area studied.  In conclusion, the finding that capacity planning enhanced the performance in the brewing industry in Southeastern Nigeria implied that it made the brewing companies studied to achieve their organizational goals and objectives. The finding that there was a significant positive relationship between capacity requirements planning and materials requirements planning implied that there was a positive correlation between them. This means that materials requirements planning which was a method of coordinating the detailed production plans could lead to an enhancement of capacity requirements planning which meant taking future decisions on the items needed for the production capability of the brewing facility.

CHAPTER ONE

1.1 BACKGROUND TO THE STUDY

Capacity Planning has enhanced the performance of the brewing industry in Nigeria right from 1946 when Nigerian Breweries Limited set up the First Brewery in Nigeria (Nigerian Breweries PLC, 2011). The direction has been to increase the number of breweries. Guinness Nigeria Plc set up a Brewery in Lagos in 1963. The magnitude is now five breweries located at Ikeja, Ogba, Benin, Jos and Aba (Guinness Nigeria Plc; 2011). Capacity has continued to be the production capability of a facility in terms of the inputs, throughput and outputs.
 
In 1989, the Federal Government policy of using local inputs such as sorghum and corn instead of malled barley negatively affected a lot of the breweries. Both Nigerian Breweries Plc and Guinness Nigeria Plc depended on the assistance of the Parent Companies. The Brewing Industry in Nigeria have relied on capacity planning for meeting the increased demand for beer, stout and malt products through Demand Forecasting and Capacity Requirements Planning (Guinness Nigeria Plc, 2011; Nigerian Breweries Plc, 2011).
 
Capacity building has followed capacity planning in the creation of the enabling environment with appropriate policy and legal frameworks, institutional development including community development (of women in particular). Human Resource Development and strengthening of managerial systems, adding that, UNDP recognizes that capacity building is a long-term, continuing process, in which all stakeholders participate (ministries, local authorities, non-governmental organizations and water user groups, professional associations, academics and other (citation: UNDP). Capacity building is very necessary for capacity planning. Planning is deciding in advance what is to be done, when, where, how and whom it is to be done. In that it bridges the gap from where we are to where we want to go in any business building and performance. It is continuous, periodic managerial activities and reduces uncertainty.  Capacity is the production capability of a facility and it is measured in terms of inputs, throughput and outputs. Manufacturing is that aspect of industry in which products, waste products and services are produced (UNDP, 2012).
 
By 1992, capacity building became a central concept in Agenda 21 and in other United Nations Conference on Environmental and Development (UNCED) Agreements. By 1998, the UN General Assembly had commissioned and received evaluations of the impact of the UN system’s support for capacity building. These evaluations were carried out by the UN Department of Economic and Social Affairs as part of the United Nations GATT Agreement’s (UNGA’) triennial policy review during which it looks at all UN system development activities (UN Publications Section). Since then, the issue of capacity building has become a major priority within the global conventions, the Global Environmental Facility (GEF) and the International Communities.
 
In the year 2000, UNDP through its Strategic Partnership with the GEF Secretariat, launched the Capacity Development Initiative (CDI), a consultative process involving extensive outreach and dialogue to identify countries’ priorities issues in capacity development needs, and based on these findings, to develop a strategy and action plan that addresses identified needs to meet the challenges of global environmental action.
 
In 2002, the World Summit in Sustainable Development (WSSD) and the Second GEF Assembly reaffirmed the priority of building the capacity of development countries. The WSSD recommended that GEF resources be used to provide financial resources to developing countries to meet their capacity needs for training, technical knowhow and strengthening national institutions.
 
Capacity Building is, however, not limited to international aid work. More recently, the term is being used by governments to transform community and industry approaches to social and environmental problems.
According to Skinner (1985), there are five periods of industrial history that stand out in the development of manufacturing management:
1780 – 1950    Manufacturing leaders as technology capitalists.
1850 – 1890    Manufacturing leaders as architects of mass production.
1890 – 1920    Manufacturing management as movers in the organization.
1920 – 1960    Manufacturing management refines its skills in controlling and stabilizing.
1960 – 1980    Shaking the foundations of industrial management.
During the early years of the indusial revolution, production began to shift from low volume activity to larger-scale operations. Although the scale of these early operations was large, the machinery was not particularly complex and production operations were rigid. The management of these operations remained essentially in the hands of top management with the aid of overseers. Working conditions during this period were often abysmal.
 
