DECLARATION

This is a declaration that this research work titled “The Effects of Inventory Management
on Organizational Performance : Case of Foeh and Son Limited” is the original work of
NGHOMBUOMBUEN HENRY. This study has not been presented in any institution. All
sources used for this study have been duly acknowledged.

NAME: NGHOMBUOMBUEN HENRY

SIGNATURE……………………………………………..

DATE…………………………………………………

i
 CERTIFICATION
This is to certify that the project report entitled “ The Effects of Inventory Management on
Organizational Performance : Case of Foeh and Son Limited is written by
NGHOMBUOMBUEN HENRY under the supervision of Dr. KATU HAZCEL MUSA in
Heritage Higher Institute of Peace and Development Studies (HEHIPEDS) Yaounde. This
report meet the requirements toward the award of a Bachelors’ Degree in Logistics and
Transport Management

Academic supervisor

Dr. KATU HAZCEL MUSA

(Lecturer HEHIPEDS)

Signature: ………………………………date……………………… ………………………

ii
 DEDICATION

To my elder sister Fohyeh Chantal for her financial supports

iii
 ACKNOWLEGDEMENT

I sincerely appreciate the untiring efforts of my supervisor, Dr. KATU HAZCEL MUSA,
who guided me from research proposal to the project writing. He really inspired, motivated
and assisted me during the process of this work. .

Special thanks to all the lecturers of HEHIPEDS who worked willingly to empower us with
knowledge and skills.

I am equally grateful to professor Willibroad Dze-Ngwa the director and founding president
of HEHIPEDS for his financial, moral and fatherly support in all aspects of academics

My thanks also go to the Employees and Management of Foeh and Son Limited, Yaounde
who allowed me to do research in the Company; respondents who sacrificed their time in
giving me relevant information that backed my research.

I equally appreciate my family members for their financial, moral and spiritual support during
my research.

Despite these words of appreciations, I assume full responsibility for any weaknesses which
may be found in this work given that a work of this magnitude can never be void of errors .

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 ABSTRACT
This work titled “The Effects of Inventory Management on Organizational Performance. The
case of Foeh and Son Limited” has as it main object “To assess the effect of inventory
management on organizational performance at Foeh and Son Enterprise”, with specific
objectives to evaluate the effect of periodic inventory management on organizational
performance at Foeh and Son Enterprise, to examine the effect of just-in-time inventory
management on organizational performance of Foeh and Son Enterprise., to find out the
challenges faced by Foeh and Son Enterprise in inventory handling. The main problem faced
by the company is that they do not have any systematic system to record and keep their
inventory data. Data were collected using closed-ended questionnaires and during data
collection, purposive sampling method was used. Quantitative methodologies were used to
analyse data and a sample size of 50 respondents was used. At the end of the study
conclusion arrived at were that the common materials handling techniques used at Foeh and
Son Limited include; Just-in-time, the Bin Card System with Total Inventory Control System
(TICS) responsible for management information system, inventory requirement points. Also
that, proper periodic inventory management technique plays an important function on the
performance of Foeh and Son Limited and that the kind of relationship between inventory
management techniques and performance of Foeh and Son Limited is positive, that the
challenges faced by Foeh and Son Limited in the process of managing inventories include;
loss in inventories through theft, obsolete and damage, repeated requisition, among other
challenges faced by the company.The study recommended Foeh and Son Limited to
centralize the purchase and store function and switch over to ERP software for efficient
linking of all aspect of supply chain through ICT, emphasis on the proper use of inventory
management techniques, apply the ABC or Pareto analysis in order to segregate materials
according to their monetary value, undertake periodic stock taking and forward plan
production in anticipation of service orders. Lastly, further studies are suggested on the
following areas: The Effects of automated inventory management through Enterprise
Resource Planning (ERP) in private organizations in Yaounde. The effect of Distribution,
Logistics and materials handling techniques on employee’s efficiency in private
organizations in Yaounde.

Keywords: inventory, inventory management, organizational performance

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 RESUME
Ce travail intitulé "Les effets de la gestion des stocks sur la performance organisationnelle. Le cas de
Foeh and Son Limited" a pour objectif principal "d'évaluer l'effet de la gestion des stocks sur les
performances organisationnelles de l'entreprise Foeh and Son", avec pour objectifs spécifiques
d'évaluer l'effet de la gestion périodique des stocks sur les performances organisationnelles de
l'entreprise Foeh and Son, d'examiner l'effet de la gestion des stocks en flux tendu sur les
performances organisationnelles de l'entreprise Foeh and Son et de découvrir les défis auxquels
l'entreprise Foeh and Son est confrontée en matière de gestion des stocks. Le principal problème
auquel l'entreprise est confrontée est qu'elle ne dispose d'aucun système systématique pour
enregistrer et conserver ses données d'inventaire. Les données ont été collectées à l'aide de
questionnaires fermés et la méthode d'échantillonnage raisonné a été utilisée. Des méthodologies
quantitatives ont été utilisées pour analyser les données et un échantillon de 50 répondants a été
utilisé. À la fin de l'étude, les conclusions sont les suivantes : les techniques communes de
manutention des matériaux utilisées à Foeh and Son Limited comprennent le juste-à-temps, le système
de carte à puce avec le système de contrôle total des stocks (TICS) responsable du système
d'information de gestion, les points d'inventaire requis. En outre, une technique appropriée de gestion
périodique des stocks joue un rôle important dans les performances de Foeh and Son Limited et le
type de relation entre les techniques de gestion des stocks et les performances de Foeh and Son
Limited est positif. Les défis rencontrés par Foeh and Son Limited dans le processus de gestion des
stocks comprennent, entre autres, la perte de stocks par le vol, l'obsolescence et les dommages, les
réquisitions répétées. L'étude recommande à Foeh and Son Limited de centraliser les fonctions
d'achat et de stockage et de passer au logiciel ERP pour relier efficacement tous les aspects de la
chaîne d'approvisionnement grâce aux TIC, de mettre l'accent sur l'utilisation correcte des techniques
de gestion des stocks, d'appliquer l'analyse ABC ou Pareto afin de séparer les matériaux en fonction
de leur valeur monétaire, de procéder à des inventaires périodiques et de planifier à l'avance la
production en prévision des commandes de services. Enfin, d'autres études sont suggérées dans les
domaines suivants : Les effets de la gestion automatisée des stocks par le biais de la planification des
ressources de l'entreprise (ERP) dans les organisations privées à Yaoundé. L'effet des techniques de
distribution, de logistique et de manutention sur l'efficacité des employés dans les organisations
privées de Yaoundé.

Mots clés : inventaire, gestion des stocks, performance organisationnelle

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 TABLE OF CONTENT

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

CERTIFICATION.......................................................................................................................................ii

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

ACKNOWLEGDEMENT...........................................................................................................................iv

ABSTRACT..............................................................................................................................................v

RESUME................................................................................................................................................vi

TABLE OF CONTENT...............................................................................................................................x

LIST OF TABLES......................................................................................................................................xi

LIST OF FIGURES...................................................................................................................................xii

ACRONYMS/ABREVIATION..................................................................................................................xiii

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

GENERAL INTRODUCTION......................................................................................................................1

1.1 Background to the Study..........................................................................................................1

1.1.1 HISTORICAL BACKGROUND TO THE STUDY...........................................................................3

1.2 Statement of the problem..........................................................................................................4

1.3 Research Objective...................................................................................................................4

1.3.1 Main Objective......................................................................................................................4

1.3.2 Specific Objectives................................................................................................................5

1.4 Research Questions..................................................................................................................5

1.4.1 Main Research Question.......................................................................................................5

1.4.2 Specific Research Question...................................................................................................5

1.5 Research Hypothesis................................................................................................................5

1.5.1 Main Hypothesis....................................................................................................................5

1.5.2 Specific Hypothesis...............................................................................................................5

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 1.6 Scope of the study....................................................................................................................6

1.6.1 Geographical scope...............................................................................................................6

1.6.2 Thematic scope.....................................................................................................................6

1.7 Significance of the study...........................................................................................................6

1.8 Justification of the Study..........................................................................................................7

1.9 Organization of Study...............................................................................................................7

CHAPTER TWO.......................................................................................................................................8

LITERATURE REVIEW AND THEORITICAL FRAMEWORK.........................................................................8

2.1 Literature Review....................................................................................................................8

2.2 Conceptual Review................................................................................................................10

2.3 Theoretical Framework..........................................................................................................16

2.3.1 The theory of Just-in-Time Management by Taichii Ohno................................................16

2.3.2 The Theory of ABC Analysis by Dominic Vaiana (2022).......................................................19

How to use ABC analysis with inventory......................................................................................20

2.3.3 Stochastic Inventory Theory by Evan L. Porteus 1988.........................................................22

2.4 Empirical Review:...................................................................................................................23

CHAPTER THREE...................................................................................................................................24

METHODOLOGY...................................................................................................................................24

3.1 Research design:.....................................................................................................................24

3.2 Study Area:.............................................................................................................................24

3.3 Data sources:..........................................................................................................................24

3.4 Study population:...................................................................................................................24

3.5 Sample size and sampling technique:.....................................................................................25

3.6 Sampling method:..................................................................................................................25

3.7 Data collection and instruments:...........................................................................................25

3.8 Study Variables:......................................................................................................................25

3.9 Method of Data Analysis:.......................................................................................................26

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 3.10 Presentation of the Enterprise And Internship Activities.....................................................27

3.10.1 Presentation of Foeh And Son Enterprise..........................................................................27

THE ORGANIZATIONAL CHART OF FOEH AND SON LIMITED........................................................28

3.10.2 Presentation of Internship Activities.................................................................................28

3.4 Difficulties Encountered during the Internship.......................................................................29

CHAPTER FOUR...............................................................................................................................30

DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS.......................................................30

4.1 Data Presentation and Analysis:.............................................................................................30

4.2 Presentation of demographic data.........................................................................................30

4.2.1 GENDER DISTRIBUTION.......................................................................................................31

4.2.2 Age distribution...................................................................................................................33

4.1.1 Objective I...........................................................................................................................34

CHAPTER FIVE.................................................................................................................................56

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS.......................................................................56

5.1 Summary:...............................................................................................................................56

5.2 Conclusions:...........................................................................................................................59

5.3 Recommendations:................................................................................................................59

5.4 Suggested areas for further study:.........................................................................................61

REFERENCES.........................................................................................................................................62

APPENDIX B: QUESTIONNAIRE FOR THE COMPANY WORKERS..............................................65

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 LIST OF FIGURES

Figure 1: Distribution of respondent according to Age................................................................31

Figure 2: Distribution of respondent according to Age................................................................32

Figure 3: periodic inventory management...................................................................................33

Figure 4: adequate inventory management.................................................................................34

Figure 5........................................................................................................................................35

Figure 7........................................................................................................................................37

Figure 14: The relationship between just-in-time inventory management and performance of the
Company is positive.....................................................................................................................44

Figure 15: just-in-tine Inventory management in Foeh and Son Limited is effective...................45

Figure 16: Ineffective inventory management affects Organizational performance negatively....46

