THE IMPACT OF INVENTORY MANAGEMENT ON THE ORGANIZATIONAL PERFORMANCE OF THE SELECTED MANUFACTURING FIRMS IN CAMEROON

CHAPTER ONE

INTRODUCTION

Background of the study

Historically, the necessity of inventory control was not recognised. Indeed, an abundance of inventories was regarded as a sign of affluence. At that juncture, management regarded overstocking as crucial and advantageous for organisations. In recent times, however, businesses have begun to adopt efficient inventory control. Inventories consist of supplies, finished products, work in progress, and raw materials that are maintained by a company to facilitate production operations (Olu, 2022). Inventories may consist of goods that are either consumable or utilised in the manufacturing process of goods intended for sale, or they may be assets and objects held in the ordinary course of business.

The inception of inventory can be traced back to the military's imperative to procure provisions such as arms, ammunition, and sustenance during their transition from a forward position to their base. The emergence of inventory as a business concept did not occur until the 1950s. This development was primarily driven by the growing intricacy of managing inventory and supplying materials to a business via a globalised supply chain (Coker 2020).

There is a growing recognition across industries that inventory management serves as a mechanism to maximise resource utilisation and attain organisational efficiency as a whole. Additionally, Ali (2019) disclosed that inventory management systems empower businesses to identify special orders, sell products in limited quantities on an as-needed basis, and establish a favourable reputation for promptly fulfilling special orders by minimising inventory costs. A effective inventory system, according to Ali (2019), ensures that organisations always have accurate information on inventory count, thereby enhancing customer service, providing accurate information to customers, and improving the organisations' image. According to Mbuk (2018), a business that maintains an efficient inventory management system will invariably gain a competitive edge over its rivals.

Inventory management is an essential managerial concern for the majority of organisations, including large, medium, and small businesses. A critical determinant of success in supply chains is the implementation of efficient inventory flow management. The difficulty in inventory management is achieving a balance between supply and demand. An ideal situation for a business would be to maintain adequate inventories to meet consumer demand; there should be no lost sales attributable to inventory stock-outs. However, due to the expense associated with inventory carrying, the organisation prefers to maintain a minimal amount of stock on board. Sufficient without going overboard is the ultimate goal (Mbuk 2018). Inventory management is responsible for facilitating a more rapid turnover of stock. It decreases expenses by 10% to 40% while increasing inventory turnover by ten (10) %.

Inventory management continues to be a critical component for all businesses on a global scale. Inadequate inventory systems can lead to customer attrition and decreased sales, whereas effective inventory management can increase revenue and have a direct impact on company performance (Olu, 2022). Therefore, it should be properly maintained, as it is related to the financial success of the organisation. Effective and strategically planned inventory management can significantly impact the annual turnover of a business. The purpose of this investigation is to determine how inventory management practices affect the performance of an organisation. This is because a company's inventory can significantly impact whether the company succeeds or fails. Therefore, ineffective inventory management can result in stock-outs, which will inevitably result in the loss of customers and goodwill, a decline in the company's profits, and ultimately its demise.

The majority of manufacturing organisations consistently prioritised the implementation of an effective inventory management system. This system ensured that the organisation maintained cost-effective quantities of materials by regulating inventory movement and recording. According to Bello (2018), in addition to the advantages associated with material inventory holding, there are expenses that arise from maintaining substantial quantities of materials. These expenses consist of storage charges, opportunity costs of funds that are tied up in materials, illumination, security, and insurance.

Basing on the above facts, it is evident that the overall organizational performance position of the firm largely depends on the firm level of investment in supplies and effective inventory management.

1.2 Statement of the problem

As stated by Duyile (2020), inventories hold the most strategic position within the working capital structure of the majority of businesses and organisations. Effective inventory management is crucial for manufacturing organisations as it safeguards against substandard products, dissatisfied long-term clients, financial losses, and compromised social responsibility. Successful operation of a company is significantly influenced by the efficiency of flow management within its supply channels. Maintaining a balance between inventory supply and demand is the most difficult aspect of inventory management. An optimal inventory level for a business would be sufficient to meet consumer demands and prevent sales losses caused by stock-outs. Furthermore, the company strives to minimise its inventory holdings in order to avoid the expenses associated with inventory transporting. The ultimate goal is to have just enough, without going overboard (Duyile, 2020).

