This document discusses inventory management and its effect on organizational effectiveness. It begins by defining inventory management and describing the different types of inventory. It then discusses the purposes of holding inventory and different inventory systems like fixed order quantity and fixed order interval systems. The document also covers inventory control methods like perpetual, physical and materials control cycle. It presents research on four organizations in Enugu, Nigeria to analyze the relationship between inventory management and organizational productivity, profitability and effectiveness. The findings indicate a significant relationship between good inventory management and organizational effectiveness, and that inventory management positively impacts organizational productivity and profitability.
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Internal and external institutions and influences of corporateGrace Fatima Abelida
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Chapter 4 Accounting information system, the revenue cycle, overview, three key processes, physical system, Sales order processing, sales return processing, cash receipts and controls over revenue cycle
Lecture 21 expenditure cycle part i - accounting information systesm james ...Habib Ullah Qamar
the expenditure cycle, the physical phase, financial phase, the purchases system, the cash disbursement system, conceptual revenue cycle, manual revenue cycle and computer based accounting information systems
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the expenditure cycle, the physical phase, financial phase, the purchases system, the cash disbursement system, conceptual revenue cycle, manual revenue cycle and computer based accounting information systems
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Inventory Management System and Performance of Food and Beverages Companies i...IOSR Journals
Inventory management decisions are an integral aspect of organisations. Inventory postponement as
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inventory items until demand or usage requirements are known with certainty. This is an effective supply chain
strategy adopted by most manufacturing organisations by reducing the inventory, and in turn reducing the cost
of obsolete stock. This study explores the relationship between inventory management and control and
performance and Food and Beverages companies in Nigeria. Secondary data were obtained from annual
financial reports and accounts of Food and Beverages companies listed on the Nigerian Stock Exchange. The
data obtained were analyzed using simple and multiple regression models. The results show that there
significant relationship between inventory management and control and the performance of Food and
Beverages companies in Nigeria. The multiple regression correlation coefficient (R) =0.996, R2=0.990 and pvalue
=0;00<0.05 The results also show the relative importance of the inventory management decisions made
by the organisation, and the implications these decisions have on the consumer. The findings show that the three
key qualities that are essential in inventory management decisions for manufacturing organisation from the
perspective of the third party logistics provider are customer satisfaction, on time delivery and order fulfillment
IOSR Journal of Mathematics(IOSR-JM) is an open access international journal that provides rapid publication (within a month) of articles in all areas of mathemetics and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications in mathematics. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
The role of raw material management in production operationsijmvsc
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salient issue of inefficiency in the practice of raw material management and its effects on production
operations of manufacturing concerns by theoretical review. The paper concludes that, should
practitioners become proactive by applying proffered solutions, efficiency will be achieved in management
of raw materials and production operations.
Factors Affecting Inventory Management Efficiency in Kenya Seed Company, Kita...paperpublications3
Abstract: Most of parastatal in Kenya face problems of efficiency in their inventory management systems. Despite this fact, limited scientific research has been undertaken to examine the factors that influence inventory management efficiency in Kenya Seeds Company. The main objective of the study was to assess factors affecting the effectiveness of inventory management practices in Kenya Seed Company. The study adopted a case study research design to produce detailed description in order to evaluate the phenomena. The target population was 110 management staff working at the Company’s procurement departments from which a sample size of 87 respondents was drawn. Questionnaires were used to collect data and descriptive statistics data analysis method applied to analyze data using Statistical Package for Social Sciences version 20. Data analysis involved inferential statistics where regression analysis was used to establish the association between study variables at 95% confidence level, p-value ± 0.05. Staff training, level of technology, stock evaluation and procurement policies had a positive and significant association on the efficiency of inventory management at Kenya Seed Company. The results showed that most of the staff do not have necessary competency to run the procurement function, there is poor stock audit practices, outdated procurement systems and long bureaucratic procedures. The research finding is helpful to academicians, procurement officers and the Kenya seed company as a whole on the determinants of procurement performance.
Keywords: Inventory management efficiency, level of technology, procurement policies, Staff training, and stock evaluation.
