CHAPTER ONE

INTRODUCTION

1.0 Introduction

This chapter focuses on the flowing section: background of the study, problem
statement, research Purpose, research objective, research questions, scope of the study,
significance of the study, and research terms

1.1 Background of the study

Inventory management refers to the process of ordering, storing, and using a company's
inventory. These include the management of raw materials, components, and finished
products, as well as warehousing and processing such items. Adam Hayes (2019)

Inventory management is an approach for keeping track of the flow of inventory. It starts
right from the procurement of goods and its warehousing and continues to the outflow of
the raw material or stock to reach the manufacturing units or to the market, respectively.
The process can be carried out manually or by using an automated system. Prachi M
(2019).

Customer satisfaction (CSAT) is a metric used to quantify the degree to which a

Customer is happy with a product, service, or experience. This metric is usually
calculated by deploying a customer satisfaction survey that asks on a five or seven-Point
scale how a customer feels about a support interaction, purchase, or overall Customer
experience, with answers between "highly unsatisfied" and "highly satisfied" to choose
from. Sophia Bernazzani (2020)

Customer Satisfaction can be defined as “the degree of satisfaction provided by the

Goods or services of a company as measured by the number of repeat customers”
(Business Dictionary).

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In Pakistan Customer satisfaction entirely depends on the effective supply chain
Management which is not an easy task. In past companies used to hold Large inventories
to avoid shortage of inventories and to increase the customer satisfaction however it has
been observed that this “satisfaction” is Subjective to person to person, though effective
inventory management Is the only way to increase customer satisfaction. This inventory
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.

Atkinson said that manufacturers and retailers can incorporate technology to assist in the
managing of this inventory, which is later on used by almost all the multinational
companies. This inventory management system uses strong applications of good
forecasting techniques with effective incoming and outing inventories. These systems
make the inventory management more effective and efficient. According to retail
historian, Robert Spector, a critical factor for retailers is that they have to have a good
inventory system. If the retailer does not have a good inventory system, they will not be
able to forecast demands with any kind of accuracy. This might result in them
running out of stock every so often (Levinson, 2005).

Customer satisfaction entirely depends on the effective supply chain management which
is not an easy task. In past companies used to hold large inventories to avoid shortage of
inventories and to increase the customer satisfaction however it has been observed that
this “satisfaction” is subjective to person to person, though effective inventory
management is the only way to increase customer satisfaction. This inventory 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.

Large inventories are not the preferred choice to handle the shortage for big companies.
As we know that large inventory incurs three different types of costs i.e. holding costs,
when the inventory comprises of raw materials; work in process, or finished goods. The
inventory cost, is the range of 20 to 40 percent of annual inventory in rupees. Another

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variables associated with the holding cost is the opportunity cost, which comprises of any
increase in rents due to the need for more space for inventory, higher rates for insuring
the inventory, and the cost of goods that are outdated.(Mehfooz Ali, 2012)

According to retail historian, Robert Spector, a critical factor for retailers is that they
have to have a good inventory system. If the retailer does not have a good inventory
system, they will not be able to forecast demands with any kind of accuracy. This might
result in them running out of stock every so often (Levinson, 2005).

The study of customer satisfaction has shown that there could be a disproportional
relationship between cause and effect, or between a factor and its consequence on the
organization. For instance, a five percent increase in loyalty can increase profits by 25 to
85 percent (Cacioappo, 2000). Loyal customers are six times more likely to repurchase or
recommend the purchase of the product or service to someone else. Studies have shown
that on average, four percent of the customers will be dissatisfied or complain about the
product and/or service. Edward Marien, director of supply chain management at the
University of Wisconsin, defines “perfect order” as when a customer finds the right
product, destination, condition, documentation, and cost.

The study of customer satisfaction has shown that there could be a disproportional
relationship between cause and effect, or between a factor and its consequence on the
organization. For instance, a five percent increase in loyalty can increase profits by
25 to 85 percent (Cacioappo, 2000).

Loyal customers are six times more likely to repurchase mend the purchase of the
product or service to someone else. Studies have shown that on average, four percent
of the customers will be dissatisfied or complain about the product and/or service.
Edward Marien, director of supply chain management at the University of Wisconsin,

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defines “perfect order” as when a customer finds the right product, destination, condition,
documentation, and cost. mehfoos Ali and muhhamadasif (2012)

In Nigeria Customer satisfaction as a major determinant of business performance is

highly relevant to the long term success of an efficient inventory management system.
Customer satisfaction is therefore, very significant to marketing concept with strong
reasons of strategic linkages between overall quality and customer satisfaction (Truck,
2006).Recent researches in customer satisfaction have sifted the centre stage that
generates the important value to other distant areas that are important when compared
with other issues. This can be seen in the works of Duncan and Elliote (2004).

