THE IMPACT OF INVENTORY MANAGEMENT ON THE

PROFITABILITY IN ORGANIZATIONS: A CASE

STUDY OF MTN INVENTORY AND

ENGINEERING DEPARTMENT

IN BUGOLOBI

BY

MASEMBE RAJAB

A RESEARCH REPORT SUBMITTED TO THE SCHOOL OF BUSINESS

AND MANAGEMENT OF KAMPALA INTERNATIONAL UNIVERSITY

AS A PARTIAL FULFILLMENT OF THE REQUIREMENTS

FOR AWARD OF BACHELORS' DEGREE OF

SUPPLIES AND PROCUREMENT

MANAGEMENT

MARCH 2011
 DECLARATION

I Masembe Rajab, declare that this research report is my original work and it has

never been submitted to any institution or university for any award.

Date

\iJ0( ~tJII
Masembe Rajab

BSP/ 6487/ 72/ DU

 APPROVAL

The following research report by Mr. Masembe Rajab has been carried out under

the little, The Impact of Inventory Management on the Profitability in

Organizations, the case of MTN- Uganda, Inventory and Engineering Department

Bugolobi.

Sign Date

~
········~ ············ ........ /.3........ ~.\. .. ½ .~.\.
Mr. Barasa Henry

II
 DEDICATION

I dedicate this report/ work to my dear beloved parents Mrs. Nakajubi Sophia and

the late Yasin Khamis, the president of the Republic of Uganda, President Yoweri

Museveni for paying my tuition, the mother of my child Nalukenge Jackie and my

precious daughter Suha Mariam.

And to all those who have enabled me to pursue and successfully complete my

studies. May the Almighty Allah your maker and mine Bless you Abundantly.

Ill
 ACKNOWLEDGEMENT

I would like to thank the Almighty Allah for giving me strength and for his grace,

wisdom and mercy that has enabled me to complete my report successfully.

lam deeply indebted to my mother Sophia Nakajubi and to all individuals and

groups of people who through their contribution have directly or indirectly

enabled me to prepare this report.

I would also like to acknowledge the contribution of the lectures and special

acknowledgement goes to my supervisor Mr. Barasa Henary whose patience,

criticism, guidance, constructiveness and tolerance have enabled me to write this

report.

Lastly my appreciation goes to my friend Tukundane Benson (BB, BS), Raymond

Makubuya Kaweesa for their support, love, care throughout my academic trial.

GOD BLESS YOU

IV
 TABLE OF CONTENTS

DECLARATION .................................................................................................. i

APPROVAL ....................................................................................................... ii

DEDICATION ................................................................................................... iii

ACKNOWLEDGEMENT ................................................................................... iv

TABLE OF CONTENTS .................................................................................... v

ABSTRACT .................................................................................................... viii

LIST OF ABBREVIATIONS .............................................................................. ix

CHAPTER ONE ................................................................................................1

1.0 lntroduction .................................................................................................. 1

1.1 Background of the study .............................................................................. 1

1.2 Statement of the problem ............................................................................ 3

1.3 Purpose of the study .................................................................................... 3

1.4 Objectives of the study ................................................................................ 3

1.5 Research questions .................................................................................... .4

1.6 Scope of the study ...................................................................................... .4

1.7 Significance of the study ............................................................................. .4

1.8 Structure of the research report ................................................................... 5

1.9 Conceptual framework ................................................................................. 6

V
CHAPTER TWO ................................................................................................7

LITERATURE REVIEW .....................................................................................7

2.0 lntroduction ..................................................................................................7

2.1 Inventory defined .........................................................................................7

2.2 Inventory management ................................................................................8

2.3 Inventory management costs .................................................................... 10

2.4 Inventory performance measures .............................................................. 12

2.5 The relationships between inventory management and profitability .......... 13

2.6 Important tools of inventory management ................................................. 14

2.7 Inventory control approaches' ................................................................... 16

CHAPTER THREE ..........................................................................................22

METHODOLOGY ............................................................................................22

3.0 lntroduction ................................................................................................ 22

3.1 Research design ........................................................................................ 22

3.2 Research method ...................................................................................... 22

3.3 Sources of data .........................................................................................22

3.4 Data collection ...........................................................................................23

3.5 Data presentation and analysis .................................................................23

3.6 Limitations of the study ..............................................................................23

VI
CHAPTER FOUR ............................................................................................24

INTERPRETATION AND DISCUSSION OF FINDINGS ................................. 24

4.1 lntroduction ................................................................................................24

