Assessment of Inventory Management System

(The case of Ethiopian Electric Power Corporation Southern Region

Wolkite Branch)

WOLKITE UNIVERSITY
COLLEGE OF BUSINESS AND
ECONOMICS
DEPARTMENT OF MANAGEMENT

A Research Paper Submitted to Department of Management, in Partial

Fulfillment of the Requirements for BA Degree in Management

By: Zerfinesh Nida

Advisor: Birhanu (MBA)

JANUARY, 2018

WOLKITE, ETHIOPIA

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ABSTRACT
 The research was conducted to assess the inventory management system through a case
study of EEPCO Wolkite Branch. Descriptive research design was used in this study. The
study was used both quantitative and qualitative types of data. The study was used both
primary and secondary sources of data. Since the numbers of respondents is small in
number, the study was used Census sampling technique to select the sample size. After
gathering all required qualitative and quantitative information, data analysis was
performed and presented through tables, percentages and frequencies. Then the data was
analyzed by using descriptive analysis method. The study has the following findings as
problem. Several surpluses and scraps inventories was existing in the ware house and
around store yard. These materials tied up the capital and increases carrying cost; stock
and scrap that was available around the stock yard do not have any controlling
mechanisms; less modern inventory management system is existed in the region and the
likes.

Key words: Inventory management system, EEPCO

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AKNOWLEDGEMNT
First my special thanks go to the almighty God for his undeserved support. And secondly I
would like to thank my advisor Ato Birhanu (MBA) for his special assistance in providing
professional and technical advice.

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TABLE OF CONTENTS
ABSTRACT....................................................................................................................................................2
List of Table.................................................................................................................................................4
ACRONYMS..................................................................................................................................................5
CHAPTER ONE..............................................................................................................................................6
INTRODUCTION...........................................................................................................................................6
1.1. BACKGROUND OF THE STUDY......................................................................................................6
1.2. STATEMENT OF THE PROBLEM....................................................................................................8
1.3. OBJECTIVE OF THE STUDY............................................................................................................9
1.3.1. General objective.................................................................................................................9
1.3.2. Specification Objective.........................................................................................................9
1.4. SIGNIFICANT OF THE STUDY........................................................................................................9
1.5. SCOPE OF THE STUDY................................................................................................................10
1.6. ORGANIZATION OF THE PAPER..................................................................................................10
CHAPTER TWO...........................................................................................................................................11
LITERATURE REVIEW..................................................................................................................................11
2.1. DEFINITION OF INVENTORY............................................................................................................11
CHAPTER THREE........................................................................................................................................20
METHODOLOGY.........................................................................................................................................20
1.1. Study Design..............................................................................................................................20
1.2. Data type and sources...............................................................................................................20
1.3. Sample Size and Sampling Techniques......................................................................................20
1.4. Data Collection Instrument........................................................................................................20
1.5. Data analysis Method and Presentation....................................................................................20
CHAPTER FOUR..........................................................................................................................................21
DATA ANALYSIS AND FINDINGS.................................................................................................................21
3.1. Introduction....................................................................................................................................21
3.2. Identification of the main problems of EEPCO Southern region of Welkite....................................22
CHAPTER –FIVE..........................................................................................................................................29
CONCLUSION AND RECOMMENDATION...................................................................................................29
4.1. CONCLUSION..................................................................................................................................29
4.2. RECOMMENDATION.......................................................................................................................30
REFERENCE................................................................................................................................................31
APPENDIX..................................................................................................................................................34

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List of Table
Table 1: Based on age& education

Table 2: Respondent reply on stock control explanation

Table 3: How do you evaluate the system efficiency for disposal of deprecated material?

Table 4: The respondent reply on comparison of the stores they handle against the materials

Table 5: Respondent replay on material deliveries from store department using requisition

Table 6: Respondent replay on evaluate of inventory management.

Table 7: The respondent reply on techniques used to inventory management properly.

Table 8: To what extent the inventory control system of your organization affect the customer
services.

Table 9: Respondent replay find management system of inventory to meet the organizations
operation efficient and effectiveness.

Table 10: What kind of inventory system used in your organization.

Table 11: Do you think modern inventory management system exists in your organization

Table 12: respondent reply on what is the modern management system.

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ACRONYMS
EEPCO: Ethiopian Electric Power Corporation

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CHAPTER ONE

INTRODUCTION
1.1. BACKGROUND OF THE STUDY
The American Production and Inventory Control Society (APICS) define inventory
management as the branch of business management concerned with planning and
controlling inventories (Toomey, 2000). According to Lyson & Gillignham (2003)
inventory management involves controlling of stock or inventory levels with the physical
distribution function to balance the need for minimizing stock holding and handling costs.
Consistently, inventory management is aimed at ensuring that the company is supplied
with the right inventories at the right time, in the right places and
ensuring optimization of the benefits of holding inventory in the organizations. Inventories
are the stock of products a company holds to further its production and sales (Pandy, 2005)
they appear in the form of raw materials, work in progress, finished products and supplies
maintained by firms to smoothly conduct their business.

The problem of inventory has continued to receive much attention in most businesses.
Inventory levels of raw materials, semi-finished and finished goods need to be effectively
managed to control the cost of inventory (Kotler, 2002). It is common to find the balance
sheet of an average company having inventory running to 60% of its current assets as
capital tied down (Pandey, 2005). It is for this reason that the management of Population
Services International Ethiopia (PSI/Et) through its warehouse manual (2010) have
instituted procedures and techniques for the purpose of proper inventory control.