Figure 17: inventories held are mostly for executing client’s projects rather than for stocking....47

Figure 18:Material quarantine is an essential task in carting away obsolete materials.................48

Figure 19: The Company is faced with challenges of improper record keeping...........................49

x
 LIST OF TABLE

Table 4.1: Distribution of respondent according to Gender.........................................................31

Table 4. 2: Distribution of respondent according to Age..............................................................32

Table 4.4: periodic Inventory Management..................................................................................34

Tabble 4.5:Consumables are the most used inventories in Foeh and Son enterprise....................35

Table 4.6:Materials are purchased on periodic basis at Foeh and Son Limited.............................36

Table 4.7: ABC or Pareto analysis model is used in segregating materials according according to
monetary values...........................................................................................................................37

Table 4.8:Bin Card is physical controlling techniques used to record materials in Foeh and Son
Limited.........................................................................................................................................38

Table 4.9: Just-in-time inventory management is used at Foeh and Son Limited..........................39

Table 4.10:Material replenishment is periodical carried out to determine inventory levels in Foeh
and Son Enterprise.......................................................................................................................40

Table 11: Foeh and Son Limited practice drop shipping to end users.........................................41

Table 4.13: Obsolete, scrap, expiration & damage are reasons for quarantine of materials in Foeh
and Son Limited...........................................................................................................................43

Table 4.14: The relationship between just-in-time inventory management and performance of the
Company is positive.....................................................................................................................44

Table 4.15: just-in-tine Inventory management in Foeh and Son Limited is effective..................45

Table 4.16: Ineffective inventory management affects Organizational performance negatively. .46

Table 4.17: inventories held are mostly for executing client’s projects rather than for stocking.. 47

Table 4.18: Material quarantine is an essential task in carting away obsolete materials...............48

Table 4.19: The Company is faced with challenges of improper record keeping.........................49

xi
 ACRONYMS/ABREVIATION

EDI Electronics Data Interchange

EOQ Economic Order Quantity

ERP Enterprise Resource Planning

FIFO First In First Out

ICT Information and Communication Technology

JIT Just in Time

LIFO Last In First Out

MRO Maintenance, Repair and Operations.

MRP Materials Requirements Planning

MRP Manufacturing Resources Planning

TICS Total Inventory Control System

HEHIPEDS Heritage Higher Institute of Peace and Development

Studies

xii
 CHAPTER ONE

GENERAL INTRODUCTION
1.1 Background to the Study
Today’s competitive business world has placed companies on edge as they strive to set up
Strategies that will properly position their performance towards satisfying the demand of their
customers who want customized goods and services at no extra cost. Companies are
exploring ways toward postponement strategy in response to constant changing demand.
Inventory management is pivotal in having 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 (Abdulraheem, et al 2011).
There are many very-low-demanded items that keeping any stock of these items is
unreasonably expensive, so companies must strive to provide good services while
maintaining minimal inventories. Effective inventory management determines how profit of
an organization can be maximized. Maximizing of profit depends on minimizing cost and
maximizing revenue. Maximization is an efficient concept which requires increasing profit
without increasing the resources used (Stephenson, 2010). The import of inventory
management in organization is to ensure that at any point in time the capital of the business is
not necessarily tied down in form of material in the store, which may provide opportunity for
fraud and theft. In other words, the management wishes to put at minimal rate stock losses,
which emanate from store operations.
Therefore, inventory management approaches are essential aspects of any organization. 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.

1
Consequently, 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 spare 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 although evidence of improved firm performance is mixed (Larrson et al., 2009).
Inventory control involves the coordinating of material availability, controlling, utilization
and procuring of materials. Inventory control is the direction of activities with the purpose of
getting the right inventory in the right place at the right time and in the right quantity and it’s
directly linked to production function of any organization which implies that the inventory
management system operated will affect the profitability of any organization directly and
indirectly .
Inventory management is a function that is very vital and of great significance to any kind of
organisation. It is not peculiar to only manufacturing organizations but also necessary to
service oriented organisation as in Foeh and Son Limited. Inventories are the stock of raw
materials, work in progress, finished goods and supplies held by a business organisation to
facilitate operations in the production process, fabrication, installation, repair and
maintenance. AMACOM ;2nd edition(2011).
Also, if the company fails to manage its inventory efficiently, it is likely to face profitability
problems. The goal of inventory management therefore is to provide the inventories required
to sustain operations at minimum costs.
Inventory management helps an organisation to establish the proper inventory levels through
the economic order quantity; and to keep track of this level through inventory control system
which may be manual such as Bin Card, two bin method and red line method, or
computerized total inventory control systems (TICS). Proper inventory controls also require
an organization to have stock taking and use appropriate method to value stock so as not to
under or over state profits. Daniel Liberto (2022).
Companies incur substantial costs in the procurement and maintenance of inventories, which
costs form a large portion of production costs. Inventory costs include: carrying costs such as
storage and insurance; ordering costs like transporting and store placement; and stock out
costs like redundancy (non-production because of no stock), loss of services and goodwill. A
company cannot achieve an outstanding performance without proper and efficient control of
materials. Materials are as much as cash itself and any theft, wastage and excessive use of

2
materials are of immediate financial loss and leads to poor performance of a company. The
scope of inventory management also concerns the fine lines between replenishment lead time,
carrying costs of inventory, asset management, inventory forecasting, inventory valuation,
inventory visibility, future inventory price forecasting, physical inventory, available physical
space for inventory, quality management, replenishment, returns and defective goods and
demand forecasting Grablowsky, B.J. (2011).

Material management involved a systematic control and regulation of purchase, storage and
usage of materials in such a way to maintain an even flow. In recent years, poor inventory
management had become an issue of great concern since performance is regarded as the main
stream for development of organizations. A truly effective inventory management system
minimizes the complexities involved in planning, executing and controlling a supply chain
network which is critical to business success. The objectives of inventory reduction and
minimization are more easily accomplished with modern inventory management processes
that are working effectively for improved performance Inventory management guide for
Manufacturer (2023).
Too much inventory and not enough customer service is very common, but unnecessary.
There are proven techniques that can accurately help industry to calculate the inventory
needed to meet customer demand and defined level of customer service and satisfaction.
Using the right techniques for sales forecasting and inventory management help to monitor
changes and respond to alerts when action needs to be taken. The right approach to inventory
management can produce dramatic benefits in customer service with lower inventory.

1.1.1 HISTORICAL BACKGROUND TO THE STUDY

Before the industrial revolution, merchants basically had to write down all the
products they sold every day. Then they had more products based on their hand written notes
and gut feelings. This was an incredibly inefficient and inaccurate way of doing business.
Merchants could not really account for stolen goods unless they did time-consuming physical
counts on a regular basis. They also had trouble making sure the right number of products
when the orders came in because of sparse record keeping. But it was the best they could.
Luckily, in 1889, a man name Herman Hollerith invented the first punch card that could be
read by machines by feeding sheet of papers that have little holes in specific places; people
could record complex data for a variety of purposes from census taking to clock in and out of
work. This was basically the precursor to computers that can read data in tiny microchip.
Holllerith’s company even went on to form the world’s first computer company. Harvard

3
University took the Hollerith’s idea in the 1930s and created a punch card system for
businesses. Companies could tell which products were ordered and also record some
inventory and sales data based on punch card customers would fill out of catalogue items.
Unfortunately, other management system used to cost too much and were too slow to keep up
with rising business challenges Since the mid-1970’s the bar code has predominantly been
used by many industries primary inventory management tool. In the 1950s Norman
Woodland invented the bar code due to a request from a distraught grocery store owner who
needed help in keeping track of inventory. The first to take advantage of the technology
include National Association of food chains, which used them to decrease check out times.
The first bar code ever scanned in a supermarket was a ten-pack of Wrigley’s Juicy fruit
chewing gum.

1.2 Statement of the problem

The problem faced by the company is that they do not have any systematic system to record
and keep their inventory data. It is difficult for the administrators to record the inventory data
quickly and safely because they only keep it in logbooks which are not properly organized.
As the company is using chaos system, it is difficult for the administrators to estimate profit.
With the new system developed, the company can manage their inventory data easily, quickly
and more secured. Furthermore, there is inadequate inventory control, keeping excess
inventory ties up money and affect performance and having too little leads to stock outs and
missed sales which lead to less profit.
Also, to record the inventory data cost a lot of time since the company have only one
administrator who needs to record every stock detail clearly or else it may lead to lack of
information about data. The company does not have any secure system for their inventory
system. The data can easily loss because they only use a logbook to record their inventory
data. With the system, it will help more on the security of the data. Inventory loss is hard to
detect because administrators need to review the logbook one page after another.

1.3 Research Objective

1.3.1 Main Objective

To assess the effect of inventory management on organizational performance the
performance at Foeh and Son Enterprise.

4
1.3.2 Specific Objectives
i. To evaluate the effect of periodic inventory management on organizational performance at
Foeh and Son Enterprise.

ii. To examine the effect of just-in-time inventory management on organizational

performance of Foeh and Son Enterprise.

iii. To find out the challenges faced by Foeh and Son Enterprise in inventory handling.

1.4 Research Questions.

1.4.1 Main Research Question

What is the effect of inventory management on organizational performance at Foeh and Son
Enterprise?

1.4.2 Specific Research Question

i. What is the effect of periodic inventory management on organizational performance at
Foeh and Son Enterprise?

ii. What is the effect of just-in-time inventory management on organizational performance at

Foeh and Son Enterprise?

iii. What are the challenges faced by Foeh and Son Enterprise in inventory

handling?

1.5 Research Hypothesis

The hypothesis is stated in its null form as follows

1.5.1 Main Hypothesis

H0: Inventory management does not have a positive effect on organizational performance at
Foeh and Son Enterprise.

1.5.2 Specific Hypothesis

H01: Periodic inventory management does not affect organizational performance at Foeh and
Son Enterprise.

H02: Foeh and Son Enterprise does not face any challenges in inventory handling.

5
H03: Perpetual inventory management does not affect organizational performance at Foeh
and Son Enterprise.

1.6 Scope of the study

The scope of the study encompasses three components which are, time, geographic and the
thematic.

1.6.1 Geographical scope

The area of the study was Foeh and Son Limited, which is located in Yaounde the capital of
Cameroon.

1.6.2 Thematic scope

The research is carried out to understand how inventory management will affect the
performance of the firm and to evaluate the importance of inventory management on
organizational performance to a firm.

1.7 Significance of the study

To the organization.

Inventory management helps organization to identify which and how much stock to order at
what time. Proper planning and organizing your warehouse help to manage time and reduce
the risk of damages that may occur due to poor management. In meeting organization
objectives, they should be strategies to organize your warehouse and how to easily identify
the products that are being stored. In carrying out research, it will help the organization to
work in line with customer needs and the methods to use in managing inventory which gives
the organization a high market share.

The research and findings from this study will significantly impact the society in the

following ways:

i The findings may be used as basis for further research and investigations in form of
literature review.

ii The findings may provide information to managers in different organizations especially on

knowing how to compare actual performance and inventory management.