4.1 Findings on the relationship between Inventory Management and

Profitability .......................................................................................................24

4.2 Findings of inventory management tools ................................................... 25

4.3 Findings on the inventory control. ..............................................................25

CHAPTER FIVE ..............................................................................................26

SUMMARY OF THE FINDINGS, CONCLUSION AND RECOMMENDATIONS

........................................................................................................................26

5.0 lntroduction ................................................................................................26

5.1 Summary of findings ..................................................................................26

5.2 Conclusion .................................................................................................27

5.3 Recommendation ......................................................................................28

5.4 Area of the further research .......................................................................29

REFERENCES ................................................................................................30

VII
 ABSTRACT

The study is focused on Inventory Management and Profitability. This is based

on three main objectives which include, to establish the relationship between

inventory Management and profitability in organizations, to establish the different

tools of Inventory Management and lastly to establish the control measures or

systems used in Inventory Management. There is also a detailed discussion of

the related literature to the topic under evaluation of which is cited by different

researchers and scholars.

The data used to carryout the research is secondary data, which was collected

from existing company documents, journals, textbooks, articles, magazine

reports, newspapers and detailed literature on Inventory Management and

profitability. Inventory management has a very strong connection or relationship

with profitability in organizations. A need to involve Inventory tools and Inventory

control systems in an organization, surely leads to profitability in an organization.

The conclusion drawn shows a positive relationship between Inventory

Management and profitability and this is mainly fueled by the presence of the

Inventory tools and Inventory control systems.

VIII
 LIST OF ABBREVIATIONS
ABC Analysis

EPOS Electronic Points of Sale

RFID Radio Frequencies Identification

EOQ Economic Order Quantity

PRS Periodic Review System

JIT Just in Time

MRP Materials and Requirements Planning

DRP Distribution Requirements Planning

ERP Enterprise Resource Planning

VMI Vendor Managed Inventory

TQM Total Quality Management

MRPII Manufacturing Resource Planning

ERP Enterprise Resource Planning

KPI Key Performance Indicators

SKU Stock of a Keeping Unit

MU Maximum Usage

MLT Maximum Lead Time

MTN Mobile Telecommunication Network

IX
 CHAPTER ONE

1.0 Introduction

This chapter covers the background, statement of the problem, purpose of the

study, objectives of the study, research questions, scope of the study,

significance of the study and the structure of the research.

1.1 Background of the study

The word inventory was first recorded in 1601. The French term inventaire, or

"detailed list of goods," dates back to 1415. Inventory management is primarily

about specifying the size and placement of stocked goods. Inventory

management is required at different locations within a facility or within multiple

locations of a supply network to protect the regular and planed course of

production against the random disturbance of running out of materials or

goods/stock.

Inventory management is one of the strategies employed by organizations as a

way of having an edge/ competitive advantages over others and a way of

maximizing profits at large. The main objective of Inventory management is to

acquire the right quantity and quality of materials at the right time, at the same

time keeping the cost of holding stock as low as possible so as to fully acquire

the benefits of managing Inventory.

Profitability performance has been realized during 20 th century due to the impact

on Inventory management.

The increased competition and demand by organizations to reduce costs

associated with Inventory management has forced many organizations to device

means of cost reduction in the stocks bought (Lysons, 2006), Monezka, (2005)

for successful competitive advantage Inventory management has got in the

organization with the right quantity, quality and time enabling organizations

generate profits.

Inventory management represents a major asset of most organizations and

constitutes a significant proportion of total operational costs. So its paramount for

organization to avoid poor Inventory management due to the fact that it would

hinder the profits of the organization.

Inventory management is the efficient administration of how orders for materials

goods, services, supplies are brought into the organization Burt (2003).

As long as there is good Inventory management all the mentioned can be

delivered in time and the performance of the organization will be seen in the

profits made.

Inventory management with the help of the tools of Inventory like ABC analysis,

barcoding among others and the Inventory control systems associated with

2
different push and pull strategies like for instance periodic review system, just in

time systems, materials and requirements planning (MRP) among others. All the

above mentioned tools and Inventory control systems will lead to profitability in

organizations.

1.2 Statement of the problem

Organizations that do not adopt the tools of Inventory management and Inventory

control systems face a lot of challenges and hence the performance of these

organizations declines due to no profits made. If there are no profits, it means

that there is no business.