According to Coyle, Bardi, & Langley (2003), effective inventory flow management in
supply chains is one of the key factors for success. The challenge in managing inventory is
to balance the supply of inventory with demand. A company would ideally want to have
enough inventories to satisfy the demands of its customers- no lost sales due to inventory
stock-outs. On the other hand, the company does not want to have too much inventory
staying on hand because of the cost of carrying inventory. The success of one organization
depends on the efficient and effective utilization of the given resources. These resources need
proper management. Management’s role in any organization involves the acquisition, storage

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disposition and control of resources that are necessary for the attainment of organizational
objectives. Those (factors of production) typically include labor, capital equipment and material
of inventories.

Inventory management is concerned basically with planning and control of materials. There
must be a store, where to buy, when to buy, and how much to buy to control materials. The
purpose of inventory management is to ensure uninterrupted supply of inventory at lowest
possible cost for ongoing operation of business. Management has compare different cost
components such as cost of supplying inventory, inventory holding costs, and costs resulting
from insufficient inventory when making decision on inventory. (Hugo, Baden horest-weiss,
&Van Rooyen, 2002)

According to Wild (2002), inventory management is key activity which organizes the
availabilities of material for the smooth ongoing operation. It coordinates purchasing,
manufacturing, storing and distribution functions to meet the marketing needs and customer
satisfaction. This role includes the supply of new products consumables; spare parts, obsolescent
items, and all other items that help to have satisfactory operation to customers. Inventory
enables a company to support customer satisfaction by making the operation with high quality.
(Clod Felter, 2003)

Despite this fact, many organizations have not yet clearly understood the benefits of efficient
stores management and control, and thus my subsequent study was tried to investigate how
stores management and control. EEPCO Wolkite Branch is using different kinds of inventory
those are listed below. (www.eepco.gov.et, public relation)

 Stock yard.
 Electrical equipment and materials
 Electrical insulators
 Cables which they may deteriorate due to sun light.

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1.2. STATEMENT OF THE PROBLEM
Inventory comprises the most significant part of current assets in EEPCO. Inventory accounts
large part of its current asset in the balance sheet of the corporation. Therefore, due to the
relative largeness of inventories maintained by the organization, a considerable sum of an
organization’s fund is being committed to them. (www.eepco.gov.et, public relation)

It thus becomes absolutely imperative to manage inventories effectively so as to avoid

unnecessary cost and ensure high level of customer service. Inventory control is the function of
materials management which attempts to maintain stocks at their predetermined levels. It is
exercised by planning required stock levels at regular intervals and by comparing the two sets of
figure it has the following main purposes. Those are to determine maximum, minimum and stock
recorder levels and to ensure the least possible working capital is brooked without allowing
stocks to rise so high or full below the predetermined minimum levels. A balance stocks must be
maintained (Sharma, C., 2004)

Invariably, the organization must neither keep excess inventories to avoid an unnecessary
inventory carrying cost and unnecessary tying down of funds as well as loss in fund due to
pilferage, spoilage and obsolescence nor maintain too low inventories so as to meet users
demand as at when needed. Keeping in mind the grievance resulted from likely poor
management of inventory, the study was tried to assess if the problem is really there. One might
expect the seemingly infinite stream of inventory theory related research to be a key resource for
managers seeking to gain a competitive advantage through inventory control. However, some
have suggested that managers who turn to inventory theory research may find it to be of little
significance (Krautter, 2009)

This has led many to suggest a gap exists between inventory theory and practice (Lenard & Roy,
1995; Silver, 1981; Wagner, 2002; Zanakis et al., 1980). While the varied solutions offered to
bridge this gap represent valuable research, input from practitioners is noticeably absent (Patton
& Steele, 1990).Therefore, an empirically derived agenda founded on practitioner-identified
issues, is needed (Vigoroso,2005). There is limited studies that have been comprehensively been
done on factors influencing effective inventory control in electric power sector and hence the
study intend to fill those gaps.

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The study was tried to answer the following questions:

1. What are the main problem of inventory management in EEPCO

2. What is the factor that creates a problem in inventory management in EEPCO?
3. What types of inventory management system the EEPCO use?

1.3. OBJECTIVE OF THE STUDY

1.3.1. General objective
The general objective of the study is to assess the inventory management system of
Ethiopian Electric power corporations for in Southern region Welkite.

1.3.2. Specification Objective

 To identify the main problems of the EEPCO of Welkite branch.
 To identify the factors that create a problem in inventory management in EEPCO
Wolkite branch?
 To explain the types of inventory management used by the organization
1.4. SIGNIFICANT OF THE STUDY
Inventories represent a sizeable investment and a potential source of waste that needs to be
reviewed regularly and closely reviewed e.g. through perpetual stock taking, periodic reviews
also as well as internal and external auditing. Thus an effective inventory control is paramount to
ensuring that money is utilized appropriately.

It assists the management in ensuring effective inventory control at all times as it aids those
entrusted with decision making to formulate strategies of combating the persistent problem of
inventory control in the organization. Lastly for the researcher, the study not only fulfills the
partial requirement for the award of the Degree of B.A. but also serves as a basis for further
research in the field of inventory control.

1.5. SCOPE OF THE STUDY

The study was conducted in EEPCO Wolkite Branch. It is aimed to assess the inventory
management system of Ethiopian Electric power corporations Welkite branch. The study is
descriptive type. It is impossible for the author to make a longitudinal study, in which the

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implementation result of the proposed inventory control system can be observed and verified.
And this may limit the credibility of the study to some extent.