In the past, inventory management was not seen as being significant because excess
inventory was conceptualized as an indication of being wealthy and therefore over
stocking was encouraged. But in recent times companies accepts effective inventory
control (Susan and Micheal, 2000) Management currently control inventory and reduce
costs yet remaining competitive. Inventory has been estimated to take care of about 30%
of business investment in capital. Inventory control greatly increases profitability by
minimizing costs related to storage handling of materials. The reasons for keeping
inventory that too much stock could lead to tying down of funds, increment in holding
cost, and deterioration of materials, obsolescence and theft. Managing assets of various
kinds connotes inventory problems, since it is the same principle for cash and fixed
assets. The relationship between ordering costs and holding cost is a feature of the
transaction approach to inventory management that is seen in the inventory model that
has been in place many decades ago (Koumanakos, 2008). Inventory threatens a firm
existence so its control and management must be critical to a firm. Much inventory takes
up a great space, creates financial burdens and increase damages, spoilage and loss.
Asserts that the major objective of inventory management is to improve services to the
customer. This is executed through guard against stock out as a result of changes in
demand in the market. Inventory management therefore, attempts to increase the

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efficiency in production. Thus, inventory management is important to a firm’s success in
logistics. By Ogonu and Gibson chiture (2016)

In Somalia there is no center of research; there for researchers have no evidence in the
literature review with regard to the study the effect of inventory management on
customer satisfaction. Thus this study examines the effect of inventory management on
customer satisfaction. Theories of much inventory management have been proposed for
the last fifty years. Which have claimed lack of inventory management to have influenced
the overall organizations where there have been un satisfied customers.

Although Customer satisfaction is a significant problem in Somalia, however, there are

no sufficient studies related to the problem under investigation. Therefore, this study is
aimed to determine the Effect Inventory Management on Customer Satisfaction
Mogadishu, Somalia.

1.2 Problem Statement

The problem statement of our research is “how the effective inventory management can
affect the customer satisfaction”. This study examines the relationship between effective
inventory management and customer satisfaction with the goal of having complete orders
and on time deliveries. This research’s purpose is to find ways to improve inventory
management, thereby increasing customer satisfaction

Inventory management has issues that affect customer satisfaction levels. Many large
retailers are expecting manufacturers to provide them with perfect order deliveries. This
study examines the relationship between effective inventory management and customer
satisfaction with the goal of having complete orders and on time deliveries. This
research’s purpose is to find ways to improve inventory management, thereby increasing
customer satisfaction. Lee and Kleiner (2001) stated that in order to manage inventory
management successfully, “retailers should understand customer needs, vendor
partnerships, technology, data integrity, and performance measurements”

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Inventory is a vital part of current assets mainly in manufacturing concerns. Huge funds
are committed to inventories as to ensure smooth flow of production and to meet
consumer demand. However, maintaining inventory also involves holding or carrying
costs along with opportunity cost. Inventory management, therefore, plays a crucial role
in balancing the benefits and disadvantages associated with holding inventory. Efficient
and effective inventory management goes a long way in successful running and survival
of a business firm, when organizations fail to manage their inventory effectively they are
bound to experience, stock out, the decline in productivity and profitability, customer
dissatisfaction

Therefore, this study is aimed to determine the Effect Inventory Management on

Customer Satisfaction Mogadishu, Somalia.

1.3 Objective of the study

1.3.1 Generalobjective
The purpose of this study is to examine the relationship betweentheeffects of inventory
management on customer satisfaction
1.3.2. Specific Objective

1. To determine the impact of inventory control system on customer satisfaction

2. To examine the effect of economic order quantity on customer satisfaction
3. To examine the effect of ABC analysis on customer satisfaction

1.4 Research Questions

1. How can the impact of inventory control system determine customer satisfaction?
2. How can the effect of economic order quantity examine customer satisfaction?
3. How can the effect of ABC analysis examine customer satisfaction?

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1.5 Significance of the study

This Study will be useful for local authority because it informs them to existing problems
in the area and also enables them to come up with long last solution to the problem.