1.3 Purpose of the study

The purpose of the study is to establish the relationship between profitability and

Inventory management in organizations.

1.4 Objectives of the study

i. To establish the relationship between Inventory management and

profitability in organizations

ii. To establish the different tools of Inventory management

iii. To establish the control measures/ systems used in Inventory

management

3
1.5 Research questions

i. What is the relationship between Inventory management and profitability

in organizations?

ii. What are the different tools used in Inventory management?

iii. What are the Inventory control systems used in Inventory management?

1.6 Scope of the study

The study is based on organizations' profitability performance due to Inventory

management.

1.7 Significance of the study

The findings of the study will:

i. Greatly assist the policy makers and the business community in

appreciating how Inventory management greatly impacts on the

profitability in organizations.

ii. Provide a better understanding to Inventory management and profitability.

iii. Contribute a body of knowledge and existing literature for future

researchers with interests in Inventory management.

4
 iv. Help managers and policy makers to improve and adopt more and better

appropriate Inventory tools and Inventory control.

v. Fulfill the requirements for my achievement of the Bachelors Degree in

Supply and Procurement.

1.8 Structure of the research report

The research consists of five chapters and is organized as follows:-

Chapter one; The section includes background of the study, statement of the

problem, Purpose of the study, research Objectives and questions, Significance

of the study and Scope of the study.

Chapter two; This chapter represents the literature review about Inventory

management and the performance in terms of profitability.

Chapter three; The chapter represents the methodology with aspects of

research design, sources of data, data processing and analysis and type of data

Chapter four; Findings on the study that is profitability and Inventory

management.

Chapter five; This represents the conclusion or summary of the findings and

recommendations.

5
1.9 Conceptual framework

Dependent variables Independent variables

Inventory management - Profitability

- Efficiency - Service delivery
.
- Tools
- Control measure

The efficient application of inventory and control tools will lead to profitable

operations and better service delivering to the organizations' customers.

6
 CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This chapter covers or provides the existing literature that is being evaluated by

different scholars, authors or researchers. The literature stresses about the

different control and tools of Inventory management, the tools of Inventory

management and profitability.

2.1 Inventory defined

According to the institute of logistics and transport defines Inventory as a term

used to describe:-

• A list of items held in stock

• All the goods and materials held by an organization for sale or use

An alternative definition is materials in a supply chain or in a segment of a supply

chain, expressed in quantities, locations and/or values (synonym stock)

The term can also mean a detailed list of goods in a given place or stocktaking

Haudorson et al (2004) define Inventory as the value or quantity of raw materials,

assemblies, components, work in progress and finished stock that are kept or

stored for use as the need arises.

7
2.2 Inventory management

According to (Lyson et al 2003) Inventory management is referred to as the

technique used to ensure those stocks of raw materials or other supplies, work

in progress and finished goods kept at levels which provide maximum service

level at minimum costs.

According to Burt (2003), Inventory management is the efficient administration of

how orders for goods, services, supplies and works are brought into the

organization.

Also Arora (1994) defines Inventory management as a systematic control

regulation of purchase, storage and usage of materials in such away to maintain

an even flow of production, avoiding excessive investment in Inventory.

Due to effective Inventory management, organizations produce in time and meet

customer's orders and expectations of product availability and hence leading to

profitability in organizations.

The major objective of Inventory management is seen in the need to control and

manage the large asset called inventory /stock. This is seen where by

organizations sustain operations that are always available at all times and at the

same time holding the ordering and carrying costs at the same time holding the

ordering and carrying costs at the some time holding the ordering and carrying

costs to the highest possible levels.

8
According to Gillingham and Lysons (2000) the main objectives of inventory

management is to provide both the internal and external client/ customers with

the appropriate service levels in terms of order rate fill, quality and quantity, and

to ascertain the present and the future requirements for all types of inventory,

and to both bottlenecks and overstocking in productions.

Not forgetting keeping costs to a minimum by variety reduction, economic lot

sizes and analysis of costs incurred in obtaining and carrying out inventories.

Lastly providing up stream and down stream inventory visibility in the supply

chain.

However, it should be noted that, a lot of problems or challenges are constantly

faced by organizations in their effort to achieve the objectives of inventory

management. Normally challenges originate from both within and outside the

organizations. These are normally in terms of inventory costs like for instance

acquisition costs, holding costs, cost of stockouts an of course not forgetting the

natural calamities/ diseases like earthquakes, floods among others hence leading

to high operational costs.