The interaction among the actors in the network in terms of inventory control is excluded. And
from the supply chain management perspective, the contribution of the study is reduced.

1.6. ORGANIZATION OF THE PAPER

The paper has consisted of five chapters. The first chapter has covered the introductory parts
which includes background of the study, back ground of the organization, statement of the
problem objective of the study, significance of the study scope and limitation of the study. The
second chapter was consisted only the literature review. The third chapter covered the term
research design, sources of data, data collection techniques, method of data analysis and
presentation, target population and sampling methods. Chapter four was dealt with analysis and
presentation of the data collected. Finally the last chapter has covered conclusion and
recommendation.

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CHAPTER TWO

LITERATURE REVIEW
2.1. DEFINITION OF INVENTORY
2.1 Definition of Inventory

Lysons and Gillingham (2003) defined Inventory as an American accounting term for the
value or quantity of raw materials, components, assemblies, consumables, work-in progress and
finished stock that are kept or stored for use as need arises.
(Coyle et al., 2003) defines Inventory as raw materials, work-in-progress, finished goods
and supplies required for creation of a company’s goods and services. The number of units
and/or value of the stock of goods a company hold.
Rick (1998) defines Inventory as piles of money on the shelf and profit for the company or
organization. Pandey (2005) added that inventories are classified as current assets because
typically they will be sold within the year or during a firm’s normal operating cycle if it
should be longer than a year for retailing firms, inventories are often the largest and most
valuable current assets.

2.2 Inventory Management

(Coyle et al., 2003) define Inventory management as the management of materials in

motion and at rest. The following activities all fall within the scope of inventory
management (Wikipedia, 2014) the fine lines between replenishment lead time, carrying
costs of inventory, asset management, inventory forecasting, inventory valuation, future
inventory price forecasting, physical inventory, available physical space for inventory,
quality management, replenishment, returns and defective goods, and demand forecasting.

Balancing these competing requirements leads to optimal inventory levels, which is an ongoing
process as the business needs shift and react to the wider environment.
Inventory management basically serves two main goals (Reid & Sanders, 2007). First of
all good inventory management is responsible for the availability of goods. It is important
for running operations that the required materials are present in the right quantities, quality
and at the right time in order to deliver a specific level of service. The second goal is to
achieve this service level against optimal costs.

2.3 Inventory Control

Eni, O. (2001) defines inventory control as the problems of verifying the quantity, the value
and the balance of the entire range of materials held in stock, so that it would be easy and
possible to give the exact quantities of materials in the store at any given time. It helps the
store-keeper (or the inventory controller, as the case may be) to tell how much was ordered

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(requested for), how many have been used, what is remaining and when to place the next
order so that the enterprises would not lack materials to work with at any point in time.
Similarly, Sharma (2004), views inventory control as the means by which materials of the
correct quantity and quality is made available as at when required with due regard to
economy in terms of storage and costs (both ordering and working capital). He also opines
that inventory control is the systematic ways of locating; storing and recording of goods in
such a way that desired degree of service can be made to the operation shops at minimum
ultimate cost.

Kumar & Suresh (2008) argue that effective control on inventory is a must for smooth and
efficient running of the production cycle with least interruptions. They proceed with their
argument that this is warranted by varying intervals between receiving the purchased parts
and transforming them into final products. They further argue that inventory control would
ensure adequate supply of products to customers and avoid shortages and ensure timely
action for replenishment. Inventory control systems may ensures smooth production &
hence no stock-out.

Inventory control aims at providing the following information to the business

organizations for effective decision making (Sharma, 2004): Information on the accuracy
of stock records and physical quantities, evidence in support of the value of stock shown in
the balance sheet & profit and loss statement, reveal any weakness in the method of
inventory keeping, disclose any loss, fraud, or theft in the process of material handling,
and identifying deterioration, obsolescence, slow movement and redundancy in the stocks
on hand.

Martand (2009) have identified the objectives of inventory control to include: to minimize
the costs involved in purchasing, stocking and issuing of the supplies, to reduce the
frequencies of ordering for stock items, to decrease pilferage, waste and over stocking, to
minimize the investment and fluctuations in Inventories while at the same time providing
prompt order filling services for customers, to integrate and deploy within the logistical
system the minimum amount of inventory consistent with desired delivery capability and
total cost expenditure, to ensure adequate supply of products to customer and avoid
shortages as far as possible, to provide a scientific base for both short term & long term
planning of materials, and to provide a reserve stocks for variations in lead of delivery of
materials.

Good inventory control system offers the following benefits (Clod Felter, 2003):

1. The proper relations ship between sales and inventory can better be well
maintained. Without inventory control procedures in place the store department can
became overstocked or under stocked.

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2. Inventory control systems provide a business with information needed to take
markdowns by identifying slow -selling merchandise. Discovering such items
early in the season will allow a business to reduce prices or make a change in
marketing strategy before consumer demand completely disappears.

3. Merchandise control systems allow buyers to identify best sellers early enough in
the season so that reorders can be placed to increase total sales for the store
department.

4. Merchandise shortages and shrinkage, can be identified using inventory control

systems. Excessive shrinkage will indicate that more effective merchandising
controls need to be implemented to reduce employee theft or shoplifting.

