INVENTORY MANAGEMENT AND SUSTAINABILITY IN COCA-COLA

MANUFACTURING COMPANY IN MOGADISHU, SOMALIA

BY:

KHADRA MOHAMUD HUSSEIN

MBA/3 9699/ 131 /D F

A THESIS PRESENTED TO THE COLLEGE OF HIGHER DEGREES AND RESEARCH

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AW ARD OF A

DEGREE MASTER OF BUSINESS ADMINISTRATION IN BANKING

& FINANCE OF KAMPALA INTERNATIONAL UNIVERSITY

KAMPLA, UGANDA

NOVEMBER, 2014
 I

DECLARATION
"This thesis is my original work and has not been presented for a degree or any other
academic award in any university or institution of learning

Name of Candidate: Khadra Mohamud Hussein

~
Signature:_ _ __ _ __,__ _ _ _ _ __

Date: - ----=
l8'-'-( _ l 'j
lj_ ;),.O
__,_
l _,____ _

u
 APPROVAL
"I confirm that the work reported in this thesis was carried out by the under my
supervision".

Name of Supervi

Signature:._ _ 4---Jll-'-'-t- -~ - - -c::;__-

Date: _ _ _J__ -1-::=.l-.!1.___J__ __J_.:,2::_::::s;~

ii
 DEDICATION

I dedicate this research work to my beloved parents, siblings, fiancee, friends specially
dear uncle Mohamed Hussein who have supported me financially and imparts in me moral
values in my studies.

iii
 ACKNOWLEDGEMENT

In the name of Allah, the most merciful the most gracious, the researcher thanks to Allah
the way has guided to him and given the ability, the knowledge and the wealth to write
this thesis.

I would like to acknowledge the varied assistance of the following persons in the course of
my research.
0

To the College of Higher Degrees and Research, Kampala International University, for
giving me all the skills and knowledge that has enabled me to do this research.

To the Deputy Vice Chancellor of College of Higher Degrees and Research, Kampala
International University Dr. Novembrieta R. Sumi! and Viva voce panel members who in
their various capacities made this studies possible.

To my research supervisor Dr. Ssendagi Mohamed for giving him all the necessary
comments that have made this work look the way it is now.

To the Coca-Cola parts, Managers and Customers who participated in this study. Your
generosity in providing relevant information for this study has made it as it is now.

To my beloved mother Zeinab Ali Farah, father Mohamud Hussein, siblings, fiancee who
have helped to shape me morally and spiritually most
•

Lastly, to individuals who contributed in one way or another towered the success of this
work.

"Thank you and Allah bless"

iv
 TABLE OF CONTENTS
Declaration ............................................................................................................................................ i
Approval .................................................................................................................................... ii
Dedication ............................................................................................................................... iii

Acknowledgement. ................................................................................................................ iv

Table of Contents .................................................................................................................... v

List of Tables .......................................................................................................................... .

Acronyms ................................................................................................................................ .

Abstract. ................................................................................................................................. vi

CHAPTER ONE .................................................................................................................................... !

INTRODUCTION ....................................................................................................................... !
I. I Background of the Study ......................................................................................................... I
I. 1.1 Historical Perspectives .................................................................................................... !
I. l .2Theoretical Perspectives ......................................................................................... .4

l. I .3 Conceptual Perspectives ........................................................................................ .4

l. l .4 Contextual Perspectives .......................................................................................... 6

1.2 Statement of the Problem ...................................................................................................... 7

1.3 Purpose of the study........................................................................................................ .

1.4 Research Objectives .............................................................................................................. 8

1.4.1 General ................................................................................................................... 8

1.4.2 Specific .................................................................................................................. 8

1.5 Research Questions ............................................................................................................... 9

1.6 Null Hypothesis ..................................................................................................................... 9
1.6 Scope .................................................................................................................................... 7
1.6.1 Geographical Scope ................................................................................................ 7
1.6.2 Theoretical Scope ................................................................................................... 7
1.6.3 Content Scopc ......................................................................................................... 7
1.6.4 Time Scope .......................................................................................................... 10
1.7 Significant of the Study ................................................................................................................. 10

V
CHAPTER TWO ...................................................................................................................... 12
LITERATURE REVIEW .......................................................................................................... 12
2.0 Introduction ......................................................................................................................... 12
2. I Theoretical Review .............................................................................................................. 12
2.2 Conceptual Framework ......................................................................................................... I 5
2.3 Conceptual Review ....................................................................................................................... 16

2.4 Related Studies .................................................................................................................... 38

CHAPTER THREE .................................................................................................................. .43

3.0 Introduction ................................................................................................................................... .43
3. I Research Design .................................................................................................................. .43
3.2Research Population .............................................................................................................. .43
3.3 Sample Size ....................................................................................................................... .44
3.4 Sampling Procedures .......................................................................................................... .44
3.5 Research Instruments .......................................................................................................... .44
3.6 Validity and Reliability of the Instruments ............................................................................ .45

3. 7 Data Gathering Procedures ................................................................................................... 45

3.7.1 Before the administration of the questionnaires ...................................................... .45
3.7.2 During the administration of the questionnaires ...................................................... .46
3.7.3 After the administration of the questionnaires ......................................................... .46
3.8 Data Analysis ..................................................................................................................... .46
3.9 Ethical Considerations .......................................................................................................... .47
3. IO Limitations of the Study .................................................................................................... .48

CHAPTER FOUR ..................................................................................................................... 50

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA ....................................... 50
V
4.0 Introduction ........................................................................................................................ 50
4. I Demographic prolik ofRespondents .................................................................................... 51
4.2 Level of Level of inventory management in Coca-Cola Company, Mogadishu, Somalia ............ 53
4.3 Level of Sustainability of Coca-Cola Company in Mogadishu Somalia ......................................... 60

vi
4.4 Relationship between Inventory Management and Sustainability of Coca-Cola
0

Company, Mogadishu Somalia .............................................................................................. 66

CHAPTER FIVE ....................................................................................................................... 69

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS ..................................................... 69

5.0 lntroduction ......................................................................................................................... 69

5. I Findings .............................................................................................................................. 69
5. l. l Level of inventory management in Coca-Cola Company, Mogadishu, Somalia ........... 70

5.1.2 Level of Sustainability of Coca-Cola Company in Mogadishu Somalia .................... 70

5.1.3 Relationship between Inventory Management and Sustainability of Coca-Cola
Company, Mogadishu Somalia ................................................................................................ 72

5.2 Conclusions ......................................................................................................................... 72

5.3 Recommendations ................................................................................................................ 74
References ................................................................................................................................ 76
Appendices ............................................................................................................................... 58
Appendix IA: Transmittal Letter ................................................................................................. 79

Appendix I B: Tra,,smittal letter for the respondents .................................................................... 80

Appendix II: Clearance from Ethics Committee ........................................................................... 81
Appendix !VB: Questionnaire To Determine inventory management in Coca-Cola Company,
Mogadishu, Somalia ............................................................................................................................ 83
Appendix IVC:Questionnaire To Determine Sustainability of Coca-Cola Company in Mogadishu
Somalia .................................................................................................................................... 85
Appendix VIII: Researcher's Curriculum Vitae ................................................................................... 65

vii
 LIST OF TABLES

Table 4.1: Demographic Characteristics of Respondents ...................................................... .37

Table 4.2: The Level of social economic development of women in Mogadishu, Somalia
··············································································· ............................... .40
Table 4.3 Level of social economic development of women in Mogadishu, Somalia .......... .43

Table 4.4: Correlation Analysis between Micro finance Institutions and socio-economic
development of women in Mogadishu, Somalia................................................. .46

Table 4.5: Regression Analysis between Micro finance Institutions and socio-economic
development of women in Mogadishu, Somalia ........................................ .47

viii
 ABSTRACT

The topic of the study was "Inventory Management and Sustainability of Manufacturing

Companies in Mogadishu, Somalia: A Case Study of Coca -Cola Company." The purpose

of the study was to investigate whether there is a relationship between inventory

management and sustainability of in coca-cola manufacturing companies in Mogadishu. It

was guided by three objectives. These are to examine the level of inventory management in

Coca-Cola Company, Mogadishu, Somalia, to examine the level of sustainability of Coca-

Cola Company in Mogadishu and to determine if there is a significant relationship between

inventory management and sustainability of Coca-Cola Company, in Mogadishu. The study

was guided by Geoff Buxey theory of reconstructing management (2006). This study

employed the descriptive survey design specifically the descriptive comparative and

descriptive correlational strategies. A sample I 09 respondents was selected by the purposive

sampling technique to select managers' Simple random sampling technique for other

respondents. The researcher found out that the level of inventory management was (mean =

2.71) interpreted as high. The researcher also found out the level of sustainability of Coca-

Cola Company was high (mean= 2.53) interpreted as high. in terms of relationship between

inventory management and sustainability, the researcher found out that there is a positive

significant relationship between inventory management and sustainability with (r = 0.842).

ix
 CHAPTER ONE

INTRODUCTION

1.0 Introduction

This chapter contains the background, problem statement, purpose and objectives of

the study, research questions, hypotheses, scope and significance of the study.

1.1 Background of the study

I. 1. 1 Historical perspective

In traditional settings, inventories of raw materials, work-in-progress components

and finished goods were kept as a barrier against the possibility of running out of

needed items. However, large barrier inventories consume important resources and

generate hidden costs, as a result, many companies have changed their approach to

production and inventory management. Since at least the early 1980s, inventory

management leading to inventory reduction has become the primary target, as is

often the case in just-in-time (JIT) systems, where raw materials and parts are

purchased or produced just in time to be used at each stage of the production

process. This approach to inventory management brings considerable cost savings

from reduced inventory levels. As a result, inventories have been decreasing in

many firms (Chen and eta!, 2005).

Since the mid-l 980s the strategic benefits of the inventory management and

production planning and scheduling have become evident. The business press has

highlightec.! the success of Japanese, European, North American firms in achieving

of unmatched effectiveness and efficiency in manufacturing and distribution. In

recent years, many of the firms have raised the bar', yet again by coordinating with

1
other firms in their supply chains. For instance, instead of responding to unknown

and changeable demand, they share information so that the changeability of the

demand they observe is significantly lower (Silver and et al, 1998).

Most companies worldwide supply their products to a number of distributors and a

significant inventory that maintains 100 percent service level of supply to all

customers is emphasised. Currently, product forecasts presented by customers are

used to calculate monthly demand rate and the monthly cover of the products.

Products are then ordered according to the lead time of delivery and the monthly

cover obtained. This system is supposed to ensure that monthly cover is always

greater than the sum of on order stock so as to achieve a 100 percent service level of

supply to the customers" (Salami, 2000). Some of the merchandising companies

have inventory management to control and manage to their inventory because

inventory is the backbone of business. In this study the researcher focus on

merchandising companies only those operate in Mogadishu, Somalia, the

researcher made selection from Coca-Cola Company. All companies have

inventory management but some of them are not so good, while others have very

good inventory management of their business operations, in accordance with their

control system. (Aliet al 2012).

Inventory management deals with ordering and stock keeping of goods for sale,

production or distribution. In many cases, inventories are kept in many

environments, for instance, in the mining-industry of minerals, in factories of raw

m.aterials, parts, work in progress and finished products, and in warehouses, depots

and wholesale dealers of goods for distribution, and at shops and by retailers of

goods for sale. The main reasons why inventories are held are that it is

2
uneconomical to produce, to handle or to transport units one by one and that

consumers often do not accept a delay in the delivery of goods or only want to buy

goods that are on display or available in a shop, supermarket or department store

(Blanc, 2011 ).

In Africainventory management has become greatly developed to meet the

increasing challenges in most corporate entities and this is in response to the fact that

inventory is an asset of separate feature. The inventory management situation of the

Nigeria Bottling Company, Ilorin Plant has been made known using the EOQ

model. It was also seen that the Company through a well-built policy is able to

handle its idle stock without incurring unnecessary costs. A basis for inventory

planning and control was also provided in this study. Though, looking through the

inventory policy ofthc Company, it can be said to be dynamic to some extent but the

analysis and findings have revealed the need to remedy some situations in the

Company's management of inventory (Adeyemi&Salami ,2010).

1.1.2 Theoretical perspective

This study is based on reconstructing inventory management theory developed by

Geoff Buxey (2006). The theory states that inventory management is a complex

problem area owing to the diversity of real life-time situations in business entities.

Successful inventory management requires sophisticated methods to cope with the

continuously changing environment. However, it is noted here that the practical

implementation of inventory models lags behind the development of inventory

modelling. The assumption of this theory is that it is also necessary that some

quantity should be stored so that the manufacturer does not get out of stock. And

3
such being the nature of an inventory, it follows that inventory management must

deal with the logic which should underline this procedure for future production. The

theory is called reconstructing Inventory Management whereby the biasedangle of

established models neglects the impact of various ordering policies at the supplier's

end, where the promotion of cost-effective and responsive warehouse and transport

operations is paramount. As a rule, both areas benefit from stable resources

planning, based on cyclic orders and delivery schedules along fixed vehicle routes.

This theory developed is a merger of two different products combining the

functionalities of normal inventory system and 'point of sales' (POS) system that

later on affect the sustainability of aCompany.