Most firms/ organizations employ substandard inventory managers and

techniques that do not match their activities, at times the human resource itself

do not have the experience in handling or managing inventory and as a

consequence operations decline and profits dwindle, losses are seen through

unprofessional mistakes made and hence leading to high operational costs.

9
It would be a great deal to save money by trying to hire inexperienced personnel

because of the availability of cheap inexperienced labour but in the long-run

organization do not make profits and hence more challenges are instead brought

about.

2.3 Inventory management costs

The economics of inventory management and stock control are determined by an

analysis of the costs incurred in obtaining and carrying inventories under the

following headings.

Acquisition costs

Many of the costs incurred in placing an order are incurred irrespective of the

order size, for example, the cost of an order will be the same irrespective of

whether 1 or 100 tones are ordered.

The ordering costs include:-

Preliminary costs-preparing the requisition, vendor selection, negotiation

Placement costs-order preparation, stationary, postage

Post-placement costs-progressing, receipt of goods, materials, handling

inspection, certification and payment of invoices

These costs will be met as long as an organization places orders.

10
Holding costs

These costs are incurred due to maintaining inventory

These are two types of holding costs:-

• Cost proportional to the value of the inventory such as;

Cost of insurance

Losses in value due to deterioration, obsolescence and pilfering

Financial costs like interest on capital tied up in inventory, which

may be bank rate or more realistically, the target return on capital

required by the enterprise.

• Cost proportional to the physical characteristics of inventory such as:-

Labour costs, relating to handling and inspection

Clerical costs, relating to stores, records and documentation

Storage costs-storage space, stores' rates, light, heat and power

Cost of stockouts

The costs of stockouts-the cost of being out of inventory, include:-

• Loss of production output

• Costs of idle time and of fixed over heads spread over a reduced level of

output

• Loss of customer goodwill due to the inability to supply or late delivery

• Costs of any action taken to deal with the stockout, like buying from

another stockout at an enhanced price, switching production, obtaining

substitute materials

11
2.4 Inventory performance measures

A number of key performance indicators (KP\) have been devised to measure the

extent to which an undertaking has the right quantity of inventory in the right

place at the right time some of the most useful are the following.

• Lead times, the length of time taken to obtain/supply a requirement from

the time of need is ascertained to the time the need is satisfied

• Service levels, the actual service level attained in a given period, which

can be ascertained from the formula:-

Number of times the item is provided on demand

Number of times the item has been demanded

• Stockouts in a given period, this can be expressed as a percentage of the

total stock population during a given period.

• Rate of stock turn, this indicates the number of items that a stock item has

been sold and replaced in a given period and is calculated by the formula:-

Sa\es/ issues

Average inventory (at selling price)

• Stock cover, this is the opposite of stock turn and indicates the number of

days the current stock of a keeping unit (SKU) will last if sales or usage

continues at the anticipated rate.

12
2.5 The relationships between inventory management and profitability

Every firm/ organization goes into business to make profits. Therefore, every

firms' main objective is profit maximization. Profit maximization is the (short run)

process by which a firm determine the price output level that returns the greatest

profit according to wikipedia. If organizations fail to achieve profits organization,

they fail to succeed or crumble; that is why organizations have been forced to

search for better ways of maximizing profits of which inventory management is

one of them among others. Inventory management enables an organization to

meet or exists customers expectations of product availability while maximizing

profits. Much as this is true, inventory management has its associated costs like

acquisition costs among others. The costs has an impact on the profitability

performance of any organization. However if these costs are well managed and

controlled then there are high chances of maximizing profits due to the fact that

cost management is the major determinant of profit maximization. It should be

noted that for instance stocks running out, associated with interruption in the

productions process, failure or delays in fulfilling customer needs which also

further lead to loss of customers, incompetent personnel, among others and

hence these reduce the volume of sales which definitely leads to low profit

margins

Inventory management with the use or help of the tools and control inventory

systems/ techniques, profit maximization will be achieved. Therefore inventory

management costs are supposed to be kept low in order to reap the benefits of

holding inventory. This is normally achieved by maintaining an optimal inventory

13
level. For example the ABC analysis, barcoding, vender managed inventory,

economic order quantity among many others with these in place, profits will be

achieved due to the fact that they control costs incurred in the organization.