The major thrust of the Industrial Revolution took place in the (second 40-year) period from 1850 – 1890. During this period, the concepts of mass production and the assembly line were born. Since coal could be efficiently transported, plants could be located in a larger variety of locations. The plant foreman had enormous power and influence during this period.
 
According to Skinner(1985), the job of production manager actually came into being in the period 1890 – 1920. Manufacturing processes became too complex to be handled by top management personnel only. With this complexity came the need for scientific management techniques. Frederick Taylor (often called the father of industrial engineering) is generally credited with being the originator of the concept of scientific management. Most of the scientific management techniques introduced around the turn of the century involved merely breaking a task down into its various components. These techniques are probably less scientific than just orderly. With the new levels of complexity, the single plant foreman could no longer coordinate the demands of producing a varied product line and changing production schedules.
 
The enormous worldwide depression that took place n the 1930s notwithstanding, in many ways the period 1920 – 1960 can be considered a golden age for the development of industry in the United States. By 1960, the United States was the preeminent economic power in the world. With the growth of the labour movement, working conditions had improved enormously. True scientific methods started finding their way into the factory. Mathematical models for learning, inventory control, quality control, production scheduling, and project management gained acceptance by the user community. Top management often came through the ranks of production professionals during this period.
 
Since 1960, many American companies have relinquished their domination of certain markets. Products that were traditionally produced in the Untied States are now imported from Germany, Japan, and the Far East. Many products are produced more cheaply and with higher quality overseas. Furthermore, management-employee relations are often better in foreign companies. Quality circles, introduced in Japan, allowed employees to input opinions about product development and production procedures. Far more sophisticated scientific production methods have been adopted in Japan than in other countries. For example, there are many more robots and modern flexible manufacturing systems in Japan than in the United States (Skinner, 1985).
 
Over the past five years, a broad conceptual framework has emerged. This approach is increasingly being adopted by the development cooperation community. It involves a System Perspective that addresses various levels of environmental management capacities (i.e. capacities of institutions, individuals, overall countries and regions) (Vallejo, 2006). This approach lays greater emphasis on the Capacity Development Process itself, on local ownership of its process and on equal partnership in its support (Lafontaine, 200).Capacity Building involves human resource development, the development of organizations and promoting the emergence of an overall policy environment, conducive to the generation of appropriate responses to emerging needs (UNDP/UNDOALOS, 1994).
 
The concept of capacity building includes the following issues.
Human resource development, the process of equipping individuals with the understanding, skills and access to information, knowledge and training that enables them to perform effectively.Organizational development, the elaboration of management structures, processes and procedures, not only within organizations but also the management of relationships between the different organizations and sectors (public, private and community).Institutional and legal framework development, making legal and regulatory changes to enable organizations, institutions and agencies at all levels and in all sectors to enhance their capacities.The levels of capacity building are that:The Individual: refers to the process of changing attitudes and behaviours-imparting knowledge and developing skills while maximizing the benefits of participation, knowledge exchange and ownership.The Institution: focuses on the overall organizational performance and functioning capabilities, as well as the ability of an organization to adapt to change.
 
The System: emphasizes the overall policy framework in which individuals and organizations operate and interact with the external environment (Lafontaine, 2000).
 

1.2   STATEMENT OF THE PROBLEM

There is difficulty in determining the extent to which capacity planning enhanced performance in the brewing firms in Southeastern Nigeria from the inception of brewing industry in Nigeria in 1946 to date. Capacity has consistently and continuously determined operational capabilities of decision, focasting changes in demand attitudes, skill and aids proximity to market future time services needed and work load leading to various shortage or lack of stock in production process which involves complex measures in terms of input, through put and output. This problem leads to other challenges in ascertaining the relationship between capacity requirementsplanning and material requirements planning and the extent to which capacity planning sustains organizations’ competitive advantage.
 
Determining the extent of the relationship between capacity planning and capacity building and the steps towards developing a capacity plan to improve the profitability in the brewing sector have also produced several challenges and these lead to lack of gateways. It is these challenges that are to be addressed in this study.
 
The capacity planning problem of a brewing firm would make it have less output in the form of Lager beer, Stout and malt than is demanded by the present and potential customers. One of the numerous ways of solving this problem is to build a new brewery firm. This is a long term decision that will raise new issues of plant location, plant layout, selection and design of the product, selection of equipments and processes, production design of items processed, and job design. If these issues are not properly handled, performance will be negatively affected. This is why the topic on capacity planning and performance in the Nigerian brewing industry in the Southeastern States of Nigeria is apt.
 

