The Role of Inventory Management in an Organisation: A Case Study of Shiloh Printers
Chapter One
General objective
The objective of the study was to establish the relationship between inventory management practices and performance of Shiloh Printers Ltd.
Specific objectives
- To examine the relationship between storage management practices and performance of Shiloh Printers Ltd
- To establish relationship between materials handling practices and performance of Shiloh Printers Ltd
- To examine the relationship between lead time management practices and performance of Shiloh Printers Ltd
CHAPTER TWO
LITERATURE REVIEW
Introduction
This chapter presents the scholarly material regarding the study. Theories regarding data quality were also reviewed and arranged according to the study objectives. The gaps identified in the literature review are also indicated. It is done mainly from the survey already conducted in the field of inventory management practices and performance in organizations. The sources of information will include the secondary data which includes data from the internet, library books, journals, reports and magazines on inventory management practices and performance.
Theoretical review
Resource-Based View Theory
The resource based view theory was mainly developed in the late 1980s and 90s by Barney, while later being adjusted with extensions (Barney 1991). With paying attention to the achievement of a competitive advantage through internal resources, the resource based view became one of the grand theories of economics. According to Barney (1991) “the resource based view examines the link between a firm’s internal characteristics and performance’’. As the basis for a competitive advantage, the resource based view considers the application of a bundle of tangible and intangible resources (Wernerfelt, 1984). In order to make to competitive advantage sustainable, resources are required to be heterogeneous and immobile (Barney, 1991).
The Resource Based View (RBV) theory is one of the fundamental principles for the competitive advantage of a firm. The RBV of the firm posits that a firm’s internal processes create a resource bundle which can become the means of creating and sustaining a competitive advantage (Bates & Flynn, 1995). The RBV literature considers a firm as a collection of heterogeneous resources, or factors of production or as bundles of resources including all inputs that allow a firm to operate and implement its strategies (Barney et. al., 1991). A company achieves a competitive advantage when it has key resources (these can be physical resources, human resources or organizational resources) that its competitors do not have (Barney, 1991). Developing and maintaining this competitive advantage depends on whether the firm is able to identify, develop, deploy, and protect the internal resources (Barney, 1991).
In the context of the resource-based view, a firm might lose its competitive advantage if important inventory management skills are scarce or are getting lost as they are not easily duplicated or substituted. Inventory management skills are valuable as they help providing supply strategies for future needs and developing supply management strategies to support company strategies (Carr & Pearson, 2002). As purchasing professionals interact with other functions within a complex social network, purchasing skills are difficult to replicate (Eltantawy, 2005).
The two assumptions for RBV theory are (1) resources and capabilities are heterogeneously distributed among firms; and (2) resources and capabilities are imperfectly mobile, which make firms’ differences remain stable over time (Barney 1991). Every firm is different (heterogeneous) from other firms in terms of the resources and capabilities a firm possesses or accesses. These differences differentiate one firm from another and a firm’s success is due to its firm-specific resources.
Types of resources in organizations
Broadly construed, resources are any assets that an organization might draw on to help it achieve its goals (Bryson et al. 2007). More specifically, “resources include all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc. controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness” (Barney 1991). Also, resources are the tangible and intangible assets firms use to develop and implement their strategies (Ray, et al 2004).
As mentioned above, there exist many kinds of resources in an organization. Scholars have offered a variety of classifications for resource types. Bozeman et al (1990) offer three types: personnel resources, financial resources, and organizational structure. Russo et al (1997) classify resources as physical assets and technologies, human resources and organizational capabilities, and the intangible resources of reputation and political acumen. According to Rainey and Steinbauer (1999), organizational resources are divided into financial, human, and technological resources. Hansen et al. (2004) classify an organization’s resources into two broad concepts based on Penrose’s (1959) argument: productive resources (which are needed for achieving goals) and administrative resources (which govern the use of productive resources). Fry et al (2004) divide resources into the people, physical materials, financial assets, and information.
CHAPTER THREE
METHODOLOGY
Introduction
This chapter describes the methods and techniques that were used to address the research problem. It describes the research design, population, sampling instruments, validity, reliability and procedures for data collection and analysis.
Research Design
The study employed cross sectional survey research design as the overall strategy. Cross- sectional study was used in this study because it emphasizes detailed contextual analysis of a limited number of events or conditions and their relationships. The researcher employed both
quantitative and qualitative research approaches because they complement one another. Using both helped cover more areas, while using only one approach was defective (Barifaijo et al 2010).
Mugenda et al (1990) contends that a survey that is a descriptive study essentially concerned with describing, recording, analyzing and interpretation of conditions that exist or that once existed or as they were or as they may be (Oso et al 2009). Surveys do not manipulate variables nor arrange for events to happen, but focuses only on conditions or relations that exist, opinions held, processes that are going on, effects that are evident or trends that are developing (Kathuri et al.2009). The researcher used descriptive because it was one of the suitable methods to obtain information concerning current situations.