Title: Factors Affecting Inventory Management Efficiency in Kenya Seed Company, Kitale Branch, Kenya
Author: Okwaro, Fredrick, Iravo, Mike, Berut, Zipporah
ISSN 2349-7807
International Journal of Recent Research in Commerce Economics and Management (IJRRCEM)
Paper Publications
Corporate Governance Mechanism and Sustainability of Health Care Firms in Nig...ijtsrd
This study was carried out to examine the relationship between corporate governance mechanism and sustainability of health care firms in Nigeria. The study is vital as it portrays the extent to which corporate governance mechanism ensures organizational sustainability. In order to determine the relationship between corporate governance mechanism CGM and sustainability, CGMs key proxy variables were used in the study, namely board independence BI and board diligence BD while sustainability on the other hand was measured by social environmental performance. Two hypotheses were formulated to guide the investigation and the statistical test of parameter estimates was conducted using ordinary least square model. The study anchored on the Stewardship Theory adopted an Ex Post Facto Approach. Hence, data were collected from the annual reports and accounts of listed health care firms in Nigeria for the period 2016 2020. The empirical analysis of the research indicates that there is a significant and positive relationship between board independence, board diligence and sustainability of listed health care firms in Nigeria at 1 significant level. Thus, the study concludes that corporate governance mechanism ensures sustainability of quoted health care firms in Nigeria. In lieu of this, the study recommended that companies should re examine the frequency of meetings of the Board. Attention should be focused on the efficiency and not the frequency of meetings of the Board. Also in the composition of corporate board, there shall be independent directors and female directorship presence as thus ensures organizational sustainability. Onuora, J. K. J. | Obiora Fabian. | Iloghalu Chika. R "Corporate Governance Mechanism and Sustainability of Health Care Firms in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-6 | Issue-3 , April 2022, URL: https://www.ijtsrd.com/papers/ijtsrd49500.pdf Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/49500/corporate-governance-mechanism-and-sustainability-of-health-care-firms-in-nigeria/onuora-j-k-j
Cost Implication of Inventory Management in Organised SystemsDr. Amarjeet Singh
This paper investigates the role of cost implication in
inventory management in order to improve Institutions’
Stores. The study takes a critical look at the costs involved and
the use of economic order quantity as a tool that minimizes the
total inventory costs, the time saved between the manual and
the automated operational system using a Nigerian University
Store, AYZ University (not the real name because of the
ethical issue), as a case study. The study was being guided by
the following objectives; to have stocks available when
required, to maintain accurate stock records and facilities, and
to recommend area improvement of the inventory system at
AYZ University Stores. Findings revealed that the economic
order quantity is seen as a control technique that is attributed
to determine the inventory costs and how it can be minimized.
The data collected from the store were analyzed and the
results obtained shows that the existing system which is
majorly manual based is not effective when it comes to time
management and efficiency. A new automated system,
computerized maintenance store system (CMMS) was
proposed for development and implementation for the AYZ
University Store for her end users of the store and her clients
from within and outside the University system. This would be
greatly improved in terms of both financial and time cost of
inventory management.
Globalization and managing across cultures and borders make the business sense of efficient supply chain management more challenging than ever before. The demand and supply chain can now be as long or as short as the distance between suppliers and consumers who have critical influence on the value chain. This is important because the demand and supply chain processes often have profound effect on productivity levels of the organization. The exploratory research design was deployed for the investigation to gauge the effect of supply chain management on productivity. Through regression analysis it was found that for a 1 percent increase in supply chain management productivity increases by 1.88 percent. Organizations around the globe are getting increasingly concerned about the process with which their goods and services reach the ultimate consumer or customer. It is believed that an effective and efficient supply chain management is the corner stone for customer satisfaction, and to this extent, supply chain management is an important topic in business and management today. According to Chase, et al (2001) the critical idea of supply chain management is to apply a total system approach to managing the entire flow of information, materials and services from raw materials suppliers, through factories and warehouses to the end customer. They posit that the idea of supply chain management comes from a picture of how organizations are linked together as a particular company. Such linkage is typically between suppliers that provide inputs, manufacturing and service support operations that transform the inputs into products and services, and the distribution and local service providers that localize the products. They argue that localization can involve just the delivery of the products or some other processes that tailors the products or services to the needs of the local markets and customers. Enterprises have come to realize that achieving significant competitive advantage depends to a great extent on the way they configure and manage their supply chain operations. Stevenson (2002) states that a supply chain is a sequence of organizations – their facilities, functions, and activities that are involved in producing and delivering a product or service. According to him, the sequence begins with basic suppliers of raw materials and extends all the way to the final customer. Basic facilities in supply chain management include warehouses, factories, processing centres, distribution centres, retail outlets, and offices. On the other hand, the major activities in supply chain management include forecasting, purchasing, scheduling, production, distribution, delivery, and customer service (Copacino, 1997, Marshall, 1997, Handfield, et al, 1999). Stevenson (2002) elaborates that supply chains are sometimes referred to as value chains; a term that reflects the concept that value is added as goods and services progress through the chain supply or value chains
Effects of Internal Control on the Financial Performance of Processing Firms ...paperpublications3
Abstract: Internal control is a system structured within the corporation whose goal is to raise efficiency and effectiveness of activities. The main objective of the study was to establish effects of internal control systems on the financial performance of Menengai Oil Company, Kenya. The specific objectives of the study were to determine the effect of control environment on the financial performance of Menengai Company, determine the influence of risk assessment on the financial performance of Menengai Company and to establish the influence of information systems on financial performance of Menengai Company. The study adopted a survey research design. A census of 189 respondents was used in the study. The data collected were first be tabulated, then analyzed by use of descriptive statistics and inferential statistics. The results were presented in charts, tables and graphs. ANOVA tests confirmed that control environment, risk assessment and information have a significant influence on the financial performance of Menengai Company. This study will shed light on the various internal control activities which can be put in place by the management of Menengai Company.
