The impact of inventory management on the performance of business organisations

Abstract

The purpose of the study was to determine the impact of inventory management on the performance of business organisations. The objectives of the study were to; determine the techniques of inventory management used at Spedag Interfreight, examine the challenges of inventory management at Spedag Interfreight and suggest the strategies that can be used to improve inventory management. The research methodology for the study was a case study design and used Spedag Interfreight Limited as its case study. The sample size was 54 employees and simple random sampling technique was applied in selecting the employees who were included in the sample.The researcher used questionnaires to collect data and data was analyzed using SPSS version 20.The study revealed that majority of the respondents (70.4%) were males and the rest were females. The study findings revealed that Spedag Interfreight Limited uses only two techniques of managing inventory and that is Just In Time (JIT) and Material Requirement Planning (MRP) and this was evidenced by 100% responses. The study findings indicated that respondents agreed that ; inventory management techniques used by Spedag Interfreight affects its performance, profitability of Spedag Interfreight industries can be generated by maximum attention paid to those inventories whose value is highest and that the rate of usage, lead time and stock level at Spedag Interfreight limited affects the quality of products. Concerning the challenges, the study findings indicated that respondents agreed that Spedag Interfreight is faced with costs of checking orders and maintaining records of entire process (Mean = 4.37) on addition to transportation and freight costs (Mean = 3.98). However, most of them were undecided on the statement that Integrating demand planning and inventory planning remains a challenge (Mean = 2.50) and the one which asserts that there is less reliable lead times from suppliers of Spedag Interfreight (Mean = 2.69). The study found significant relationship between paying more attention to highly valued inventory and profitability of the Spedag Interfreight Limited, the skills of staff and the profitability of Spedag Interfreight Limited and the rate of usage, lead time and stock level at Spedag Interfreight Limited and the quality of services (P-value<0.05). The study concluded that effective inventory control mechanisms boost the performance of a business organization. The study recommended that the management of Spedag Interfreight Limited should consider regular training of staff on computerized systems of inventory control so as to make demand planning and forecasting accurate.