All in all inventory management is a very important aspect in the organizations

performance because, if its not considered, then the profits of the organization

will not be realized.

Am confident to assert that inventory management has a very strong relationship

with the profitability performance of any organization. This depends largely on the

fact that the way management of an organization handles its inventory

determines the future or the profitability performance.

2.6 Important tools of inventory management

The tools used in inventory management depend on the organizations nature of

business and situational aspects encountered by the organization. These are

apparatus/ tools for the complete automation of the inventory management of a

distressed inventory warehouse.

Inventory management tools help organizations in managing the flow of goods/

products/ services and provide the workers to co-ordinate the various activities

for effective inventory management. The following are the tools used by

organizations for effective inventory management.

14
The ABC Analysis

This particular tool ensures that the materials of high value are kept abundant. In

most cases, inventory in organizations consists of more than one item which

means that there are many types being stocked and these items vary according

to their value and usage rate hence different levels of management.

A represents materials of high value and they require the most managerial

attention and review.

B materials are second in importance with moderate impact. The control system

used needs to be as simple as possible.

C represents/ constitutes materials or items of low importance. The items are

basically of low usage value because of low demand/ low costs.

Bar coding

Barcodes accelerate the flow of products and information throughout business.

The most familiar example of the use of barcodes is Electronic Points of Sale

(EPOS) which is when retail sales are recorded of scanning product barcodes at

checkout tills. An EPOS system/ tool verifies, checks, and charges prices and

sends intra and inter-store messages and data. For example MTN scratch cards,

phones, laptops among others can be tracked.

Some production applications for bar coding include among others

• Lot tracking

• Packaging tracking

15
 • Access control

• Counting finished goods inventories (for instance scratch cards).

Radio Frequencies Identification (RFID)

A RFID tag contains a silicon chip that carries on identification number and an

antenna able to transmit the number to a reading device. This means improved

inventory management and replenishment practices, which inturn, results in a

reduction of interrupted production or lost sales due to items being out of stock.

The reduction in the cost of chips to a point where they can be used to track high

volume, \ow-cost stores and individual items rather than an aggregate stock

keeping unit is revolutionary in its implications for inventory intelligence and

control.

2.7 Inventory control approaches'

As far as control of inventory is concerned, we have to look at the nature of

demand of materials/ goods. When forecasting the future requirements for

supplies, we have to distinguish between independent demand and dependent

demand. Independent demand items are finished goods or other end items and

the demand for them can not be precisely forecasted.

16
INDEPENDENT DEMAND

Independent demand is related to 'push' system (push strategy-when products

are manufactured in anticipation of demand and production based on long-term

forecasts and therefore, uncertain. Both independent demand and push systems

are concerned with fixed order quantities and periodic review systems.

Fixed order quantities

With fixed order quantities, inventory is replenished with a predetermined

quantity of stock every time the inventory falls to a specific order level. The

reorder level is the quantity to be used during the lead replenishment time plus a

reserve. This can be calculated by using the formula:-

Maximum usage X maximum lead time

MU X MLT

If for instance, the lead time is 25 to 30 days and the maximum usage in the lead

time is 200units, then the reorder level will be:

200 x 30 = 6000 units.

Economic Order Quantity (EOQ)

This is the optimal ordering quantity for on item of stock that minimizes costs. It is

based on the assumption that demand is uniform, lead time is constant and

certain, the cost of planning an order is independent of size of the order. This

approach system assists in ensuring a reduction in inventory held by an

organization as orders are made at re-order level and this minimizes costs.

17
Periodic Review System (PRS)

As the name implies or suggests in this system on items inventory position is

reviewed periodically rather than at a fixed order point. The periods or intervals

at which stock levels are reviewed will depend on the importance of the stock

item and the costs of holding that item. A variable quantity will be ordered at

each review to bring the stock level back to maximum, hence, the system is

sometimes called the 'topping-up' system.

DEPENDENT DEMAND

Items are typically components or subassemblies used during the production of a

finished or end product. Demand is derived from the number of units to be

produced-for example demand for 1000 cars will give rise to a derived demand

for 5000 car wheels.

Dependent demand relates to Just-In-Time (JIT), Materials and Requirements

Planning (MRP), Distribution Requirements Planning (DRP), Enterprise

Resource Planning (ERP) and Vendor-Managed Inventory (VMI).