1.1.3 Conceptual perspective

Inventory management is pivotal in effective and efficient organizational

performance. It is also vital in the control of materials and goods that have to be held

(or stored) for later use in the case of production or later exchange activities in the

case of services. The principal goal of inventory management involves having to

balance the conl1icting economics of not wanting to hold too much stock, thereby

having to tie up capital so as to guide against the incurring of costs such as storage,

spoilage, pilferage and obsolescence and, the desire to make items or goods

available when and where required (quality and quantity wise) so as to avert the cost

of not meeting such requirements (Adeyemi& Salami, 2010).

According to Kotler (2002), inventory management refers to all of the activities

involved in developing and managing the inventory levels of raw materials,

semi-finished materials (work in-progress) and finished good so that adequate

4
supplies are available and the costs of over or under stocks are low.It is a critical

component of operating performance, especially among retailers and manufacturers.

For example, retailers use recorded inventory quantities to forecast customers'

demands for goods, which in turn results in the issuance of purchase orders to

replenish store shelves.

The concept of inventory management on production volume adopted in this study

is derived from Adeyemi& Salami (2010). Accordingly, inventory management is

pivotal in effective and efficient organization. It is also vital in the control of

materials and goods that have to be held (or stored) for later use in the case of

production or later exchange activities in the case of services. The principal goal of

inventory management involves having to balance the conflicting economics of not

wanting to hold too much stock. Thereby having to tie up capital so as to guide

against the incurring of costs such as storage, spoilage, pilferage and obsolescence

and, the desire to make items or goods available when and where required (quality

and quantity wise) so as to avert the cost of not meeting such Requirement.

According to Dan (20 l l ), sustainability is an initiative increasingly essential to the

core business modd of many companies. There are many diverse perspectives on

sustainability. Some companies consider it to be the burden of more government

regulations, new compliance requirements and higher manufacturing costs.

However, industry leading companies recognize that sustainability can actually be a

business driver for next-generation products, more efficient operations and

increased profitability. Many major manufacturing organizations now include the

topic of sustainability on their websites, in their marketing literature and investor

relation information - recognizing its value to customers, consumers and the public

5
at large.The high-lc\·cl commitment to sustainability is evident, but the success of

these programs will be driven by the implementation details. A challenge for many

manufacturers is determining where to focus sustainability efforts given global

operations with varying geographical expectations.

1.1.4 Contextual pcrspcdivc

Somalia has extended its econonuc engagement with foreign governments and

investors within the region and beyond. It is engaged in negotiations with Ethiopia

to finalize the first official bilateral strategic cooperation agreement. Because

Somalia is open for business as well as its well-established peace and stability as

well as its economic potentials that remain untapped thence very lucrative for

investment both foreign and Iocal.Djiboutian have invested heavily in Somalia's

economy, including about$ I 5 million in a Coca Cola factory which opened in 2012.

Somalia has used diplo111,1cy to help explore recent efforts to attract FD! from

Turkey, Malaysia. the UAE, Kenya, Egypt and China into Somalia's key sectors

such as livestock and fisheries. According to Trade and foreign investment minister,

Somalia is signalling to all potential investors that it is "open for business," having

progressed from a post-conflict situation to a state of political stability and

sustainable economic development. Underpinned by this transformation, Somalia is

now firmly in a period where it is able to encourage foreign investment (SDA,

2011 ). The Coca-Cola Company is the world's largest beverage Company,

refreshing consumers with more than 500 sparkling and still brands. Led Coca-Cola,

the world's most valuable brands including Diet coke, Fanta, Sprite, Coca-Cola

Zero, among others.

6
1.2 Problem Statement

Sustainability in any organisation is vital for the continual running of the business.

Despite this, mismanagement of items and low profit margin has become the order

of the day in most manufacturing companies. The mismanagement and other

adverse effects arc linked to lack of effective control of stock of materials for

production and operational activities. This poses a serious problem in terms of

sustainability, service delivery, low profit margin and inability to meet up with

customer demands. While there are many variations on sustainability programs of

manufacturing companics,Coca Cola Company inclusive, the core components of

an effective sustainability may include among others inventory and performance

management as it has been identified that companies have not identified stock

control as very crucial which has led to such practices as theft, pilferages, sho1iages,

wastages, inappropriate accounting and inadequate record keeping and other loses,

as they cannot account for the usage and management of specifically raw materials

and others like supplies, andproduction equipment. So Coca-ColaCompany as a

newly established Company (2012) in Mogadishumay face a great variety of other

inventory management problems that may negatively affectits sustainability in the

country. This study \\ill therefore analyse the effect of inventory management on

sustainability of mlmufacturing companies in Mogadishu, focusing on coca-cola

bottling Companyin Mogadishu.

1.3 Purpose of !he study

The purpose of the study was to investigate whether there is a relationship between

inventory management and sustainability of incoca-cola manufacturing companies

in Mogadishu.

7
1.4 Research Objl·ctivcs

1.4.1 General

This study im-cstigated the relationship between inventory management and

sustainability of in manufacturing companies in Mogadishu.

1.4.2Specific Objectives

1) To examine the level

2) of inventory management in Coca-ColaCompany, Mogadishu, Somalia.

3) To examine the level of sustainability of Coca-Cola Company in Mogadishu

4) To determine if there is a significant relationship between inventory

management and sustainability of Coca-ColaCompany, in Mogadishu.

1.5 Research Questions

1. What is the level of inventory management 111 Coca-Cola Company,

Mogadishu, Somalia? Trình độ quản lý hàng tồn kho ở Cty Coca Cola

2. What is the level of sustainability of Coca-Cola Company in Mogadishu?

3. Is there a significant relationship between inventory management and

sustainability of Coca-Cola Company, in Mogadishu?

1.6 Null Hypothesis

There is no signi licant relationship between the extent of inventory management and

sustainability of a Coca-Cola Company in Mogadishu, Somalia.

8
1.7 Scope of the study

1.7.lGeographical scope

The study was conducted within the capital city of Somalia, Mogadishu. Mogadishu

provided an optimal focus for this study because it is where most of the service in the

country. u

1.7.2Theorctical Scope

The study was underpinned by Geoff Buxey theory of reconstructing management

(2006).

1.7.3 Content scope

This study investigated the relationship between inventory management and

sustainability of in manufacturing companies in Mogadishu. It also examined the

level of inventory management in Coca-Cola Company, Mogadishu, Somalia, and

the level of sustainability of Coca-Cola Company in Mogadishu.

1.7.4Time scope

The time bound of this study was April 2013 up to April, 2014

1.8 Significance of the study

It will help the organization to develop and adapt to proper techniques of inventory

control. It will also enable the organization to understand the weaknesses imbedded

in inventory control that has always contributed to its poor performance.

9
This study will help the organization to determine rates of consumption and when

more stock is be ordered bv placing of orders.

This study could be helpful for all Manufacturing industry as findings and

recommendations provided in the conclusion of this research, they can know the

level effect of im·cntory management on production volume, further it can take

corrective actions.

The study also will help managers to !mow how inventory management and control

are managed and how they influence sustainability of an organisation.

Like any other research. the findings will be used as a reference as far as further

studies are concerned and 11ash off further research in inventory management and

sustainability of manufacturing companies.

The researcher's knowledge, skills and understanding will be improved through the

interaction with the respondents. And finally, it will enable the researcher to fulfil

the partial requirements 1,,r the award of the masters in Business administration by

Kampala International University.

10
 CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This chapter covers all reviews of literature related to the study. It is from studies

and observations made by other scholars/ researchers with more concrete

understanding of the research variables. Inventory control can significantly boost

customer service level.s while operating as a cornerstone of an effective

organizational performance which results into the sustainability of an organisation.

The related literature reviewed below is therefore in line with the research

objectives.

2.1 Theoretical review

Geoff Buxeys theory of reconstructing inventory management (2006) is focused on

in this research. He asserts the promotion of cost-effective and responsive

warehouse and transport operations is paramount. As a rule, both areas benefit from

stable resources planning, based on cyclic orders and delivery schedules along fixed

vehicle routes. This theory developed is a merger of two different products

combining the functionalities of normal inventory system and 'point of sales' (POS)

system. It can be considered as an intelligent 'point of sales' that peeps into the

inventory to know what to be sold and at what rate from time to time. This is

achieved through the use of a common database which acts as sales and inventory

tracker and at the same time a reservoir from which inferences can be drawn for

making critical reorder/sales decisions Again, the new system is also enriched with

11
the capability of sending alerts via SMS to stock controllers and administrators even

when they are far away from their offices. This capability makes it possible for the

administrator to have information about what happens at various branches of his

business outfits without visiting the branches. Finally, the theory gives real-time

information concerning stock level without manually counting the items on stock,

unlike the other inventory models that allow some critical transactions to be done off

line, only to be reconciled on a later day. As an online line system, it is possible to

have accurate and reliable information at all times for more effective stock

management. It can be considered as an intelligent 'point of sales' that peeps into the

inventory to know what to be sold and at what rate from time to time. This is

achieved through the use of a common database which acts as sales and inventory

tracker and at the same time a reservoir from which inferences can be drawn for

making critical reorder/sales decisions Again, the new system is also enriched with

the capability of sending alerts via SMS to stock controllers and administrators even

when they are far away from their offices. This capability makes it possible for the

administrator to have information about what happens at various branches of his

business outfits without visiting the branches. Finally, the theory gives real-time

information concerning stock level without manually counting the items on stock,

unlike the other inventory models that allow some critical transactions to be done off

line, only to be reconciled on a later day. As an online line system, it is possible to

have accurate and reliable information at all times for more effective stock

management.

Silver, (1981 ), notes that it is also necessary that some quantity should be stored so

that the retailer or manufacturer does not get out of stock. And such being the nature

of an inventory, it follows that inventory management must deal with the logic

12
which should underline this procedure. Apart from dealing with the logic. it also has

to deal with some costs that are associated with inventory which include ordering

costs (i.e. cost of replenishment and fresh orders), holding cost and stock out costs.

The discrepancy between theory and practice of inventory is partly caused by the

different goals of academics and practitioners. Much of the academic research is

aimed at rigorous analysis of underlying equations representing the inventory

problems and developing mathematically elegant decision models. This type of

theoretical work is most highly valued by the academic community. Therefore, there

is often less attention given to providing workable solutions to real problems. Most

of the time, the underlying mathematical equations will be made up of numerous

mathematical assumptions that make the models practically impossible to provide

any workable solution for real life problem (Zanakis, et al (1980).

13
 2.2 Conceptnal frame work

A Conceptual framework showing the relationship between inventory management

and sustainability of coca-cola Company in Mogadishu Somalia

.Figure 1: Conceptual' Framework between Inventory Management and

Sustainability of Manufacturing Companies

INVENTORY SUSTAINABILITY OF
) MANUFACTURING
MANAGEMENT ,~
I COMPANIES

l
Record keeping
l
Techniques used ► Profitability
• EOQ ► Risk reduction
• EDI ► Efficiency and
Costs of inventory accountability

Performance measures

Extraneous variables
• Funds availability
• Technology
updating
Key: • Economic climate
• Government policy
EOQ- economic order quant ity • Skilled manpower

EDI -Electronic data interchange

Source: Researcher (2014)

A functional regression model derived from the conceptual frame work

Y=a +~1x1+ ~2X2

Where Y= Dependent variable

a =level of significance (0.05)

~= Beta
X 1= Independent variables

14
The conceptual framework in the figure above shows that inventory management

have a direct effect on the sustainability of a manufacturing industry. The

independent variable directly affects the dependent variable which has been

conceptualised in terms of profitability, risk reduction, efficiency and accountability

which all results into effective performance in terms of quality and production.

However the relationship between the two variables can be revised and/or affected

depending on the funds availability, economic climate in the country, government

policies and skilled manpower as well as the level of technology used in updating

the system.

2.3 Conceptual review

2.3.1 Inventory Management

Inventories over the past years have been difficult to control and even up to day

through it's to some extent being brought down. This has always raised because they

are immovable and subject to decision made many persons including vendors and

customers. Joseph L. Cavinator (I 990). Over the past in the whole sale or retail

business or in productive facility, inventory was being recognized as boxes of parts

or as racks of closes. Material becomes inventory as its purchased and delivered to

the facility and placed in the store or holding area. Material represents a large part of

finished products cost 55% is the average in manufacturing organization. An

organization investment, in inventory can become excessive unless property

controlled. Mark A. Vonderembse and P. White (1998). According to Brain (2006)

both industry and government need to better understand and determine how to move

towards a sustainable future. Innovation plays a key role in moving manufacturing

industries towards sustainable production. Evolving sustainable manufacturing

15
initiatives - from traditional pollution control through cleaner production initiatives,

to a lifecycle view, to the establishment of closed-loop production - can be viewed

as facilitated by eco-innovation. Figure 5 provides a simple illustration of the

general conceptual relations between sustainable manufacturing and

eco-innovation. The steps in sustainable manufacturing are depicted in terms of their

primary association with respect to eco-innovation, i.e. with innovation targets on

the left and mechanisms at the bottom. The waves spreading towards the upper right

corner indicate the path dependencies of different sustainable manufacturing

concepts.

The stock control process focuses attention on factors related to time utility, supply

of quantity and quality materials used by the operations of the manufacturing

industry (Tosdal, 2006). Stock control procedures are those measures that are

adopted to determine how much stock an establishment can hold at a given time and

how they keep track ofit. This practice covers stock at every stage of the production

process, from purchases and delivery to using and reordering of items. This concept

revolves on the fact that stores, being a service oriented department, must provide

the entire organization with the right materials that are delivered and issued in the

right quantities and quality which must be available at the right time, right place and

at the right price (Levis, 2009). The objective of practicing inventory management is

to ensure that the conditions mentioned above are fulfilled by providing the

information necessary to take appropriate action at every stage of the production

process or operation. Stock control practice is a necessity if the manufacturing

industries are to offer a balanced assortment on the market; this means every item

held in the store should be controlled.