The study will also useful for local institution including civil society organizations
because it will act as source of literature and also guide line for them to follow in the
subsequence studies on the same problem under investigation.

1.6. Scope of the Study

The study will be conducted on the effect of inventory management on customer

satisfaction.

The study will be conducted some selected private organization Mogadishu Somalia

The study will conducted between April to July, 2021

1.8. Operational Definitions

Inventory management refers to the process of ordering, storing, and using a company's
inventory. These include the management of raw materials, components, and finished
products, as well as warehousing and processing such items. Adam Hayes (2019).

Customer satisfaction (CSAT) is a metric used to quantify the degree to which a

Customer is happy with a product, service, or experience. This metric is usually
Calculated by deploying a customer satisfaction survey that asks on a five or
Seven-Point scale how a customer feels about a support interaction, purchase, or overall
Customer experience, with answers between "highly unsatisfied" and "highly satisfied" to
choose from. Sophia Bernazzani (2020)

Inventory control system: are developed to cope with situation where the demand and
lead time both are fluctuating. The basic approach to all stock control method is to

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establish a re-order level which, when reached would indicate signal for the
replenishment action. Thus the replenishment of inventories means determining the
quality to be ordered and the time of ordering. Mudra rakshakas

Economic Order Quantity (EOQ) is an inventory management system that

demonstrates the quantity of an item to reduce the total cost of both handling of inventory
(Handling Cost) and order processing (Ordering Cost). Samitham and Senthilnathan
(2019)

ABC Analysis is def2ined in the as "An analysis of a range of items that have different
levels of significance and should be handled or controlled differently. It is a form of
Pareto analysis in which the items (such as activities, customers, documents, inventory
items, and sales territories) are grouped into three categories (A, B, and C) in order of
their estimated importance. 'A' items are very important, 'B' items are important, 'C' items
are marginally important. For example, the best customers who yield highest revenue are
given the 'A' rating, are usually serviced by the sales manager, and receive most attention.
'B' and 'C' customers warrant progressively less attention and are serviced accordingly.
Business Dictionary (2018)

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 1.9 Conceptual framework

Iv Inventory management Customer satisfaction

Dv Non-

Inventory control system

Economic order quantity Customer satisfaction

ABC Analysis

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 CHAPTER TWO
LITERATURE REVIEW

2.0 Introduction

In chapter two it is about literature review of this study In this section information had
been obtained from secondary source of data which are available such as articles journals
thesis and reports

2.1 Inventory Management

Inventory Management according to Stevenson (2010) is a terminology adopted by a firm

to take charge of her investment in inventory. It comprises the recording and monitoring
of the level of stocks, forecasting of future demand and a decision on when and how
order could be executed (Adeyemi and Salami 2010)

Thus inventories characterizes items which are kept for sale or are yet to be used in the
productive process, while an inventory system is a function of the particular level to be
sustained, when to replenish stock and how the order size will look like. Every
inventory policy aimed at having in place enough and sustained quantities of excellent
quality items accessible to furnish customer needs and at the same time reducing
inventory carrying costs (Brigham and Herald, 2005). Stock must be well managed in
order to maximize profits Since many small business could not absorb the types of
losses arising from poor

Inventory management. Basically inventory management aims at enriching customer

service which is achieved through guard against stock out as a result of elasticity in the

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market place. Inventory management aims at improving production efficaciousness.
(Kothari 1922). This study adopts the following inventory management practices as the
dimensions of inventory management system: Information Technology Leon Inventory
System and Strategic Supplier Partnership

Inventory managers  refers to the process of ordering storing and using a company's
inventory Brigham and Gape ski (1993 noted that the savings has been evaluated by
literature to be between 20-30 percent. Under the Lean Inventory system we considered
management oriented systems which include Just-in-time (JIT) AND THE Materials
Requirements planning (MRP) Systems Just-in-time refers to the assemblage of
practices that shuts out waste. It is an organization-wide practice that surrounds the
whole supply chain. The components of JIT are shared product design with suppliers
and customers, movement towards single sourcing proximate suppliers, reduced
machine set-up times and total preventive maintenance The just-in-time inventory
system ensures that the return on investment of a business is enhanced through the
reduction of inventory and its associated carrying costs It emphasizes that producers
should generate items are handy when required. The key to just-in-time and inventory
reduction is the prompt communication of the consumption of old stocks which
activates the ordering of fresh stocks The fundamental philosophy of JIT is that
inventory is delineated as waste. The Materials requirements planning systems (MRP) is
a product-oriented computerized technology intended to reduce inventory and sustain
delivery program Lyons and Guillinghm (2003) noted that MRP commune the dependent
conditions for materials and elements constituting a finished product to time period over
arranged limit of what is possible on the bedrock of forecasts made available by
marketing sales and other input information The MRP system is grounded on the
acknowledgement that demand for an item may rely on the demand for other inventory
items The system greatly