Keywords: Internal Control, Control environment, Risk Assessment, Information Systems, Menengai Oil Company.
Title: Effects of Internal Control on the Financial Performance of Processing Firms in Kenya: A Case of Menengai Company
Author: Janet Cheptoo Bett, Dr. Florence Sigara Memba
ISSN 2349-7807
International Journal of Recent Research in Commerce Economics and Management (IJRRCEM)
Paper Publications
The Impact of Inventory Management on Manufacuring Industryinventionjournals
Inventory is generally considered to comprise in three main areas which are raw materials, work in progress and finished goods. Where these are held and in what quantities, and how they are managed will vary significantly from one organization to another. The activities of inventory management involves are identifying inventory requirements, setting targets, providing replenishment techniques and options, monitoring item usages, reconciling the inventory balances, and reporting inventory status. In order to have clear inventory management, a company should not only focus on logistic management but also on sales and purchase management. Inventory management and control is not only the responsibility of the accounting department and the warehouse, but also the responsibility of the entire organization. Actually, there are many departments involved in the inventory management and control process, such as sales, purchasing, production, logistics and accounting. All these departments must work together in order to achieve effective inventory controls. Inventory includes raw material in progress, finished products, general Suppliers and equipment etc. inventory control may defined as systematic location, storage and Recording of goods in such a way that desired degree of service can be made to the operating shops at minimum ultimate cost. The need for inventory control is to maintain stock of goods and ensure Manufacturing according to the production schedule based on sale requirement and the lowest possible ultimate cost to the customer. Every enterprise needs inventory for smooth running of activities, it serves as link between production and distribution process and there is general time lag between the recognition of a need and its fulfillment. The greater time lag, the higher the requirement for inventory. The unforeseen fluctuation in demand and supply of goods also necessitate the need for inventory as it provides cushion for future price fluctuation. This paper includes the concept of inventory management, nature of inventory management, materials management techniques and inventory accounting
A project on inventory management. The necessity of effective inventory management is being increasingly realized in industrial and non-industrial organization both in India and abroad. This realization has come about because of increasing complexity of the task of managers and administrators. In most organization, the problem of effective inventory control is now viewed as the most critical problem with changes in social climate. While these can be great assets to the organizations, they become problems if the organization is not able to manage inventory properly.
Liquidity and profitability are the two vital aspects of corporate business. Any business cannot run without these two. A firm may run without profits for sometime; but with no liquidity, the firm cannot run their business. That is why management of inventory is an integral part of corporate planning in business life.
The proper inventory control system leads to an optimum utilization of resources. Idle materials are of a financial burden to the organization. Thus proper, inventory management directly assists in efficient functioning of the company. S.L. Goel says “takecare of the forest, the tree will take care of itself”, it should be the main motto of an inventory controller.
In inventory management, various methods and techniques can be adopted to control the inventory like, prompt maintenance of registrars, proper raw material arrangement, and fixation of various control levels and application of inventory control techniques and bin card system etc, which are relevant for inventory control in stores department.
Inventory management will help an organization in dealing with the supply of the raw materials and other activity in order to achieve the maximum co-ordination and optimum expenditure on materials to increase the profits of the firm. CLA‟s inventory control system is chosen for the study; by the investigator is no expectation in view of growing significance of the efficient control of inventories. Hence, the researcher was prompted to take up this topic.
Influence of Inventory Management on Sales Growth of Food and Beverage Manufa...ijtsrd
The study investigated the influence of inventory management on the sales growth of selected food and beverage companies in Nigeria. Cross sectional survey research design was used. The target population comprised 2027 top, middle and lower level managers within the selected food and beverage companies in Lagos State, Nigeria. A stratified random sampling technique was used to select the sample size of 434. A structured closed ended questionnaire was used to collect data. Cronbach's alpha coefficients for the constructs ranged from 0.709 to 0.867. Hypotheses were tested using inferential statistics with the aid of SPSS V 25.0. The findings revealed that inventory management had significant effect on sales growth of selected food and beverage manufacturing companies in Nigeria Adj R 2= 0.390, F 4, 351 = 57.779, p 0.05 . There were significant influence ofinventory turnover, information technology, and inventory reorder point on sales growth of selected food and beverage manufacturing companies in Nigeria. However, inventory forecasting did not significantly influence sales growth of selected food and beverage manufacturing companies. The study concluded that inventory management significantly influence sales growth of selected food and beverage manufacturing companies in Nigeria. The study therefore recommends that management of the food and beverage manufacturing companies in Nigeria should ensures adequate implementation inventory management mechanisms in order to enhance high level of sales growth. Akinlabi, B. H. | Sonko, M. L. "Influence of Inventory Management on Sales Growth of Food and Beverage Manufacturing Companies in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-6 , October 2021, URL: https://www.ijtsrd.com/papers/ijtsrd47615.pdf Paper URL : https://www.ijtsrd.com/management/business-and-retail-research/47615/influence-of-inventory-management-on-sales-growth-of-food-and-beverage-manufacturing-companies-in-nigeria/akinlabi-b-h
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Effect of inventory management on organisational effectiveness
1. Information and Knowledge Management www.iiste.org
ISSN 2224-5758 (Paper) ISSN 2224-896X (Online)
Vol.3, No.8, 2013
92
Effect of Inventory Management on Organisational Effectiveness
Anichebe Nnaemeka Augustine1
:Emekanichebe @yahoo.com.