Just-In-Time (JIT)

In short JIT production is making what the customer needs, when it is needed

and in the quantity needed using the minimum resources of people, material and

machinery. From the definition, it can be seen that JIT is more than delivering an

item where and when required and at the right time. JIT is both a production

scheduling and inventory control technique and an aspect of total quality

18
management (TQM). JIT is used to improve quality to zero defects, reduce lead

time by reducing set-up times, hence improving profits of organizations.

Materials and Requirements Planning (MRP)

Developed in the 1960s, is the technique that assists in the detailed planning of

production. The aim is to make available either purchased or company

manufacturing assemblies just before they are required by the next stage of

production or for delivery. MRP enables orders to be tracked throughout the

entire manufacturing process and assists purchasing and control departments to

move the right materials at the right time to manufacturing or distribution points.

Organizations use this method as inventory kept depends on the demand

available or at hand.

Manufacturing Resource Planning (MRP 11)

MRP II may be defined as the extension of computerized MRP to link together

such functions as production planning and control, engineering, purchasing,

marketing, financial, cost accounting and human resource management into on

integrated decision support system. Its mainly driven by a master production

schedule, but additional inputs are received from production control, purchasing

and engineering.

The computerized system also collects data to support financial or cost

accounting, marketing and human resource management. The system controls

inventory.

19
Enterprise resource planning (ERP)

ERP is the latest and possibly the most significant development of MRP and

MRP II. ERP is applicable to all organizations and allows managers from all

functions or departments to have a consolidated view of what is or is not taking

place throughout the enterprise.

ERP can be defined as a business management system that, supported by

multimodule application software integrates all the departments or functions of an

enterprise. The functions/ departments include finance logistics manufacturing,

supplier management, human resource. This controls inventory in organizations

like MTN hence making profits

Distribution requirements planning (DRP)

An inventory control and scheduling technique that applies MRP principles to

distribution inventories. It may also be regarded as a method of holding stock

replenishment in a multi-echelon environment. An 'echelon' is defined by

chamber's Dictionary as a stepuise arrangement of troops, ships, planes, etc.

DRP is useful for both manufacturing organizations, such as car manufacturers

that sell their cars via several distribution points, such as regional and local

distributions, and purely merchandising organizations such as supermarkets.

Vender-managed invention (VMI)

This is a JIT technique in which inventory replacement decisions are centralized

with upstream manufactures/ distributors.

20
VMI may also be considered to be an extension of Distribution in Requirements

Planning (DRP)

VMI enables manufactures or distributors to eliminate the need for customers to

reorder, reduce or exclude inventory and obviate stockouts. With VMI, customers

no longer 'pull' inventory from suppliers. Rather, inventory is automatically

'pushed' to customers as suppliers check customers' inventories and respond to

previously agreed stock levels. VMI is particularly applicable to retail distribution.

It can also relieve the customer of much of the expense of ordering and stocking

low-value.

21
 CHAPTER THREE

METHODOLOGY

3.0 Introduction

This chapter covers the research design, research methods, source of data, data

collection, data presentation, data analysis, and the limitation of the study.

3.1 Research design

A descriptive and analytical research design is used to establish the Inventory

Management tools and control systems.

3.2 Research method

The research method used entailed review of related literature to draw

conclusion to the research problem by analyzing the relationship between

Inventory Management and profitability performance in organizations.

3.3 Sources of data

The data used was only secondary data. The information about Inventory

Management and Profitability was established from existing company documents

and other related written data from journals, textbooks and the internet which are

relevant to the theme under study.

22
3.4 Data collection

The information was obtained by reading the company's inventory records,

including; manuals, purchasing procedures, stock control process, storage

systems, issuing and receiving documentation.

3.5 Data presentation and analysis

The findings are presented in quantitative forms where they are discussed,

described and interpreted systematically in relation to the objectives of the study.

Data is analyzed by making references to the available documents and literature,

in order to compare and contrast different opinions as presented by the different

methods of inventory management. The aim is to identify the gaps that exist in

order to make appropriate recommendations.

3.6 Limitations of the study

Time constraints to cover every document and literature that was obtained for the

research because of diverse documents on the subject order study. Financial

constraints most especially funds for collecting information from the company

internet, printing and photocopying of the relevant documentaries.

Some of the existing sources of data do not have all the necessary information

needed to complete the study as a result limited information.