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 2.1.1 Inventory control system

Inventory control systems maintain information about activities within firms that ensure
the delivery of products to customers. The subsystems that perform these functions
include sales, manufacturing warehousing ordering and receiving. In different firms the
activities associated with each of these areas may not be strictly contained within separate
subsystems but these functions must be performed in sequence in order to have a well-run
inventory control system.

Inventory control theory is linked with inventory control system objective in that both
increases firm’s productivity enables ABC grouping screen item accessibility enhances
buying strategies minimizes operational expenses remove out of date stock and enables
stock spending plan. Stock administration is a framework that coordinates data transport
obtaining review material taking care of warehousing bundling and supply control and
guarantees stock security as per Silver David and Rein (2012). Stock administration goes
for finding and keeping up ideal dimensions of interest in a wide range of inventories and
boosting the stream of merchandise data and other related assets like individuals and
vitality from the purpose of starting point to the point of conclusive utilization (Peter,
2010). Stock administration theory expects to enhance stock streamline capacity limit
costs expand benefit lessen harm/deterioration and improve association's money related
execution. Zap pone (2014) expressed that dealing with a wide range of assets in an
association can be seen as a stock management issue They utilize an assortment of stock
control speculations and scientific equations for the expansive firms to enable them to
modify the creation and capacity of different a great many units of items and to enable

them to limit costs. In the meantime, the entrepreneurs can utilize thoughts from a few
stock control techniques to deal with their generation and capacity dependent on their
cost-regulation and client administration needs.

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 Any stock manager’s objective inside an association is to limit cost and maximize
benefit while fulfilling client's requests An excess of stock devours physical space makes
a budgetary weight and improves the probability of harm, deterioration and misfortune.
Zap pone (2014) further clarifies that messy and wasteful administration, poor forecasting
heedless planning and deficient procedure and strategies frequently makes up for by
exorbitant stock Too little stock frequently disturbs producing activities and improves the
probability of poor client administration

In today's business environment even small and mid-sized businesses have come to rely
on computerized inventory management systems. Certainly there are plenty of small
retail outlets, manufacturers and other businesses that continue to rely on manual means
of inventory tracking. Indeed for some small businesses like convenience stores shoe
stores or nurseries purchase of an electronic inventory tracking system might constitute a
wasteful use of financial resources But for other firms operating in industries that feature
high volume turnover of raw materials and/or finished products computerized tracking
systems have emerged as a key component of business strategies aimed at increasing
productivity and maintaining competitiveness Moreover the recent development of
powerful computer programs capable of addressing a wide variety of record keeping
needs including inventory management in one integrated system have also contributed to
the growing popularity of electronic inventory control options

Given such developments it is little wonder that business experts commonly cite
inventory management as a vital element that can spell the difference between success
and failure in today's keenly competitive business world. Writing in Production and
Inventory Management Journal Godwin Duo described telecommunications technology
as a critical organizational asset that can help a company realize important competitive
gains in the area of inventory management. He noted that companies that make good use
of this technology are far better equipped to succeed than those who rely on outdated or
unwieldy methods of inventory control.

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The Inventory control system is maintained by every firm to manage its inventories
efficiently. Inventory is the stock of products that a company manufactures for sale and
the components or raw materials that make up the product. Hence, an inventory
comprises of the buffer of raw material, work-in-process inventories and finished goods

The inventory control systems are developed to cope with situation where the demand
and lead time both are fluctuating. The basic approach to all stock control method is to
establish a re-order level which, when reached would indicate signal forth replenishment
action. Thus the replenishment of inventories means determining the quality to be
ordered and the time of ordering. In an inventory control system there are two types of
replenishment systems1.

