CHAPTER ONE

1. INTRODUCTION

1.1   BACKGROUND OF STUDY

According to Stevenson (2010), Inventory Management is defined as a framework employed in firms in controlling its interest in inventory. It includes the recording and observing of stock level, estimating future request, and settling on when and how to arrange. On the other hand, Deveshwar and Dhawal (2013) proposed that inventory management is a method that companies use to organize, store, and replace inventory, to keep an adequate supply of goods at the same time minimizing cost.

Organizational performance or effectiveness holds a central position in the management of private and public organizations as well as in the field of organizational research. Over the last decades, concerns for efficiency, productivity, excellence and total quality have become increasingly widespread in Western organizations (Lewin & Minton, 1986). These concerns are often motivated by the perception of threats to the durability of the organization. They also seem to be justified by the ever-greater international competition for market shares and resources (Maltz & al., 2003).  

The inventory investment for a small business takes up a big percentage of the total budget, yet inventory control is one of the most neglected management areas in small firms. Many small firms have an excessive amount of cash tied up to accumulation of inventory sitting for a long period because of the slack inventory management or inability to control the inventory efficiently.

Poor inventory management translates directly into strains on a company’s cash flow. The SMEs, specially manufacturing enterprises, contribute significantly to the economy in several ways. Naliaka and Namusonge (2015) an effective and efficient management inventory flow across the value chain is one of the key factors for success of large and small enterprises.

Inventory management is necessary at different locations within an organization or within multiple locations of a supply chain, to protect (the production) from running out of materials or goods. Adequate inventories kept in manufacturing companies will smooth the production process. The wholesalers and retailers can offer good customer services and gain good public image by holding sufficient inventories.

The basic objective of inventory management is to achieve a balance between the low inventory and high return on investment (ROT). (Johson et al, 1974). Inventory levels have been seen as one of the most interesting areas for improvement in organization materials management (Kumar Ordamar, Zhang, 2008).

Inventory plays a significant role in the growth and survival of an organization in the sense that ineffective and inefficient management of inventory will mean that the organization loses customers and sales will decline. Prudent management of inventory reduces depreciation, pilferage, and wastages while ensuring availability of the materials as at when required (Ogbadu, 2009).

1.2   STATEMENT OF THE PROBLEM

Inventory is a vital part of current assets mainly in manufacturing concerns. Huge funds are committed to inventories as to ensure smooth flow of production and to meet consumer demand. However, maintaining inventory also involves holding or carrying costs along with opportunity cost. Inventory management, therefore, plays a crucial role in balancing the benefits and disadvantages associated with holding inventory. Efficient and effective inventory management goes a long way in successful running and survival of a business firm, when organizations fail to manage their inventory effectively they are bound to experience, stock out, the decline in productivity and profitability, customer dissatisfaction. Hence the study; relationship between inventory management and organisational performance. Finally, there have been several research carried out on inventory management, but not even a single research has been carried out on the relationship between inventory management and organisational performance.

1.3   AIMS AND OBJECTIVES OF STUDY

        The main aim of the study is to examine the relationship between inventory management and organisational performance. Other specific objectives of the study include:

1. to determine the relationship between inventory management and organisational performance.
2. to determine the effect of inventory management on organisational performance.
3. to determine the extent to which inventory management affects organisational performance.
4. to proffer possible solutions to the problems.

1.4   RESEARCH QUESTIONS               

1. What is the relationship between inventory management and organisational performance?
2. What is the effect of inventory management on organisational performance?
3. What is the extent to which inventory management affects organisational performance?
4. What are the possible solutions to the problems?

1.5   STATEMENT OF RESEARCH HYPOTHESIS

H0:   Inventory management has no significant effect on an organizational performance.

H1:      Inventory management has a significant effect on an organizational performance.

1.6   SIGNIFICANCE OF STUDY

        The study on relationship between inventory management and organisational performance will be of immense benefit to the entire Nigeria breweries plc, Lagos in the sense that it will enable the management of companies to keep accurate records of their inventories for proper management in other not to affect the organisational performance of the company. It will also enable them to employ people who are equal to the task of proper inventory management skills. Finally, the study will contribute to the body of existing literature and knowledge to this field of studies and basis for further research.

1.7   SCOPE OF STUDY

        The study on the relationship between inventory management and organisational performance is limited to Nigerian Breweries plc, Lagos from 2000-2017

1.8   LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.9   DEFINITION OF TERMS

Relationship   The way in which two or more people or things are connected, or the state of being connected.

Between In or along the space separating two objects or regions.

Inventory                A complete list of items such as property, goods in stock, or the contents of a building.

Inventory Management  Is the supervision of non-capitalized assets (inventory) and stock items. 

Organisational Performance  comprises the actual output or results of an organization as measured against its intended outputs (or goals and objectives).