Prempeh (2016) investigated the Impact of Efficient Inventory Management on Profitability of selected Manufacturing Firms in Ghana .The study design was cross sectional. The study employed the use of secondary data. Cross sectional data from 2004 to 2014 was gathered for the analysis from the annual reports of four manufacturing companies listed on the Ghana Stock Exchange. Judgmental sampling was used to select the four companies and only manufacturing companies listed on the Ghana Stock Exchange (GSE) whose data was up to date were considered. Measures of profitability were examined and related to proxies for efficient inventory management by manufacturers. The Ordinary Least Squares (OLS) stated
69 in the form of a multiple regression model was used in the data analysis. The study revealed that there is a significantly strong correlation between the main variable, raw materials inventory management and profitability of manufacturing firms in Ghana and it is positive.
Therefore, efficient management of raw material inventory is a major factor to be considered by Ghanaian manufacturers in enhancing or boosting their profitability
Etale, Paymaster and Bingilar (2016) analyzed the effect of inventory cost management on Profitability of listed brewery Companies in Nigeria. Inventory cost management proxy by raw materials cost, work in progress cost and finished goods cost was regressed against profitability proxy by gross profit margin. Secondary time series data was collected from the annual reports and accounts of selected brewery companies from the Nigeria Stock Exchange from 2005 to 2014. A multiple regression technique to analyse the data obtained from NSE.
The study revealed that efficient inventory cost managementhave positive influence on the profitability of brewery companies in Nigeria. Based on the findings, the study recommended that brewery companies should adopt effective and efficient inventory cost management practices; deploy appropriate modern technology for effective inventory cost management;
and employ capable and qualified staff who should be trained regularly on proper and efficient inventory cost management.
Mwangi and Nyambura (2015) carried out a study aimed at determining the role of inventory management on performance of food processing Companies in Kenya. This study used descriptive research design. Using stratified random sampling design, the researcher selected 110 respondents on whom he conducted the study. The study used a questionnaire to collect primary data. The data was summarized and categorized according to common themes. Descriptive statistics was employed to analyze the data. A multiple regression model was applied to determine the relative importance of each of the variables with respect to performance of food processing companies in Kenya. The findings of the study shows that a
70 unit increases in maintaining production will lead to an increase in the scores of the performance of food processing company. The study recommends that inventory management should be well articulated, there should be a good management on cost control such as carrying cost, ordering cost as well and maintain production should be managed to meet demand, increase production turnover and identify opportunity.
Sitienei and Memba (2015) carried out a study on the effect of Inventory Management on Profitability of Cement Manufacturing Companies in Kenya. 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. Given the milestone contribution of the Cement manufacturing firms to the economy of Kenya, this research is necessary to evaluate the effects of inventory management on the profitability of the Cement manufacturing firms in Kenya. A cross sectional data from 1999 to 2014 was gathered for the analysis of the annual reports for the three sampled firms listed at Nairobi Securities Exchange (NSE). The ordinary least squares (OLS) stated in the form of a multiple regression model was applied in the data analysis to establish the relationship between inventory management and firm‘s profitability; The variables used include inventory turnover, inventory conversion period, Inventory levels, storage cost, size of firm, gross profit margin, Return on assets and growth of firm. The results provide a negative relationship between inventory turnover, inventory conversion period and storage cost with profitability of the company. In addition, inventory level was found to be directly related to firm‘s size and storage cost. The study recommends that the Cement-manufacturing firms in
71 Kenya should strive to ensure that the right stock is kept in their warehouses to hedge against excessive holding cost and stock-outs.