An effective inventory control system is achieved when the two objectives are balanced to the greatest benefit of the organisation. Despite the advantages of inventory management, organisations have consistently disregarded the potential cost savings that could be realised through effective inventory management, resulting in unnecessary investments in inventory, according to Altan (2019). This is due to the fact that they are unable to satisfy customer demands as a result of inadequate investment allocation among inventory items; thus, the reason for this study. Inventory is the predominant component of current assets in the majority of manufacturing sectors (Bello, 2018). Manufacturing companies achieve substantial cost reductions through efficient inventory management, amounting to approximately 50% to 60% of overall expenditures. It is possible to achieve a 6% reduction in total expenses by implementing efficient inventory management practices. In this view, the study wishes to examine the impact of inventory management on the organizational performance of the selected manufacturing firms in Cameroon.

1.3 Objectives of the Study 

The aim of this study is to examine the impact of inventory management on the organizational performance of the selected manufacturing firms in Cameroon. Specifically the study seeks to:

Determine whether there are inventory management practices in manufacturing firms in Cameroon.

Determine whether inventory management has a significant impact on organizational growth of the selected manufacturing firms in Cameroon.

Determine whether inventory management has a significant impact on organizational profitability of the selected manufacturing firms in Cameroon.

Examine the effects of inventory management on the organizational performance of the selected manufacturing firms in Cameroon.

1.4 Research Questions

The following research questions will be answered in this study:

Are there are inventory management practices in manufacturing firms in Cameroon?

Does inventory management have a significant impact on organizational growth of the selected manufacturing firms in Cameroon?

Does inventory management have a significant impact on organizational profitability of the selected manufacturing firms in Cameroon?

What are the effects of inventory management on the organizational performance of the selected manufacturing firms in Cameroon?

1.5 Research Hypothesis

The following null hypothesis will validate this study:

Ho1: Inventory management does not have a significant impact on organizational growth of the selected manufacturing firms in Cameroon.

1.6 Significance of the study

To the organizations, the result of this study will benefit organizations that keep huge amount of inventories to hold just what is necessary so as to avoid the carrying costs.

The study findings will further enable the management of manufacturing firms in Cameroon to get in-depth insights of the benefits of management strategies, procedures, and practices to avoid making losses. This stimulated the desire of reviewing company policies.

The study will also inspire and aroused other researchers’ curiosity to conduct further research on inventory management and financial performance.

Finally, this study will be beneficial to future researchers, as the study findings can be used as a reference for their work.

1.7 Scope of the study

The study aims to examine the impact of inventory management on the organizational performance of the selected manufacturing firms in Cameroon. Empirically, this study will determine whether there are inventory management practices in manufacturing firms, determine whether inventory management has a significant impact on organizational growth of the selected manufacturing firms, determine whether inventory management has a significant impact on organizational profitability of the selected manufacturing firms and examine the effects of inventory management on the organizational performance of the selected manufacturing firms.

This study will be carried out in Cameroon.

1.8 Limitation of the study

The researchers encountered slight constraints while carrying out the study. The significant constraint was the scanty literature on the subject owing that the impact of inventory management on the organizational performance in Cameroon discourse is vast thus the researcher incurred more financial expenses and much time was required in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size covering only residents of Cameroon. Thus findings of this study cannot be used for generalization for other regions within Cameroon. Additionally, the researcher will simultaneously engage in this study with other academic work will impede maximum devotion to the research. Howbeit, despite the constraint encountered during the research, all factors were downplayed in other to give the best and make the research successful.

1.9 Definition of terms

Inventory: It can be defined as the available stock, in the warehouse of the firm.

Inventory techniques: These are techniques to control, coordinate and utilize stock effectively.

Stock control: Activity process or study of stock ensuring that quantities of stock or raw materials suppliers or finished goods are such that satisfactory services level is maintained for all stock keeping unit while holding cost are minimized.

Inventory management: Inventory management is the process of ordering, storing and using a company's inventory: raw materials, components, and finished products.