The Study Population
This comprised of staff and support staff members of Shiloh Printers ltd who made a total of 110. These included departments like administration, Stores, Operations/Production departments and others. This enabled the researcher to get relevant information from the right people. Data was analyzed using percentages and trend analysis technique and presented in tables and figures.
CHAPTER FOUR
PRESENTATION, ANALYSIS AND INTERPRETATION OF RESULTS
Introduction
This chapter presents the analysis and discusses the findings of the study entitled “inventory management practices and performance of Shiloh Printers’ ltd, Cameroon. In the presentation of findings pie charts, tables, frequencies and percentages were used to explain the findings. The presentation, analysis and discussion of the findings were arranged according to the objectives of the study that included; examining the relationship between storage management practices and performance of Shiloh Printers Ltd, establishing the relationship between materials handling practices and performance of Shiloh Printers Ltd and to examine the relationship between lead time management practices and performance of Shiloh Printers Ltd. The researcher administered 86 questionnaires from which 76 were returned fully filled by the respondents from which findings are based. Results were also obtained from interviews.
CHAPTER FIVE
SUMMARY OF FINDINGS, DISCUSSION , CONCLUSION AND RECOMMENDATIONS
Introduction
The study examined the effects of inventory management practices and performance of Shiloh Printers’ ltd, Cameroon. The study specifically set out to: examine the relationship between storage management practices and performance of Shiloh Printers Ltd, establish relationship between materials handling practices and performance of Shiloh Printers Ltd and to examine the relationship between lead time management practices and performance of Shiloh Printers Ltd. This chapter presents the summary, discussion, conclusions and recommendations arising out of the study findings according to the objectives.
Summary of Findings
The relationship between Storage management practices and performance of Shiloh Printers Ltd
The study tested the first hypothesis; “storage management practices has a significant positive influence on performance of an organization” and it was accepted. This is because there was a moderately positive relationship (r=0.185) between storage management practices and organizational performance whereby an improvement in storage management practices increases on the performance of the organization.
The study revealed that 56.6% agreed that storage management practices contribute greatly to the performance of Shiloh Printers Ltd. Basing on this finding; organizations consider storage productivity as a major aspect of organizational efficiency. When goods are stored well, their value is maintained. Storage management helps in inventory planning and scheduling in Shiloh Printers Ltd.
77.7% agreed that Procurement/purchase dates and quantities are improved by inventory management practices. Basing on the findings, Storage management practices provide tools to enable organizational operations to consistently offer exemplary service delivery, that unified data gives you the information integrity.
The study further revealed that Cost reduction in Shiloh Printers Ltd is a result of inventory management practices. Cost reduction helps in preparing employees towards managing the inventory ideology and also in achieving profitability objective of Shiloh Printers.
The study revealed that storage Management helps in effective stores management of Shiloh Printers Ltd. According to the field survey, effective Stores Management is an attempt to maintain a systematic and well organized infrastructure and an orderly inventory system. It is also concerned with the adequate supply of goods/products in the Stores, while minimizing inventory costs at the same time. Improved customer service can be realized with inventory management. This helps to improve the organization’s accuracy and efficiency, and the customers will love them for it. Basing on the findings, storage management isn’t just a concern for companies that deal in finished goods, such as retailers and wholesalers. It’s also critical for manufacturers, who maintain three types of inventory: raw materials, works in process and finished goods.
Relationship between Materials handling practices and performance of Shiloh Printers Ltd
The study tested the second hypothesis: “there is no significant relationship between material handling and performance of organizations”, and it was rejected. This is because material handling practices and organizational performance have no significant relationship (r = 0.038).
The study revealed that material handling practices in the organization lead to reduction in wastes, material handling practices in the organization lead to reduction in production costs. Basing on the field findings, when material is not managed well, you can also wind up with overstock too much of certain items. Overstock comes with its own set of problems.
The respondents rated at 73.7% agreed that material handling practices in the organization lead to Increased product quality whereby any improvement in continuity of supplies with improved material handling will lead to improvement in cooperation and will also enhance cooperation’s and communications with reduced duplication of efforts, reduction in material costs and improvement in quality control, which are the main benefits of materials management.
This study established that through material handling practices can achieve the benefits of effective use of labour, providing system flexibility, increasing productivity, decreasing lead times, reduction in wastes, reduction in production costs, increased product quality are achieved. The ratings showed that material handling does not play a vital role in organizational performance however organizations must ensure that inventory control system be highly involved in material management activities hence achieving higher organizational performance.
The relationship between Lead time management practices and performance of Shiloh Printers Ltd
The study tested the third hypothesis: “lead-time management practices have a significant positive influence on performance of organizations” and it was rejected. This is because there was no significant relationship (r=-0.163) between lead-time management practices and organizational performance whereby an improvement in lead-time management practices does not improve on the performance of organizations. In regards to this negative relationship, the more the supply delays, the more the decline in customer satisfaction.
Basing on the above findings, shorter lead times allow designers to be more flexible and creative, prevent lost business, and increase cash flow, having a consistently quick turnaround
helps businesses gain traction and outpace their competitors. Further, it’s arguable that these benefits may overcome the advantage of lower labor costs in cheaper foreign factories. However, Mutengo distributors Ltd sometimes do not supply the products in the shortest time possible but they offer extra products at the same price which helps in customer loyalty where by the price of the product mainly affects the performance not the lead time.