According to Arora (2000), the factors to be considered in inventory control include;

procurement costs, inventory carrying costs, cost of spoilage and obsolescence, cost of
running-out of stock and set-up cost. A good inventory control system minimize the
possibility of delays in production that are caused by lack of materials, permits a company
to exercise economics in purchasing, essential for an efficient accounting system is
deterrent to people who might steal materials from factory, expedite the production of
financial statement, allows for possible increase in output, creates buffer between input
and output, insures against scarcity of materials in the market and avoid inventory build-up
(Carter, 2002).

Poor inventory control has the following symptoms: high rate of order cancellations,
excessive machine downtime due to material shortage, large scale inventories written
down because of price decline, distress sales, widely varying rate of inventory losses, large
writing down at the time of physical inventory taking, continuous growing inventory
qualities, liabilities to meet delivery schedules and even production rate (Menon, 2006).

2.4 Inventory Model: The Economic Order Quantity (EOQ) Model

Piasecki (2001) presents an inventory model for calculating optimal order quantity that
used the Economic Order Quantity (EOQ) method. He points out that many companies are
not using the EOQ method due to poor results received resulted from inaccurate data input.
He clarifies that many errors resulted in the calculation of EOQ in the computer software
package are due to the failure of the users in understanding how the data inputs and system
setup that control the output. He says that EOQ is an accounting formula that determines
the point at which the combination of order costs and inventory cost are the least. He
highlights that the EOQ method would not conflict with the Just in Time (JIT) concept. In
fact, he explains that JIT is actually a quality initiative to eliminate wasted steps, wasted
material, wasted labor and other costs; EOQ method is used to determine which
components would fit into the JIT model and what level is economically advantageous for
the operation

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2.5 Purchasing and Inventory Performance

According to Susan & Michael (2000), the primary purchasing objectives are to buy
materials at the lowest responsive and responsible cost and to ensure adherence to
purchasing terms and conditions. Maintaining continuity of supply and consistency of
quality are also important objectives that go hand in hand with searching for new products
and vendors and developing alternative supply sources. Meeting these purchasing
objectives, as a means to improve inventory performance and maintenance productivity, requires
teamwork among inventory, purchasing, and maintenance departments.

According to Susa& Michael (2000), improving inventory performance can be

accomplished by the following: reducing purchase cycle time, including lead time,
developing commodity expertise/specialization, increasing the use of different purchase
order types, consolidating purchases, increasing the use of volume discounts, tightening
control of purchase order terms and conditions, qualifying vendors, monitoring vendor
performance, searching for new products and vendors, developing supplier relationships,
and working with vendors to reduce the incidence of past-due deliveries.
Other approaches to improving inventory performance require using different procurement
methods, depending on such factors as the types of material or services purchased and
whether the purchase is small bid, one time, or repetitive.

2.5.1 Bureaucratic Procurement Procedures

Procurement encompasses the whole process of acquiring property and/or services. It

begins when an agency has identified a need and decided on its procurement requirement.
Procurement continues through the processes of risk assessment, seeking and evaluating
alternative solutions, contract award, delivery of and payment for the property and/or
services and, where relevant, the ongoing management of a contract and consideration of
options related to the contract. Procurement also extends to the ultimate disposal of
property at the end of its useful life (Waters, 2004).

As organizations become large and more complex, the authoritarian- paternalistic patter
gave way to increased functional specialization with many layers of middle and lower
management for coordinating organization effort (Kenneth & Kenneth, 2005). The
advantages of bureaucracy are many folds; apart from consistent employee’s behavior, it
eliminates overlapping or conflicting jobs or duties and behavior of the system is
predicable (Osborne and Plastrik, 1997). Despite the above advantages, bureaucratic
organization has some significant negative and side effect. Too much red tapes and paper
work not only lead to unpleasant experiences but also to inefficient operations (Osborne &
Plastrik, 1997). Because employees are treated impersonality and they are expected to rely
on rules and policies, they are unwilling to experience individual judgment and they avoid
risks.

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2.6 Inventory Cost

The basic object of inventory management is to maximize customer service through

maintaining appropriate amount of inventory with minimum possible cost. There are costs
associated with holding all inventories, and the costs go beyond the expenditure of the
inventory investment, inventory carrying costs form an interesting concept, representing
both accounting costs and economic costs (Goldsby, &Martichenko, 2005). Accounting
costs are explicit and call for a cash payment. Economic costs are implicit, not necessarily
involving an outlay but rather an opportunity cost.

Goldsby&Martichenko (2005) explain the cost components in Figure 2.1 above

comprehensively as following: The capital cost is the single biggest factor of inventory
carrying cost. It is opportunity cost; to clarify its sense, just think about what else could be
done with the amount of capital if it were not tied up in inventory. Inventory is viewed as
an asset on the balance sheet; hence, many state governments impose property tax rates on
inventory.
Insurance premiums are paid to provide coverage against loss or damage to inventory.
Obsolescence reflects the real possibility that inventory value may decline in the course of
being kept. Storage costs in this figure just refer to variable costs of storage. Fixed
warehousing costs, which do not change with the volume of inventory maintained are not

16
included in inventory carrying costs but are calculated as warehousing costs in a total
logistics cost

2.7 Internal Control

Horngren& Harrison (1992) define internal controls as the organization plan and all
related measures adopted by an entity to safeguard assets ensure accurate and reliable
accounting records promote operational efficiency and encourage adherence to company
policies. Internal controls include administrative controls and accounting controls.
Administrative controls include the plan of organization methods and the procedures that
help managers achieve operational efficiency and adherence to company policies.
Accounting controls include the methods and procedures that safeguard assets, authorize
transactions and ensure the accuracy of the financial records. Internal controls are policies
and procedures established in an organization to authorize transactions in order to ensure
the accuracy of the financial records and to provide assurance that organizational
objectives will be achieved.