Nwosu (2014) examined the impact of materials management on the profitability of Nigeria brewing firms. The purpose of the study is to investigate whether there is effective and efficient materials management in Nigeria brewing firms and the extent to which it has contributed to their profitability. The population of this study is 4648 being the total staff strength of Nigeria Breweries and Guinness Nigeria PLCs, and a sample size of 368 was selected. Materials inventory, Materials procurement, materials storage and interdepartmental collaboration were adopted as sub variables of materials management while profit before tax, return on equity, earnings per share, tax paid aid dividend paid was used as profit indicators to ascertain the profitability of organizations under study Questionnaire and oral interviews were major instrument used in data collection and simple percentages were used in analyzing the data collected from the questionnaire the findings were made: that materials procurement has a significant effect on the profitability of brewing firms; that materials storage has significant effect on the profitability of brewing firms; that materials inventory has a significant contribution to the profitability of brewing firms; and that interdepartmental collaboration significantly contributed to the profitability of brewing firms. Based on the above findings, the study therefore concludes that effective materials management is indispensable to brewing firms in making profits. However, the study recommended that all manufacturing firms should embrace effective and efficient materials management in order to remain profitable. management should be well articulated, there should be a good management on cost control such as carrying cost, ordering cost as well and maintain production should be managed to meet demand, increase production turnover and identify opportunity.
72 Anichebe and Agu, (2013) studied the effect of Inventory Management on Organizational Effectiveness in Emenite, Hardis & Dromedas and the Nigeria Bottling Company all in Enugu, Enugu State. Descriptive research method, especially survey and case study were employed in carrying out the study. The population of the study is six hundred and fifty eight (658). A sample size of two hundred and forty eight (248) was derived using the Tarn Yamene formula for sample size determination from a finite population. Data were generated using questionnaire, oral interviews, observations, books, journals and the internet. Data were presented in tables and analyzed using simple percentages. Pearson product moment correlation coefficient and linear regression was use, it was discovered that irrespective of the fact that the organizations studied, painted the picture that they were applying the tenets of good inventory management, they from time to time run into the problems of inventory inadequacy. This consequently affected their production, leading to the scarcity of one brand of their products or the other, thereby affecting their profitability and consequential effectiveness negatively. The Findings indicate that there is significant relationship between good inventory management and organizational effectiveness. Inventory management has a significant effect on organizational productivity. There is highly positive correlation between good inventory management and organizational profitability. The study concluded that inventory Management is very vital to the success and growth of organizations. The entire profitability of an organization is tied to the volume of products sold which has a direct relationship with the quality of the product Against this background the study recommended that Organizations should diversify their inventory system to suit specific needs of production, and that management should closely monitor and manipulate their inventory system to maintain production consistency for organizational profitability and effectiveness.
Panigrahi (2013) conducted a study to study in depth the inventory management practices of Indian cement companies and its impact on working capital efficiency. The purpose of the
73 study is to examine the relationship between inventory conversion period and firms profitability. The dependent variable, gross operating profit is used as a measure of profitability and the relationship between inventory management and profitability is investigated for a sample of five top Indian cement companies over a period of ten years from 2001-2010. This study employs Regression analysis to determine the impact of inventory conversion period over gross operating profit taking current ratio, size of the firm, financial debt ratio as control variables. The results indicate that there is a significant negative linear relationship between inventory conversion period and profitability. The results of this research are in line with the previous findings. The findings indicate that Inventory conversion period has an inverse relationship with firm‘s profitability i.e. when the ICP days increase the ―profitability of firm decreases and vice versa. It was found that, the firms‖ profitability as measured by GOP has a negative relationship with financial debt ratio.
This implied that profitability increases with decrease in financial debt ratio. Furthermore in this study the relationship between the firm size and GOP was positive which indicates that profitability increases with an increase in firm size. The relationship between current ratio and the GOP was negative.
Working capital management efficiency is vital for manufacturing firms, where a major part of the assets is composed of current assets (Home & Wachowitz, 2004). One of the major components of working capital is inventory. The inventory of a manufacturing company comprise of finished goods, work in progress and raw materials. The sum of the three components of the inventory constitutes a heavy investment in a manufacturing firm. Current assets for a typical manufacturing company account for over half of its total assets (Raheman
& Nasr, 2007).