16
Keth et al. (1994) stated that inventory management and control helps managers to

check on their sustainable programs that keep them in business in future and stable

on the market. This is derived at through infonnation got and passed to the managers

and inform them on how much of a good to re-order, when to re-order the good, how

frequently orders should be placed and what the appropriate safety stock is, for

minimizing stockouts. Thus, the overall goal of inventory is to have what is needed,

and to minimize the number of times one is out of stock.

Drury (1996) defined inventory as a stock of goods that is maintained by a business

in anticipation of some future demand. This definition was also suppo1ied by

Schroeder (2000) who stressed that inventory management has an impact on all

business functions, particularly operations, marketing, accounting. and finance. He

established that there are three motives for holding inventories. which are

transaction. precautionary and speculative motives. The transaction motive occurs

when there is a need to hold stock to meet production and sales requirements. A firm

might also decide to hold additional amounts of stock to cover the possibility that it

may have under estimated its future production and sales requirements. This

represents a precautionary motive, which applies only when future demand is

uncertain. The speculative motive for holding inventory might entice a firm to

purchase a larger quantity of materials than normal in anticipation of making

abnormal profits. Advance purchase of raw materials in inflationary times is one

form of speculative behaviour.In traditional settings, inventories of raw materials,

work-in-progress components and finished goods were kept as a buffer against the

possibility of running out of needed items. However, large buffer inventories

consume valuable resources and generate hidden costs. Consequently, many

17
companies have changed their approach to production and inventory management

(Sahari, Tinggi, &Kadri, 2012).

According to (Rich 1991) the level of technology used in the development of the

inventory system is a · very crucial technology that interfaces with several

development tools. The technology has interface that is compatible with virtually all

Database Management System (DBMS). But the DBMS employed in this work is,

which is used to design back ends of the system (i.e data and knowledge base).

According to Dennis & Meredith (2000), identifying the correct kind of production

and inventory management (P &IM) system for a manufacturing firm can be a

difficult and complex task. Since the investment in a P&IM system is large and

remains fixed over a considerable length of time, the correct system choice is critical

to both a firm's short and long-term profitability.

According to Silver(l 998),the effectiveness of inventory management attempts to

answer three key questions on an item-by item basis are; how often should the

inventory status be determined, that is, what is the reviewinterval? When should a

replenishment order be placed and how large should the replenishment order be?

Many firms within the high technology capital equipment sector arc subject to a

rather unique set of challenges when it comes to materials management. Some

critical aspects of the situation that they face can include long procurement

lead-times for raw materials, short assembly lead-times, extreme volatility in

demand, and individually customized orders for products, and short product life

cycles. These factors make materials management rather difficult. Traditional

inventory control methods often do not take some of these critical aspects into

account (Abhyankar, 2000).

18
The Inventory Management function is accountable for tracking all assets, from

Mainframe based to Data Network based, that are connected to the data center or

data network. In each case, the Inventory Management Systems must be able to

classify the asset and its serial number, Associate the asset with its owner and

location, Relate the asset to its vendor, Track the maintenance level of the asset; and,

Provide the asset's Problem and Change history (Bronack, 2012).

Many food companies have been under pressure to streamline their supply chain,

minimize large inventories, and cut holding cost on inventory. In the past, inventory

management has focused on not running out of finished goods. This caused

manufacturers to stockpile large amounts of raw materials, work in process, and

finished goods. The extra finished goods would be to protect them from going out of

stock (Eckert, 2007).

While Ballou (2004 ), inventory are stockpiles of raw materials, supplies,

components, work-in-process, and finished goods that show at numerous points

throughout a firm's production and logistics channel. According to Pandey (1999),

inventory management is stock of the product a firm is manufacturing for sale and

the components that makes up a product. Firm hold inventory in a form of raw

material, work in progress, finished goods and supplies. These inventories facilitates

production and sales operation, shield against the risk of unpredictable changes in

usage and delivery time and take advantage of quality discount and price

dissatisfaction.

2.2 Techniques of inventory control

According to Zenz techniques of inventory control are manual system,

computerized system, ABC analysis, maximum and minimnm (Economic order

19
quantity) and Barcoding according to Lysons and Farrington 2006.

Manual system

According to Zenz(l 987), this is a Basic and sound system of inventory control

which is the assembling of pertinent data to provide economic ordering points and

ordering quantities. This is done with the help of an inventory ledger which ranges

from simple to complex form depending on the nature ofbusiness. Data in this form

include; Detailed identification of item ,List of suppliers ,List of purchase orders

,Monthly rate of usage for past several years , Delivery time, Minimum order

quantity, Bin balance available for issue to production, It's likely that manual

inventory technique will completely vanish.The major advantage associated with

this technique is that risks like computer viruses which distort the information in soft

copies and also harking in the system to gain access to confidential Company's

information is greatly eliminated.

Computerized system

Records management under a computer system is easier and accurate than manual

system. The computerized system uses code numbers which respond to specific

items. Each item in inve;1tory is loaded and any adjustment made to the items is

effected through use of items code number. Most computerized systems make an

inventory adjustment each time an order for a patiicular item is processed, for either

an internal requisition or an outside sale. When an item is ordered, the amount of

remaining them in inventory is adjusted accordingly. The adjustment is a decrease in

total inventory (Zenz, 1987). This technique has an advantage of ensuring that

orders made are quickly met and also reduces costs involved in too much paper work

and travel costs for delivery of order documents as opposed to the manual system.

20
ABC Analysis

According to Lysons and Farrington 2006, page 319, a household will buy many

items in the course of a year. The weekly shopping will include a number of basic

food items such as bread; milk, vegetables and so on.

These basic food items many accounts for the bulk of the annual expenditure in

shops. Because these items are so important in the household budget. It's wo11h

taking care to choose a shop that gives good value. The information about prices

changed elsewhere can be obtained from advertisements and visits to other super

markets. In ABC Analysis, these items are known as class A items. They merit close

to day control because of their budgetary importance.

Other items such as replacement rubber washers for water taps may be needed

occasionally. A pocket of washers costs between 30 and 50 pence spending hours

comparing prices of these at different suppliers doesn't make economic sense. The

possible saving is at most a few pence and a year or more may elapse before another

pocket is needed. Items like these that account for only a small portion of spending

arc known as class C items.

Class B is a set of items that is intermediate between class A and class B is a set of

items that is intermediate between class A and C, they should be regularly reviewed

but are not as closely controlled as class A items. This technique has an advantage of

catering for all levels of income earners as stocks are classified and also enables the

organization to under the priority items that need to be given first attention as they

are the heart of operations within an organization, also entails an understanding

within the organization on which items are to be handled with great care to avoid

losses and damages.

21
The Italian StatistianVilfredo Pareto (1848-1923) discovered a common statistical

effect. About 20 percent of the population own 80 percent of the nation's wealth.

About 20 percent of employees cause 80 percent of problems. About 20 percent of

items account for 80 percent of firm's expenditure. The terms "Pareto" analysis and

"ABC" analysis.

Economic Order Quantity

Inventory control analysts have developed a number of techniques which can help

both small and large-scale businesses manage inventory effectively. The most basic

is the Economic Order Quantity (EOQ) model. This involves establishment of

maximum and minimum inventory levels. Theoretically the minimum inventory

level could be Zero, meaning the last unit of inventory would be used up at the

moment a new shipment arrives. But practically a point is set where the inventory

order is placed if this point has reached such that the organization would not run out

of inventory as it wants for new shipments (Brain, et al (2006) This involves a

trade-off between the two fundamental components of an inventory control cost.

Inventory-carrying cost (which increases with the addition of more inventory), and

order-processing cost (which decreases as the quantity ordered increases). These

two cost items are traded off in determining the optimal warehouse inventory

quantity to maintain for each product. The EOQ point is the one at which total cost is

minimized by maintaining product inventories as close to the EOQ Point as possible.

This technique helps the organization to know when an order is to be placed to

reduce stock outs and customer complaints. Also enable the organization to know

the items that are highly consume such that they may order accordingly. Inventories

are an essential investment with clear benefits that a business cannot afford to

22
ignore, however, investn1ent in inventories involves costs. Total inventory costs are

classified as ordering (set up) costs and carrying costs. (Kakuru, 2007)

2.2.1 Types of inventory

According to the Viale (1996) there are five basic types of inventory:

Raw material: all the purchased parts and direct material that go into the end

product. This type of inventory has value added to it as it flows together as

subassemblies, assemblies and finally into the shippableproduct.

Work-in-process: this is inventory in the process of being assembled into final

products. Raw material are released from inventory and moved to a work center.

People (direct labor) and /or machine are used to add value of putting products.

These parts may be restocked temporarily nntil withdrawn for use later in the

production process. While they are in this state, they may be referred to as

semi-finished assemblies.

Finished goods: these are shippable inventories ready to be delivered to distribution

centres, retailers, wholesalers or directly to customers.

Distribution inventory: this is inventory held at point as close to the

customer as possible. Distribution point, such as warehouses or stores, may be

owned and operated by the manufacturer or may be independently owned and

operated. However managing inventories is necessary regardless of ownership, so

the term "distribution center" is used throughout this book to indicate intermediate

storage locations, pending delivery to the final customer.

23
Maintenance, repair and operating (MRO) supplies: these terms

are held by most companies. These inventories are often low cost, and include office

and operating supplies and services. It is obvious, therefore, that all organizations

whether manufacturers, wholesalers, retailers, banks, hospitals or even the federal

reserve-have same inventory concerns.According to Viale (1996) the major reason

for managing inventory is to reconcile the following potentially conflicting

objective:

Maximizing customer service: In accurate customer forecasts a multitude of

changes to the original customer order and an overall lock of account management

are major cause of poor customer service in terms of time delivery not suppliers not

purchasing. The result is excessive inventory which ultimately leads to inventory

write offs and high product cost and lower profit margins.

The more accurate the individual product-sales forecasting is, the smaller the

forecast error, and the less inventory need to be ca1Tied to maintain a specified level

of customer services. By carrying fewer inventories the capacity of machine

required to build products is better utilized. Inventory is not built before it is needed,

thus avoiding the mistake committing capacity of machines too early. By carrying

fewer inventories, generally less space used, and it is not used too early.

Maximizing the efficiency of purchasing and production: There are instances

when inventories are held due to cost efficiencies in procurement and production In

manufacturing, long production runs (large lot sizes) of single product are usually

much more efficient than short runs. Managers are often measured by the amount of

production they produce, which acts as an incentive for longer production runs.

24
Long runs results in inventory that sits for long period of time. Theoretically, this

inventory presented miscommitted capacity and reduction in machine flexibility.

Remember, if you can't ship the product, don't build it-no matter what benefits long

runtimes are.

Minimizing inventory investment: Inventories tie up cash that the Company could

use elsewhere in the business. Excess inventory can create a negative cash flow

something that must be avoided. This is why the financial people work to keep

inventories as possible.

Maximizing profit: Profit can be maximized by increasing revenue or decreasing

cost one of the best ways to do this is by proper management of inventory.

Companies should focus on inventory management toreduce the risk of supplier's

failure or uncertainty. Safety and buffer stocks are held to provide some protection

against such contingencies for example drought and floods or snow, strikes,

transport breakdown, crop failures, wars and similar factors. This exist as a result of

variability in demand or supply. Raw materials, purchased parts or MRO buffer

stocks give some protection against the variability of supplier performance due to

shut downs, strikes, lead time variations, late deliveries to and from supplier, poor

quality units that cannot be accepted and so on. (Johnson and Fearon, 2006).Ensure

rapid replenishments of items in constant demand, such as maintenance of suppliers

and office stationary. This entails keeping track of inventories which are constantly

and highly consumed during the process of controlling inventories. This allows for

constant availability of inventories that are regularly demanded. (Lysons&

Farrington, 2003).

25
Hedge against anticipated shortages and price increase especially at times of high

inflation. Inventory control fights against stock outs and therefore the issue of price

increments at times of inflation are minimized since the inventories are always

available even during seasons when they could be scarce, given the inventory

control is at work. (Zenz, 1987).Transit or pipeline is used to stock the supply and

distribution pipelines linking an organization to its suppliers and customers as well a

internal transpo1iation points. They exist because of need to move materials from

one point to another. Obviously, transit inventories are dependent on location and

mode of transport (Johnson &Fearon, 2006).

'
Seasonal inventories. If demand follows a seasonal pattern, inventories can be

accumulated during low sales periods and depleted during high usage periods to

avoid problems associated with adjusting capacity. (W.C Benton, Jr. 2007). Also

stocks of inventories at major stocking points throughout the system make it

possible to carry on each activity independently. This is to say, the presence of

inventories allows for each work centre to begin at the same starting time.

(Michiel,e/. al., 1980).

Because of the high cost of carrying inventory, many systems have been developed

to reduce stock. Japanese manufactures have spearheaded lean supply chain

practices, including just-in-time systems. Neve1iheless, it useful to understand the

nature and costs of inventories so that appropriate politics and procedures can be

developed for specific organizational needs. North American organizations have

begun to rely heavily on material requirements planning systems that have similar

goals of reducing inventories wherever possible by having accurate, timely

information on all aspects of the users' requirements, through coordination of all

26
 departments, and rigorous adherence to the system. (Lenders el. al.,2006).