Internal controls include all policies and procedures adopted by management of an entity
to assist in achieving their objectives as far as practicable. The controls are aimed at aiding
management in carrying on business in an orderly and efficient manner and showing
transparency and accountability of any policies in such as stock controls through
professional ethics and following routine practices.

Internal control over inventory is important to any business because inventory is the life
blood of a merchandiser. Horngren& Harrison (1992) argue that successful companies
take great care to protect their inventory.

According to Horngren& Harrison (1992), Elements of good internal control over

inventory include: physically counting inventory at least once each year no matter which
system is used, maintaining efficiency purchasing, receiving and shipping procedures,
storing inventory to protect it against theft damage and decay, limiting access to inventory
to personnel who do not have access to the accounting records, keeping perpetual
inventory records for high unit cost merchandise, purchasing inventory in economic
quantities, keeping enough inventories on hand to prevent shortage situations, and not
keeping too large stock pilled, thus to avoid capital tied up.

2.8 Knowledge and Skills Possessed the Staff

According to Susan & Michael (2000), people in warehouse (that is, stores) are
responsible for the distribution of inventory materials to all storage or using locations.

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They are also responsible for the physical security and safekeeping of material at all stores
locations and for all storekeeping activities, including material receiving, put-away, and
material picking and shipping. Other responsibilities include: maintaining accurate
inventory records, managing the physical layout of storehouses, including bin location
assignments, determining the physical movement and distribution of material throughout
the organization, receiving and storing material; issuing stock material in response to a
material request from customers, conducting cycle counts, annual physicals, or both,
reconciling discrepancies between cycle count and annual physical inventory, developing
and operating truck and route schedules for distribution of material, and working with
purchasing departments to resolve vendor-related problems with timing, quality, quantity,
and delivery.

According to PSI/Et warehouse manual (2010), warehouse officers are the direct
custodians of PSI/Et stores and assist in achievement of economy in expenditure on
supplies by the application of proper stores accounting, prevention and detection of losses,
wastage or misuse of stores and disposing of stores in the most advantageous manner to
the organization. The manual therefore recommends that in order to keep costs to the minimum,
PSI/Et should ensure that warehouse staff are properly trained, supervised and
allocated for the work they are required to perform.

Lyson and Gillingham (2003) define training as a planned process to modify attitudes,
knowledge or skill behavior through learning experience to achieve effective performance
in an activity or range of activities. Its purpose in the work situation is to develop the
abilities of the individual and to satisfy the current and future human resource needs of the
organization. The author further says that employees may be trained internally on the job
or externally in a college offering supply chain management courses.

Baily and Farmer (1982) argue that for the supplies function to achieve a superior supply
performance, it is necessary to recruit, train and develop personnel with the capacity and
motivation to do better work. Qualified staff that is competent and skilled will help the
organization to achieve its goals and objectives by being efficient and effective when
carrying out their various functions. For an organization to succeed, qualification is
therefore a pre-requisite and must be matched with job requirement. Baily and Farmer (1982)

2.9 Stock Record Practice

Inventory accuracy defines how well the inventory records, specifically the quantities on
hand, match the actual quantities in the storeroom. Accurate records are a prerequisite to
effective inventory management. Susan & Michael (2000) accuracy of inventory records is
necessary to provide satisfactory customer service, determine replenishment of individual
items; ensure that material availability meets repair or project demand, analyze inventory
levels and dispose of excess inventory. Bailey and Farmer (1982) argue that stock

18
recording are expected to maintain particulars of receipt, issues and balances remaining in
stock for each individual item held in the storehouse daily.

Baily and Farmer (1982) argue that transactions must be posted promptly and correctly to
the records if they are to provide accurate up-to-date information which the stock
controller needs. If left pending for long, transactions can easily be forgotten and the
objective of maintaining stock records will not be met because stock records will be
indicating balances that are not real and hence the records will not be reliable. Therefore
maintaining accurate and up-to-date information of stock recording is one of the crucial
tasks of warehouse personnel.

According to Carter and Price (1993), receipt of goods must be strictly controlled to ensure
efficient stores management. Contributing to the function of receipt and inspection of
goods, Jessop and Morrison (1994) agree that goods supplied to an organization must be
properly looked after. Normally, a certain process of stores recording is followed, which in
its natural course forms the basis of stores accounting system. PSI/Et Warehouse Manual
(2010) argues appropriate standard records and documents should be used for receipts and
inspection of goods.

Jessop and Morrison (1994) argue items in stock represent money and therefore should not
be misappropriated, wasted or improperly used. Storekeepers should have full details of
the name, designation and specimen signatures of all persons empowered to approve issue
notes. Further, issue documents should contain the description and stores code number
entered by the user who prepares the document in the first place. According to Carter and
Price (1993) specialized control documents have been developed to enable the issue of
stock to be successfully monitored and controlled. It is important to ensure that all stock
records are updated and that an accurate picture of the total stock situation can be
maintained to ensure sufficient supplies of all materials.