6
To other researchers

The findings may also be beneficial to future researchers to investigate further about the
impact of inventory management on organizational performance of other organizations other
than Foeh and Son Limited, Yaounde.

To the general public

iv. The study may further encourage educational authorities to set up institutions to provide
training on how to manage inventory in organizations.

1.8 Justification of the Study

Nearly 81% of consumers experience an “out-of-stock” situation in the past resulting to
loss of sales by retailer’s lots of disappointment for in –store shoppers. If you are still
managing your inventory on spreadsheet, your business might be suffering. To prevent
this, they should be tracking inventory, control your costs that is, keeping reports about
your inventory helps you understand when stocks are doing well and the ones that are
taking up shelf space.
This study brings out the fact that inventory management is of great impact to a firm as
they do not keep excess inventory or experience shortages.

1.9 Organization of Study

This study is divided into five distinct chapters.chapter one introduces the study by looking at
the general introduction, the background of the study through to the significance of the study
and its limitations . cahpter two which consist of literature review and theoretical framework,
chapter three look at the methodology of the research under study. Chapter four deals with
the data presentation, analysis and discussion of findings and chapter five which deal with
summary, conclusion and recommendations.

7
 CHAPTER TWO

LITERATURE REVIEW AND THEORITICAL FRAMEWORK

2.1 Literature Review
Historically, inventory management has been referred to as excess inventory and inadequate
management or shortage of inventory and adequate management practice. Several penalties
could be apportioned to excesses in either direction. Inventory problem has escalated as
progress in technology increases the ability of organizations to produce goods and services
faster in multiple design variation and greater quality (Letinkaya and Lee, 2010).Since the
mid-1980’s inventory management, production planning and scheduling has become the
obvious strategic benefit (Larrson et al., 2009). In recent years, many of the firms have raised
the bar yet again by coordinating with other firms in their supply chains. For instance, instead
of responding to unknown and variable demand, they share information so that the variability
of the demand they observe is significantly lower. Japanese firms earned more deserved
attention in the mid 1980’s due to their notable performance on quality and inventory
management. The constant alert of the bar code being scanned at a checkout lane shows a
pillar of modern system of inventory management stock tracing. In the earliest days of shop
keeping, merchants write down procurement or they looked at how many units where gone at
the day’s end and then did their best to forecast future needs. The key skills where experience
and intuition, but it remain an imperfect method, even when applied to operations that where
quite small by today’s standards (Miller, 2010).
Inventory management nowadays is becoming an important part of operational in the world
of companies. When managing inventory it is suggested that a continuous review system is
advantageous in the sense that it helps keep a closer and tighter control of items since a
continuous track of movement is performed. More and more companies use several systems
such as enterprise resource planning, supply chain execution or warehouse management
systems in order to plan and control their material flows effectively. Many of these systems
have, however, yielded poor results due to the unavailability of accurate information to
manage the inventory. It is therefore critical to the success of these companies to have
information on the identity, status and location of inventories. This implies that profitability
of any organization directly and indirectly is affected by the inventory management system
operated (Miller, 2010). It is therefore imperative to direct activity with the purpose of getting

8
the right inventory in the right place at the right time and in the right quantity and directly
link this to production function of the organization.
An inventory system should be able to provide the operating policies and organizational
structure for maintaining and controlling goods to be stocked. A proficient management of
inventory system requires an appropriate way of making decisions about how much to order
and when to order and a means of keeping track of items in inventory. Decision on inventory
in any organization depends on facts about on-hand stock level, demand information with
regards to the forecasted quantity, lead time and lead time variation, inventory holding costs,
ordering cost and shortage cost. This information help the manager in charge of controlling
inventory to meet the competitive advantage desired by the Organization (Jossop 1986).
The management of materials in organizations cannot be achieved without reference to
inventory, also referred to as stock. Inventory and its management remains a central theme in
discourse on managing materials.
Vrat (2014) in general terms defines inventory as the stock of goods physically stored to
meet expected demand. However, from a material management
axis, Vrat (2014) views inventory as resources that though having economic value for
use remain idle. Vrat argues that it is sensible to set aside some physical stock that can take
care of anticipated demands rather than cause delays in operations for lack of relevant
materials, necessitating inventory in most organizations.
Kontus (2014) posits that inventory management is a key organizational function that helps in
the development of policies aimed at optimal investment in inventory. Consequently, optimal
inventory management can lead to maximization of liquidity and risk. Chambers and
Lacey (2011) observe that inventory management seeks to strike a balance between
benefits that accrue from holding inventory and costs of doing the same.
Consequently, inventory management as noted by chambers and Lacey is a process
designed to maximize the net benefits of the inventory, yet at the same time minimize
expenses that go to it.The study was guided on lean theory.
Heizer and Render (2006) indicate that “inventory management or “inventory planning
and control” refers to the ongoing provision of standard items with independent demand,
where some speculative quantity should always be on hand.Lean theory therefore
focuses on optimization of costs in inventory systems. It is posited that through this theory,
decisions on manufacturing, warehousing, and general supply chain concerns can be
expedited

9
(Tempelmeier, 2011). The theory builds upon the economic order quantity (EOQ) model that
seeks to optimize the quantity of any individual item ordered. Choice of Lean Theory for
this study was informed by the need to examine how inventory management influences
organizational performance thereby calling for a prudent approach to inventory management

2.2 Conceptual Review

Inventory
According to Ballon (2004), define inventories as stockpiles of raw materials, supplies,
components, work-in-progress, and finished goods that appear at numerous points throughout
a firm’s production and logistics channels. Inventory is the stock of any item or resource used
in an organization.

Inventory management according to Geogios Priniotakis 2018

Inventory management is the process of monitoring and controlling the level of inventory to
ensure adequate replenishment in order to meet customer demand. Determining the
appropriate inventory is crucial since inventory ties up money and affects performance.
Having too much inventory reduces the working capital and impacts the company’s liquidity.
On the other hand, having too little leads to stock outs and missed sales which lead to less
profit. It becomes clear that management attention should be focused on keeping inventory
level somewhere in between, striving for increased customer satisfaction and minimum stock
outs while keeping inventory costs as low as possible.

Inventory management is a system used to oversee the flow of products and services in and
out of an organization. A company may decide to incorporate one key inventory management
technique or combine a variety of techniques to meet organizational needs. Inventory
management strategies are utilized by Organization to create invoices and purchase orders,
generate receipts and control inventory-related accounting, (Sherrie Scott 2012)

Halachmi and Bouckart, (2010) defined inventory management as the science-based art of
controlling the amount of stock held in various forms, within a business to meet economically
the demands placed upon that business. The aim of inventory control system is to maintain
the quantities of stock held by a business at a level which optimizes some management
criteria such as minimizing the costs incurred by the whole business enterprise for improved
performance.

10
Firms realize that inventory management represent an avenue with the potential increase of
profits, lowering costs and releasing scarce capital. An inventory replenishment technique is
very important in obtaining optimum stocking level, which is maintained at a targeted level
for sufficient on-hand stock to satisfy customer demand.
Within inventory management, several activities take place. Forecasting is the first activity
that is performed. It is done based on orders; both previous amounts ordered and on expected
or upcoming orders. MRP parameters, defined upfront, decide the levels for safety stock,
review level etc. The order history for example is used to calculate the turnover rate which
determines the point at which one should purchase new goods in order to prevent out of
stocks. Furthermore, orders that are already placed are also added to the forecast, because for
those orders materials have to be purchased for certain. These parameters form the inputs for
the forecast calculation. The forecast is used to decide whether goods have to be purchased in
order to complement the stock to a secure level again.
Inventory management basically serves two main goals. First of all, good inventory
management is responsible for availability of goods. It is important for running operations
that the required materials are present in the right quantity, quality and at the right time in
order to deliver a specific level of service. The second goal is to achieve this service level
against optimal cost. Not all items can be held in stock against every cost for example and
choices have to be made. Organization will naturally focus on good inventory management
because inventory is often where the biggest costs are hidden in business. It goes to show
why a good technique is relevant to this study. According to Likert (2013) manual perusal of
the inventory levels on a daily basis is one of the ways to facilitate re-ordering under
computerized system. Under this plan a printout is generated for all items in inventory and is
examined by the inventory manager, who decides when and how much to order based on
usage rates and expected future needs. ABC analysis and minimum and maximum meters of
establishing inventory review plans are vital and they are useful for both manual and
computerized systems.
In order to obtain daily or weekly report on inventory level, an organization needs to apply
some inventory management techniques to harness their inventory and operational
requirements.
supplying goods or services as close as possible to when they are actually needed.

11
Organizational performance:
Organizational performance according to Wikipedia is the company’s performance compared
to goals and objectives of the actual output as measured against the intended output
Reasons for holding inventory
Lucey (2012) identified the following point as reasons of holding inventories in organization:
To absorb variation in demand and production; to ensure that sufficient goods are available to
meet anticipated demand; to meet possible shortage in future; to take advantage of bulk
purchasing discount; stocks are also held as a necessary part of production process. He
equally identified three major reasons for holding inventories which are transactionary
motives; precautionary motives and speculative motives.
i. The transactionary motive talks about the need to maintain inventory to facilitate the
smooth production or sales operation of day to day transaction.
ii. The precautionary motive necessitates inventory holding to guard against the risk of
unpredictable change in demand and supply forces and other factors.
iii. The speculative motive influences the decision to increase or decrease inventory level to
take advantage of price fluctuation. Rosenblatt (2010) noted that the cost of maintaining
inventory is included in the final price paid by the consumers. As such, goods in inventory
represents a cost to their owner because, the manufacturer has paid for materials and labour.
Morris (2009) also stressed that inventory management in its broadest perspective is to keep
the most economical amount of one kind of asset in order to facilitate an increase in the total
value of all assets of the organization such as human and material resources. Thus, the overall
goal of inventory management is the minimization of stock-out and maximization of profit.
Nearly all the literature on optimal inventory management uses criteria of cost minimization
or profit maximization. An inventory manager’s goal for example, is modeled at minimizing
cost or maximizing profit while satisfying customers’ demands. In the operations
management literature the question of how much inventory a firm should keep has been
extensively studied but there is dichotomy in the views given that inventory is both an asset
and a liability. Too much inventory consumes physical space, creates a financial burden and
increases the possibility of damage, spoilage, obsolete and loss. Furthermore, excessive
inventory frequently compensates for sloppy and inefficient management, poor forecasting,
haphazard scheduling, and inadequate attention to process and procedures. In this context the
lean production principle pioneered by Womack et al, (2011) has been linked with reduced
level of inventories, (Rajagopalan and Kumar, 2012; Herer et al, 2009; Wickramatillake et
al., 2012) even if volatility of demand may limit the application of this principle. On the other