For every item carried in inventory, the costs of having' it must be less than the costs

of not having it. Inventory exists for this reason alone. Inventory costs are real; but

are not easy to quantify accurately. The relevance of cost elements in a given

situation depends on the decisions to be made. Many costs remain fixed when the

order size of only one item is doubled, but the same costs may well become variable

when 5,000 items are under consideration. The main types of inventory costs are

described below.

Carrying, holding , or possession costs include handling charges; the cost of

storage facilities or warehouse rentals; the cost of equipment to handle charges; the

cost of storage facilities or warehouse rentals; the cost of equipment to handle

inventory; storage, labor, and operating costs; insurance premiums; breakage;

pilferage; obsolescence ; taxes; and investment or opportunity costs. In short, any

cost associated with having, as opposed to not having, inventory is included.

Ordering or purchase costs include the managerial, clerical, material, telephone,

mailing, fax, e-mail, accounting, transpmiation, inspection, and receiving costs

associated with a purchase or production order. What costs would be saved by not

ordering or by combining two orders? Header costs are those incurred by

identifying and placing an order with/ a supplier. Line item costs refer to the cost of

adding a line to a purchase order. Most orders will involve one header and several

line item costs. Electronic data interchange (EDI) and / Internet-based ordering

systems try to reduce ordering or purchase costs significantly aswell as reduce lead

time at the same time. (Leenders Jonson and Flynn Fearon, 2006).

27
 Setup costs refer to all the costs of setting up a production run. Setup costs may be

substantial. They include such learning-related factors as early spoilage and low

production output until standard rates are achieved as well as the more common

considerations, such as setup, employees' wages and other costs, machine

downtime, extra tool wear, parts (and equipment) damaged during setup, and so on.

Both the purchaser's and vendors' setup costs are relevant. It should be pointed out

that the reduction of setup costs and times permits smaller (Michie! R Leendcrs,

Harold E. Fearron& Wilbur B. England 1980).

Stockout costs are the costs of not having the require parts or materials on hand

when and where they are needed. They include lost contribution on lost sales (both

present and foture), changeover costs necessitated by the shortage, substitution of

less suitable or more expensive parts or materials, rescheduling and expediting

costs, labor and machine idle time, and so on. Often, customer and user goodwill

may be affected, and occasionally penalties must be paid. The impact of stockouts

on customers will vary. In a seller's market, an unsatisfied customer may not be lost

as easily as in a buyer's market. In addition, each individual customer will react

differently to a shortage.

In many organizations, stock out costs is very difficult to assess accurately. The

general perception, however, is that stock out costs are substantial and much larger

than carrying costs. Stock out costs, here discussed as they relate to inventory, are

similar for late delivery or quantity shortfalls.

28
Variations in delivered costs are costs associated with purchasing in quantities or

at times when prices or delivery costs are higher than at other quantities or times.

Suppliers often offer items in larger quantities or at certain times of the year at price

and transpo1iation discounts. Purchases in small quantities or at other times may

result in higher purchase and transpo1tation costs, but buying in larger quantities

may result in significantly higher holding costs. The quantity discount problem will

be discussed in (Leenders Johnson & Flynn Fearon 2006).

Many inventory costs may be hard to identify, collect, and measure. One can try to

trace the individual costs attributable to individual items and use them in decision

making. Usually such costs will be applicable to a broader class of items. A second

approach is to forecast the impact of a major change in inventory systems on

various cost centres. For example, what will be the impact on stores of a switch to

systems contracting or vendor-managed inventories for some low-value items? Or

what would be the impact of a just-in-time system on price, carrying, ordering, and

stock out costs? Because most inventory models are b_ased on balancing carrying,

order, and stock out costs to obtain an optimal order and inventory size, the quality

and availability of cost data are important considerations (Leenders, Fearon&

England, 1980).

2.3.2 Sustainability of Coca-Cola Company

Sustainability is comprised of a complex combination of business and

manufacturing initiatives that must be synchronized into a cohesive vision. There is

no single, unified approach that will address sustainability for every Company.

Establishing an infrastructure that supports and enables sustainability objectives is

29
critical to achieving success. The implementation of a performance management

system that provides a mechanism for collecting, visualizing, analyzing and

rep01iing key sustainability information such as carbon emissions and water usage is

fundamental to this infrastructure.

However, it is important to recognize that production management and execution

solutions are not only limited to the performance management aspect of

sustainability, but also can provide benefits in other key areas. Finding a solution

that can deliver sustainability benefits via energy profiling, resource management,

batch genealogy tracking, and order management will enable the success of

sustainability programs and ultimately determine how the strategic goals are

converted to practical implementation plans utilizing available tools to achieve

overall sustainability benefits.It is relatively easy to collect an analogy process value

on a flow measurement at a distillation column. The information related to

sustainability is typically not as straightforward. This is why many companies do not

have this data available today in a usable form. Most sustainability metrics require

not only measured values but calculations of varying complexities with multiple

inputs and outputs.Ideal sustainability monitoring includes the ability to collect and

store large volumes of process data. Scalable calculation engines can provide the

ability to build calculations without the need for complex programming languages,

allowing users to collect basic data and calculate sustainability performance

measurements within manufacturing locations and across the enterprise.With these

tools, sustainability information can then be viewed in a number of different ways

depending on the needs of the specific end-user. For example, a corporate resource

that monitors sustainability data from 20 locations across the world may prefer a

30
Key Performance Indicator (KP!) graphic that simply provides a graphical alert if

something requires action.

Manufacturing industries are in a position to help overcome global business risks

challenges, but their future contributions will depend on how well they adopt and

integrate the eco-innovative approaches and economic approaches like inventory

management when modifying their production patterns (Charter and Clark, 2007).

This requires a broad perspective on what is understood by the sustainability of

manufacturing and a strong focus on identifying areas in which eco-innovative

solutions can substantially reduce environmental impacts. Furthermore, industry

must recognise that because the main features of any innovation are determined

early in the innovation process (Reid and Miedzinski, 2008), important benefits of

eco-innovation may be Jost if broad environmental aspects do not have priority from

the beginning of the process.

Reducing energy usage at an individual location can involve a variety of areas from

steam usage to electrical efficiencies. Reducing energy usage across an organization

may incorporate the entire supply chain and may include a much broader spectrum

of functions such as transportation of raw materials and products, shutdown and

turn-around scheduling, etc. There is not a single approach which addresses energy

usage for all users, but finding Dexible tools adaptable to specific Company

requirements is easier than it sounds.Forexample, some tools can be used to

facilitate the energy usage reduction eff01is by giving users the capability to manage

to an ideal profile. Unit startup is an example where tools like this can be utilized

with regards to reducing energy costs. Energy costs can be high during startups, so

establishing a preferred profile and then tracking performance to this profile can

31
help identify areas to target for energy reduction opportunities. Because deviations

from the profile are quickly identified, this also provides operations with the

opportunity to make immediate adjustments to save energy throughout the

remainder of the startup process (Gregory, 1988).

Assigning production resources in a logical way that maximizes the effective use of

operational equipment can also help reduce associated energy costs. Once a batch

production run is complete, energy usage data can be included as a part of the

cohesive batch record and further analyzed for future efficiency improvement

opportunities.

There are many ways to approach energy reductions leveraging industry solutions.

The power of batch record and analysis tools can be used both within batch and

continuous processes to identify and help realize energy usage reduction

opportunities. The reductions may not seem significant when viewed as an

individual location and a single production run where you are saving a small amount

of energy used. However, consider this as an on-going effort over the course of

annual production campaigns and then expand it to all production facilities within an

enterprise and the energy usage reductions can become quite significant.

Profitability

Since inventory is an important entry into the balance sheet of an organization

especially in merchandise business, policies and directives should be properly and

specifically tailored to safeguard its proper management. Successful management of

inventory will definitely improve on the profitability of the Company through

improved efficiency in operations and reduction in wastage through pilferage and

32
misuse. Petroleum products are especially susceptible to wastage through spillages,

leakages and evaporation due to their liquid from characteristics (Kakuru, 2007).

The high value of the product and case to resell also makes petroleum products very

susceptible to theft. In this regard, the management of Petro City Uganda ought to

have a very strict and clear policy to safeguard, its inventory.

According to Bateman and Zeithaml (1990) preliminary controls take place before

operations begin and include policies, procedures and rules designed to ensure that

planned activities will be carried out properly for profitable purposes. Taylor and

Glezen (1991) stated that financial statement accounts have financial asse1iions

embodied in them. For these assertions to be valid policies and procedures must

exist to assure that the recording, Processing, summarizing and repo1iing data in

these financial statement accounts are consistent with assertions. For example, if a

Company has no sound policies and procedures for recording credit purchases in a

proper and timely way, it has no reasonable assurance that the existence, occurrence,

completeness, rights and presentation assertions for purchases and accounts payable

are valid. Likewise weak policies and procedures will lead to internal control and

likelihood of theft and wastage of inventory.

Various types of inventory in stock of current resources will be very prominent in

the balance sheet of any business (Kakuru, 2007). These include stocks of raw

materials, work-in-progress, finished goods and supplies such as stationery. Though

inventories are idle resources, they play as major role of smoothening out business

activity thereby enabling the business to be flexible in purchasing, operations and

making. Ross, Westerfield and Jordan (2003) noted that a retailer's inventory could

33
represent over 25% of the assets. This implies committing huge amounts of business

resources in idle stocks thus successfi.il inventory management will be mandatory

for survival of the business.

Risk reduction

In many ways, the efforts to reduce raw material usage parallel the energy usage

reduction efforts outlined above. Raw materials include feed streams and additives

that are used to make products as well as natural resources that are required as part of

the process (e.g., water) but may not be a component of the final product. Improving

production equipment efficiency is one way to reduce raw material usage.

Measuring and managing usage data via by profiling against operational limits as

well as historical data can identify opportunities to more efficiently use valuable

natural resources. Alerts can be generated when real-time opportunities to reduce

raw material usage becorne available and can prompt operator action at the control

system level. Alternately, once oppmtunities are identified via data analysis,

advanced process control tools can be used to provide multi-variable control

incorporating optimized raw material usage into the solution.

Tools that help identify opportunities for raw material usage reduction and provide

enabling support for implementing key responS\:S are critical to overall

sustainability efforts. The ability of solutions to help users quickly identify issues,

diagnose root causes and associate products with the specific raw materials and

process equipment used to manufacture them can prove valuable as part of the

overall sustainability program.

34
Efficiency

A properly designed internal control system encourages adherence to prescribed

managerial policies. It also promotes operational efficiency, protects the business

assets from waste, fraud and theft, and ensures accurate and reliable accounting data.

For large companies internal auditing department independently appraises the firm's

financial and operational activities. In addition to reviewing for errors and

regulations, the internal audit staff attempts to uncover wasteful and inefficient

situations. To be effective, the internal staff must be independent of operating

fonctions and should report top a high ranking executive or to the firm's board of

directors.

Manufacturing companies sustain in business through effective product Innovation

and Development.As companies begin to develop new products and alter existing

products to reduce usage and waste, the agility of the entire manufacturing process

must be improved. The ability to quickly adapt existing procedures and equipment

to enable manufacturing of new and improved products is essential to maintaining

competitiveness. Collecting and analyzing production information and comparing

batch profiles as discussed in the sections above can be very valuable to both process

engineers and product development teams as they assess new products and

determine how they impact production. According to Keth (2006), a more unique

application of production management and execution solutions as related to product

innovation is efficiently handling the associated changes required in procedures and

operating instructions. For example, a Company determines that a new supplier can

provide a single compound that takes the place of two compounds normally used in

production, leading to a favorable environmental impact. Implementing this

improvement may require changes to manual documents, modifications within

35
multiple systems, and involvement by numerous resources with potentially limited

availability.

Effective solutions provide a platform from which the changes required in the

standard operating procedures and operating instructions as a resull of changes

associated with modified production can be handled with relative ease. This

flexibility can help reduce the time needed to introduce new products and make

production changes, meaning that sustainability gains are realized sooner.

Technology of this nature can be an important part of manufacturing efforts to assess

and produce new products helping companies deliver new products to customers as

quickly as possible.

2.4 Related studies

According to American Institute of Certified Public Accountants (1963 ),

management has the responsibility for devising, installing and supervising an

adequate system of internal control. Any system regardless of its fundamental

soundness may deteriorate if not reviewed periodically. The system of internal

control must be continuing supervision to determine whether prescribed policies are

being interpreted properly carried out, changes in operating conditions have made

the procedures cumbersome, absolute or inadequate and effective corrective

measures are taken promptly where breakdowns in a system appear.

Blanc (2007) states that inventory is idle goods commg up for use or sale,

inventories are reserved in many environments, for instance, in the mining-industry

of minerals, in factories of raw materials, pmis, work in progress and finished

products, and in warehouses, depots and wholesale dealers of goods for distribution,

36
and at shops and by retailers of goods for sale.

According to Pandey (I 999), inventory management is stock of the product a firm is

manufacturing for sale and the components that makes up a product. Firm hold

inventory in a form of raw material, work in progress, finished goods and supplies.

These inventories facilitates production and sales operation, shield against the risk

of unpredictable changes in usage and delivery time and take advantage of quality

discount and price dissatisfaction.However, many studies investigated in the area of

inventory management like An analysis of process industry production and

inventory management systems in USA, Inventory Management Delivering Profits

through Stock Management, Inventory management: A Tutorial, Canadian

publications, practical applications and suggestions for future research and

Inventory Management in Malaysian Construction Firms: Impact on Performance,

but the effect of inventory management on production volume in manufacturing

companies in Mogadisht1 has not beeninvestigated in our country.