Stock control as described by Jessop and Morrison (1994) is the operation of continuously
arranging flows of materials so that stock balances are adequate to support the current rate
of consumption, with due regard to economy. Stock control documentation therefore is the
capture of data relating to stock balances, dues in, dues out, consumption record, forecast
requirement, lead-time and economic order quantities (EOQ).

Jessop and Morrison (1994) argue stock records are important when estimating future
consumption because past performance acts as a guide. PSI/Et Warehouse Manual (2010)
recommends that the basic method of controlling stock by quantity is by means of fixing,
for each commodity, stock levels which are recorded in the stock record system and
subsequently used as a means of indicating when some action is necessary. Carter and
Price (1993) argue that stock records and control are two sections of stores management

19
that have to work very closely together because stock records provide statistical
information.

Susan & Michael (2000) argue that stock records provide the management with the
information which is used to ensure accountability through stocktaking and stock audit
exercise. Jessop and Morrison (1994) argue that records can be posted manually but,
where the volume and complexity of the documents handled is of major proportion mechanical
methods are often to be more effective. Manual posting is comparatively slow,
there is high risk of filling the wrong detail, and it can be easily misplaced or lost due to
multiple handling as compared to computer posting system.

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CHAPTER THREE

METHODOLOGY
1.1. Study Design
Descriptive research design was used in this study since the researcher intended to
look at the problem at hand thoroughly to define it, clarify it, and obtain pertinent
information that could be of use in assessment of factors that influence inventory
control/management. The research was conducted through a case study of EEPCO Wolkite
Branch.

1.2. Data type and sources

The study was used both quantitative and qualitative types of data. The study was collected both
primary and secondary sources of data. Primary data was collected through questioners.
Secondary data was collected from books, manuals, publication search papers and written
materials on the subject matter.

1.3. Sample Size and Sampling Techniques

Since the numbers of respondents is small in number, the study was used Census sampling
technique to select the sample size. Questionnaires was distributed to all 15 employees of
EEPCO Southern Region Welkite branch.

1.4. Data Collection Instrument

To collect the data for the study, the researcher was distributed the questionnaires to employees,
head office branch manager and finance workers in the Southern Region Welkite EEPCO.

The questionnaires were designed based on the consideration of the skills and knowledge of
members and attempts was made to make the questions easily understandable to the respondents.

1.5. Data analysis Method and Presentation

After gathering all required qualitative and quantitative information, data analysis was performed
and presented through tables, percentages and frequencies. Then the data was analyzed by using
descriptive analysis method.

21
CHAPTER FOUR

DATA ANALYSIS AND FINDINGS

3.1. Introduction
The data collection method used in this paper is based on the questionnaires filled by employees.

The questionnaires was disturbed randomly selected employees found at Southern region
EEPCO’s the questionnaires is designed and developed in consideration to the skill and
knowledge of members attempts was made to make questions easily understand able to the
respondent.

Finding of the study

A total of 15was distributed and all was filled and reformed by workers of EEPCO of Southern
region of Welkite branch office account).

Table 1: based on age education

No Item Sex Age education

1 Sex Male female Total
no 8 7 15
percentage 67% 33% 100%
2 Age in year 20.25 26.30 31.35,36-40
No 3 9 2,1,15
Percent 20% 60% 14%6% 100%
3 Educational level 12th grade less Diploma Degree
No 0 2 13,15
Percent age 0% 13% 87%,100%
Source: survey study

Shows in table 1, among the sample population size 15, 8(53.3%) was male and the remaining
7(46.7%) was female. The no. of the female and male workers was almost similar. To summarize
the above table, the gender contribution of male and female respondents was balanced.

Item number”2”of table “15” shows, 9(60%) of male employees 26.30year old. 2(14%) was
femal31-35 years old and 1(6%) 36-40 and male and 3(20%) female 20-25year old. From this the
majority of respondent are found at middle age.

22
Item number”3”of table shows the sample population of 2(13%) diploma 13(87%) was degree
and 12th grade less 0(0%) most of the workers status are degree.

3.2. Identification of the main problems of EEPCO Southern region of Welkite.

Table 2: respondent reply on stock control

No Item Number Percentage

1 Do you think that is their adequate stock control
system in your organization?
Yes 6 40%
No 9 60%
Total 15 100%
Source: survey study

According to the respondent says that 6(40%) replied that yes and 9(60%) replied that from the
above response was say that the region have no adequate control of stock.

Stock records (control cards)

Stock record card are usually together in one place, it is difficult to generalize on this point but
there is much to be said for holding the record in or very near to the store house building. If this
is done contract between the clerks keeping the records and the store house staff responsible for
receipts, issues and stock taking is easy. And furies or mistakes can be settled quickly without
need of written inquiries and explanation.

Table 3: How do you evaluate the system efficiency for disposal of unused or deprecated
material?

No Item No Percentage
2 How do you evaluate the system efficiency for
disposal of unused or deprecated material?
High - -
Medium 3 20%
Low 12 80%
Total 15 100%
Source: survey study

According to the respondents 12(80%) replied that the systems efficiently for disposal or unused
deprecated materials is low. Only three respondents replied the system efficiency as medium.

23
For this that the region system efficiency for disposal of surplus unused materials is too low so
corrective measures must be taken to dispose surplus materials on time according to the rules and
regulations.

Disposal of scrap materials

According to the EEPCO, s inventory management manual surplus material were identified least
annually, then surplus materials has been identified by branch and regulations should inform to
the concerned bodies.

Normal physical receiving storage control and protection procedures were apply to surplus
materials whether at stores division or other location.