Management, University of Nigeria, Enugu Campus
Agu, Okoro Agu 2
:Don_okojombo@yahoo.com
Management, University of Nigeria, Enugu Campus
Abstract
The study of the “Effects of Inventory Management on Organizational Effectiveness in selected organizations in
Enugu, was carried out, to asses the impact of proper inventory management on organizational performances in
Emenite, Hardis & Dromedas and the Nigeria Bottling Company all in Enugu, Enugu State. Descriptive research
method, especially survey and case study were employed in carrying out the study. The population of the study
is six hundred and fifty eight (658). A sample size of two hundred and fouthy eight (248), was derived using the
Taro Yamene formula for sample size determination from a finite population. Data were generated using
questionnaire, oral interviews, observations, books, journals and the internet. Data were presented in tables and
analyzed using simple percentages. Pearson product moment correlation coefficient and linear regression was
used in the hypotheses testing. From the analyses, it was discovered that irrespective of the fact that the
organizations studied, painted the picture that they were applying the tenets of good inventory management, they
from time to time run into the problems of inventory inadequacy. This consequently affected their production,
leading to the scarcity of one brand of their products or the other, thereby affecting their profitability and
consequential effectiveness negatively. The Findings indicate that there is significant relationship between good
inventory management and organizational effectiveness. Inventory management has a significant effect on
organizational productivity. There is highly positive correlation between good inventory management and
organizational profitability. The study concluded that Inventory Management is very vital to the success and
growth of organizations. The entire profitability of an organization is tied to the volume of products sold which
has a direct relationship with the quality of the product Against this background the study recommended that
Organizations should diversify their inventory system to suit specific needs of production, and that management
should closely monitor and manipulate their inventory system to maintain production consistency for
organizational profitability and effectiveness.
Keywords:Inventory management, Organisational effectiveness, Firms
Introduction
Inventories are vital to the successful functioning of manufacturing and retailing organizations. They may consist
of raw materials, work-in-progress, spare parts/consumables, and finished goods. It is not necessary that an
organization has all these inventory classes. But, whatever may be the inventory items, they need efficient
management as, generally, a substantial share of its funds is invested in them. Different departments within the
same organization adopt different attitude towards inventory. This is mainly because the particular functions
performed by a department influence the department’s motivation. For example, the sales department might
desire large stock in reserve to meet virtually every demand that comes. The production department similarly
would ask for stocks of materials so that the production system runs uninterrupted. On the other hand, the
finance department would always argue for a minimum investment in stocks so that the funds could be used
elsewhere for other better purposes, (Vohra, 2008:427).
Inventory represents an important decision variable at all stages of product manufacturing, distribution and sales,
in addition to being a major portion of total current assets of many organizations. Inventory often represents as
much as 40% of total capital of industrial organizations (Moore, Lee and Taylor, 2003:321). It many represent
33% of company assets and as much as 90% of working capital, (Sawaya Jr. and Giauque, 2006:121). Since
inventory constitutes a major segment of total investment, it is crucial that good inventory management be
practiced to ensure organizational growth and profitability.
According to Temeng et al (2010:195), historically, however organizations have ignored the potential savings
from proper inventory management, treating inventory as a necessary evil and not as an asset requiring
management. As a result, many inventory systems are based on arbitrary rules. Unfortunately, it is not unusual
for some organizations to have more funds invested in inventory than necessary and still not be able to meet
customer demands because of poor distribution of investment among inventory items (Temeng, Eshun and Essey,
2010:199). Based on the above analogy, therefore this paper evaluates the inventory management and
organizational effectiveness in manufacturing organizations in Enugu State, with respect to: Emenite and Hardis
and Dromedas both at Emene Enugu as well as the Nigeria Bottling Company at 9th
Mile concern also in Enugu.
2. Information and Knowledge Management www.iiste.org
ISSN 2224-5758 (Paper) ISSN 2224-896X (Online)
Vol.3, No.8, 2013
93
Statement 0f the Problem
Problems of inventory management and control have been around for a very long time. The need to collect food
when it is readily available and then store it for times of shortage is perhaps the fundamental stock holding
problem, which was tackled long ago by man. Nowadays, we usually think of stocks being held by organizations
to allow efficient and continuous operations.