Successful Inventory Management

Various types of inventory in stock of current resources will be very prominent in

the balance sheet of any business (Kakuru, 2007). These include stocks of raw

materials, work-in-progress, finished goods and supplies such as stationery. Though

inventories are idle resources, they play as major role of smoothening out business

activity thereby enabling the business to be flexible in purchasing, operations and

making. Ross, Westerfield and Jordan (2003) noted that a retailer's inventory could

represent over 25% of the assets. This implies committing huge amounts of business

resources in idle stocks thus successful inventory management will be mandatory

for survival of the business.

37
Inventories are an essential investment with clear benefits that a business carmot

afford to ignore, however, investment in inventories involves costs. Total inventory

costs are classified as ordering (set up) costs and carrying costs. (Kakuru, 2007)

Ordering costs include administrative costs in preparing and dispatching orders,

communication with suppliers, placing orders into warehouses. These are costs

incurred right from the time the orders of inventories are placed to when the order is

actually received and placed in the business premises. Normally, the ordering costs

per order decrease with increase in the size of the order due to the economics of scale

and vice versa.

Carrying costs are expenses incurred to keep the inventories in the business, from

the time of receipt to the time they enter production or marketing functions like

storage costs, opportunity costs of funds tied up in inventories and risk that the

inventory will become obsolete. The costs increase as more inventories are

maintained. For instance, Petro City Uganda will store petroleum inventories in

huge tanks at its depot. Some product will also be stored at the government reserve

tanks in Jinja town and both of these will involve some cost storage. Due to high

price of petroleum products, huge sums of funds will be tied up and insurance for the

product will necessary. Losses due to pilferage and leakages will be inevitable.

According to Ross, et al. (2000, inventory management involves acqumng the

inventory, selling and collecting the sales proceeds smoothly. Brealey, Myers, and

Marcus (2004) site the following as the features of inventory management. Optimal

inventory level involves trade-off between carrying costs and order costs, carrying

38
costs involves storage costs and tied up capital cost, inventory level decrease when

storage/interest costs increase and inventory level increase when restocking costs

increase and Inventory level is not directly proportional to sales

In general the level on inventory should always depend on the forecast of sales

which like any other forecast is subject to unce1iainty. Ross, et al (2003 ), notes the

basic goal of inventory management as minimizing the sum of carrying costs and the

stocking costs (or shortage or ordering costs)

Managing stock-outs

Stock-outs demonstrate a failure in inventory management and can be very

expensive to a business due idle resources and loss of sales. In any business,

stock-outs should be avoided by all means. Riggs (1987), cite accelerated demand,

extended lead time and a spurt in demand coupled with delivery delay as the

conditions that contribute to stock-outs after a replenishment order has been placed.

The most used approach ion attaining the goals of inventory management is the

Economic Order Quantity (EOQ) analysis which used the EOQ model. The size of

order that minimizes the total inventory cost while assuring liquidity to the business

is called the Economic order quantity (Kakuru, 2007). The EOQ model makes the

following assumptions:The rate of usage (demand) of the product over the planning

period is known with certainty and is constant,The inventory is replenished

periodically over the time. Such replenishment is instantaneous and there is no lead

time between the ordering and receipt of inventories in the business, Ordering costs

per order are known with certainty and fixed and Carrying costs per unit of

inventory are !mown with ce1iainty and fixed.

39
 Successful inventory management helps to minimizing Wastage: Wastage in

inventory especially petroleum products will refer to losses due to pilferage,

leakages, spillages and evaporation. Good inventory management through internal

control systems will ensure that these losses are minimized. Wastage is classified

under the carrying cost in inventory management. Other carrying costs include

space, insurance, and opportunity cost of holding inventory (Brealey et al., 2004).

However, for an ideal quantity of inventory, the latter three will be more or less like

fixed costs. This leaves the losses due to spoilage, and theft as the controllable

variable of carrying cost. Internal controls will ensure that these losses are

minimized or eliminated altogether.

Gaps identified

The literature presented in this study is rich with works on independent variable

(inventory management) and performance of organisation in different aspects such

as productivity, profitability among others. This provides a theoretical foundation

for the field of inventory management and makes it one of the most developed fields

ofoperations research. However, it is noted here that the little has been discussed

about sustainability of manufacturing companies in particular in regard to their

inventory management practices. Hence this research is prepared to fill that gap

between practical implementation of inventory management models, development

of inventory modelling and how this influence suitability of the company by

profitability, risk reduction, efficiency and accountability.

Similarly, much of the literature is aimed at analysing the theoretical models of

inventory which is mostly valued by the academic community but often less

information on the work solutions that may be required in organisations. In this

regard, manufacturing companies need such information to improve their

40
performance so that they can continue with their routines, ultimately leading to

sustainability. Therefore, this study, explores the effect of inventory management

on sustainability of manufacturing companies in Mogadishu and no other researches

have been conducted in the same area.

41
 CHAPTER THREE

METHODOLOGY

3.0 Introduction

This chapter focuses on the methodology of the study. The chapter consists of eight

sections: section one discussed the research design, section two focused on the target

population followed by research instruments and procedure for collecting data, while

the fifth section highlighted how toanalyze data, the sixth section focused on ethical

consideration followed by limitation of the study.

3.1 Research Design

This study employed the descriptive survey design and descriptive correlational

strategies. Descriptive studies are non-experimental researches that describe the

characteristics of a particular individual, or of a group. It deals with the relationship

between variables, testing of hypothesis and development of generalizations and use

of theories that have universal validity. It also involves events that have already

taken place and may be related to present conditions (Kothari, 2004 ). Fmiher,

descriptive surveys are used to discover causal relationships (descriptive

correlational), differences (descriptive comparative), to provide precise quantitative

description and to observe behavior (Treece and Treece, 1973).

3.2Research Population

The target population of this study consisted of 150 of which 20 of them are

managers, 130 are employee in Coca-Cola Companyin Mogadishu, Somalia.

42
 3.3 Sample Size

In analysis of the nature of the target population of 150 managers and employee of

Coca-Cola Company in Mogadishu-Somalia, a sample size of 109 will be selected.

This was arrived using the Sloven's formula which states as following:

n = N/l+N(e 2 ).

Table 3.3 Respondents of the study

Category Total Sample size
Target Population
Employees Managers Employees Managers
Coca-Cola 130 20 95 14
Grand total 150 109

3.4 Sampling Procedure

The study used purposive sampling technique to select the branches of coca-cola

Company and their managers. Simple random sampling technique was used to select

the employees. A list of employees and managers of coca-cola Company was

obtained; the names of employees especially subordinate employees were put in rote

and were randomly selected. This technique was used because it allows for easy

generalizability of the findings and offers least bias.

3.5 Research instruments

The research tools that were utilized in this study include the following: (I) .fc1ce

sheet to gather data on the respondents' demographic characteristics or profile (age,

gender, education level and experience); (2) researcher devised questionnaires to

determine the levels of inventory management and sustainability of coca-cola

manufacturing companies in Mogadishu. The response modes and scoring are as

43
follows:.for inventory management are indicated as: Strongly agree (4); agree (3);

disagree (2); strongly disagree (I). The researcher devised questionnaires to

determine the levels of sustainability of coca-cola manufacturing companies in

Mogadishu.

3.6 Validity and Reliability of the Instruments

The questionnairewas given to three lecturers to judge the validity of questions

according to the objectives. After the assessment of the questionnaire. the necessary

adjustments were be made bearing in mind the objectives of the study. Then a

content validity index (CVI) which was 0.85 wascomputed using the following

formula.

No.of quesl ionsdeclaredvalid

CVI - - - ~ - - - - - - - - - -
to lalN o.o f questionsinthequestionnaire

A minimum of0.75 of CV! was used to test validity. To ensure the reliability of the

instrument, the researcher usedthetestre-test method. The questionnaire was given to

IO people and after two weeks, the same questionnairewasgiven to the same people

and the Cronbach's Alpha was computed using SPSS. The minimum Cronbach's

Alpha coefficient of0.79 was used to declare an instrument reliable (>0.75).

3. 7 Data Gathering Procedures

3.7.1 Before the administration of the questionnaires

Before the administration of the questionnaires the researcher took an

introductory letter from the CHDR (College of Higher Degrees and Research), the

researcher first got authorization from the proposed case study (coca-cola Company,

Mogadishu) to conduct research and review the questions to avoid errors and ensure

that only qualified respondents were approached.

44
3. 7.2 During the administration of the questionnaires

The respondentswererequested to sign and answer the questionnaires, the researcher

and research assistants emphasized retrieval of the questionnaires within five days

from the date of distribution, and all returned questionnaireswere checked if all are

answered.

3.7.3 After the administration of the questionnaires

The data gatheredwascoded and entered into the computer and statistically treated

using the Statistical Package for Social Sciences (SPSS).

3.8 Data Analysis

During data analysis, data was mainly analysed using SPSS, a statistical package for

social scientists. The datawas analysed and obtained the descriptive statistics such as

frequency tables, percentages and also data from each questionnaire is categorized

and edited for accuracy and completeness of information. The information obtained

was further triangulated with information from secondary sources for meaningful

interpretation and discus~ion. The following mean ranges and descriptions wereused

to interpret responses:

J?or the level of Inventory Management

Mean Range Response Mode Interpretation
3.26-4.00 Strongly agree Very satisfactory
2.51-3.25 Agree Satisfactory
1.76-2.50 Disagree Unsatisfactory
1.00-1.75 Strongly disagree Very tinsatisfactory
For the level of Sustainability of coca-cola manufacturing companies
Mean Range Response Mode Interpretation
3.26-4.00 Strongly agree Very satisfactory
2.51-3.25 Agree Satisfactory

45
1.76-2.50 Disagree Unsatisfactory
1.00-1.75 Strongly disagree Very unsatisfactory

A Pearson correlation co.efficient was used to test the hypothesis on correlation at

0.05 level of significance using al-test was employed. The regression analysis was
carried out to determine the influence of the independent variables on the dependent
variable.

3.9 Ethical Consideration

The research process was guided by sound ethical principles which included the

following:-

Objectivity: The researcher ensured objectivity when carrying out the research and

any attempt to bias results was considered unethical and was therefore avoided.

Respect: The researcher ensured that t respect for the respondents was applied. The

type of respect was encompassed respecting where the opinion of the respondents

including the opinion to terminate the interview was allowed and whenever they

could feel uncomfortable to continue, questioning style especially for very personal

and sensitive questions.

Also the researcher promised the respondents that -their identity could not be

disclosed as there is no writing of names on the questionnaires and that everything

was lo be confidential. The researcher gave the respondents the true facts about the

research in order to make informed decisions about participating or not.

3.10 Limitations of the study

In view of the following threats to validity, the researcher allowed 0.05 level of

significance. Measures are also indicated in order to minimize if not to eradicate the

threats to the validity of the findings of the study.

46
Extraneous variables which were beyond the researcher's control such as

respondent's honesty , personal biases and uncontrolled setting of the study Testing

the use of research assistants could bring about inconsistency in the administration

of the questionnaires in terms of time of administration, understanding of the items

in the questionnaires an~ explanations given to the respondents. To minimize the

threat, the research assistants were oriented and briefed on the procedures to be done

in data collection.

Attrition/Mortality: Not all questionnaires may be returned completely answered

now even retrieved back due to circumstances on the part of the respondents such as

travels, sickness, hospitalization and refusal/withdrawal to participate. In

anticipation to this, the researcher reserved more respondents by exceeding the

minimum sample size.

The respondents were also reminded not to leave any item in the questionnaires

unanswered and were closely followed up as to the date of retrieval.

47
 CHAPTER FOUR

PRESENTATION, ANALYSIS AND INTERPRETATION OF RESULTS

4.0 Introduction

In this chapter, the researcher presents an analysis of the study; this was done with

an aim of providing answers to the research questions and interpretation of each of

these findings in light of the research objectives. Tables, percentages frequencies

and other statistical tools were used to help the analysis and interpretation of the

findings. The purpose of analysis was to search for the broader meaning of answers

to the research study, which helped to draw conclusions and make recommendations

useful Coca-Cola Company regarding inventory management. The chapter analyses

data collected effects of inventory management and sustainability of Coca-Cola

Company in terms of profitability, risk reduction, efficiency and accountability and

the relationship that exists between the two variables, In answering the following

research questions, the tables were structured to contain the data on the profile of the

respondents in terms of gender, age, level of education, employment status and year

of service. This was analyzed using frequencies and percentages. Purposely, the

study analysed and interpreted the following research objectives. To examine the

level of inventory management in Coca-Cola Company, Mogadishu, Somalia, to

evaluate the level of sustainability of Coca-Cola Company in Mogadishu and to

determine if there is a significant relationship between inventory management and

sustainability of Coca-Cola Company, in Mogadishu. These objectives were

analysed using descriptive statistics and t-test and Pearson's correlation coefficient.