Table 4: the respondent reply on comparison of the stores they handle against the materials

No Item No Percentage
3 What is the level of the capacities of the storage to
hold the materials?
v. Adequate 2 13%
Adequate 4 27%
In adequate 9 80%
Total 15 100%
Source: survey study

According to the respondents only 9(60%) respond that the store is not enough to accommodate
the material the region have to hold. 4(27%) of the respondent respond that there is adequate
place for the material and only 2(13%) verify that there is very adequate place besides this in my
observation the organization have to construct better store which accommodate buffer quantity.

Questions number 5.how do you affect the customer service? From the respondent most says that
conclude and summarized, if such inventories are out of stock (e.g.) material different kind of
writ cables, breakers etc. may our customers suffer our service in time and cost etc.

Table 5: respondent replay on material deliveries from store department using requisition

No Item No Percentage
4 What is the frequency of delivery of product from the
store department made by requisition?
Always 13 86.67%
24
 Some times 2 13.33%
Noting requisition all - -
Total 15 100%
Source: survey study

According to the respondents 13(86.67%) said deliveries from the stores department made all
ways in requisition, 2(13.33%) of the respondent said delivered from the store department mad in
requisition some times. None of the respondent said it is made with of requisition at all from this
that can understand that the corporation uses requisition to issue material user department. For
materials to be delivered to the concerned departments requisition procedures should be strictly
observed. According to EEPCO, s materials management manual around the store there are
many material that need protection of them is stock yard because they are electrical equipment
and materials such as electrical insulators cable varies etc. which they may deteriorate due to sun
light. Purchasing unit the store staffed this leads to un proper purchasing and the store rapiers
what so ever is purchasing by the purchase no more inspection precludes would not be
implemented this may impose to stock items that do not fit the required jobs.

1.3. Identification of the skill and knowledge of the workers of the inventory management in
the organization.

Table 6: respondent replay on evaluate of inventory management

No Item No Percentage
5 How did you evaluate the inventory management control system
of the corporation?
V, good 2 13.33%
good 12 80.00%
Fair 0 -
Poor 0 -
Need improvement 0.1 6.67%
Total 15 100%
Source: survey study

According to the respondent 2(13.33%) responded that the inventory management control of the
corporation v, good and also 12(80%) responded that if was good and 1(6.67%) of the
respondent that the corporation need improvement.

Inventory element

25
Order quantity (Q) and order frequency are inversely related large orders result in less frequent
ordering and smaller orders result in more frequent ordering. Holding costs (carrying costs) are
the costs of holding the inventory. Opportunity costs is the minimum retouch on investment
(role) required by organization.

Table 7: the respondent reply on techniques used to inventory management properly.

No Item No. Percentage

6 Do you believe that the technique used to inventory manage
properly?
Yes 14 93%
No 1 7%
Total 15 100%
Source: survey study

According to the respondent 14(93%) responded was yes and 1(7%) was no from this would be
that the organization used technique for inventory management properly.

Inventory and store management

A wide variety of inventory management techniques exist which directly affects the inventory
management in arranging its day to day activities staffing from the simplest to the sophisticated
methods. Each technique is specially designed for controlling a given inventory situations.
Considering such variable factors as the degree of uncertainty of demand for supply of inventory,
the cost of developing and maintain the system and the inventory accuracy requirement.

Table 8: To what extent the inventory control system of your orgn. affect the customer services

No Item No Percentage
7 To what extent the inventory control system of your
organization affect the customer services?
V, high 0 -
High 2 13.33%
Medium 12 80%
Low 01 6.67%
V, low 0 -

26
 Total 15 100%
Source: survey study

According to the respondent 2(13.33%) responded that the service given by the store persons
was high and 12(80%) responded that if is medium and 1(6.67%) of the respondent said that the
service is low. Form this region was gives service to users at medium level.

Table 9: respondent replay find management system of inventory to meet the organizations
operation efficient and effectiveness.

No Item No Percentage
8 How do you find management system of inventory to meet
the organization operational efficient and effectiveness?
V, good 4 26%
good 9 60%
Fair 0 -
Poor 0 -
Need improvement 2 14%
Total 15 100%
Source: survey study

According to the respondent 4(26%) responded was v, good and 9(60%) good from this and
2(14%) responded need improvement from this the organization was on good condition.

3.4. Identification explains the types of inventory management used by organization.

Table 10: What kind of inventory system used in your organization

No Item No Percentage
9 What kind of inventory system used in your
organization??
Periodic 14 93.3
Perpetual 1 6.7
Others 0 -
Total 15 100%
Source: survey study

According to the respondent says that 14(93.7%) was periodic and 1(6.7%) was perpetual from
this the organization was used periodic inventory system.

The periodic inventory system

27
As the name implies when the periodic inventory system is used the amount of inventory on
hand is determined only periodically. All inventory acquired during an accounting period is
recorded by debiting the purchases account. The dollar amount in the purchase account at the end
of the accounting period is added to the inventory on hand at the beginning of the period to
determine the total.

Table 11: Do you think modern inventory management system exists in your organization

No Item No Percentage
10 Do you think modern inventory management system
exists in your organization?
Strongly agree 0 -
Strong disagree 9 60%
Agree 3 20%
Disagree 3 20%
Total 15 100%
Source: survey study

According respondent only 9(60%) responded that the strongly disagree 3(20%) of the responded
agree and 3(20%) of the respondent that agree and 3(20%) is disagree from the above response
says that the organization strong disagree.