Managers are aware of the vital roles inventory plays in the activities of organizations. In most organizations,
direct materials represent up to 50% of the total product cost, as a result of the money entrusted on inventory,
thereby affecting the profitability of the organization. Organizations at times do not control their inventory
holding, resulting in under stocking and causing the organizations to stay off production, thereby resulting to
organizational ineffectiveness. This therefore creates relationship problems between inventory management and
organizational productivity, profitability and effectiveness,
Objectives of the Study
The broad objective of this study is to evaluate the effects of inventory management on the effectiveness of
manufacturing organizations in Nigeria, while the specific objectives are:-
1. To examine the nature of relationship between inventory management and organizational effectiveness.
2. To determine the effect of inventory management on organizational productivity.
3. To evaluate the nature of correlation between inventory management and organizational profitability.
Research Questions
The following questions will guide the study;
1. What is the nature of relationship between inventory management and organizational effectiveness?
2. What is the effect of inventory management on organizational productivity?
3. To what extent does inventory management correlate with organizational profitability?
Research Hypotheses
The following research hypotheses were formulated for the study;
H1: There is significant relationship between inventory management and organizational effectiveness.
H2: There is significant positive effect inventory management on organizational productivity
H3: There is positive correlation between inventory management and organizational profitability
Review of Related Literature
Inventory is the stock of any item or resource used in an organization. An inventory system is the set of policies
and controls that monitors levels of inventory and determines what levels should be maintained, when stock
should be replenished, and how large orders should be, (Chase and Aquilano, 1995:546). On the other hand,
management is an act of organizational design. The basic functions of management is to identify for a focal
business organization areas of crucial contingencies and constraints so that the business organization can make
structural responses to include these constraints and contingencies within its boundary. (Onwuchekwa,
1993:193).
Inventory management therefore has been defined in many ways by many authors. As expected, these authors
defined inventory management based on their perception of the subject matter. Nwandu, (2006:171) defines
inventory management as a form of administration control that is particularly essential in all manufacturing,
wholesale and retail organizations. The essence of inventory according to Nwandu is, “to have the right goods
quality and quantity, at the right place and time”. The essence of inventory management for a contemporary
organization. This process is needed as a part of supply chain network to protect production system against any
kind of disturbance. Orga (2006:66), defines inventory control as a process of ensuring that the right quality of
the relevant stock is available at the right time and in the right place. Nweze (2004:423), on his own part defines
inventory control as the means of ensuring that actual flow of inventory in an organization conforms with plan.
From the foregoing therefore, one infers that inventory management is the act of ensuring that balanced items of
stock are maintained at the right quantity, quality, place and time in an organization, to ensure organizational
business continuum.
Types of Inventory
Ile (2002:371), opines that inventory is classified into three types which include;
i. Raw Material inventory
ii. Work-in-progress inventory
iii. Finished goods inventory
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Raw material inventory:
This includes all items purchased by an organization for processing. For instance, Flour, yeast, eggs etc. are all
part of raw materials inventory of a confectionary organization.
Work-In-Progress Inventory
This is also called goods-in-progress inventory. This is an intermediate stage of raw material inventory that is yet
to be finished by the plant to enter into another stage of processing. These are materials that have been partly
processed but are yet uncompleted.
Finished Goods Inventory
This is the stock of finished goods. These could be stock of goods awaiting shipment or in the warehouse, the
level of finished goods stock is a matter of co-ordination between the production and sales departments of the
organization.
Purposes for Holding Inventory
According to Banjoko (2004:192), manufacturing organizations carry inventories for a variety of reasons.
Inventories perform significant functions in the total production system and since “it is physically impossible and
economically impracticable for each stock of item to arrive exactly where and when it is needed”, there is need
to keep some amount of inventory at any point in time. Banjoko outlined seven reasons for holding inventories,
which include;
1. To enhance uninterrupted flow of production
2. To meet variations in product demand.
3. To allow flexibility in production scheduling
4. To decouple successive stages of operations
5. To level production activities
6. To provide a means of hedging against future prices and delivery uncertainties
7. To provide a means of obtaining economic lot size and gaining quantity discounts.
On their own part, Chase and Aquilano (1995:547) enumerated five reasons for holding inventories. They are,
1. To maintain independence of operations
2. To meet variations in product demand
3. To allow flexibility in production scheduling
4. To provide a safeguard for variation in raw material delivery time
5. To take advantage of economic purchase order size.
From the foregoing, one observes that the authors are saying virtually the same thing, despite the fact
that Banjoko considered seven reasons against five proffered by Chase and Aquilano. We therefore subscribe to
their views for holding inventories, and conclude that the reasons for holding inventories are to minimize cost
and consequently, maximize profit in an organization.
Inventory System
The cardinal objective of inventory management is the maintenance of an optimum level of inventory necessary
to support the production system at any time and at the least cost possible. The attainment of this objective
entails taking decisions with respect to the determination of an appropriate order quantity, when to place the
order and how much inventory to carry per unit of time. These various decision variables will, at any time,
dictate the behaviour of any inventory system. Inventory ordering systems reflect part of the strategies available
to an organization in meeting its inventory management objectives. Basically, there are three major inventory
ordering systems, the fixed – order quantity system, the fixed-order interval system and the ABC inventory
analysis system.