48
4.1 Profile of Respondents

Respondents were asked to provide information regarding their gender, age,

education level, years of service at the Company. Their responses were summm-ized

using frequencies and percentage distributions as indicated in table 4.1;

Table 4.1: Demographic characteristics of Respondents

Category Frequency Percent
Age 18-30 yrs 45 42
31-40 YRS 32 29
- ---
41-50 YRS 22 20
---
Above 50 YRS 10 9
-- -~---
Total 109 100
Sex Male 75 69
----
Female 34 31
Total 109 100
-
Education level Certificate 12 11
- - · - "----
Diploma 28 26
- ---
Bachelor's degrees 39 36
------- - - ---
Masters 22 20
Ph.D 8 -
7
-
Total 109 100
---
Working Less than 1year 34 31
experience 1-2 years 61 56
3-4years 14 13
--
Total 109 100 - - -
Source: Primary Data (2014)

For the validity of this research, the researcher tempted to find out the characteristics

of the respondents in Coca-Cola Company so that the findings on the performance

and sustainability of the Company could be genuinely analysed with observable and

background material.

Results in the table above indicate that the respondents age in this sample were

dominated by those between 18-30 years (42%), suggesting that most of the

49
employees in the Company are youths who are assumed to be physically capable and

productive in the manufacturing Company. These were followed by those between

31-40 with 29% and 41-50 years with 20% respectively. There were a few

respondents within the age bracket of above 50 years (9%). The analysis in the

variations of the age bracket indicates that Coca-Cola Company employs mixture of

different adults who are considered to be responsible and mature with reasonable

academic qualifications.

In regard to sex, Table 4.1 reveals that majority of the respondents were males75 (or

69%). While 34 (31 %) were female. The study was dominated by male respondents

and given the socio-cultural beliefs of Somalia, women are less engaged in the

business sector and their education levels are quite low compared lo their male

counterparts. The results concur with the study conducted by World Bank, (2001)

who found out that women make up about 22% of the formal sector, and dominate

the informal economic sector which is principally made up of home-based

enterprises (Soetan, 1995) due lo socio-cultural and religious norms and values.

Regarding level of education, respondents holding degrees were the majority with

39 (36%), diploma holders with 26(26%), Masters 22(20%), while PhD holders

were 8(7% ). The results i·evealed that most respondents employed at the Company

are education with a bachelor's degree, masters and some with PhDs, this indicates

that Coca-cola being an international Company, its sets its minimum education

requirements of al least a diploma during recruitment and those with certificates

were the lower employees working as cleaners and loading stock. The findings

agree with earlier scholars Venniker (2000) who identified education as an

50
investment and increases the stock of skills and productive knowledge embodied in

human resource. Respondents with PhD were mostly consultants and Board

members.

As to employment experience majority had worked in the Company between 1-2

years (61 %), less than one year were 34% and 3-4yeas were only 14. This is based

on the fact that most respondents had worked for the Company for a small period of

time because the Company itself has just been established in the Company in 2012

hence only four years in existence. However, majority respondents were

experienced and knowledgeable concerning the study.

4.2 Level of inventory management in Coca-Cola Company, Mogadishu,

Somalia.

This section covers data and its analysis and interpretation about the level of

inventory management in Coca-Cola Company in Mogadishu. This is in response to

research question one and data specifically include responses in the questionnaire.

Data under this sub-division incorporates both the questionnaire and unstructured

interviews responses. Further, in this theme, the SPSS Pearson's correlation analysis

results are covered about selected statistical data reflected in the table below;

51
 Table 4.2:Record keeping
-
Item Means Std. D Interpretation Rank
Record keeping
-· -
Coca-Cola use EOQ as the most effective .789
3.65 Very high 1
method to calculate stock levels
-
The Board of Directors regulates key inventory .789
-related policies to strike the right balance
3.35 Very high 2
between customer service and cost effective
product inventory.
- - - - -·---- ---- -. -
Optimal order is calculated on a regular basis for .912
3.00 High 3
improving the process.
---
Backorders are created for partial orders of .971
3.00 High 4
inventory
·-·
Stock levels are calculated on a regular basis to .976
2.89 High 5
make them up-to-date
-- --
Managers have access to excess and obsolete .798
2.88 High 6
stock
-·-- --
Only production sourcing managers determine .749
the optimal frequency for producing ordering 2.35 Low 7
products
Obsolete/excess stock is linked directly to .571
targeted action plans to regulate and control all 2.34 Low 8
the inventory in all departments
- - - --- ·- - - -·-··· -------
A cross-fonctional team determines the optimal .567
2.24 Low 9
frequency for producing ordering products.
-- - - ~- -·-
Average Mean 2.85 .872 High
-- - - - "'' ----------- -- - -

Source: Primary data (2014)

Means range Interpretation Level
3.26-4.00 strongly agree very high
2.51-3.25 agree high
1.76-2.50 disagree low
1.00-1.75 strongly disagree very low

Results in table 4.2 above illustrate that the mean responses of record keeping. The

results reveal that concerning whether Coca-Cola use EOQ as the most effective

method to calculate stock levels, this was ranked the highest with (mean = 3.65)

interpreted as very high. The results reveal that coca cola use economic order

quantity. Concerning whether the Board of Directors regulates key inventory

--related policies to strike the right balance between customer service and cost

52
effective product inventory, this ranked second with (mean= 3.35) interpret3d as

very high. In terms of whether the optimal order is calculated on a regular basis for

improving the process, and concerning whether backorders are created for partial

orders of inventory, these had the same mean, that is, (mean= 3.00), interpreted as

high.

Concerning whether stock levels are calculated on a regular basis to make them

up-to-date, this was ranked 5th with (mean = 2.89) interpreted as high. Regarding

whether managers have access to excess and obsolete stock, this was ranked 6th with

(mean = 2.88) interpreted as high. Concerning whether only production sourcing

managers determine the optimal frequency for producing ordering products, this

was ranked 7 th with (mean= 2.35) interpreted as low. On the other hand, regarding

whether obsolete/excess stock is linked directly to targeted action plans to regulate

and control the entire inventory in all departments, this was ranked 8th with (mean ~

2.43) interpreted as low. The last ranked item under this construct was concerned

with whether a cross-functional team determines the optimal frequency for

producing ordering products with (mean ~ 2.24) interpreted as low.

Results show that most respondents agreed to the constructs in the question about

record keeping as a construct of inventory management. They agreed that Stock

levels are calculated on a regular basis to make them up-to-date and that the

Company use EOQ as the most effective method to calculate its stock levels. In

addition to that, respondents strongly agreed that the Board of Directors regulates

key inventory -related policies to strike the right balance between customer service

and cost effective product inventory, they also agreed that optimal order is

calculated on a regular basis for improving the process, that obsolete/excess stock is

linked directly to targeted action plans to regulate and ·control all the inventories in

53
 all departments and Backorders are created for partial orders of inventory. However,

according to the respondents, they disagreed with the statements that a

cross-functional team determines the optimal frequency for producing ordering

products, and that only production sourcing managers determine the optimal

frequency for producing ordering products. This was attributed to the fact that

mostly, managers report to the board which controls major inventories in the

Company to regulate the policies and procedures to be followed specifically since

the Company's routines involves regular sales and purchases. The average mean on

record keeping is (2.85) which reflect a high level of consistency in keeping records

of the Company.

Table 4.3:Costs of Inventory

-· - -- - -
I terns ---- _,_
Mean Std.D Interpr etation Rank
"------ , ----- - ------
C oca-cola Company has a scheduling procedure .789
1or production process of different levels of 2.82 High 2
production to reduce costs of it_s inventories
Inventory management attempts to reconcile the .749
2.35 Low 4
problem of storage costs and ordering costs
Coca-cola Company use reorder quantities for .571
High I
ts inventory items 2.83 _, __ --
serial numbers are used on inventory items .567
0
C onsidering the numbering requirements of the 2.78 High .)

C' ompany
-- - ~- -- . ·- - - - - - - ------ - - --------
A verage mean 2.69 .798 High
- -
Source: Primary data (2014)

Results in table 4.3 reveal the mean responses pertaining costs on inventory. The

results reveal that concerning whether Coca-Cola Company use reorder quantities

for its inventory items, this was ranked first with (mean= 2.83) interpreted as high.

Concerning whether Coca-Cola Company has a scheduling procedure for

production process of different levels of production to reduce costs of its

54
 inventories, this was ranked 2nd with (mean= 2.82) interpreted as high. Concerning

whether serial numbers are used on inventory items considering the numbering

requirements of the Company, this was ranked 3rd with (mean= 2.78) interpreted as

high. The last ranked item was concerned with whether inventory management

attempts to reconcile the problem of storage costs and ordering costs with (mean =

2.35) interpreted as low.

Results from table 4.3 above indicate that majority of the respondents agreed to most

of the items regarding the costs of inventory at coca-cola Company. They agreed

that the Company has a scheduling procedure for production process of different

levels of production to reduce costs of its inventories and also use reorder quantities

for its inventory items. Similarly, it was agreed that serial numbers are used on

inventory items considering the numbering requirements of the Company as a cost

reduction measure. On the other hand, respondents disagreed that inventory

management attempts to reconcile the problem of storage costs and ordering costs as

there may other factors contributing to this like efficiency and productivity of staff

in the control stores.

Table 4.4:Performance Measures

-
Items Mean Std.D Interpretatio n Rank
--
Coca-Cola track its inventory department by .749
2.72 High
department
----
All inventories from different departments are .789
2.62 High 2
tracked by their agencies
·- ~- - - - - --- ---- - - --------- -·---~ - - - ----- - ---··
Inventories are regularly checked from all .798
2.47 Low 3
stages of production on a regular basis
- ------ ---
Average mean 2.60 High
----
Source: Primary data (2014)

55
Results in the table 4.4 reveal the mean responses concerning performance measures

on inventory management. The results show that concerning whether Coca-Cola

track its inventory department by department, this item was ranked the highest with

(mean = 2.72) interpreted as high. On the other hand, concerning whether all
inventories from different departments are tracked by their agencies, this was ranked

second with (mean = 2.62) interpreted as high. The last ranked item under this
construct was concerned with whether inventories arc regularly checked from all

stages of production on a regular basis with (mean = 2.4 7) interpreted as low.

Results in the above table show that coca-cola tracks its inventory from their

respective departments ai1d are also traced by their agencies. However, respondents'

registered negative responses that inventories are regularly checked from all stages

of production on a regularly basis explaining that sometimes there is a breakdown in

the control system which makes it difficult for a regular operation.

Table 4.5: Summary of Findings on the Level of Inventory Management

- .
Constructs Mean Intcroretation Rank
- -·
Record kee12ing 2.85 High 1
Costs of inventory 2.69 High 2
Performai1ce measures 2.60 High 0
.)
··--·-
Average mean 2.71 High
Source: Pnmary data (2014)

The overall average mean for level of inventory management was 2. 71 according to

the findings which is interpreted as high. The Company use Economic order

Quantity as the most effective method to calculate stock levels because it is effective

in keeping the stock levels updated. Such findings are backed by citation of Brain

(2006) that the most basic technique of inventory control is the Economic Order

Quantity (EOQ) model because it involves establishment of maximum and

56
minimum inventory levels. Theoretically the minimum inventory level could be

Zero, meaning the last unit of inventory would be used up at the moment a new

shipment arrives. But practically a point is set where the inventory order is placed if

this point has reached such that the organization would not run out of inventory as it

wants for new shipments, Findings also showed that stock levels are calculated on a

regular basis to make them up-to-date because inventory management by daily

updates is useful to determine the level of sales expected. In this regard, sales and

marketing department of the Coca-Cola Company pay closer attention to the growth

pattern of inventory usage. In addition, the Company through a well-built policy by

the management is able to handle its idle stock without incurring unnecessary costs

and the policies laid by the board are dynamic to a great extent. Managers also

have access to excess and obsolete stock and obsolete stock is linked directly to

targeted action plans to regulate and control the entire inventory in all departments

of production. However, there is still a gap in the management of storage costs and

ordering costs; this was evidenced by the responses that Coca-cola bas a scheduling

procedure for production process of different levels of production.

57
 4.3 To Evaluate the Level of Sustainability of Coca-Cola Company in

Mogadishu

Sustainability of Coca-cola Company was the dependent variable in this study and a

questionnaire was developed to examine the level of sustainability of the Company

and four point Liker! scale was also used to analyse the data collected (responses)

indicating the extents to which they agree or disagree with each question. To

measme this variable, it was categorised into three; risk reduction, profitability and

efficiency in performance all relating to the independent variable. Therefore

respondents' responses were analyzed using SPSS and summarized using means as

indicated in tables below;

Table 4.6:Risk Reduction

--- ---- - - - ----- --- -- - ~ - -
Item Meaus Std.D Interpretation Rank
. ---- --- ------ -. ---- - ----
Effective t1pdating on inventories at the Company .769
reduces ris ks of making losses on both raw 2.88 High 1
materials and products --
------ -- -------- . -- - - . --
Coca-cola trains their inventory control personnel .876
for effectiv e performance and future 2.72 High 2
sustainabil ity of the Company.
Regular servicing of inventory control equipment .789
0
puts the Co mpany in a better position of 2.61 High j

sustainabil ity
The Comp any recruits only qualified personnel to .765
2.59 High 4
manage its inventories to avoid loses
Average m can 2.70 High
·--·--- -
Source: Primary data, (2014)

Means range Interpretation Level

3.26-4.00 strongly agree very high
2.51-3.25 agree high
1.76-2.50 disagree low
1.00-1.75 strongly disagree very low

58
Results in table 4.6 above reveal the mean responses concerning the risk reduction.

Concerning whether effective updating on inventories at the Company reduces risks

of making losses on both raw materials and products was ranked first with (mean =

2.88) interpreted as high. Concerning whether Coca Cola trains their inventory

control personnel for effective performance and future sustainability of the

Company, this was ranked 2nd with (mean = 2. 72) interpreted as high. Concerning

whether regular servicing of inventory control equipment puts the Company in a

better position of sustainability was ranked 3rd with (mean= 2.61) interpreted as

high. On the other hand, concerning whether the Company recruits only qualified

personnel to manage its inventories to avoid loses; this was ranked the least under

this construct with (mean ~ 2.59) interpreted as high.