Table 12: respondent reply on what is the modern management system

No Item No Percentage
11 The answer for question no9 is agree what is the modern
management system is in your organization?
Economic order - -
Record level 3 20%
Material require meat place - -
Total 15 100%
Source: survey study

According to the respondent says that only 3(20%)is agree there is record level used in the
EEPCO, the stock record head extracts SR and forward them to the respective head for
permission and approval as per the priority level.

 level item high value (sensitive expensive )

 item to the store division regional and project manager

28
  Level item moderate value item to the ware house section head or regional administration
manager.

Question 13: if your answer to question no 12periodic why?

 In order to save frequently cost of physical counting the availability of many types of
stock and others.

Question 14: add some other point which you think that have impact on the inventory
management system that the company supply?

 Even if the organization provide a good inventory management system there is poor
decision making of the time of found and the occurrence of shortages employee by
unqualified and un related employees follows poor inventory management system.

CHAPTER –FIVE

CONCLUSION AND RECOMMENDATION

This chapter is deal with the conclusion and recommendation part of the research. Conclusion
and recommendation for the research finding was as follows.

29
4.1. CONCLUSION
The success of one organization depends on the effective and effective utilization of the given
resources. There resources need proper managements and control for an organization to exist in a
com repetitive business environment inventory management and control system must be
designed so that the organization operates efficiently earn higher profit and secure future
growth.

In Ethiopia electric power corporation the system of inventory management and control is done
by the help of computers. This system contributes a lot of the success of the corporation.

Generally the region has good inventory management control system despite the following
problems.

 Several surpluses scrape inventories was existing in the ware house and around store
yard. These materials tied up the capital and increases carrying cost. But currently the
corporation was be gone to collect records of scrap materials all over its districts and
power station to dispose these materials.
 Stock and scrap that was available around the stock yard do not have any controlling
mechanisms.
 Less modern inventory management system exist in the region
 Lake of purchasing procedures in the region
 Lake do not use scientific method in determine their inventory level.

4.2. RECOMMENDATION
From this study we can understand that a through most of the respondents the actual questioner
distributed and from EEPCO manual these papers suggest that the corporation has good

30
inventory management system. It has same problems which calms for immediate correction
measures

The researcher recommends the following ideas for better improvement of the inventory
management and control of the region.
 In order to determine inventory level in – it should develop softy stock level and recorder
point.
 In order to effectively control resources and to reduce expense incurred in relation to
landing of material the region should organize its un organized store
 Give training and development course for employees who work in store to upgrade their
skills and knowledge
 Establish appreciates control methods for scrap material and necessary action to dispose
them.
 There should be separate place for scrap stock yard equipment.

31
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APPENDIX
WOLKITE UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

Dear respondents,

The purpose of this questionnaire is to collect data on Assessment of Inventory Management

System (The case of Ethiopian Electric Power Corporation Southern Region Wolkite
Branch) for the partial fulfillment of BA degree in Management. Dear respondents, the
information you will provide is very important for successful accomplishment of this research.
Furthermore, the information you give will be used for only the academic research. Therefore,
you are kindly requested to read all the questions and fill honestly without any hesitation and all
the data gathered will be held confidential.

Thank you in advance!

ZerfineshNida

Appendix I

Questionnaires to respondent

Personal Information

 Age

A. 20-30 

B. 31-40 

C. 41-50 

D. above 50 

 Sex

35
 A. Male 

B. Female 

 Education background:

A. primary school (5-6) 

B. Secondary school (7-12) 

C. Technical school 

D. College (diploma) 

E. College (degree) 

IDENTIFICATION OF THE MAIN PROBLEMS OF EEPCO SOUTHERN REGION OF WELKITE

1. Do you think that is their adequate stock control system in your organization?
A. Yes 
B. No 
C. Total 
2. If you say yes, how do you evaluate the system efficiency for disposal of unused or
deprecated material?
A. High 
B. Medium 
C. Low 
3. What is the level of the capacities of the storage to hold the materials?
A. V. Adequate 
B. Adequate 
C. In adequate 
4. What is the frequency of delivery of product from the store department made by
requisition?
A. Always 
B. Some times 
C. Noting requisition all

36
5. How did you evaluate the inventory management control system of the corporation?
A. V, good 
B. Good 
C. Fair 
D. Poor
E. Need improvement
6. Do you believe that the technique used to inventory manage properly?
A. Yes 
B. No
7. To what extent the inventory control system of your organization affect the customer
services?
A. V, high 
B. High 
C. Medium 
D. Low
E. V, low
8. How do you find management system of inventory to meet the organization operational
efficient and effectiveness?
A. Very good 
B. Good 
C. Fair 
D. Poor
E. Need improvement
9. What kind of inventory system used in your organization??
A. Periodic 
B. Perpetual 
C. Others
10. Do you think modern inventory management system exists in your organization?
A. Strongly agree 
B. Strong disagree 
C. Agree 
D. Disagree

37
11. The answer for question no. 9 is agree what is the modern management system is in your
organization?
A. Economic order 
B. Record level 
C. Material require meat place
12. Is there any inventory item in the warehouse which is overstocked?
A. Yes
B. No

13. Do you have insurance for inventory items?

A. Yes
B. No
14. How do you determine inventory order size?
A. Past experience
B. Vehicle capacity
C. Forecasting
D. Mathematical model
15. Do you have any expired, obsolescence and damaged inventory items in
warehouse?
A. Yes
B. No

38