12
hand, too little inventory often disrupts manufacturing operations, and increases the
likelihood of poor customer service. In many cases good customers may become irate and
take their business elsewhere if the desired product is not immediately available.
Building on the above intuitions, the purpose of the present study is an assessment of
inventory management on the organizational performance at Foeh and Son Limited, In
general, efficient or inefficient management of inventories is only one factor out of many
others that can influence a firm’s performance. The broad for determining inventory policy
rests with general management because inventories figure prominently in a company’s
financial operations. However, the actual management of inventory is usually entrusted to
subordinate departments. There is considerable variation in which a department manages
inventory control procedures. The customers’ service level that the firm wants to maintain
and the stock out reveals that the leverage require defining as part of management’s
responsibility for inventory control.
In a few companies an inventory control committee has been established to initiate broad
control policies with the administration of the policies left to the purchasing department.
Representatives of all the company departments affected by inventory control policies fit into
such committees (Lei, D, Slocum and Pitts 2009).
Like in purchases, Leenders and Fearon, (2012) noted that inventories may be classified in a
variety of ways including ABC analysis, nature of items carried and frequency of use.
Modern computer and word processing systems allow extensive automation of purchasing
and inventory control. Control of all items is improved and a managerial time freed for the
negotiations, value engineering, research and other managerial tasks necessary to deal
effectively with A and B items.
Leenders and Fearon (2012) have a different description on inventory control. Many
purchases cover repetitive items held in inventory. Thus inventory has a great influence on
purchase-quantity decisions. It is important in making delivery inventory or purchase order
size decisions to understand why inventories exist and what the relevant trade-offs are. The
rapidly changing environment within which an inventory complicates inventory management
and purchasing planning is carried out. Inventories always seem to be too big, too small or
the wrong type or in the wrong place. With changing economic conditions, what is too little
in one period may easily become too much in the next. Because of the high cost of carrying
inventory many systems have been developed to reduce stocks (Hellen, 2013). Japanese
manufactures have spearheaded such efforts in mass production industries. Suppliers often
located very near the facility deliver directly to the point of use in the base and at very

13
frequent interval. The use of Kanbans and a variety of just in time inventory management
schemes have revolutionized manufacturing thinking about all form of inventories. Never the
less it is useful to understand the nature and costs of inventories so that appropriate policies
and procedures can be developed for specific organizational needs (Michael, E. Porter, 2009).
Inventory exists for this reason alone, the relevance of the decision to be made. Carrying,
holding or possession costs. These include handling charges, labour and operating costs,
insurance premium, breakage, pilferage, obsolescence, taxes and investment or opportunity
costs. In short any cost associated with having as opposed to not having inventory is
included. Other costs may include ordering costs, or purchase costs, set-up costs, stock out
and price variation costs ( Ronald, H. 2009),
According to Halachmi and Bouckart (2010) inventories have the following purposes:
i To provide and maintain good customer service;
ii To smooth the floor of goods through the productive process,
iii To provide protection against the uncertainties of supply and demand and
iv To obtain a reasonable utilization of people and equipment.
Challenges faced by the Company in managing their inventories:
Inventory management challenges can interfere with a company’s profits and customer
service. They can cost a company more money and can lead to an excess of inventory
overstock that is difficult to move. Most of these problems are usually due to poor inventory
processes and out-dated systems, unqualified employees in charge of inventory, using a
measure of performance for their business that is too narrow, flawed or unrealistic business
plan for a business for the future and not identifying shortages ahead of time. Having people
in charge of inventory without adequate training, experience or who neglects the job will lead
to inventory problems that will result into poor organizational performance. The use of a
measure of performance for business that is too narrow. This is a situation where the
performance measure are not wide enough and do not encompass all the aspects of the
organization. Many areas get overlooked and can lead to either inventory shortages or
inventory stockpiling.
A flawed or unrealistic business plans leads to failure in predicting how well a company may
do in the future. This affects inventory management because if a company predicts more
growth than they actually experience, it can lead to an overstock of inventory. The opposite is
true if forecasters do not predict enough growth and are left without enough inventories.
Failure to identify shortages ahead leads to lack of enough products in stock to meet customer
demands which spoil customer relations and company goodwill. The staff in charge of

14
inventory management should look over their inventory on a regular basis to make sure
enough products are in stock.
Bottlenecks and weak points in delivery slows down deliveries and systems; “bullwhip
effect” an over-reaction by an organization to changes in the market that leads to unnecessary
overstocking; distressed stock in inventory; excessive inventory in stock and unable to move
it quickly enough; inaccurate computer assessment of inventory items for production and
complicated computer inventory systems.Customer satisfaction and value added services like
accurate deliveries will keep customers loyal to an organization. Both MRP and JIT
techniques if applied together would assure greater satisfaction. This could lead to cost
effective techniques and effective performance measurement to guide in strategic and tactical
planning. It will ensure a company’s competitive advantage in the business while achieving a
“world class” status.
The above challenges lead to over stocking, under stocking and Inventory costs which
reduces the working capital required. Holding stock is an expensive business. It is estimated
that the cost of holding stock each year is one third of its production or purchasing cost. The
cost include: interest on capital invested in stock, storage space - rent, lighting, heating,
refrigeration and air conditioning, insurance and security, deterioration and obsolescence,
loss of future sales and labour frustrations over stoppages.
Lucey (2012) observes that excessive levels of stock are undesirable because they increase
the risks of inventory becoming obsolete, stock loss through damage and theft, increased
storage costs like rent, insurance and unnecessary tie up of the firm’s funds. He further state
that a firm would be foregoing profits when it continues maintaining excessive levels of
inventory, which implies that the probability position of the firm is being threatened in the
long run since funds are not being invested in other profitable ventures. So organizations
should establish proper inventory control procedures, efficient and effective information
system regarding stock so that they are able to balance the costs and risks of inventory control
against the benefits gotten from having inventory readily available for smooth operations.
Lower levels of inventory are also undesirable because it interrupts production, loss of good
will and high ordering costs especially when ordering is frequent. Inadequate inventory levels
leads to business closure due to shifting of customers to other efficient suppliers as a result of
production/ operation interruptions.

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2.3 Theoretical Framework
The researcher seeks to critically examine some of the under-listed inventory management
techniques in line with concepts of some authors on this study variable.

2.3.1 The theory of Just-in-Time Management by Taichii Ohno

Just - In – Time inventory is generally regarded as an efficient inventory management
system.Many suppliers and retailers partner in the early 21st century to co-ordinate their Just–
In –Time efforts. The JIT concept of production was introduced in Japan under the name of
Kanban. It is generally associated with Japanese businessman Taichii Ohno. He introduced
this production philosophy to meet the needs of the Japanese automobile market after World
War II. Later JIT was adopted in United States, called as Learn Manufacturing. US
companies seek to eliminate the wastes by calling it as Value Added manufacturing. It is a
method that seeks to eliminate waste in processing Adhering to the edict that a stage of the
process that does not add value to Meaning.

Just- in – Time is both a philosophy and set of methods for manufacturing. According to this
concept material and components are supplied to the work station just at the time they are
required for use.

Purpose

The purpose of JIT is to avoid waste associated with overproduction, waiting, excess
inventory, total quality control and devotion to the customer. JIT inventory is intended to
avoid situations in which inventory exceeds demand and places to manage the extra
inventory. Manufactures using JIT processes want to use materials for production at levels
that meet distributor or retailer demand but not in excess. Retailers only want to acquire and
carry inventory that meets immediate customer demand as excess inventory requires storage
and management cost. The list of seven wastes is the target for continuous improvement in
production process. They are:

 Waste of overproduction: Eliminate by reducing setup times, synchronizing quantities and

timing between processes, compacting layout, visibility, and so forth. Make only what is
needed now.

 Waste of waiting: Eliminate through synchronizing work flow as much as possible, and
balance uneven loads by flexible workers and equipment.

16
 Waste of transportation: Establish layouts to make transport and handling
unnecessary if possible. Then rationalize transport and material handling that cannot
be eliminated.

 Waste of processing itself: Extend thinking beyond economy of scale or speed, like why
this part or product should be made at all, then why each process is necessary.

Waste of stocks: Reduce by shortening setup times and reducing lead times, by
synchronizing work flows and improving work skills, and even by smoothing
fluctuations in demand for the product. Reducing all the other wastes reduces the
waste of stocks.

 Waste of motion: Study motion for economy and consistency, economy improves
productivity, and consistency improves quality.

Waste of making defective products: Develop the production process to prevent defects from
being made.

Advantages of Just- In-Time

The use of just-in-time inventory has the following advantages:

 There should be minimal amounts of inventory obsolescence, since the high rate of
inventory turnover keeps any items from remaining in stock and becoming obsolete. Since
production runs are very short, it is easier to halt production of one product type and switch to
a different product to meet changes in customer demand.

 The very low inventory levels mean that inventory holding costs (such as warehouse
space) are minimized.

 The company is investing far less cash in its inventory, since less inventory is needed. Less
inventory can be damaged within the company, since it is not held long enough for storage-
related accidents to arise. Also, having less inventory gives materials handlers more room to
manoeuvre, so they are less likely to run into any inventory and cause damage. Production
mistakes can be spotted more quickly and corrected, which results in fewer products being
produced that contain defects.

Disadvantages Associated with Just-In-Time Inventory

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Despite the magnitude of the preceding advantages, there are also some disadvantages
associated with just-in-time inventory, which are:

 A supplier that does not deliver goods to the company exactly on time and in the correct
amounts could seriously impact the production process.

A natural disaster could interfere with the flow of goods to the company from
suppliers,which could halt production almost at once.

 An investment should be made in information technology to link the computer systems of

the company and its suppliers, so that they can coordinate the delivery of parts and materials.

 A company may not be able to immediately meet the requirements of a massive and
unexpected order, since it has few or no stocks of finished goods.

. Conclusion

Just-In – Time is a manufacturing philosophy which leads to producing the required items, at
the required quality and in the right quantities at the precise time as they are required. Just-In-
Time manufacturing is a system of enforced problem solving. Managers have the choice
between putting a huge effort in finding and solving causes of production problems, or they
can learn to live with an intolerable level of interruptions in production. As everybody knows,
the situation in which one has to put huge efforts is highly undesirable, and the system is
called enforced.

Quality within JIT manufacturing is necessary, because without a quality program in JIT, the
JIT will fail. Therefore JIT implies on high quality at the Source and the Plan, Do, Check,
Action with its statistical process control. Furthermore, techniques are also very important.
The JIT technique is a pull system rather than a push system, based on not producing things
until they are needed. The well-known Kanban card is used as a signal to produce. Moreover,
integration also plays a key role in JIT systems. JIT has its influence in ordering, scheduling
and producing sides of a manufacturing firm. This influence in manufacturing firm is
depending on employees, suppliers or customers. Therefore a large element of training is put
towards the JIT to reach certain goals. One of the important principles of JIT is mutual trust
and team work. When the managers and workers find each other as equal, committed to the
organisation and its success, they are more willing to co-operate with each other in order to
find the problems and solve these problems. It is concluded that the implementation of JIT

18
system, the positive outcomes that arise from the use of the system is far greater than those
that are not. The JIT system really is a state of the art idea that is beginning to catch on in a
tremendous way all over the world.

2.3.2 The Theory of ABC Analysis by Dominic Vaiana (2022)

ABC (Always Better Control) analysis is one of the most commonly used inventory
management methods. ABC analysis group’s items into three categories (A, B, and C) based
on their level of value within a business. Classifying inventory with ABC analysis helps
businesses prioritize their inventory, optimize operations, and make clear decisions. Coming
up, we’ll explore ABC analysis in-depth, explain how to use it, and even guide to decide if
it’s right for your business.