Results from the study showed that coca-cola training their inventory control

personnel to effectively perform their duties and this is intended for the

sustainability of the Company by reducing on the risks that may be associated with

inefficiencies. Respondents further agreed that only qualified personnel arc

recruited to manage the Company's inventories and regular servicing of inventory

control equipment puts the Company in a better position of sustainability because

through this, even risks are easily detected and addressed promptly. Similarly, it was

agreed that effective updating on inventory reduce risks of making losses on both

raw materials and products because the Company puts major emphasis on this. The

average mean score is 2. 70 indicating that the level of controlling risks at coca-cola

Company is high.

59
 Table 4.7: Profitability
--------·-··-- . - - - --- -----
Item Means Std.D Interpr etation Rank
-
Coca-cola has the best inventory control .769
measures in place to increase profitability of the 2.85 High I
Company produce
The level of customer satisfaction is high due to .876
2.66 High 2
proper inventory management
. - - - ------ -
The Company earn maximum revenues due to .789
2.59 High 3
having a variety of products on the market.
·-
Clients receive new inventory alerts on new .765
product arrivals to increase sales hence 2.56 High 4

profitability
- --- ------- - - - - --· - - - .. - -- -
Coca-cola uses its profits to allocate enough .678
financial resource to the inventory control section 2.04 Low 5
to eliminate risks.
- - - - - ---- -· ,._ -- ---·-· --
Average mean 2.54 High
----------- . ---- ------- - · - - - ----·- - - - -- -

Source: Primary Data (20 I 4)

Results in table 4.7 above reveal the mean responses pertaining profitability. The

results reveal that concerning whether Coca-Cola has the best inventory control

measures in place to increase profitability of the Companyproduce was ranked first

with (mean = 2.85) interpreted as high. In terms of whether the level of customer
nd
satisfaction is high due to proper inventory management, this was ranked 2 with

(mean= 2.66) interpreted as high. Concerning whether the Company earn maximum
rd
revenues due to having a variety of products on the market, this was ranked 3 with

(mean = 2.59) interpreted as high. Regarding whether clients receive new

inventory alerts on new product arrivals to increase sales hence profitability was

ranked 4 th with (mean = 2.56) interpreted as high. Concerning whether Coca Cola

uses its profits to allocate enough financial resource to the inventory control section

to eliminate risks, this was ranked the least with (mean= 2.04) interpreted as low.

60
 Results in the table above indicate that Coca-cola has the best inventory control

measures in place to increase profitability of the Company produce as was strongly

agreed by the respondents(mean= 2.85), they also agreed that clients receive new

inventory alerts on new product arrivals to increase sales hence profitability. In the

same way, respondents agreed that the level of customer satisfaction is high due to

proper inventory management and the Company earn maximum revenues due to

having a variety of products on the market. However, respondents disagreed that

coca-cola use its profits to allocate enough financial resources to the inventory

control section to eliminate risks. This was attributed to the Company's external

financial sources because of its wide scope and it needs external financial sources

perhaps for a short term being a new establishment in the country.

Table 4.8: Efficiency

-- ~--· Rank
Item Means Std.D Interpretation

All balances and checks in ·all

departments are reported regularly to the 2.50 .786 Low 1

top management for accountability

- -
The market of Coca-Cola products is .789
always growing further in 2.32 Low 2

Mogadishu-Somalia
The potential demand for Coca-Cola .734
0
products is always much higher than what 2.28 Low J

is produced now
~-~~- -
Average mean 2.36 Low
--~

Source: Primary Data (2014)

Results in table 4.8 above reveal the mean responses pertaining efficiency. The

results show that pertaining whether all balances and checks in all departments are

reported regularly to the top management for accountability, this was ranked first

61
with (mean= 2.50) interpreted as low. Regarding whether the market of Coca-Cola
nd
products is always growing further in Mogadishu-Somalia, this was ranked 2 with

(mean = 3.32) interpreted as low. Concerning whether the potential demand for

Coca-Cola products is always much higher than what is produced now was ranked

the last under this construct with (mean = 2.28) interpreted as low.

As table 4.8 indicates, majority of the respondents disagreed with the statements that

all balances and checks in all departments are reported regularly to the top

management for accountability, the market of Coca-Cola products is always

growing further in Mogadishu-Somalia and that potential demand for Coca-Cola

products is always much higher than what is produced now. Respondents attributed

that although the policy at the Company is to make regular reports about the

balances and checks, the staff responsible sometimes fails due to internal factors and

perhaps due to motivational factors. This renders the level of efficiency low as

shown in the table that the average mean score for the level of efficiency is low

(2.36).

Table 4.9 Summary of Findings on the Level of Snstainability of Coca Cola

Company
Item Means Interpretation Rank
Risk reduction 2.70 High I
Profitability 2.54 High 2
1
Efficiency 2.36 Low .)

--
Average mean 2.53 High
-
Source: primary data

Findings in table 4.9 indicate that the average mean value for the sustainability of

Coca-Cola Company is 2.53interpreted as high. This was explained that for any

human resource working in the stock control departments and inventory systems

62
they have to undergo staff training sessions so that they can efficiently perform their

duties with minimum risks that would result into losses for the Company. Again,

result showed that the Company recruits only qualified personnel to resourcefully

manage its inventories by setting up minimum qualification standards for applicants

during recruitment. Respondents added that the Company is very critical in the

department of inventory management since it's considered to be crucial for its

sustainability. Findings further established that clients receive new inventory ale11s

on new product arrivals to increase sales and profitability and this is done through

investing massive advertisement on all Medias. However, it was noted that at to a

ce11ain extent financial resources allocated to the inventory control section to

eliminate risks are not enough leading to inefficiencies.

4.4 Relationship between Inventory Management and Sustainability of

Coca-Cola Company, Mogadishu.

The third objective of the study was to investigate whether there is a significant

relationship between inventory management and sustainability of Coca-Cola

Company, Mogadishu. The researcher carried out correlation analysis between the

means oflnventory management and Sustainability, and fm1her carried out bivariate

regression analysis between Inventory management and Sustainability. The results

are shown in tables 4.10 and 4.11 below.

63
Table 4.10: Relationship between Level of Inventory Management and

Sustainability of Coca-Cola Company (Level of significance at 0.05)

-. -
Variables correlated r-value Significance Interpretation Decision
On Ho
Inventory management Positive and Rejected
Vs 0.842 0.000 Significant
Sustainability
Source: Primary Data 2012

Results in Table 4.10 indicate that inventory management was positive and

significantly correlated with overall level of sustainability index(1~ 0.842, s1g.

=0.000). Therefore, at (sig. = 0.005) the null hypothesis was rejected and alternative

hypothesis was accepted. This implies that, there a significant relationship between

Inventory management and sustainability of coca-cola Company in Mogadishu

Somalia. This further . implies that, inventory management constructs are

strategically maintained for the productivity, profitability and sustainability of the

Company.

The findings in table 4.4 are in agreement with those of Douglas (2000) that to

achieve material and sustainable improvement in performance of a Company,

inventory management and performance must be aligned in well by updating the

system regularly and supply chain executives need to take a holistic,

cross-functional approach that aligns supply chain, finance, operations and other

affected stakeholders to a consistent, agreed-upon set of inventory performance

objectives.

64
Table4.11: Regression Analysis between inventory management and

sustainability of coca-cola company in Mogadishu Somalia.

-
Variables Adjusted F Sig Interpretation Decision on
Regressed -
r-value Ho
Inventory 0.709 39.78 0.000 Positive an Rejected
Management significant
andSustainability - - - - .
Coefficients Beta t Sig. Decision on
Interpretation
-
Ho
Constant 1.678 2.045 0.000 Significant effect Rejected
Inventory 1.456 3.534 0.01 I Rejected
Significant effect
Management - --·-
Source: primary data.

The above table confirmed that there is significant relationship between inventory

management and sustainability of manufacturing companies. Given that (F ~ 39.78,

Sig ..-. 0.000), the hypothesis is rejected. The coefficient table revealed that. the rate

of sustainability independent of inventory management was (beta ~ 1.678). This

means that at zero level of inventory management, the level of sustainability in Coca

cola company is (beta = 1.678). The rate of change of sustainability to change in

inventory management was (beta~ 1.456). Since (beta= 1.678, sig. ~- 0.000 < 0.05)

and (beta= 1.456, sig. ~ 0.011 < 0.05), the results indicate that the values of beta

coefficients are different from zero. The results also indicate that inventory

management causes only 70.9% variations in sustainability in Coca Cola Company,

Mogadishu Somalia (adjusted r2 = 0.709).

65
 CHAPTER FIVE

DISCUSSIONS, CONLUSIONS AND RECOMMENDATIONS

5.0 Introduction

This chapter presents the findings, conclusions, recommendations and suggested

areas that need further research following the study objectives. This study was set to

find out the relationship between inventory management and sustainability of

manufacturing companie~ using a case study of Coca-Cola Company in Mogadishu.

It was guided by three specific objectives) to examine the level of inventory

management in Coca-Cola Company, Mogadishu, Somalia, ii) to evaluate the level

of sustainability of Coca-Cola Company in Mogadishu, and iii)To determine if there

is a significant relationship between inventory management and sustainability of

Coca-Cola Company, in Mogadishu.

5.1 Discussion of findings

The study findings indicated that majority of respondents in this sample were mostly

young adults between 30 years and 40 years and these were mostly males. This was

attributed to the qualification standards of the Company whereby only qualified

personnel with a reasonable working experience were employed. Realistically

people under 30 years are considered to be less productive due to pride and lack of

experience because are mainly fresh graduates with minimum skills. On the other

hand the big percentage of male respondents attributed to socio-cultural and

religious beliefs that given females little priority in economic and education

perspectives.

66
5.1.l Level of inventory management in Mogadishu

Findings revealed that the level of inventory management in coca-cola Company is

high having come-up with an average mean value of2.89. It was established that the

Company uses the most effective techniques of inventory controls which establishes

maximum and minimum inventory levels. The implication of these results is that

updating inventories regularly helps the Company to be effective in its performance

as stock levels are calculated on a regular basis which makes it helpful determine the

level of sales ordinarily. Additionally. it was revealed that the board of directors

regulates key inventory -related policies to strike the right balance between

customer service and cost effective product inventory meaning that inventory

management m Coca cola is monitored on a regular basis as it could be

recommended by expert managers and financial statement accounts have financial

assertions embodied in them. These findings are in line with those of Bateman &

Taylor (1990) who cited that preliminary controls take place before operations begin

and include policies. procedures and rules designed to ensure that planned activities

will be carried out properly. For these assertions to be valid policies and procedures

must exist to assure that the recording, Processing, summarizing and repmiing data

in these financial statement accounts are consistent with asse1iions. For example, if a

Company has no sound policies and procedures for recording credit purchases in a

proper and timely way, it has no reasonable assurance that the existence, occurrence,

completeness, rights and presentation assertions for purchases and accounts payable

are valid. Likewise weak policies and procedures will lead to internal control and

likelihood of theft and wastage of inventory.

67
5.1.2 Sustainability of Coca-Cola Company in Mogadishu

Findings established that the level of sustainability is also high (average

mean=2.52). This was attributed to constructs that were rated by respondents and

revealed that training of staff especially those in the respective departments of

inventory management is a priority. For any human resource working in the stock

control depaiiments and inventory systems they have to undergo staff training

sessions so that they can efficiently perform their duties with minimum risks that

would result into losses. In addition to recruiting qualified personnel as a

prerequisite for applicants, the Company is very critical in the department of

inventory management regarding experience and consistence in performance.

Further findings established that regular servicing of inventory control equipment

puts the Company in a better position for sustainability However, checks and

balances in all departments are not regularly reported to the top management which

could result in false entries in terms of accountability hence putting the Company a

risky point in the long run. It was also noted that at a ce1iain extent financial

resources allocated to the inventory control section to eliminate risks are not enough.

This was attributed perhaps because the Company is not yet fully established its self

in the country for fear of political instabilities although it was officially launched in

2012.

These findings 111 line with those of (Kakuru, 2007) that smce inventory

management 1s an important entry into the balance sheet of an organization

especially in merchandise business, sustainability will ofno question if management

well. Successful management of inventory will definitely improve on the

profitability of the Company through improved efficiency in operations and

reduction in wastage through pilferage and misuse.

68
5.1.3 Relationship between Inventory management and sustainability of coca

cola Company in Mogadishu

Results showed that there is a significant relationship between inventory

management and of sustainability of coca-cola Company. The null hypothesis was

rejected. This is attributed to the strategies employed by the management to keep its

market position on top by maintaining its inventories up to date although there were

some loopholes discovered like in the allocation of financial resources towards the

independent variable. Therefore inventory management and performance must be

aligned properly by updating the system regularly and supply chain executives take

inclusive approaches to a consistent, agreed-upon set of inventory performance

goals.