Discussion of Findings
The relationship between Storage management practices and performance of Shiloh Printers Ltd
The findings revealed that performance in an organization can be increased with a change in storage management practices. The findings of this study could be attributed to the fact that all the organizations consider storage productivity as a major aspect of organizational efficiency. When goods are stored well, their value is maintained and that storage management helps in inventory planning and scheduling in Shiloh Printers Ltd. Storage management implies the coordination of materials controlling, utilization and purchasing. It has also the purpose of getting the right inventory at the right place in the right time with right quantity because it is directly connected with the production. The objective of any organization is to get a good return out of every cedi invested in the company. According to Pandey (2005) management through their policies, coordination, decision and control mechanisms must maximize the return on investment (ROI).
Peterson et al (2007) while supporting Pandey (2005) states that it is clear that ROI can be maximized either by increasing profit margin or by reducing the capital employed or by both. In the market situation, sales price cannot be increased (rather there is a demand to reduce it) and as such profit can be increased only by reducing the material costs. On the other hand, the opportunity to reduce the overheads and capital employed is more by inventory reduction (Drury, 2002). It is thus evident that the ROI can be maximized by either reducing the material cost or reducing the current assets by way of inventory of materials or can be optimized by increasing profits.
Conclusion
The relationship between Storage management practices and performance of Shiloh Printers Ltd
The study concludes that that storage management is a process that is continuous in the organization and therefore there is always need for managing inventory throughout using a certain technique good inventory management can lead to good performance in an organization. Storage management in an organization co-ordinates the purchasing, manufacturing and distribution functions to meet the marketing needs and ensures that organizations performance is in line with the set objectives and centres on customer satisfaction.
Finally, it can also be concluded that storage management challenges interfere with a company’s profits and customer service. They cost an organization more money and lead to an excess of inventory overstock that is difficult to move. Storage management is one of the important key activities of any organization. It is important in logistics planning and control, production process, purchasing and satisfaction of customer services all of which are important in organizational performance and it helps organizations to meet higher than expected demand. This helps the organization to protect against running out of inventory.
Relationship between Materials handling practices and performance of Shiloh Printers Ltd
In regards to material handling and performance, the study concluded that the companies good material management that is having multiple suppliers of various products and services, trying as much as possible to reduce variability, always having a smooth workflow in the organization, having proper queue control to avoid delays, expediting some processes to avoid delays, using multi modal transportation to avoid delays and offering warranty of the products/services for at least 12 months significantly affects performance positively. These are the relationships that had a strong negative effect on organizational performance; number of complaints, repeat customers, returned goods, warranty claims, customer feedback and after sale service.
The relationship between Lead time management practices and performance of Shiloh Printers Ltd
From the findings, the study concluded that lead time management practice is not a very important competitive tool in organizations. However the pricing of your product mainly affects your performance as see in the discussion above. One might deliver very expensive products on time however another delivers very good and relatively cheaper products and still capture the highest sales volume because one of the most obvious affects pricing will have on your business is an increase or decrease in sales volume.
Recommendations
Since inventory management enhances organizational performance, there is need to improve on them in the following ways:
The relationship between storage management practices and performance of Shiloh Printers Ltd
The study recommends that Shiloh Printers should adopt proactive attitudes towards the issue of proper inventory management practices. Being proactive requires maintenance of the right level of inventory at any point in time. The organizations should avoid the dangers that are inherent in keeping too little or too much of stock. Management of Shiloh Printers should closely monitor and manipulate their inventory system to maintain production consistency for organizational profitability and effectiveness.
The relationship between materials handling practices and performance of Shiloh Printers Ltd
The study recommends that the management of Shiloh Printers should carry out control measures on stock as it is the case of cash by large firms. This is because stock represents cash and a substantial share of fund is invested in the firm’s inventory. Shiloh Printers should fully adopt lean inventory systems in inventory management as this will greatly improve the performance of the procurement function. Just-in-time systems should also be integrated by the firms. A good inventory system will help in preventing stock outs, overstocking, deterioration, obsolescence, and high carrying cost. The firms should make use of a sound inventory system for decision making in the procurement function and the company as a whole.
The relationship between lead time management practices and performance of Shiloh Printers Ltd
The study recommends that there is need for the top management at Shiloh Printers to adopt the use of information technology, that will not only help in information sharing, but also will help in hastening orders from suppliers hence shortening the lead time.
Further, the study recommends that management at Shiloh Printers needs to form an expediting committee that will help in following up of orders with the suppliers hence delivering the products at the right time. Stores Department at Shiloh Printers therefore should help in marketing, selling, promotion and even control of all types of materials for its quantity, quality and cost. The CEOs and other organization managers at Shiloh Printers should strive to ensure good lead time management and good customer satisfaction. This will ensure that the organization environment is conducive for economic growth resulting to higher productivity in investment.
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