.Fixed quantity system

. Fixed period system

 Fixed quantity system: In this, quantity to be ordered is fixed and normally it is

equal to EOQ It is suitable for low unit cost and high order quantity.
 Fixed period system: The period of ordering inventory is fixed and order
quantity is depends upon stock on hand

There are several inventory control systems that are in practice, and these range from
simple system to a complex one depending upon nature and the size of the business
operations. Talking about the simple system, several small manufacturing firms operate a
Two-Bin System; wherein inventory is stored in two bins. Once the inventory in one bin
is used, and the order is placed, meanwhile, the inventory from the other bin is used by
the firm.

In the latter part of the 1990s, many businesses invested heavily in integrated order and
inventory systems designed to keep inventories at a minimum and replenish stock

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quickly. But business owners have a variety of system integration options from which to
choose, based on their needs and financial liquidity.

At the same time that these integrated systems have increased in popularity, business
observers have suggested that "stand-alone" systems are falling into disfavor. A 1996
study by the International Mass Retail Association (IMRA), for example, concluded that
stand alone Warehouse Management System (WMS) packages acquired to perform
individual functions will soon become obsolete because they do not integrate well with
other systems.

Another development of which small business vendors should be aware is a recent trend
wherein powerful retailers ask their suppliers to implement vendor-managed inventory
systems.

2.1.2Economic order quantity (EOQ)

Economic Order Quantity (EOQ) is an inventory management system that demonstrates

the quantity of an item to reduce the total cost of both handling of inventory (Handling
Cost) and order processing (Ordering Cost) the EOQ model (Hex and Candia 1984).
With respect to an item to be ordered from a business point of view the EOQ model
establishes the amount of quantity to be placed in an order in consideration of minimizing
the annual total cost of inventory handling and order processing. In this context, these
specific two types of costs are the main categories of determining the EOQ in its basic
explanation. However the model has been presented with certain assumptions for the
initial understanding; and from that point onward its extensions are used widely in
businesses especially in inventory management
The basic EOQ model with all assumptions in consideration deal with two types of costs
Total Ordering Cost (TOC) and Total Handling (THL). It is obvious from the above
explanation that these costs are moving in opposite directions when certain number of
quantities is ordered for storage purpose Therefore it is important for a business to find a
trade-off point of ordering quantity in order to minimize the total cost of both: TOC plus

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THC In this context the quantity to be ordered to minimize the total cost of both TOC and
THC is known as the Economic Order Quantity (EOQ).
The determination of EOQ consists of the following assumptions:
a) The EOQ will be determined for every product individually in a business.
b) Annual requirement (Demand) for product in units is known with certainty.
c) Ordering cost is known and constant throughout the year.
d) Inventory handling cost is known and constant throughout the year notably if the
handling
Cost of an item is given as the percentage of price of the item the unit price of the item
remains same throughout the year.
e) No cash or quantity discount is allowed.
f) The ordered quantity of the product is delivered at once as a single batch.
g) Immediate replenishment of ordered quantity on time (No delay and stock shortage).
h) Constant lead time is only allowed (no fluctuation is permitted).

Bill Roach explains how the origin of the Economic Order Quantity began in his article
“Origin of the Economic Order Quantity formula transcription or transformation”
published in 2005 Roach explains that the Economic Order Quantity (EOQ) has been a
well-known formula that calculates the optimal economic order quantity He also
mentions how Ford W Harris contribution to the EOQ formula was significant Harris was
always a self taught individual that only received formal schooling that extended
throughout high school. He managed to write and publish the economic order quantity
formula in 1915 as an undergraduate student. (Roach 2005)

The Economic Order Quantity (EOQ) formula has been used in both engineering and
business disciplines. Engineers study the EOQ formula in engineering economics and
industrial engineering courses On the other hand, business disciplines study the EOQ in
both operational and financial courses in both disciplines and EOQ formulas have
practical and specific applications in illustrating concepts of cost tradeoffs as well as
specific application in inventory (Roach 2005)

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In the article “Optimizing Economic Order Quantity” published by Dave Piasecki in 2001
focused on the economic order quantity Piasecki mentions that in today’s leading
technology many companies are not taking advantage of the fundamental inventory
models There are various software packages in aiding companies with inventory control
but if the data inputted are inaccurate it may lead to poor results (Piasecki 2001)

In order to have suitable results for any inventory model accurate product costs activity
costs forecasts, history and lead times need to be in place (Piasecki 2001) As a result of
bad data companies have had bad experience with some inventory models and that is one
of the reasons they do not take advantage of the EOQ model

2.1.3 ABC analysis

ABC analysis is a simple and analytical management tool. ABC analysis is a technique of
categorizing inventory items according to their substantial impact on the overall
expenditure of an organization. It grants a solution to faulty inventory administration
within the purchased items or availed services.

