De La Salle University – Dasmariñas

De La Salle University – Dasmariñas

College of Business Administration and Accountancy

DBB-B, Dasmariñas, Cavite

EFFECTS OF INVENTORY MANAGEMENT PRACTICES

ON THE PERFORMANCE OF FEEDS
DEALER IN CAVITE

Presented to:

Ms. Epifania Anfone

In Partial Fulfillment of the Requirement

in ACTG413b (Research for Accounting and Finance)

Prepared by:

Lyka Jane Roguel

 De La Salle University – Dasmariñas

INTRODUCTION

Inventory plays an important role in every organization. Even those

who do not have financial background needs to have an understanding

about the inventory information in the company’s financial statement. The

ability to understand the impact on the income statement and cash flow

statement of the company can help one improve his ability to have the

right item and the right quantity in the right place at the right time (Muller,

2019). Inventory management is the ability of the management to organize

the availability of the items for their customers. Since the success of one’s

business highly depends on the ability of the organization to provide

goods or services to their customers while remaining financially viable, it is

important for the management to have a control over the purchasing,

manufacturing, and distribution functions of the company. Having a good

inventory management practices helps the company to cover up for the

mismatch between the supply and demand processes, minimize the risk of

failure to supply, and minimize the overall cost in supply chain. (Wild,

2017). In order to ensure that there is a continuity between function, the

inventory management must tie together certain objectives such as

company’s strategic goals, sales forecast or demand management, sales

 De La Salle University – Dasmariñas

and operations planning, production planning, and materials requirement

planning. (Narayan, P., & Subramanian, J., 2009).

Inventory management practices includes the usage of Economic

Order Quantity (EOQ) which asks the questions how much of each item

must be stocked, and when should an order be released and for what

quantity. EOQ can be used in conjunction with various inventory

management systems including Just-in-time(JIT) and EOQ models.

Activity-based costing, on the other hand, has been considered useful in

the field of warehousing operations, where various activities occur and

conventional accounting schemes fail to recognize the effect of these

activities on the company's overall profitability (Narayan, P., &

Subramanian, J., 2009). Inventory management practice also includes

Materials Requirements Planning (MRP) which is the most common

planning tool used in the industry today. MRP is a method for measuring

the materials and components necessary for the development of a

product. It requires tracking of the materials and components on hand,

determining what is needed, and then scheduling their production or

purchase. (Drexl, A., & Kimms, A., 2013).

Inventory management practices plays an important role in the

performance of an organization. Organizational performance corresponds

to how well an organization performs to accomplish its vision, goal and

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objectives. It comprises real results or outputs compared with intended

outputs. The analysis focuses on three key results which are the

performance of shareholder value, the financial performance, and the

performance of the market. The evaluation of organizational efficiency is a

critical component of strategic management. Performance, however, is a

very complex matter, and a great deal of consideration needs to be paid to

how it is measured. Performance measures in the internal business

process contribute to organizational performance. These steps help

answer the main question, "What do we have to excel at?”.

Examples include the time it takes to create or provide goods

or services for the benefit of the company and how much time does it

takes to produce a new product and get it to market. (Mastering Strategic

Management, 2011).

Many previous researches have proven how inventory

management practices greatly affects the performance of a firm, whether it

be big or small. For instance, based on the study findings of Mwangi, L.

(2016), inventory conversion period, management efficiency, firm size,

inventory conversion, and inventory days have a negative and positive

influence in the performance of the firm’s profitability. Sahari, S., Tinggi,

M., & Kadri, N. (2012), on the other hand, have concluded on their studies

that there is a positive relationship between inventory management and

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financial performance of the firm. Furthermore, Bett, K. (2018) revealed

that the Inventory management practices are responsible for the

operational performance indicators of the Small Medium Enterprises

(SMEs). However, based on his own judgement, most SMEs might be

having these practices on paper but not operationalized nor instituted.