1.3 OBJECTIVES OF THE STUDY

The thrust of the study is the effect of capacity planning on performance in the Nigerian brewing industry in Southeastern Nigeria.
The specific objectives of the study are as follows:

  • To evaluate capacity planningand performance in thebrewing industry in Southeastern Nigeria.
  • To assess capacity requirements planning and materials requirements planning.
  • To ascertain the extent to which capacity planning sustains organisations’ competitive advantage.
  • To evaluate the relationship between capacity planning and capacity building.
  • To assess the steps toward developing a capacity plan and the profitability in the brewing firms in the area studied.

1.4 RESEARCH QUESTIONS

This research is designed to provide answers to the following questions:

  1. To what extent does capacity planning enhances performance in the brewing industry in South Eastern Nigeria?
  2. What is the nature of the relationship between capacity requirements planning and material requirements planning?
  • What is the extent to which capacity planning sustains organisations’ competitive advantage?
  1. What is the extent of the relationship between capacity planning and capacity building?
  2. How do we assess the steps that could be used to develop capacity planning that would affect profitability in the brewing industry in the area to be studied?

1.5 RESEARCH HYPOTHESES

Five research hypotheses have been formulated to guide the study. They are as follows:
(i):        Capacity planning to a large extent does not enhances performance in the brewing industry in South Eastern Nigeria.
(ii):      There is no significant relationship between capacity requirements planning and material requirements planning.
(iii):     Capacity planning to a large extent does not sustain organizations’ competitive advantage.
(iv):      There is no positive significant relationship between capacity planning and capacity building.
(v):       The steps towards developing capacity plan that would not affect profitability in the brewing industry in South Eastern Nigeria are of the same order of magnitude.

  • SIGNIFICANCE OF THE STUDY

This study will be of immence significance to the Shareholders, Board members, Manager and Stakeholders of brewing firms. It will also benefit officers of government, the public at large and future researchers in the following ways: Shareholders, Members, Managers, Stakeholder, Officers of  Government,The public and Researchers.
 

1.7 SCOPE AND DELIMITATION OF THE STUDY

The focus of the study is to determine the extent to which capacity planning enhances the performance in the brewing industry in the South Eastern Nigeria. The brewing companies were chosen across the major zones in south eastern Nigeria in terms of subject matter, methodology, spatial and data that best fits the study.
 
The geographical scope is South Eastern Nigeria, and the time scope of the study is 2 years from December 2010 to December 2012. The brewing firms studied are Nigeria Breweries Plc, Ninth Mile  Enugu, Guinness Nigeria Plc, Aba (former Dubic Breweries Plc), Premier Breweries Plc Onitsha and Continental Breweries Plc Awoomama.
 

1.8       LIMITATIONS OF THE STUDY

  • Attitude of Respondents: Privacy of information and attitude of respondents were alo being constraints. Some of the respondents were reluctant at releasing the required information as a result of prejudiced opinion conceived by the study.
  • The Survey Research Design: It had the limitation that some respondents were not willing to give answers to the probes. This limitation is minimized by persuading the respondents to give answers.
  • The oral interview: Ithad the limitation that the interviewing situation may change from one situation to another especially if more than one field data collector is used. This limitation is minimized by the Researcher doing most of the field work.
  • The Questionnaire Research instrument: It had the limitation that its structured nature compelled some of the respondents to give answers that they do not fully endorse. This limitation was minimized by also asking some open-ended questions in an oral interview schedule.
  • The oral interviewschedule: It had the limitation that the open-ended questions asked were difficult to analyse. This limitation was minimized by also using relative frequencies as the numbers given over the total number of research instruments returned.
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  • 1.9    PROFILES OF THE BREWING FIRMS STUDIED
  • Historical Development of Nigerian Breweries
  • Nigerian Breweries Plc (NBPLC) is the country’s pioneer factory. Incorporated in 1946, it commenced production in 1949. It started as a joint venture between the United African Company (UAC) International, UK and Heineken of Holland, Thus, at inception, it was 100 per cent foreign owned. By the early 1950s, when it began operating fully, some indigenous traders already involved with its products were invited to become shareholders. Under the indigenization policy of the early 1970s the foreign shareholders were forced to sell a significant proportion of their holdings. Today, the company is 60 per cent Nigerian owned and 40 per cent foreign owned. The 60 per cent Nigerian stake is held by company employees and members of the public, while the 40 per cent foreign ownership is split almost equally between CWA Holdings Limited (for Unilever) and Heineken Brouwerijen BV (Nigerian Breweries Plc, 2011).

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