It is based on the Pareto Principle which states that 80% of the overall consumption value
is based on only 20% of total items the breakdown suggests that the inventories are of
different values hence it necessitates different tactics and management controls the
arrangement of categories is based on its anticipated value.

ABC analysis is an inventory categorization method which entails the dividing items into
three categories A B and C A contains the most valuable items anodic consists the least
valuable items whereas B contains items ranging between A and C It aims to focus on the
critical few (Items) and not on the trivial many (C-items)

In this analysis various items are listed according to their total usage unit cost and then
total cost of items are calculated. Different parameters are listed in tabular format which
make it easy for classifying items according to their cost and usage

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This approach states that when reviewing inventory items should be rated among A to C
by the firm establishing its ratings on the following rules

1. A-items have the highest annual consumption value of goods i.e. 70%-80% of the
annual consumption value of the company Ironically it accounts only 10%-20%
of the total inventory items They require stringent inventory control more
protected storage areas and improved sales forecasts re-orders should be frequent
with weekly or even daily reorder avoiding stock-outs on A-items is a priority
2. B-items are the interclass items having medium consumption value i.e. 15%-25%
of annual consumption value It consumes around 30% of the total inventory items
3. C-items have the lowest annual consumption value of goods i.e. 10%-15% of the
annual consumption value on the contrary it accounts for 50% of the total
inventory items.

ABC analysis is a well-established categorization technique based on the Pareto Principle

for determining which items should get priority in the management of a company’s
inventory In discussing this topic today’s operations management and supply chain
textbooks focus on dollar volume as the sole criterion for performing the categorization.

The authors argue that today’s businesses and supply chains operate in a world where the
ability to deliver the right products rapidly to very specific markets is key to survival
With suppliers intermediaries and customers all over the globe and product lives
decreasing rapidly this focus on a single criterion is misplaced

As indicated by Flores and Clay (2012) A-items dependably have the most astounding
estimation of utilization every year while B-items have the medium estimation of
utilization yearly and the C items are despite what might be expected with least yearly
utilization esteem. In connection to consumer loyalty Ballot (2014) includes that another
incessant utilization of the 80-20 idea and an ABC arrangement is to aggregate the items
in a distribution center or other stocking point, in a set number of classifications where
they are then dealt with various dimensions of stock accessibility Cesar (2016) utilized

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ABC investigation in her examination and found that store network the executive’s
practices all things considered upgraded administration conveyance improved basic
leadership upgraded generally speaking cost decrease and continuous conveyance of
merchandise and enterprises Awful (2016) decided relationship between ABC
examination practice and activity execution in the oil advertising organizations in Kenya
which uncovered that in the 75 oil promoting organizations ABC showed positive
increment on task execution. In this way ABC examination helps in deciding stock
esteem present in the stock Kumar and Sony (2017). ABC investigation figures out which
items to be organized in the administration of company's stock, Raman than (2006) ABC
examination plainly recommends that inventories are not of equivalent qualities Lun Lai
and Cheng (2010). The administration can adjust the ABC investigation shorts to
characterize stock. This will help decrease of obtainment expenses or increment income
by having the correct things accessible for client use; re-arranging supply contracts;
combining merchants having intermittent audit done to stay away from stock outs and
finally to actualize e-acquirement which may convey critical sparing

The large body of research was summarized based on multiple criteria ABC analysis that
has accumulated since the 1980s and recommend that textbooks incorporate their key
findings and methods into their discussions of this topic Suggestions are offered on how
this discussion might be structured

ABC analysis is beneficial in the following ways

1. It is a technique of allocating direct and overhead expenditures first associated

with the critical activities of the firm. This process defines the areas
generating maximum profit to the company in a better way
2. It aids stringent and better controls of high-priority inventory
3. It promotes efficient use of its resources to prioritize control of inventory
over its impact on final outcome
4. Resource allocation is more efficient during cycle counts
5. It objective is to achieve economy by efficiently managing the materials

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This aides in assets and staff assignment in regard to obtainment faculty, using faculty
and their time adequately, amplifying administration conveyance and unwavering quality,
limiting procurement costs, limiting backhanded expenses related with stock and at last
limiting stock venture as stock is blocked working capital of an association in type of
materials (Narain and Subramanian, 2008).