The Fixed-Order Quantity System
In the fixed-order size system, orders for a fixed quantity of items are placed for each inventory cycle. The time
of ordering may vary but the quantity ordered per period is always the same. This system is sometimes referred
to as the (Q,R) system. When inventory level gets as low as point R (reorder point), an order is placed for Q units
of inventory.
The Fixed-Order Interval System
The fixed-order interval system examines the status of inventory level at specific periods and tries to bring the
inventory level to a desired point, if the inventory level has gone below the minimum required point in-between
the time of the periodic reviews.
The ABC Inventory Analysis
Effective control of inventories can be costly, time and effort consuming. Experience has shown, however, that
not all items kept in inventory require such meticulous and close-study monitoring particularly if such items are
low-value items that are randomly used in the production system. There are some items, however, whose
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quantities are small but whose monetary values are exorbitant. These are usually the high class items whose
values run into thousands of Naira per unit. They normally account for between 10-20 per cent of total items
kept in inventory, while they account for as high as between 70-80 per cent of the total monetary value of
investment in inventory. These are the so called “significant few” inventory items usually designated as
belonging to the A group. There are also those items that account for between 30-40 per cent of the total items of
inventory and at the same time, take as much as 15-20 per cent of the monetary value of total investment in
inventory. This group of items are classified into group B for purposes of effective management. The last class
of inventory items fall into group C. These are the items that are usually greater in number but account for the
smallest value of the total monetary investment in inventory. This group of inventory items is referred to as the
“insignificant many”.
The purpose of the ABC inventory classification is to be able to assess the status of every item kept in inventory
in addition to determining what specific attention is required by each group of inventory (Banjoko, 2004:198).
From the study, it was discovered that, Emenite and Hardis and Dromedas operate the fixed-order quantity of
inventory system. This was evident in their production pattern of various brands of products. Their requirements
for individual items of inventory had been determined and this led to continuous production of varied products,
resulting in their consistency in products availability. On the other hand, the Nigeria Bottling Company operates
the fixed–order interval inventory system. This was evident in their production pattern which results into the
unavailability of one brand of their products and surplus of another at one time or the other. On this, we infer that
organizations should be conscious of their production pattern which is a function of their product demand and try
to tailor their inventory system toward that.
Inventory Control
Throughout the inventory chain from raw material through to retail stocks, inventories are planned and
controlled item by item. For each item in every inventory, two questions must be answered again and again:
1. How many of this item should be ordered?
2. When should it be ordered?
The classic approach to Inventory Control is the widely known “economic order quantity” (EOQ) model also
known as the economic lot size (LES) model (Plossl, 2005:64). Although offered as a general model for all
inventories, in fact the model is quite limited in its appropriate best to a subset of manufacturing inventory items,
where the item under consideration has no relationship to other parts, experiences, demand which can be
statistically forecasted and which requires the use of productive capacity in order to ‘set up’ prepare to work on
the item.
The EOQ model is based on certain assumptions which include;
1. Known and constant demand,
2. Instantaneous replenishment,
3. Backorder is not allowed
4. No constraints on order size
5. Cost of order is constant
6. Unit price is constant, (Banjoko, 2004:198).
According to Ile (2002:372), the methods that are used for the control of inventories include
a. Perpetual inventory method,
b. Physical inventory method,
c. Materials-control cycle method.
Perpetual Inventory Method
This is also called balance of stores record. The balance of stores record plays the central role in the inventory
control system, particularly in a job-order-plant. It controls the movement of each item of inventory as it goes in
and out of stock and shows the current balance at hand.
Physical Inventory Method
Some discrepancies between inventory records and quantities at hand cannot be ruled out. An actual count of all
items at hand is periodically necessary for effective inventory control. The method selected depends upon the
size and diversity of stock, the degree to which work process is standardized and the processing methods
employed in a particular plant.
Material Control Cycle Method
An efficient system must be designed for the control of material from the time of requisitioning of purchase to
the storage of the finished product. A step by step standard routine must be developed, authority and
responsibility for the execution of each step, must be clearly delegated to specific individuals.
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From the above, one can observe that the three methods of inventory control are interwoven. This is from the
point of view that physical inventory items can not be determined without the material control cycle method
which monitors the step-by-step movement of inventory from entry point to exit point and the material control
cycle cannot be effective without the application of the perpetual inventory method. Therefore the three methods
of inventory control are complementary.
Young (2002:10) admits that an alternative approach to inventory control (for manufacturing inventories in
particular) is to consider inventory as a residual and not control it directly. This is the central theme of just-in-
time (JIT) system, in which attentions is focused on the eliminations of waste, the reduction of variability, close
linkage among all systems, and process standardization and rationalization (Ohno, 2008:21) .These systems are
based on the fact that myriad decisions about manufacturing are often made with reference to the resulting
impact on inventory positions. Explicit consideration of issues that can result in inventory growth or depletion
can eliminate the causes of such growth or depletion and prevent them.