 CHAPTER FOUR

INTERPRETATION AND DISCUSSION OF FINDINGS

4.1 Introduction

This chapter represents discussion and analysis of findings revealed from the

secondary data/ documents. The findings discussed follows the order of

objectives which are to establish the relationship between Inventory Management

and Profitability in organizations, establishing the different tools and control

systems of Inventory Management.

4.1 Findings on the relationship between Inventory Management and

Profitability

According to the records examined, there's a positive relationship between

Inventory Management and Profitability in MTN. Inventory Management enables

MTN to meet its customer's expectations of product availability while maximizing

profits. The objective of Inventory Management is to have the right quantities of

materials and right quality at the right time when they are needed so as to earn

profits. Inventory Management has associated costs, these costs affect the

profitability of organizations, but if they are well managed and controlled, then the

chances of maximizing profits are very high with of course the inventory tools and

control systems in place. The best way of ensuring that Inventory Management

costs are kept low while the benefits of holding this inventory is achieved by

24
maintaining optimal inventory levels. This is the position at MTN inventory control

and engineering department.

4.2 Findings of inventory management tools

Inventory Management tools help MTN in managing the flow of their products

and provide the workers to co-ordinate the various activities for effective

Inventory Management. These tools are for the complete automation of Inventory

Management of an effective/ responsive management system. This is being

applied at MTN. The inventory tools normally depend on the MTN's nature of

business- which is the communication services. Tools like the barcoding among

others are used by MTN on the services they provide or they sell or supply.

4.3 Findings on the inventory control

The control systems at MTN depend on the nature of demand of service/

products. The control systems or techniques are used especially depending on

dependent and independent demand.

This will include mobile hand sets; airtime scratch cards/ tickets and booster

stations or masts or stations for network availability

25
 CHAPTER FIVE

SUMMARY OF THE FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.0 Introduction

The chapter presents the summary of the findings, conclusions and

recommendations based on the findings in accordance with the objectives of the

study.

5.1 Summary of findings

The findings got from the study, reveal the following, effective Inventory

Management allows MTN to produce in time and meet customer's orders and

expectations of product availability with the amount of each item that eventually

leads to better profitability due to the tools and control system of inventory

management.

Inventory Management is of great importance to MTN where by it allows the firm

to cater for the needs of its customers both internal and external as a required

guard against uncertainties or risks of stock outs, understocking and

overstocking, price fluctuations and eventually cut on operational costs leading to

profit maximization.

26
The use of the tools and control of Inventory Management are found to be

effective in the performance of MTN's profitability.

Much as Inventory Management is found to be effective in the profitability of

MTN, it should be known that it's not the only strategy that MTN can use to gain

profitability.
I

It is also revealed that the best way of ensuring Inventory Management benefits
I
are fully enjoyed while keeping down the costs of inventory is by maintaining an
I
optimum inventory level. The study therefore reveals that there's a strong

relationship between MTN's inventory management and its profitability

I
I
performance.

5.2 Conclusion

There is no doubt that Inventory Management is an important aspect/ strategy of

profitability of any organization because it represents a major asset of the

organization. Inventory constitutes over 70% of the company's income and hence

forth if inventory is not properly managed, it would hinder the profitability

performance in organizations.

Therefore for effective Inventory Management to boost the profit index, inventory

tools and inventory control systems have to be adopted.

27
5.3 Recommendation

• Basing on the finding of the study, the following recommendations are

suggested in order for organizations to maximize profits through Inventory

Management.

• The control techniques used in Inventory Management should be used in

accordance to the demand and not any how.

• The human resource department should employ the right people for the

right job to avoid mistakes of employees, damages and others and

improve efficiency.

• The organizations should use the tools to set appropriate levels of

inventory to avoid overstocking and under stocking so as to minimize the

total material costs.

• Key performance measures should be devised by organizations to

measure the extent to which the right quantity of inventory in the right

place at the right time are being held.

• Safety stock and service levels is needed to cover shortages due to the

agreed lead time being exceeded or the actual demand being greater than

28
 the anticipated. Thus, by increasing the investment in inventory, service

levels can be increased.

• Forecasting techniques or approaches should also be used by

organizations in order to predict the future inventory requirements as it's

the basis of all planning and decision making.

5.4 Area of the further research

The following are suggested for further study in relation to this research.

• The other inventory tools used in inventory management

• The other factors affecting the profitability of an organization

• Emphasis should also be put on safety stock and service levels

• Performance measures in organizations.

29
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