The ABC analysis provides a mechanism for identifying items that will have a significant
impact on overall inventory cost while also providing a mechanism for identifying
different categories of stock that will require different management and controls

2.2 Customer Satisfaction

Megrimand Ergo (2006) alludes that customer satisfaction is a measure of firms

Customer base specifically of size quality and loyalty. Satisfaction Refers to the quality
of the products, service price performance ratio including when a company Meets and
exceeds customer’s needs Customer satisfaction is one of the measures adopted by a Firm
regarding profitability. Customer satisfaction is very significant to marketing with
strong evidence of strategic linkage between overall service quality and Customer
satisfaction (Truck, 2006)

According to Giese and Cote (2000) several approaches have been used to estimate
Satisfaction With a critic on the lack of agreement on the process leading to satisfaction

them Favored the development of context-specific satisfaction measures which is based

on customers effective or emotional reaction as the base for the measurement of
customer satisfaction Companies primarily aim at satisfying the customer due to the
influence it has on competition in Industries. Customer satisfaction is the consumer
Fulfillment response a post consumption judgment by the customer that a service
provokes a Pleasing level of consumption-related fulfillments including under or –over-
fulfillment A number of studies have indicated that dissatisfied customers have the

20
tendency to tell Nine others while customers who are satisfied have the tendency to tell
five other people about Company’s products and services and the way there were handled
maintained that manufacturers are required to strive for customer brand satisfaction by
providing customer purchase satisfaction before and after a purchase experience
Customer Expectation greatly depends on the adaptability of the supply chain partners
(How ego 200).

2.3 Empirical evidence

(Nwokah, Ikegwuru & N., 2016)Examined the effects of inventory management onCustomer
satisfaction; EVIDENCE from the supermarket industry of Nigeria
the purpose of this study was to explain the extent of the relationship between inventory
Management and customer satisfaction in supermarkets in rivers state. The descriptive
research Design was adopted and the survey method was used as a useful aid in
examining the extent to which inventory management explains or predicts the variable in
customer satisfaction. Fundamentally the population of the study encompasses staff of
selected supermarket within Rivers state with a sample size of five hindered (500) bY
WAY OF CONVENIENCE SAMPLING. observably, the sampling methods was adopted due
to fact that staff of supermarket in rivers State are virtually numerous and also to
differentiate the super maker organization within the State may be impossible as such, It
may be quite cumbersome if the probability method was Employed. Therefore, fifty (50)
well established supermarkets in rivers state were selected.The Researchers assumed that
these supermarkets would be able to provide useful information regarding their
involvement in inventory management practices. Ten (10) respondents were further
selected in each of the fifty supermarkets to give a total of five hundred respondents.
Thiswas used a response rate generate data. The participant were instructed to complete a
self-administeredQuestionnaire that assess their Perspectives of inventory management
constructs. All informal were literate supermarkets staff .Further, the conceptualize
concept(information technology lean inventory management and Strategic supply
partnership were all measure on 5 point liker types scale anchored on 5 = “Strongly

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agree” and 1= “strongly disagree” at both extreme. A total of 17 scale were Employed
and to test operationalized constructs. Some of the scaled items were employed and
Modify with line with approach used in the study by lwikietal (2013). A survey approach
to SOLVING the research problems is in line with previous studies with similar aims. For
instance, (Kwadwo, 2016; nwangangietal, 2015; nsikaketal, 2015).Similarly, other past
studies (e.g. Hedrick and floyd 2008; knights 2008, kounanakes 2008; lee and kleiner
2001). Were all Survey based. To test the dimensional structure suitability and usability
of the scale, the cronbach’s Alpha test of internal consistence to assess the scales
reliability (See appendix), whereas Spearman’s correlation techniques was use to the
variables. The aim was to establish the extent of association between the predictor and
criterion variable of the study.

2.4 RESEARCH GAP

This study is aimed to determine the Effect Inventory Management on Customer

Satisfaction Mogadishu, Somalia.

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 CHAPTER THREE
RESEARCH METHODOLOGY

3.0 Introduction

This chapter contains research design, research population, and sample size, sampling
Technique, research instrument, research quality, and data collection procedure, data
Analysis, limitation and ethical considerations of the study.

3.1 Research Design

Quantitative research design was employed in this study in general, descriptive design in
particular. Since the study is intended to provide only the description about how the inventory
management effects on the customer satisfaction, it became enough to employ the above
mentioned design, descriptive design. The study adopts a cross-sectional design because of the
study considers data collected at particular point of time. Questionnaire will be the most
appropriate data gathering tool to be adopted for this study.