Method and Materials
The study was carried out primarily through the survey method and interview of employees in three
manufacturing firms in Enugu state Nigeria which include Emenite, Hardis and NBC. Secondary data were
obtained through books, journals, and internet. A sample size of 248 was obtained from the population of 658 at
5% error tolerance and 95% degree of freedom using yamane’s statistical formular. 208(84%) of the
questionnaire distributed were returned while 40 (16%) of the questionnaire distributed were not returned. The
questionnaire was designed in likert scale format. The researcher conducted a pre-test on the questionnaire to
ensure the validity of the instrument. Data collected were presented in frequency tables.
Data Analysis and Discussion
The data obtained from the field were presented and analyzed with descriptive statistics to provide answers for
the research questions while the corresponding hypotheses were tested with Pearson’s Correlation and Linear
regression at 0.05 alpha level.
What is the nature of relationship between inventory management and organisational effectiveness
Table 1: Coded Responses on inventory management and organizational effectiveness .
s/no Questionnaire items S.Agree
/Agree
Disagree
/S.Disagree
Undecided
Freq % Freq % Freq % Total
(Freg)
1 Inventory management increase share
market of a company? 190 91 8 4 10 5 208
2 High return on investment can be
achieved through effective inventory
management?
201 97 3 1 4 2 208
TOTAL 391 11 14 416
Source: fieldwork 2012
According to table (1) based on aggregate response 806(88%) indicated strongly agree, 74(8) indicated disagree
while 32 (4%) indicated undecided. This implies that there is a relationship between job satisfaction and
organizational commitment among secondary school teachers in Enugu State.
Hi 1: there is a significant relationship between inventory management and organisational effectiveness
Table 2 Descriptive Statistics between inventory management and organisational effectiveness
Mean Std. Deviation N
inventory management 1.8654 1.11258 208
organisational effectiveness
2.2452 1.31967 208
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Table 3 Correlations between inventory management and organisational effectiveness
inventory
management
organisational
effectiveness
inventory management Pearson Correlation 1 .898(**)
Sig. (2-tailed) .000
N 208 208
organisational effectiveness Pearson Correlation .898(**) 1
Sig. (2-tailed) .000
N 208 208
** Correlation is significant at the 0.01 level (2-tailed).
Table 2 shows the descriptive statistics of the inventory management via organisational effectiveness, with a
mean response of 1.8654 and std. deviation of 1.11258 for inventory management and a mean response of
2.2452 and std. deviation of 1.31967 for organisational effectiveness and number of respondents (208). By
careful observation of standard deviation values, there is no much difference in terms of the standard deviation
scores. This implies that there is about the same variability of data points between the dependent and
independent variables.
Table 3 is the Pearson correlation coefficient for inventory management and Organisational effectiveness. The
correlation coefficient shows 0.898. This value indicates that correlation is significant at 0.05 level (2tailed) and
implies that there is a positive relationship between inventory management and organisational effectiveness (r
= .898). The computed correlations coefficient is greater than the table value of r = .195 with 206 degrees of
freedom (df. = n-2) at alpha level for a two-tailed test (r = .898, p< .05). However, since the computed r = .898,
is greater than the table value of .195 we reject the null hypothesis and conclude that there is a positive
relationship between inventory management and organisational effectiveness (r =.898, P<.05).
What is the nature of the effect between inventory management and productivity
Table 4: Coded Responses on inventory management and productivity
s/no Questionnaire items S.Agree
/Agree
Disagree
/S.Disagree
Undecided
Freq % Freq % Freq % Total
(Freg)
1 Inventory management enhances
organisational competitive position in the
industry
194 93 10 5 4 2 208
2 Development of products and services
with high profit margin is as a result good
inventory management?
204 98 2 1 2 1 208
TOTAL 398 12 6 416
Source: fieldwork 2012
According to table (4) based on aggregate response 398(96%) indicated strongly agree, 12(3%) indicated
disagree while 6 (1%) indicated undecided. This implies that there is a significant positive effect inventory
management on organisational productivity.
Hi: inventory management has a positive effect on organisational productivity
Table 5 SPSS result of the effect of inventory management on organisational productivity
Particulars R R2
Adj.R2
DW Standard Coefficients F Sig.
Beta T- Value
firms 0.614(a)
0.377 0.374 .120 0.614 11.175 126.889 0.000
SOURCE: SPSS
NOTE:
R = Correlation Coefficient or Beta
R2
= Coefficient of Determination
Adj. R2
= Adjusted Coefficient of Determination
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DW = Durbin Watson (d) test statistic
T-value = Student t- test Statistic
F = F- test statistic
Model Equation IM = 0.574 + 0.844 OP
The result indicate that there was a positive significant effect of inventory management on organisational
productivity as t = 11.175 and which is above the rule of thumb positivity of 2 and the coefficient of inventory
management is (0.574). the variations from the model is explained by the model as indicated from the coefficient
of the determination (r2
) value of 61.4%.