Why using ABC analysis for inventory management?

As the name implies, ABC analysis sorts inventory into three main buckets:

A, items: This is your inventory with the highest annual consumption value. It should be your
highest priority and rarely, if ever a stock out.
B, items: inventory that sells regularly but not nearly as much as A items. Often inventory
that costs more to hold than A items.
C, items: this is the rest of your inventory that doesn’t sell much, has the lowest inventory
value, and makes up the bulk of your inventory cost.

Inventory categorization is essential with physical products because it protects your profit
margins and prevents write-offs and losses for spoiled inventory. It is also the first step in
reducing obsolete inventory, supply chain optimization, increasing prices, and forecasting
demand.

Benefits of ABC Analysis.

Let’s look at three ways ABC analysis can improve your business’ bottom line.

i. More accurate demand forecasting.

Using ABC analysis, inventory planners can predict the demand for specific products and
manage their inventory accordingly. This insight minimizes carrying costs for obsolete items,
thus improving your supply chain management.

ii. Better control of high-value inventory.

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The success of many businesses hinges on A-class inventory. ABC analysis enables you to
identify those items for them, and ensure they are never out of stock. By channeling your
resources towards high priority inventory, you can rest assured you are putting the odds of
success in your favor.

iii. Strategic pricing.

ABC analysis can optimize your pricing strategy for products that bring the most value to
your business. Once you understanrd which products are in high demand, you can increase
their price, which can significantly impact profits.

Shortcomings of ABC
While ABC analysis is an essential tool for many businesses, there are a couple of
drawbacks to be aware of:

i. Regular oversight required.

To get the full benefits of ABC analysis, you must analyze inventory regularly to ensure A-
inventory still consists of high-priority items. Otherwise, you risk squandering resources on
lower value items. Data collection and analysis can put a strain on businesses that don’t have
proper accounting software.

ii. Lacks precisions

An ABC analysis can overvalue frequently purchased items that get people in the door over
luxury goods with a lower purchase frequency but higher profit margin. ABC analysis can
also miss swings in demand for seasonal items or new items that haven’t accrued much sales
volume data.

How to use ABC analysis with inventory

To perform an ABC analysis for your business, follow these three steps:

i. Classify your inventory.

The way you classify your inventory depends on what kind of business you are running and
your company’s objectives. Your classifications should align with the type of inventory you
hold and how your business is run. Any metric you use should measure your inventory’s
consumption value for a given period. Standard metrics are total sales, gross margin,
purchasing costs, and holding costs. After you calculate the percentage for each item, place
them in you’re A, B, and C categories.

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ii. Create rules for inventory classes

For your different inventories categories (A, B, C), create rules or actions for how your
classifications should function. For example, class A inventory should never have a stock out
or have a certain turn over threshold. Then for C- class items, it is fine if you have stock outs,
but you don’t want to write off any spoiled inventory. You could rely on inventory
management solution to gain rapid insight into how your team performs relative to these
standards.

iii. Monitor and look for opportunities to change classes

As you grow and add items to your inventory, your classification mix will change. If you
continue to monitor to your analyses, you will start to notice patterns and be able to forecast
which inventory is most vital for you to manage and which are least important. By always
having the right inventory mix, your operations will run more efficiently, and cash flow
nightmares will eventually be a thing of the past.

Once all inventories has all inventories has been reviewed and categorized, the next step is to
implement your ABC analysis. The following section shares some recommended ways to
make the most of this approach in your business.

Best practices for implementing ABC analysis: ABC analysis works best when applied
consistently and reviewed regularly. Here are some best practices when implementing ABC
analysis in your business.

Keep classifications simple.

With the goal of streamlining your inventory management, the classifications of your ABC
analysis are best kept simple. It should be easy for your teams to know which products
belong to specific classes immediately. For example, common classification methods are
according to the products price or sales frequency.

Set labor levels according to classification

Each classification should be assigned its labor level or the number of hours dedicated to
working on the particular inventory class. Naturally, the more value or impact the class has
on the business, the higher labor levels should be allotted to the classification.

21
Review each class individually

Every classification should be measured against its own rules set by the initial ABC analysis.
This includes a different set of KPLs, performance reviews, and approach to reordering or
selling any overstock.

Revisit original classifications

The initial ABC analysis took into account the types of products and business status at that
point. As inventory and markets change, its important to revisit the existing classifications
and reclassify, if necessary. Consider consumer trends, new industry competitors, and
changes in sales per class and product.

Final thoughts.

Performing an ABC analysis is an effective way for a business to determine the value of its
products. It’s a simple process that helps manage Large amounts of inventory, and how many
resources should be allocated to each classification in order to yield the most profit. Using
dedicated software can streamline the inventory management process even further.
QuickBooks enterprise offers an inventory management platform to track individual product
levels in real-time, collect critical product information, and improve efficiency across all
order management.

2.3.3 Stochastic Inventory Theory by Evan L. Porteus 1988

Inventory theory deals with the management of stock levels of goods, with the intent of
effectively meeting demands for those goods. We say the demands for goods are made by
buyers and are met by sellers, regardless of whether monetary exchange is involved.
Inventory of a good that is physically available is on hand stock. Demands for a quantity of a
good are considered to be met when that quantity is physically transferred, out of the units on
hand to the buyer. Shortages are demands that are not met immediately. Shortages are
backorders if the buyers are willing to wait, and lost sales if not. Backorders are also called
backlogged demand and backlogs. From time to time, the inventory manager may choose to
place an order for additional quantities of the good to replenish the stock on hand. An order,
for the order quantity, may be placed on an outside supplier or on an internal production
facility, in which case the order quantity is a run, batch, and/or lot of the product. The order

22
lead time is the elapsed time from the moment an order is placed until the moment the
quantity ordered is received (added to the stock on hand). That definition is purposefully
vague, because of the possibility that portions of an order may be delivered at different points
in time. Quantities of the good that have been ordered (by the inventory manager) but not yet
received are on order. System stock, also called inventory position, is the sum of stock on
hand plus on order minus backorders. It represents the amount that is available to meet future
demands without placing further orders.

2.4 Empirical Review:

Several studies have been carried out by some scholars in related study of the research
variable. Among them are the ones of Ogbo Ann I. (2014), with empirical evidence in
inventory management performance in relationship with the apparatus used in inventory
recording techniques. Inventory recording is under taken to reduce the error relating to
inventory accountability and accuracy in a firm’s investment in inventories.Stock accounting
is important in any firm as it registers the changes in the level of stock held to realize
maximum value and avoid tying up funds. Inventory recording may take the form of stock
taking and spot checks which are process of physically counting, weighing or otherwise
measuring the quality of each item in stock and recording system such as in the case of Foeh
and Son Limited where TICS (Total Inventory Control System) is used to reduce the
discrepancies between stock record and the physical stock.
The use of EDI is an efficient pair-wise relationship, where automatic replenishment can be
used. EDI is a basis for easy transaction of practical business data, linking two firms. EDI
helps to reduce time delay wages, and employee cost, errors, safety stock as well as
uncertainties in order transfer time, processing and payment.
Inventory storage and issues: Stock is a vital tool to achieve an efficient inventory
management system. Since there is storage and issue of inventory, the cost of obsolescence
and fraud management should ensure performance of all storage and issue functions. Stock
valuation; according to Wood Frank (1996), the way materials are valued has amplification
on the firms reported profit, the material usage and balance therefore different inventory
profit reported by firms.

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 CHAPTER THREE

METHODOLOGY
This chapter presents the research methodology which includes; Research design, study area,
data sources, study population, sampling method, sample size, data collection & instrument,
study variables and method of data analysis.

3.1 Research design:

The study used descriptive survey research design. This kind of research design aims at
generating information after the incident has occurred. The research design looked at the
reasons why the situation behaves the way it was. The design exploited both qualitative and
quantitative approaches. Qualitative approach included use of interviews, while quantitative
approaches involved use of descriptive statistics generated with frequency tables. These
approaches was adopted to enable the researcher get and analyse relevant information
concerning people’s opinions about an assessment of inventory management on
organizational performance the case of Foeh and Son Limited.

3.2 Study Area:

The area of the study was Foeh and Son Limited, which is located in Yaounde the capital of
Cameroon . The Company holds non consumable inventories; some of which are spare parts
and accessories for vehicle engines and aluminium products (non-consumable)

3.3 Data sources:

Both primary and secondary data were the main sources of data to be used in the study.
Concerning the Field data method, the study used a questionnaire and interview guide. The
researcher collected secondary information from different sources like; text books, internet,
newspaper, magazines, and journals. This information was reviewed by visiting places like
libraries and internet and this type of information was used to supplement the collected data
from different categories of the respondents.

3.4 Study population:

The study population is 50 members of staff of Foeh and Son limited whose work is related
to inventory. The confirmation of population size by the Human Resources Manager 2015.
These members of staff were drawn from Central Stores, Procurement and Accounts/Data
Entry.

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3.5 Sample size and sampling technique:
The sample size consisted of 50 staff from the study area. Since the population sample was
small and could be managed, there was no need for a sample size. A census population size
was adopted for the study. These were 20 from Central Stores, 15 from Procurement and 15
from Account/Data Entry.

3.6 Sampling method:

For the qualitative approach, the researcher employed purposive in addition to Snowball
Sampling during the process of data collection from the study respondents. The study used
purposive sampling techniques because it was assumed to allow the researcher to select a
sample of those with experience and knowledge about the study variables. However,
Snowball Sampling was used during the selection of managers from the study area of Foeh
and Son Limited as the researcher first selected one manager who helped him in the way of
getting in touch with another respondent until the total number of the respondents in the same
category was obtained.
3.7 Data collection and instruments:
The study employed two techniques during the process of data collection and these are as
follows;
Self-administered questionnaire: The questionnaire tool was inform of closed ended in
nature and this was self-administered where the researcher was allowed to fill the
questionnaire in the study field as per respondents’ responses. The tool was used to collect
information from respondents from the company. The questionnaire method of data
collection was used because it was cheap and that the method collects responses with
minimum errors and high level of confidentiality.
Interview guide: An interview guide was also drafted with a set of questions that the
researcher asked during an interview and this was structured (close ended) in nature. The
researcher personally recorded the provided responses as per the study respondents during the
process of carrying out an interview.

3.8 Study Variables:

The study was guided by the following two variables; Inventory management as an
independent variable and performance as a dependant variable. Inventory management was
measured by the techniques used in the process of managing inventory such as;ABC or
Pareto Analysis model technique, Trial and error technique, Two Bin System technique, Just
in Time Purchasing technique, Bin card, Materials requirements planning (MRP) technique,

25
Requisitioning Technique, Integrated system technique, Material requirement points
technique, Out purchasing systems technique, Determining order quantities and inventory
levels technique, Inventory recording technique among others in addition to the skills of
labour involved in the management of inventory.
However, performance variable was commonly measured by profitability, services rendered
and productivity of the company compared to goals and objectives of the actual output as
measured against the intended output. According to Richard et al. (2009) organizational
performance encompasses three specific areas of firm outcomes: financial performance
(profits, return on assets, return on investment, (b) product market performance (sales, market
share, etc.) {C} shareholder return (total shareholder return, economic value added, etc. In
the case of Foeh and Son Limited, performance indicator was through the prompt and quick
response of the combined teams of staff and manager in meeting up with demand of the
numerous fleets of vehicles as a result of inventory management.