According to Victoire, M. (2015), observation shows that there is a

serious issue with the inventory management practices in manufacturing

organizations, especially in the case of SMEs. With the companies having

different inventory policies implemented, ONIKOYI, I. A., AMNIM, F. F.,

OJO, S., & AJE, C. O. (2017) recommends to further conduct a study

regarding the best inventory management practices such as JIT, MRP and

EOQ. In addition, with Bett, K. (2018) having a second thought about

SMEs actual practices in its operations, the researcher have decided to

conduct a study focusing on knowing how small businesses manage their

inventories, what practices do they use, and how do their inventory

management practices affects their performance. In this study, the

researcher have chosen to study on the inventory management practices

of rice dealers in Cavite. This paper intends to bring in the relevant

problem of the feeds dealers with regards to their inventory management

and its effects on their organizational performance.

 De La Salle University – Dasmariñas

References:

Sahari, S., Tinggi, M., & Kadri, N. (2012). Inventory management in

Malaysian construction firms: impact on performance. SIU Journal of
Management, 2(1), 59-72.
Link:
https://www.researchgate.net/profile/Michael_Tinggi/publication/26534973
3_Inventory_Management_in_Malaysian_Construction_Firms_Impact_on
_Performance/links/56f0977e08ae70bdd6c94ecc/Inventory-Management-
in-Malaysian-Construction-Firms-Impact-on-Performance.pdf

Mwangi, L. (2016). The effect of inventory management on firm profitability

and operating cash flows of Kenya Breweries Limited, beer distribution
firms in Nairobi county (Doctoral dissertation).
Link:
http://erepository.uonbi.ac.ke/bitstream/handle/11295/98572/Lydia
%20Mwangi%20Final%20Project%20Final.pdf?sequence=1&isAllowed=y

Bett, K. (2018). Inventory Management Practices and Operational

Performance of Small and Medium Enterprises in Kenya: a Study of
Pharmaceutical Manufacturers in Nairobi, Kenya.
Link:
http://erepository.uonbi.ac.ke/bitstream/handle/11295/105017/Bett_Invent
ory%20Management%20Practices%20and%20Operational
%20Performance%20of%20Small%20and%20Medium%20Enterprises
%20in%20Kenya-%20a%20Study%20of%20Pharmaceutical
%20Manufacturers%20in%20Nairobi,%20Kenya.pdf?
isAllowed=y&sequence=1

ONIKOYI, I. A., AMNIM, F. F., OJO, S., & AJE, C. O. (2017). Effect of
Inventory Management Practices on Financial Performance of Larfage
Wapco Plc. Nigeria. European Journal of Business and Management,
9(8), 113-122.
Link:
https://core.ac.uk/reader/234627780
 De La Salle University – Dasmariñas

Narayan, P., & Subramanian, J. (2009). Inventory Management-principles

and Practices. Excel Books India.
Link:
https://books.google.com.ph/books?hl=en&lr=&id=-
XKqiGceTp4C&oi=fnd&pg=PA1&dq=inventory+management+practices+b
ook&ots=WsLNShPucC&sig=2NwGF6AU4NUDcswTLpD_Wa8u6YI&redir
_esc=y#v=onepage&q=inventory%20management%20practices
%20book&f=true

Drexl, A., & Kimms, A. (Eds.). (2013). Beyond Manufacturing Resource

Planning (MRP II): advanced models and methods for production
planning. Springer Science & Business Media.
Link:
https://books.google.com.ph/books?
hl=en&lr=&id=_HDvCAAAQBAJ&oi=fnd&pg=PA3&dq=manufacturing+res
ource+planning&ots=GzQJRKzIlz&sig=Z4jSS8STBUtuTdKmozK6dNrSKN
E&redir_esc=y#v=onepage&q=manufacturing%20resource
%20planning&f=false

Victoire, M. (2015). Inventory Management Techniques and Its

Contribution on Better Management of Manufacturing Companies in
RWANDA Case Study: SULFO RWANDA Ltd. European Journal of
Academic Essays, 2(6), 49-58.
Link:
http://repozytorium.wsb-
nlu.edu.pl/xmlui/bitstream/handle/11199/8613/Akindipe%20Olusakin%20S.,
%20Inventory%20Management%20-%20A%20Tool%20for%20Optimal%20Use
%20of%20Resources%20and%20Overall%20Efficiency%20in%20Manufacturing
%20SMEs.pdf?sequence=1