3.2 Research Population

No Company Name Target population

1 Shakir Mattress Factory 14

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 2 Kaamil Electronics 12
3 A2Z Sports House 13
4 Cheap Computers Companies 11
Total 50

Stakeholders, Board of directors, managers, officers and customers of the selected

companies were chosen to be the target population of this study. Based on the reliable
information from the top managements of these companies, the size of our target population is
known to be a total of 50 participants.

The table below shows the names of the selected companies and the number of respondents from each.

3.3 Sample Size

The study uses the Sloven’S formula to compute the required sample size since the size of the
target population for the study is known. The sloven’s formula can be written as the follows:
n= N /¿ where

n= the required sample size,

N= the size of the target population

α = standard error or the level of significance and is usually set as 5%.

The required sample size for the study will be calculated as the follows:

n= N /¿

n= 50/ (1+50(0.05)2) = 44

Therefore our required sample size will be n= 44 respondents.

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3.4 Sampling Procedure (Technique)

The study employs probability sampling as a sampling technique in general, and stratified
random sampling in particular. The reason the probability sampling method was employed in
the study is to achieve the representativeness of the sample and to avoid the sampling bias and
person’s judgment. Since our target population consists of strata/ groups, it is more convenient
to employ stratified random sampling to distribute the sample size of 44 respondents among the
selected companies and the table below shows this distribution:

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Com Company Names Targ Target Population Sample Size

1 Shakir Mattress Factory 14 12

2 Kaamil Electronics 12 11

3 A2Z Sports House 13 11

4 Cheap Computers Companies 11 10

Total 50 44

3.5 Research Instrument

This study will use questionnaire as a method of data collection because the study is
quantitative in design. Questionnaire is most appropriate data collection tool to be adopted for
this study because the study is quantitative in design.

3.6 Research Quality

3.6.1 Reliability

Reliability pertains to the consistency of the respondents when answering the items of
the questionnaire. In other words, the instrument can be reliable only if it produces or
replicates the same results whenever it is repeatedly used to measure phenomena from
the same respondents even by other researchers. Reliability will be observed using test-
retest/ stability reliability. It is the extent to which scores on the same test by the same
individuals are consistent over time.

3.6.2 Validity

Validity relates to the relevance of the research instruments to study objectives; in other
words, it is the ability of the instruments to measure what is supposed to measure and
the data collected accurately represents the respondent‘s opinions. In order to ensure

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 validity pre-test analysis will be done and the questionnaire will be given to research
experts who will judge the relevance of the questions to the objectives of the study.

3.7 Data gathering procedure

Before the administration of the questionnaires

 An introduction letter will be obtained from the authority of the University to ask for
approval to conduct the study from respective respondents.
 When approved, the researcher will secure a list of company managers from the selected
companies.
 The managers to participate in the study will be selected using both stratified and simple
random sampling.
 The respondents will be briefed about the study and will be requested to sign the
Informed Consent Form.

During the administration of the questionnaires

 The respondents will be requested to answer completely and not to leave any part of
the questionnaires unanswered.
 The researcher and assistants will emphasize the retrieval of the questionnaires
within five days from the date of distribution.
 On retrieval, all returned questionnaires will be checked if all are answered.

After the administration of the questionnaires

The data gathered will be arranged, encoded into the computer and statistically
analyzed using the Statistical Package for Social Science (SPSS version 20).

3.8 Data Analysis

The process of evaluating data using analytical and logical reasoning to examine each
component of the data provided. This form of analysis is just one of the many steps that must be

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completed when conducting a research. Data from different sources are gathered, reviewed, and
then analyzed to form some sort of findings or conclusions. There are a variety of statistical
tools/software for data analysis, but in this study SPSS program especially version 20 will be
employed for data Analysis.

3.9 Ethical considerations

Respect: the researcher will treat the participants as capable of making decisions. The
researcher will respect respondent’s privacy when entering their private sphere and when asking
questions.

Confidentiality: the researcher will guarantee maximum confidentiality for the participants.
Their information will only be used for the purpose of the study.

Freedom to participate: participants will be informed that they are free to participate. They
will also be informed that they have the right to choose to be out of the study.

Informed consent: consent will be secured from the participants after fully informing the
nature, potential risks and benefits of the study.

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