3.9 Method of Data Analysis:

The collected data was edited sorting and collated in order to get information that is relevant
to the study variables. At this stage all the responses were looked through by the researcher
while giving codes to the answered options. Data was then entered into the computer and
analysed by the use of Statistical Package for Social Scientists (SPSS) program that was used
to develop frequency tables. However, qualitative data was analysed by developing themes
(headings) or sub themes, which were derived from the study objectives. Both quantitative
and qualitative techniques were used during data analysis.
Likert Scale and Weighted Mean Score formulae

X = ∑WF

Where:
W = Weighted Means Scale
F = Number in the category
N = Total Population
SA - Strongly Agree = 5
A - Agree= 4

26
U - Undecided = 3
SD - Strongly Disagree = 2
D - Disagree = 1
Summation 15 ÷ 5 = 3
Therefore 3 and above is positive, below3 is negative.

3.10 Presentation of the Enterprise And Internship Activities

Here, the company background will be presented. Equally the activities carried out during the
internship.

3.10.1 Presentation of Foeh And Son Enterprise

Foeh and Son Limited is a young infant company that came into existence in 2018 with its
main function of cargo survey, internship placement, job placement, transport and logistics,
import , orphans assistance and disable person’s. Foeh and Son has as motto Hard Work
Perseverance And Success

Foeh and Son Limited was created by Mr. FOEH EMMANUEL. It started functioning as
Foeh and Son limited on the 1st of January 2018. Offering services in both English and
French.

On the 15th of September 2018, Foeh and Son Limited obtained its most legal authorization
from the government to fully function.

The vision of transforming Foeh and Son center to Foeh and Son Limited company was
revealed to the director when he was still working as the operations manager of Bafanji
cooperative credit union BAFCUL from 2014 to 20117. While working there, he had an
encounter with so many students eager to do their academic and professional internship, some
seeking for job opportunities especially boys ranging from 21 to 30.

Foeh and Son limited came into existence in 2018. The main aim was to create job
opportunities for Cameroonian youths, improve professional skills and to provide assistance
to the orphan. This company is based in Yaounde and Douala but the main office is Located
Yaounde.

27
 THE ORGANIZATIONAL CHART OF FOEH AND SON LIMITED

CHIEF EXECUTIVE
OFFICER

GENERAL MANAGER

OPERATION FINANCE MANAGER DEPUTY MANAGER

MANAGER AND PERSONNEL

LOGISTICS MANAGER FIELD SUPERVISOR

SECRETARY

INTERNS

Source: field work July 2022

3.10.2 Presentation of Internship Activities.

The activities carried out during the internship are:

 Clean up and arrangement before work start.

 Was in charge of selling helmet, boats and jackets for interns who never bought theirs
before coming to the company.

 Recording of inbound and outbound inventory.

28
The third week, I was chosen to welcome customers and tell them the products that are
available in the warehouse and to tell some people the services Foeh and Son Limited offers.
Arranging the warehouse with the use of LIFO and FIFO method. That’s the new items are
kept different from the old ones to avoid keeping outdated products.

Strength and Weaknesses of the company

Below are the strengths of Foeh and Son Limited.

 Foeh and Son Limited has a well-organized warehouse. That is, the products are well
organized for easy identification.

 Their customers are well satisfied as they get quality goods from the company.

 Interns generally appreciated the fact that Foeh and Son Limited takes out time to
place students on internship. They stress on this fact because getting an internship is
not really easy butFoeh and Son Limited facilitated everything for them.

 The family spirit inFoeh and Son Limited is one of the things that keepenterprise
going. The staffs are welcoming, loving and caring. This makes the interns to feel at
home

Weaknesses of Foeh and Son Enterprise

 The office is not big enough. This is a financial problem. Also very common because
Foeh and Son Limited is a new organization.

 Inadequate equipment used to handle inventory.

 It lack software used in the warehouse for easy identification and counting.

3.4 Difficulties Encountered during the Internship

 The intern was not having enough diversify professional work. One of the reasons for
internship is to get valuable experience. But the intern didn’t work too long in the
warehouse, and then was walking round the enterprise to distribute goods.

 Language barrier as the intern does not know how to speak French and most of the
workers were Francophone.

 The intern also had transportation difficulty. This is because the location of the
company was right far from my area and motor bikes were not permitted to go where
the company is located.

29
 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS

This chapter contains the data presentation and analysis of the data. It also includes the
discussions of the findings of the study. The data are presented in order of the objectives
while the analysis is done according to the research questions. The findings of the study are
also discussed according to the research questions. The findings serve to reinforce the
existing knowledge proven about the effects of inventory management on organizational
performance of Foeh and Son limited. It is presented in the form of tables and figures based
on the responses gotten from respondents during the process of data collection. The
discussion of findings has been arranged in accordance with respondents’ and objectives of
the study as were formulated in chapter one.

4.1 Data Presentation and Analysis:

4.2 Presentation of demographic data

This is information about groups of people according to certain attribute such as gender, age
and marital status as seen below.

30
4.2.1 GENDER DISTRIBUTION

Table 4.1: Distribution of respondent according to Gender

OPTION Number of responded Percentage (%)

Male 32 64

Female 18 36

Total 50 100

Source : field work July 2023

Figure 1: Distribution of respondent according to Age.

From the table and pie chart below, it shows that, 64% of employees in Foeh and Son
Limited are Male and 36% are female. This is because the nature of work in Foeh and Son
Limited does not allow female to take part in some activities like, loading of goods from
truck to the warehouse. The female only takes recordings of goods coming or living the
warehouse.

31
4.2.2 Age distribution

Table 4. 2: Distribution of respondent according to Age.

Option Number of responded Percentage (%)

20-30 years 10 20
31-40 years 10 20
41-50 years 25 50
50 and above 5 10
Total 50
Source : field work July 2023

Figure 2: Distribution of respondent according to Age.

From the table and pie chart above, it shows that, 50% of employees of Foeh and Son
Limited are between the age of 41-50 years, 20% are between the age of 20-30 years, 20%
are between 31-40 and 10% are 50 years and above. The highest percentage is 50% because
the manager beliefs that they are more experience to carry out the activities in the company.

32
 4.1.1 Objective I:. To evaluate the effect of periodic inventory management on
organizational performance at Foeh and Son Enterprise.

1. Table 4.3: The periodic Inventory Management is clearly understood by the workers
of Foeh and Son enterprise

Options Frequency WMS Decision

periodic Inventory Management

1. The periodic Inventory Management is SA 28 4.36 POSITIVE

clearly understood by the workers of Foeh A 16

and Son enterprise
U 3

SD 2

D 1

Source : field work July 2023

Figure 3: periodic inventory management

From the above data collected as indicated by the table and chart, 56% of the respondents
strongly agreed that they understood the concept of periodic inventory management , 32%
agreed, while 6% were undetermined, 4% of the respondents strongly disagreed and 2%
disagreed. The Company periodically replenished materials to determine inventory level.
Respondents agree that the Company practice drop shipping as can be seen in the above table.

33
Table 4.4: periodic Inventory Management

periodic Inventory Management Options Frequency WMS Decisi

on

2. The Company adequately manages its SA 15 POSITIVE 3.94

Inventory.
A 25

U 3

SD 6

D 1

Source : field work July 2023

Figure 4: adequate inventory management

The study finding as seen in table 4.4 above and figure 4 shows that the company adequately
manages its Inventory. From the above findings, figure 4 reviews that 50% of the
respondents agreed , 30% strongly agreed while 12% strongly disagreed and 1%
disagreed .This therefore means that the company adequately manged its inventories

34
Tabble 4.5:Consumables are the most used inventories in Foeh and Son enterprise

Options Frequency WMS Decision

3. Consumables are the most used SA 16 3.98 POSITIVE

inventories in Foeh and Son enterprise A 26

U 3

SD 1

D 4

Source : field work July 2023

Figure 5
Table 4.5 reviews that 26 respondents representing 52% of the population agree , 16
respondents representing 32% on figure 5 strongly agree while 4 persons disagree, three
persons were undecided and I respondent strongly disagree which means that the respondents
strongly agree that Consumables are the most used inventories in Foeh and Son enterprise.

35
Table 4.6:Materials are purchased on periodic basis at Foeh and Son Limited.

Options Frequency WMS Decision

4. Materials are purchased on periodic basis SA 15 3.78 POSITIVE

at Foeh and Son Limited. A 23

U 3

SD 4

D 5

Figure 6

36
From the table and figure above base on the statement which seek to know if materials are
purchased on periodic basis at Foeh and Son Limited, 23 respondents representing 46% of the
population agree and 15 representing 30 on figure 6 strongly agree, 5 persons disagree while
4 strongly disagree and 3 were undecided representing 46%, 30% , 10%, 8% and 6%
respectively which means that the respondents strongly agree that materials are purchased on
periodic basis.

Table 4.7: ABC or Pareto analysis model is used in segregating materials according
according to monetary values

Options Frequency WMS Decision

5. ABC or Pareto analysis model is used in SA 9 2.78 Negative

segregating materials according according A 2
to monetary values.
U 9

SD 29

D 1

Source : field work July 2023

Figure 7
Foeh and Son Limited do not segregate materials in stores according to their values with
ABC or Pareto Analysis as shown with 2.78% result as indicated in the table above. This
means that the Company management need to pay attention to the inventory management of

37
 material in the store to a higher extent. Leenders and Fearon, (2012), asserts that inventories
through modern technique like ABC or Pareto analysis control all items and improve

managerial time freed for the necessary managerial tasks to be effectively carried out. From
the above results arrangement of materials at central stores should be done according to their
monetary value for improved Company’s performance.

Table 4.8:Bin Card is physical controlling techniques used to record materials in Foeh
and Son Limited.

Options Frequency WMS Decision

6. Bin Card is physical controlling SA 34 4.66 POSITVE

techniques used to record materials in Foeh A 15
and Son Limited.
U 1

SD 0

D 0

Figure 8

As illustrated in table 4.8 above, Bin Card, is the technique of inventory management used in Foeh
and Son Limited as positively depicted in the table above. Alvesson, (2010) argued that in Just-in-
time the need for cycle inventory is reduced by set up cost and time reduction. This means the
interrupted flow of 100% acceptable materials delivered on due date as option cost of 100% of
time.
38
Table 4.9: Just-in-time inventory management is used at Foeh and Son Limited

Source : field work July 2023

Options Frequency WMS Decision

7. just-in-time inventory management is SA 37 4.74 POSITIVE

used at Foeh and Son Limited. A 13

U 0

SD 0

D 0

Figure 9

As illustrated in table 4.9 above, Just-in-time purchasing techniques of inventory

management is used at Foeh and Son Limited as positively depicted in the table and figure 9
above 74% and 26% respectively strongly agree. Alvesson, (2010) argued that in Just-in-time
the need for cycle inventory is reduced by set up cost and time reduction. This means the
interrupted flow of 100% acceptable materials delivered on due date as option cost of 100%
of time.