5.2 Conclusion

5.2.1 Level of inventory management

Objective one of this study intended to examine the level of inventory management

in coca-cola Company in Mogadishu. Findings showed that Inventory management

has become highly developed to meet the rising challenges in manufacturing entities

and this is in response to the fact that inventory is an asset of distinct feature. The

inventory management situation of coca-cola Company has been revealed to be

effective and the most commonly used model is the EOQ model. It was also seen

that the Company through a well-built policy is able to handle its idle stock without

incurring too much costs. Findings indicated that the inventory policy of coca-cola is

dynamic to some extent but a cross-functional team is lacking to determine the

optimal frequency for producing ordering products. Also findings revealed that

there is a need to address some situation in the Company's inventory management

69
like financial resource allocation and daily update of the system. Therefore

responses showed that effective inventory management practice has a positive effect

on the profit margin of their Company. Such results are is in line with the notes of

Tasli (2011 ), inventory management reduces unnecessary costs and increases

revenue in a business and effective stock control increases the profit making of an

organization hence rendering its sustainability status strong on the market.

5.2.2 Sustainability of manufacturing companies -Coca Cola Company

It is similarly concluded that sustainability of coca-cola Companies the long-term

factor economically and in social dimensions, it also encompasses responsible

management of resources hence Coca-cola Company as a newly established

investment in Mogadishu need to pull-up in its stock control and inventory to

achieve its economic objectives and sustainability which is the profit margin and

satisfaction of its clients. Given !ha! the level of inventory management is still

maintained as reflected in the findings, inventory optimisation has been focused on

and this generates several options for estimating demand with greater accuracy and

this is attributed to the Company experience from other countries which helps the

one in Mogadishu to automatically create an analysis of the demand using history

for each product in other plants across the world.

70
Relationship between inventory management and sustainability of Coca Cola

Company

The results reflected a significant relationship between inventory management and

sustainability of coca-cola Company in Mogadishu. Considering the findings, it was

concluded that the Company creates an environment that appreciates the practice of

stock control basically to increase productivity which improves financial health, and

also helps the Company to meet customers' competitive priorities. Response

showed that customer support is high as regards to satisfaction obtained when goods

and services are rendered at the right quality, right time and at the right price, this

compliments the works of Anthony, Dearden, & Gorindarajan (2009), for an

organization to meet up with constant customer demand of quality products, it must

maintain consistency in quality product & service delivery to its clientele base for

the price paid and on time delivery too.

5.3 Recommendations

From the research findings, the following recommendations are suggested in line

with research objectives;

Emphasis should be nonnally placed on the economic order quantity model because

it was seen to be in the best interest of the Company in order to maintain an optimal

level of materials in store. the level that minimizes total cost of investment in

inventory. To achieve this successfully, different costs, which are associated with

inventory, should be segregated and accumulated in such a way that EOQ can be

easily determined.

71
There should be regular update, regular servicing of inventory control equipment

and all inventories should be regularly checked from all stages of production on a

regular basis to ensure profitability and sustainability of the Company.

The inventory control systems should show their levels that can be useful indication

of what level of sales to expect and the sales and marketing department of the

Company should pay closer attention to the growth pattern of inventory usage and

incorporate it in sales forecasting technique.

The Company should strategize its policies and also adopt policies that take into

consideration all its objectives and national economy in which demand of their

products stands as another factor. This should incorporate socio-economic resource

allocations geared towards maximising sales and profitability.

Materials management unit should also pay attention to sales grow1h over the years

and thus take into consideration, the apparent relevance of sales and production cost

in making decision with regards to inventory.

The government should practically ensure peaceful political atmosphere that

enables and attracts investment and that's a critical point for manufacturing

Company to fully establish their initiatives in the country for economic growth and

development.

72
 REFERENCE

Aguilera (2007).Inventory Control Management .3 rd edition.New Delhi Tata MC

Graw-Hill.

Brain F. and Kenneth L. (2006).Purchasing and supply chain management,

7th edition , Pearson, education limited ,England.

Brinlee, D. (2000).Common inventory management problems. Retrieved March 29,

2013 from http:www.askdeb.com.

Campton .H.K. and Jesop D. (1989). Dictionary of purchasing and supply

management pifrom.

Chopra S. and Meindl (2001). Supply chain management, Prentice Hall.

Dan Roessler (2011 ). Improve sustainability using production management and

execution solutions. chemicals industry manager, aspen technology

Douglas, L. (2000). Inventory management.Women's enterprise center.

retrievedmarch 22, 2013 from http://

www.womensenterprise.ca.

E.A Silver (1988). Inventory management and production planning and scheduling

3rd Edition, John Willey and Sons.

Fleming, I. (I 992). "Stock control, or Insight", Vol. 5 No 4, pp. 9-11

11
Gary J.Z. (1987). Purchasing and the management of materials, 6' edition,

published simultaneously in Canada United States of America (U.S.A)

Geoff B. (2006). "Reconstructing inventory management theory", international

journal of operations &production management, vol. 26 Iss: 9, pp.996 -

I 012.
nd
Gregory P. W.and Mark AV. (1988). Operations management 2 edition West

73
Publishing Company St. Paul, New York Los Angels SanFrancisco.

Hilton, R. (2001 ). Managerial accounting : creating value for dynamic Environment

(2 nd Ed.) New York: Me Graw Hill, Inc.

Hoffman, R. A. and Henry. G. (1970). Inventories: Control, costing, and effect

upon income and taxes. New York : Ronald Press. International .Journal

of Production Economics.( 1999 December).

Joseph L. C. (1984 ). Pnrchasing and materials management, West Publishing

Company U.S.A.

Mmiin E. Amin (2005). Social science research conception methodology and

analysis, Makerere University Printer, Uganda problems of translation,

Interfaces", Vol. 10, pp. 103-110.

Rm11 A. (2009). Reaserch methods Rawat Publications New Delhi, India.

Rich. E. and K. Knight (1991). '"Artificial Intelligence", 2nd edition the United

States of America: McGraw-Hill, Inc.

Silver, E.A. (1981). "Operations research in inventory management", perations

research, Vol. 29 No. 4, pp. 628-45.

Zanakis, S.1-l., Austine, M. L, Nowading D. C. and Silver E. A. (1980). "From

teaching to implement inventory management.

74
 APPENDIX IA

TRANSMITTAL LETTER l<'OR THE RESPONDENTS

Dear Sir/ Madam,

Greetings!
I am a Masters of Business Administration candidate of Kampala International
University. Part of the requirements for the award is a thesis. My study is entitled,
Inventory Management and sustainability of Manufacturing companies in
Mogadishu, Somalia, a Case study of Coca-Cola Company, Mogadishu. Within
this context, may I request you to participate in this study by answering the
questionnaires? Kindly do not leave any option unanswered. Any data you will
provide shall be for academic purposes only and no information of such kind shall
be disclosed to others.
May I retrieve the questionnaire within five days (5)?
Thank you very much in ·advance.

Yours faith fall y,

Ms KHADRA MOHAMUD HUSSEIN

75
 APPENDIX II

CLEARANCE FROM ETHICS COMMITTEE

Date- - - - - - -
Candidate's Data
Name - - - - - -
Reg.# ____
Course
Title of Study _ _ _ _ __

Ethical Review Checklist

The study reviewed considered the following:
Physical Safety of Human Subjects
___ Psychological Safety
Emotional Security
_Privacy
__ Written Request for Author of Standardized Instrument
__ Coding of Questionnaires/Anonymity/Confidentiality
___ Permission to Conduct the Study
Informed Consent
___ Citations/Authors Recognized
Results of Ethical Review
_Approved
____ Conditional (to provide the Ethics Committee with corrections)
__ Disapproved/ Resubmit Proposal
Ethics Committee (Name and Signature)
Chairperson _____________
Members

76
 APPENDICES III

RESEARCH QUESSTIONS

KAMPALA INTERNATIONAL UNIVERSITY

COLLEGE OF HIGHER DEGREES AND RESEARCH

Dear respondent,
I am KHADRA MOHAMUD HUSSEIN a student of Master of Business
administration al Kampala International University. Am carrying out a study titled
Inventory Management and sustainability of manufacturing companies in
Mogadishu, a case study of Coca-Cola Company. You have been chosen as a
respondent because the information you provide is very vital for this study. The
information provided will be treated with the utmost care and confidentiality.

Section A: Demographic characteristics of Respondents

1. Age
a) ---- I 8-30 years, b )--- 31-40 years, C)--- 41-50 years and d) -51 years and
above
2. Gender
-a) Male-----
b) Female-----
3. Level of education qualification
a) Certificate
b) Diploma
c) Bachelors Degree
d) Masters degree
e) Ph.D

4. Length of service in this Company

a) Below 2 years
b) 3-5 years
c) 6-8 years
d) 9 years and

77
 SECTION B: LEVEL OF INVENTORY MANAGEMENT
Direction 1: Please write your rating on the space before each option which
corresponds to your best 'choice in terms of inventory management in this
Company, Kindly use the scoring system below:
Response Mode Rating Description Lei~cnd
Strongly Agree (4) You agree with no doubt at all. SA
Agree (3) You agree with some doubt A
Disagree (2) You disagree with some doubt D
Strongly disagree (1) You disagree with no doubt at all SD

·- -· - --
sin Item Response mode /rating
- -- -- -----
Record keeping
---· - · - - -
L Coca-cola use EOQ as the most effective method to SA A D SD
calculate stock levels

2, Stock levels are calculated on a regular basis to make

them up-to-date
-
_,.--
-0 - -- -,---~- - - ----- - - -
The Board or Directors regulates key inventory -related
policies to strike the right balance between customer
service and cost effective product inventory.
-- - ---
4, A cross-functional team determines the optimal
frequency for producing ordering products

5. Only production sourci\1g managers determine the

optimal frequency for producing ordering products

6, Optimal order is calculated on a regular basis for

improving the process

7, Managers have access to excess and obsolete stock

8. Obsolete/excess stock is linked directly to targeted action

plans to regulate and control all the inventory in al
departments
----
9, Backorders are created for partial orders of inventory
-----

78
- ------ - - - - - --
- - - - - - - - - ---- ----------- - - - ---- -- ---
Costs of inventory

II. Coca-cola Company has a scheduling procedure for

production process of different levels of production
----
12. Inventory management attempts to reconcile the problem
of storage costs and ordering costs
- --- -
13 Coca-cola Company use reorder quantities for its
inventory items

14. Serial numbers are used on inventory items considering

the numbering requirements of the Company
- - -------
Performance measures
---- ------·---------- -------- - - - - .
15. Coca-cola track its inventory by department
- - ---- - - - - ------ . -- - -- -- - ------ -· -------- - - ---- -- --- - -------- - - -
I 6. All inventories from different departments are tracked by
their agencies
-· - - - - ------ ----- - --- ------ --~- - -- - --
17. Inventories are regularly checked from all stages of
production on a regular basis
--- ---

79
 Section C: SUSTAINABILITY OF COCA-COLA COMPANY

Direction 1: Please write your rating on the space before each option which
corresponds to your best choice in terms of Sustainability of Coca cola
Microfinancc institution in your branch. Kindly use the scoring system below:

Response Mode Rating Description Legend

Strongly Agree (4) You agree with no doubt at all. SA
Agree (3) You agree with some doubt A
Disagree (2) You disagree with some doubt D

Strongly disagree (I) You disagree with no doubt at all SD

--- -- - ,_ - -·--------- - -- -
s/n Item Response mode /rating
·- ----- - · - · - · - - - - -----
Risk reduction
-- - .. ... ..• -·--- ---
I. Coca-cola trains their inventory contrnl personnel for SA A D SD
effective performance and future sustainability of the
Company
-- . --- ------ - ----- - - - - - - · - -- - - - . - -·-·-- ! - - - - - -
2. The Company recruits only qualified personnel to
manage its inventories to avoid loses
- ·- ----- --- -·-- - ---- -·- --·- - - . -
"J. Regular servicing of inventory control equipment puts
the Company in a better position of sustainability
---
4. Effective updating of inventories at coco-coal reduce
risks of making losses for the Company
·--
Profitability
--- --- - - -
4. Coca-cola has the best inventory control measures in
place to increase productivity of the Company
---- ----
5. Clients receive new inventory alerts on new product
arrivals to increase profitability

6. Coca-cola allocate enough financial resource to the

inventory control section to eliminate risks.

7. The level of customer satisfaction is high due to proper

inventory management
- ---- - - - ------ _,.__ ____
80
 .
--~·
8. Coca-colaearn a lot of revenues/profits as a result of a
variety of products on the market.

Efficiency
--
9. All balances and checks in all departments are reported
regularly to the top management for accountability
-
10. The market of Coca-Cola products is always growing
fmiher in Mogadishu-Somalia
---~~- - ---
11. The potential demand for coca-cola products is always
much higher than what is produced now
-- - -- · - · ·

Thank you very much

81
 RESEARCHER CURRICULUM vrr AE (CV)
PERSONAL DATA:
Name: Khadra Mohamud Hussein

Mother Name: Zeinab Ali Farah

Nationality: Somali

Place Of Birth: Mogadishu

Date Of Birth: 1991

Marital Status: Single

Gender: Female

Address: -l 256793365059

E-Mail: 1DMAAL38@.GMA IL.Corvr

Educational Background:

2013-Now :Master Of Business Administration And Banking & Finance In

Kampala International University

2011-2012 :Diploma Of English At Somali University

209-2012 :Bachelor Of Accounting and Finance in Simad University

2005-2008 :Secondary Certificate At Al-Hikrna Secondary School

82