Also the result indicates that there is a positive relationship between inventory management and organisational
productivity as indicated by r value of 0.614 which is positive as shown by beta value of 0.614
To what extent does inventory management correlate with organisational profitability.
Table 6: Coded Responses on inventory management and organizational profitability.
s/no Questionnaire items S.Agree
/Agree
Disagree
/S.Disagree
Undecided
Freq % Freq % Freq % Total
(Freg)
1 There is positive relationship between
inventory management increase
shareholder wealth?
190 91 8 4 10 5 208
2 Inventory management promotes
organisational net income growth? 201 97 3 1 4 2 208
TOTAL 391 11 14 416
Source: fieldwork 2012
According to table (6) based on aggregate response 806(88%) indicated strongly agree, 74(8) indicated disagree
while 32 (4%) indicated undecided. This implies that there is a relationship between job satisfaction and
organizational commitment among secondary school teachers in Enugu State.
Hi 1: there is a positive correlation between inventory management and organisational profitability
Table 7 Descriptive Statistics of correlation between inventory management and organisational
profitability
Mean Std. Deviation N
inventory management 1.9519 1.08017 208
organisational profitability
2.2644 1.30857 208
Table 8 Correlations between inventory management and organisational profitability
inventory management organisational profitability
inventory management Pearson Correlation 1 .843(**)
Sig. (2-tailed) .000
N 208 208
organisational profitability Pearson Correlation .843(**) 1
Sig. (2-tailed) .000
N 208 208
** Correlation is significant at the 0.01 level (2-tailed).
Table 7 shows the descriptive statistics of the inventory management via organisational profitability, with a
mean response of 1.9519 and std. deviation of 1.08017 for inventory management and a mean response of
2.2644 and std. deviation of 1.30857 for organisational profitability and number of respondents (208). By
careful observation of standard deviation values, there is no much difference in terms of the standard deviation
scores. This implies that there is about the same variability of data points between the dependent and
independent variables.
Table 8 is the Pearson correlation coefficient for inventory management and Organisational profitability. The
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correlation coefficient shows 0.843. This value indicates that correlation is significant at 0.05 level (2tailed) and
implies that there is a positive relationship between inventory management and organisational profitability (r
= .843). The computed correlations coefficient is greater than the table value of r = .195 with 206 degrees of
freedom (df. = n-2) at alpha level for a two-tailed test (r = .843, p< .05). However, since the computed r = .843,
is greater than the table value of .195 we reject the null hypothesis and conclude that there is a positive
correlation between inventory management and organisational profitability (r =.843, P<.05).
Findings
After testing of the hypotheses, it was discovered that there was
There is significant relationship between good inventory management and organizational effectiveness(r =.898,
P<.05).
Inventory management has a significant effect on organizational productivity(r =.614; t= 11.175; P<.05).
There is highly positive correlation between good inventory management and organizational profitability(r =.843,
P<.05).
However, it was found that the organizations under study at times run into problems of inadequate stock
of inventory which consequently affected their production, leading to scarcity of one brand of their products or
the other thereby affecting their profitability and consequential effectiveness.
CONCLUSION
Inventory Management is very vital to the success and growth of organizations. The entire profitability of an
organization is tied to the volume of products sold which has a direct relationship with the quality of the product.
Management does a lot to present a good organization to the public in terms of quality production.
Good inventory management in any manufacturing organization, saves the organization from poor quality
production, disappointment of seasoned customers, loss of profit and good social responsibility, (Johnson,
2008:40). This is done by ensuring timely delivery of raw materials to the factory and distribution of finished
goods, in order of production to the warehouse. If inventory management is not adequately maintained,
production cannot meet the aspirations of customers which is loss of revenue to the organization. Right from
procurement to the time of processing, quality of raw material is the chief determinant of the productive
efficiency of any manufacturing concern. This varies from organization to organization.
In Emenite, the raw materials are volatile and chiefly cement which is procured locally. The processing
machines and technology are, however imported. In Hardis and Dromedas, the raw materials are many, and are
up to 90% locally sourced. Special chemicals are however, imported. In the Nigeria Bottling Company, the main
raw materials are colour and Reagent, which is imported. Other raw materials are water and sucrose which are
locally sourced. The organizations combine the First-in-First-out (FIFO) and Average Methods in their inventory
allocations.
Recommendations
In line with the findings, the following recommendations are made:
1. The organizations should diversify their inventory system, to suit specific needs of production.
2. Inventory management should maximize space and timely delivery to avoid staying off production.
3. The overriding need for any method of stock allocation should be customer satisfaction.
4. Cost minimization techniques should be employed in the keeping and allocation of inventory.
5. Management should closely monitor and manipulate their inventory system to maintain production
consistency for organizational profitability and effectiveness.
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