39
Table 4.10:Material replenishment is periodical carried out to determine inventory
levels in Foeh and Son Enterprise.

Options Frequency WMS Decision

8.Material replenishment is periodical SA 24 3.22 POSITVE

carried out to determine inventory levels in A 2
Foeh and Son Enterprise.
U 2

SD 5

D 17

Source : field work July 2023

Figure 10

In the table 4.10 and figure 10 above base on the statement that Material replenishment is
periodical carried out to determine inventory levels in Foeh and Son Enterprise 24
respondents representing 48% of the population strongly agree to the fact while 17
respondents representing 34% disagree, 5 strongly disagree, 2 disagree and 1 was undecided.
The findings shows that material replenishment is periodical carried out to determine
inventory levels in Foeh and Son Enterprise.

40
Table 11: Foeh and Son Limited practice drop shipping to end users
Source : field work July 2023

Options Frequency WMS Decision

9. Foeh and Son Limited practice drop SA 1 2.22 NEGATIVE

shipping to end users A 10

U 2

SD 23

D 14

Figure 11

From the above findings, 23 respondents representing 46% of the population strongly
disagree with the statement that the company practice drop shipping to end users while 14
persons representing 28% disagree, 10 persons agree, 2 undecided and 1 strongly agree which
implies that Foeh and Son Limited do not practice drop shipping to end users

Drop shipping according to Ronald, H (2009) as purchasing or production solutions may also
permit order quantities to be reduced, the other factor that has an immediate and direct effort

41
on average stock level. This will enable both purchasing and production concentrate efforts
on acquiring or making batches of a smaller size, without increasing the unit price .

Figure 4.12: Foeh and Son Limited practice Bulk–shipping of various stock together

Options Frequency WMS Decision

10. Foeh and Son Limited practice Bulk– SA 10 3.66 POSITIVE

shipping of various stock together A 24

U 5

SD 11

D 0

Source : field work July 2023

Figure 12

From figure 12 48% of the respondents agree that the company practice Bulk–shipping of
various stock together while 22% strongly disagree, 20% strongly agree and 10% undecided
as seen on the table which shows 3.66% which a positive remark indicating that the company
practice Bulk–shipping of various stock together

42
Table 4.13: Obsolete, scrap, expiration & damage are reasons for quarantine of materials in
Foeh and Son Limited

11. Obsolete, scrap, expiration & damage are SA 8 3.76 POSITIVE

reasons for quarantine of materials in Foeh and

A 30
Son Limited
U 5

SD 6

D 1

Source : field work July 2023

Figure 13:

From the figure 13, 60% of the respondents agree to the fact that Obsolete, scrap, expiration
& damage are reasons for quarantine of materials in Foeh and Son Limited, 16% strongly
agree while 12% strongly disagree, 10% were undecided and 2% disagree as represented on
table 4.13 by 3.76 thereby confirming to the fact that Obsolete, scrap, expiration & damage
are reasons for quarantine of materials in Foeh and Son Limited.

43
Table 4.14: The relationship between just-in-time inventory management and
performance of the Company is positive

Options Frequency WMS Decision

12. The relationship between just-in-time SA 17 4.04 POSITIVE

inventory management and performance of A 24

the Company is positive.
U 4

SD 4

D 1

Source : field work July 2023

Figure 14: The relationship between just-in-time inventory management and

performance of the Company is positive
Respondents reported that the relationship between Just-in-time inventory management and
organizational performance of Foeh and Son Limited can be either negative or positive
depending on the way and how the method/technique is applied in the management of
inventories. The above information as per the study respondents significantly implies that
managing of inventory techniques can either be positive or negative and these were further
evidenced by the findings as in table 4.14 above.

44
Table 4.15: just-in-tine Inventory management in Foeh and Son Limited is effective
Source : field work July 2023

Options Frequency WMS Decision

13. just-in-tine Inventory management in SA 18 3.98 POSITIVE

Foeh and Son Limited is effective.
A 22

U 3

SD 5

D 2

Figure 15: just-in-tine Inventory management in Foeh and Son Limited is effective

The findings as seen on table 4.15 shows that 22 respondents representing 44% of the
population agree that just-in-tine Inventory management in Foeh and Son Limited is effective
while 18 person representing 36% strongly agree, 5 respondents strongly disagree ,3 were
undecided and 2 disagree.

Apart from being effective, the study respondents further indicated that Just-in-time inventory
management techniques has a positive influence on the performance of Foeh and Son Limited

45
and went ahead to observe that such techniques of managing inventories help in proper
planning of the materials needed by identifying the gap between the desired and the actual
level of materials, allocation of resources, purchasing and issuing.

Table 4.16: Ineffective inventory management affects Organizational performance

negatively

Options Frequency WMS Decision

14. Ineffective inventory management SA 23 3.74 POSITIVE

affects Organizational performance A 12

negatively.
U 3

SD 3

D 9

Source : field work July 2023

Figure 16: Ineffective inventory management affects Organizational performance

negatively
Table 4.16 shows that majority of the respondents revealed that Ineffective inventory
management affects Organizational performance negatively as reprsesented on figure 16,
46% of the respondents strongly agree, 24% agree while 18% disagree, 3% strongly disagree
and 3% were neutral which therefore implies that Ineffective inventory management has a
negative effect on organizational performance.

46
Table 4.17: inventories held are mostly for executing client’s projects rather than for
stocking.

Options Frequency WMS Decision

15. Inventories held are mostly for SA 9 3.26 POSITIVE

executing client’s projects rather than for
A 20
stocking.
U 3

SD 11

D 7

Source : field work July 2023

Figure 17: inventories held are mostly for executing client’s projects rather than for
stocking
The study findings as in table 4.17 indicate that the respondents agreed with the statement
that “inventories held are mostly for executing client’s projects rather than for stocking “as
was reported by 3.26% of the respondents. The above is an indication that Foeh and Son
Limited normally stock materials as according to end users order as represented on figure 17,
40% agree, 22% strongly disagree, 18% strongly agree, 14% disagree while 6% were
neutral.

47
Table 4.18: Material quarantine is an essential task in carting away obsolete materials
Source : field work July 2023

Options Frequency WMS Decision

16. Material quarantine is an essential task SA 12 3.86 POSITIVE

in carting away obsolete materials in Foeh A 27

and Son Limited
U 5

SD 4

D 2

Figure 18:Material quarantine is an essential task in carting away obsolete materials

Frome table 4.18, 27 respondents representing 54% of the population agree that Material
quarantine is an essential task in carting away obsolete materials while 24% strongly agree 5
persons were undecided , 4 respondents strongly disagree and 2 respondents disagree with the
fact.the finding reveals that the company practice bulk shipping and quarantine obsolete,
scrap, expired and damaged materials to clear the shelves to reduce space and lead time for
better inventory management that enhance the Company performance.

48
Table 4.19: The Company is faced with challenges of improper record keeping.
Source : field work July 2023

Options Frequency WMS Decision

17. The Company is faced with challenges SA 3 2.64 NEGATIVE

of improper record keeping. A 15

U 5

SD 23

D 2

Figure 19: The Company is faced with challenges of improper record keeping.
From the above findings, the researcher was further interested in knowing whether Foeh and
Son Limited was faced with challenges of improper record keeping. The answer was negative
as indicated in the table above with 2.64%, which shows that Foeh and Son Limited records
inventories purchased and issued. The results above, can be interpreted that Foeh and Son
Limited records inventories purchased and issued at all times since the respondents covered
by the study disagreed with the statement of improper record keeping and that it was using
recording of inventories as one of the inventory management techniques for improved
performance of the Company (Kenneth and Brian2009).

49
Table 4.20: Repeated Requisition is one of the challenges faced by the Company
Source : field work July 2023

Options Frequency WMS Decision

18. Repeated Requisition is one of the SA 10 3.24 POSITIVE

challenges faced by the Company. A 20

U 0

SD 12

D 8

Figure 20: Repeated requisition is one of the challenges faced by the Company.

Table 4.20 shows that of the respondents covered by the study majority revealed that repeated
requisition is one of the challenges face by the company in the process of inventory
management as was revealed by 3.24% of the study respondents. The above study results are
also an indication that there are still challenges faced at Foeh and Son Limited as an
organization in the process of managing inventories for improving the performance of the
company was reported by 3.62% of the respondents. To avoid this, Likert (2013) posits that
organizations should use performance plat form more effectively by improving the measured
attributes and also managers should put in place a programme that will measure the level of
performance of individual employee involved in statistical quality and control.

50
 CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Summary:
The study showed that the common techniques of inventory management used at Foeh and
Son Limited , include; the Bin Card, LPR, LPO purchasing system and Total Inventory
Control System (TICS) responsible for management information system which helps to make
serious decisions on inventory, inventory requirement points, and over stock brands for the
fast moving stocks, recording of all the purchased and issued inventories.

The ABC or Pareto analysis although not applied by the Company could have been very
useful compared with Pandey (2010) who argued that since most organizations maintain
different types of inventories with different value, maximum attention is devoted to different
items with the highest value. The difference involves the different classes of inventory leads
to the inventory control model by importance and exception or ABC analysis.

The ABC analysis involves the following: - Classify the items of inventory determining the
expected used in units and price per unit for each item, determine the total value of each item
by price and units, rank items according to value, and determine Percentage (%) ratio or units
of each item to total items and value. Also, Wood Frank (2010) argued that the way materials
are valued has implication on the firms reported profit and the material usage and balance
therefore different inventory profit reported by firms. The different materials valuation
techniques include First in First out (FIFO), Last in First out (LIFO), average cost method
and net realizable value.

The study indicated that there is a relationship between inventory management and
performance of Foeh and Son Limited. This is because respondents explained that proper
managing of inventories maintains quality services rendered by staff of the central store,
control time management to maintain lead time as services are on process because materials
can be easily identified especially in the central store department when needed.

Most of the respondents still argued that proper inventory management reduce on labour with
its associated costs for improved performance of the Company operations. Also that, 3.74%
of the respondents indicated ineffective inventory management having a negative effect on

51
the performance of Foeh and Son Limited. These same respondents believed that,
inefficiency involves a lot of costs, in-consistence, theft, obsolescence among others all of
which increase on the costs hence reducing much on the performance of the organization.

These same study respondents further cited that inventories held are mostly for executing
clients ‘projects rather than for stocking which reduces the costs associated with holding
inventory as a result of effective inventory management. However, based on most of the
study respondents as elicited in table above, the study therefore established that there is a
positive relationship between inventory management and performance of private
organizations like Foeh and Son Limited, as was revealed by majority 4.08% of the covered
respondents during data collection process.

The study respondents claimed that Just-in-time inventory management techniques has a
positive influence on the performance of Foeh and Son Limited. They went ahead to say that
such techniques of managing inventories help in proper planning of the materials needed by
identifying the gap between the desired and the actual level of materials, allocation of
resources, purchasing, issues and employment of staff and everything concerning human
resources management all of which reduces the costs incurred by the organization which
improved performance of the company. However some of these respondents said that the
positive relationship of the inventory management techniques on the performance of Foeh
and Son Limited, depends on how the techniques are applied at the company.

These results indicate that proper use of inventory management techniques like application of
Just-in-time (JIT) reduces ordering costs such as administrative and air time costs, in
organizations when employed.

The study findings also revealed that there was a high level of agreement as the results
indicate that majority of the respondents did not agree that there was improper record
keeping. Rather they affirm that recording of inventories at the Company was helping in
proper decision making. The results indicate that since almost all the decisions made by the
management in the process of managing inventories aim at influencing the services of the
company for better results as recording of materials greatly influence Company’s
performance. Qualitative results from the majority of interviewed participants on the matters
concerning whether inventory management techniques have any influence on performance of
service of the company revealed that the influence between the two variables of inventory
management techniques and the performance of Foeh and Son Limited, exists.

52
This is because respondents explained that good management of inventories maintains quality
of the company products and control lead time management.

However, based on information gathered it is therefore established that there is a positive

relationship between inventory management and performance of private organizations like
Foeh and Son Limited, as was revealed by majority 4.04% of the covered respondents during
data collection process. There is also an indicator of effective inventory management, waving
off ineffective approach of inventory management notwithstanding the application of old
system models. It was further revealed that stock is mainly held to execute client’s project.

The above study findings can be related with Ronald, H. (2009), who reported that inventory
exists for this reason alone, the relevance of the decision to be made. Carrying, holding or
possession costs. These include handling charges, labour and operating costs, insurance
premium, breakage, pilferage, obsolescence, taxes and investment or opportunity costs. In
short any cost associated with having as opposed to not having inventory is included. Other
costs may include ordering costs, or purchase costs, set-up costs, stock out and price variation
costs. Also, it was indicated by the study that there are challenges faced by the Foeh and Son
Limited, in the process of managing inventories as none of the study respondents was able to
disagree with the same statement. The study on further findings established the following
challenges among others that were faced by Foeh and Son Limited, as loss in inventories
through damages, obsolete, theft, opportunity costs, administration costs such as repeated
requisition, among other challenges faced by Foeh and Son Limited, in the process of
managing its inventories at the company.

The study further revealed that 3.62% of the respondents reported that selected teams are
trained for stock taking while tasks are usually assigned to experienced hands during the
exercise while majority of the respondents 3.82% indicate that there is time peg on inflow
and outflow of material for accuracy in the process of stock taking as part of inventory
management. It was further indicated by the study respondents 4.12%, that value of inventory
variance are actualized between the System (TICS) and physical discrepancies

The study further revealed that the stock taking exercise is handled by the staff of the Central
stores, Data Entry and the Accounts Departments of the Company as part of their procedures
to manage inventory. The above study results is a pointer to the fact that there are positive
inventory management through stock taking in Foeh and Son Limited.

53
5.2 Conclusions:
The common materials handling techniques used at Foeh and Son Limited, include; Bin
Card, just-in-time and Total Inventory Control System (TICS) responsible for management
information system which helps to make serious decisions on inventory, inventory
requirement points, recording of all the purchased and issued inventories.

That proper material handling technique plays an important role on the performance of
private organizations like Foeh and Son Limited. This is because proper inventory
management techniques was established to maintain proper running of the services, controls
quality of the company products, control lead time management reduction on labour with its
associated costs for improved performance of the Company operations, helping the Company
to perform well, increase on the company profits, help in the assessment of taxes and help in
the process of determining the company service volume for understanding of the company
performance and derive towards better performance of the Company.

In addition, it is concluded that the kind of relationship between inventory management

techniques and performance of private organizations in Yaounde can either be positive or
negative depending on how the techniques of inventory management are used and how it is
applied especially in tackling the challenges facing the Company as organization in the
process of managing inventories for improving their performance.

Finally, the study noted that the procedures of stock taking has positively affected the
performance of the Company each time it was carried out as the variance were actualized by
both physical and TICS through the stock discrepancies or inconsistency.

5.3 Recommendations:
In line with the above study findings and conclusions, the following recommendations are
made:

i. That Foeh and Son Limited need to switch over to the use of Enterprise Resource Planning
(ERP), a supply chain software that will collapse storage area and enhance visibility and
efficiency. This is apt, in view of the 21st century ICT era coupled with the large volume of
purchases and activities of the company, not only in Cameroon but in over ten countries of
the world. Embracing modern technology will positively affect inventory management of
Foeh and Son Limited because you cannot do today’s job with yesterday method and be in
business tomorrow. In addition, ERP is strongly related to the field of business intelligence
and performance measurement because of its holistic approach towards business processes

54
within an organization; the description of this technology supports the identification of
typical inventory management business process. Some of ERP vendors are SAP, Oracle and
Microsoft.

ii. The study also recommended that top management in Foeh and Son Limited should
emphasis on the proper use of inventory management techniques and measuring of efficiency
deviations to identify weaknesses in the process of managing inventories. In addition, the
ABC or Pareto Analysis model be adopted in Foeh and Son Limited to augment with the
Just-in-time purchase system to aid in material segregation.These models will assist Foeh and
Son Limited to arrange materials according to their monetary values and purchase items just
when they are needed to avoid stunted growth occurring in the company. Foeh and Son
Limited to always forward planning, centralize the purchase and store function, carry out
stock taking exercise periodically because if such factors are adopted together then
performance and efficiency of the Company will be greatly influenced positively.

iii. Furthermore, that management of Foeh and Son Limited to introduce measures to prevent
the company from incurring unnecessary losses; measures such as stock-taking which is the
periodic accounting of stock, so as to record the lost and available stock. Set up strict rules to
procurement officers and store managers which they should follow during purchasing and
storing of material so as to avoid loss of inventory in Foeh and Son Limited.

iv. In addition, the study recommends that managers in Foeh and Son Limited especially
those in procurement, Stores and Data/Account departments to always undertake forward
production planning, this is because they will be able to know when the incoming service
orders can be scheduled for delivery and also takes into account current backlogs so that
service delivery schedules are realistic which will minimize inventory management costs.

v. It is also recommended that whether or not a perpetual/continuous stock control system is

maintained, there should be continuous annual stocks take at the company. To this end,
procedures can be prescribed with emphasis on identifying damaged, slow moving, and
obsolete stocks. In addition, inventories at Foeh and Son Limited, should be continuously
checked with actual stocks held by independent sub-stores, and inquires made into all
reconciling differences. If this is done, some of the challenges associated with inventory
management will be minimized at the company premises. Stock taking procedures allow
management to confirm that the inventory records are true as such it should be carried out
periodically either biannually or annually.

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5.4 Suggested areas for further study:
The study was set to assess the effect of inventory management on performance of Foeh and
Son Limited

These topics are suggested for further studies and research:

i. The effect of automated inventory management through Enterprise Resource Planning

(ERP) in private organization in Cameroon.

ii. The effect of Distribution, Logistics and materials handling techniques on employee’s
efficiency in private organizations, Yaounde.

56
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 APPENDIX B: QUESTIONNAIRE FOR THE COMPANY WORKERS

I am called Nghombuombuen Henry a student at Heritage Higher Institute of Peace and

Development studies. I am conducting a research on the topic “THE EFFECTS OF
INVENTORY MANAGEMENT ON ORGANIZATIONAL PERFORMANCE ”

Dear respondent,

Within the scope of an academic research, we wish to appeal to you to kindly fill out these
questionnaires which enable us to compare theoretical frame works. I assure you that
whatever information obtained, will be used only for academic research. Accept my sincere
thanks in advance.

Where appropriate, put a tick on the letter (A,B,C,D,E) that best suit you. In the close
ended questions, make short and straight to the point response.

Age ……………………………….

Gender …………………………….

Marital status…………………………………….

1. The periodic Inventory Management is clearly understood by the workers of Foeh and Son
enterprise

(a) Strongly agree (b) Agree (C) Undecided (d) Disagree (e) strongly disagree

2. The Company adequately manages its Inventory. (a) Strongly agreed (b) Agree (C)
Undecided (d) Disagree (e) strongly disagree

3.Consumables are the most used inventories in Foeh and Son enterprise

(a) Strongly agree (b) Agree (C) Undecided (d) Disagree (e) strongly disagree

4. Materials are purchased on periodic basis at Foeh and Son Limited.

(a) Strongly agree (b) Agree (C) Undecided (d) Disagree (e) strongly disagree

5.ABC or Pareto analysis model is used in segregating materials according according to

monetary values

(a) Strongly agree (b) Agree (C) Undecided (d) Disagree (e) strongly disagree

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6. Bin Card is physical controlling techniques used to record materials in Foeh and Son
Limited. (a) Strongly agree (b) Agree (C) Undecided (d) Disagree (e) strongly disagreed

7. just-in-time inventory management is used at Foeh and Son Limited..

(a) Strongly agree (b) Agree (C) Undecided (d) Disagree (e) strongly disagree

8..Material replenishment is periodical carried out to determine inventory levels in Foeh and
Son Enterprise.

(a) Strongly agree (b) Agree (C) Undecided (d) Disagree (e) strongly disagree

9.Foeh and Son Limited practice drop shipping to end users

(a) Strongly agree (b) Agree (C) Undecided (d) Disagree (e) Strongly disagree

10. . Foeh and Son Limited practice Bulk–shipping of various stock together

. (a) Strongly agree (b) Agree (C) Undecided (d) Disagree (e) strongly disagree

11. Obsolete, scrap, expiration & damage are reasons for quarantine of materials in Foeh and Son
Limited.

(a) Strongly agree (b) Agree (C) Undecided (d) Disagree (e) strongly disagree

12. The relationship between just-in-time inventory management and performance of the
Company is positive.

(a) Strongly agree (b) Agree (C) Undecided (d) Disagree (e) Strongly disagree

13. just-in-tine Inventory management in Foeh and Son Limited is effective.

(a) Strongly agree (b) agree (C) Undecided (d) Disagree (e) strongly disagree

14. Ineffective Inventory management affects organization performance negatively

(a) Strongly agree (b) Agree (C) Undecided (d) Disagree (e) Strongly disagree

15.Inventories held are mostly for executing client’s projects rather than for stocking. (a)
Very high extent (b) High extent (C) Neutral (d) Low extent (e) Very low extent

16. Material quarantine is an essential task in carting away obsolete materials in Foeh and
Son Limited

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(a) Strongly agree (b) Agree (C) Undecided (d) Disagree (e) strongly disagree

17.The Company is faced with challenges of improper record keeping.

(a) Strongly agree (b) Agree (C) Undecided (d) Disagree (e) strongly disagree

18.Repeated Requisition is one of the challenges faced by the Company.

((a) Strongly agree (b) Agree (C) Undecided (d) Disagree (e) strongly disagree

19. Theft, damages and obsolete are challenges of inventory management in West African

Ventures Company.

(a) Strongly agree (b) Agree (C) Undecided (d) Disagree (e) strongly disagree .

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