Abstract

The focal point of the study was conducted to determine the effect of inventory management on the performance of CDC Tiko. The main purpose of management of inventory is basically to try and balance the conflicting economics of not wanting to hold too much inventories or stocks. However, most managers ignore the saving potential that arise from proper management of inventories, trying to treat inventories as a necessary evil and not as an asset that require to be managed. As such, some firms do not or ignore to control their inventory holding, this usually leads to under stocking and causing the firm to stop or slow its production. This study sought to examine the effect of inventory management on the performance of Cameroon Development Cooperative (CDC) Tiko. This study employed a descriptive research design. The workers of this organization were considers as the respondents of the study. With the complexity in managing a large population, a sample of 40 workers were randomly selected to constitute the respondents of the study. Data was collected from these respondents with the use of questionnaires, interview and observation. The collected data was analyzed in tables and bar charts. With the use of Excel, the collected data were summed and analyzed with the use of the regression method. The analysis shows that there is a positive relationship between inventory management and organizational performance. Specifically, inventory control and inventory cost can enhance the organizational performance in customer management, budget management and more efficient use of warehouse space. This study concludes that; the management of CDC should invest in inventory management practices in order to boast its performance.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Science and technology remains the fulcrum for development over the ages. There is hardly any national development in contemporary history that is not based on consistent efforts from the science and technology sector. The spate of development in agriculture follow suit; the state of efficiency in science and technology generation correlates highly with the development of agriculture. In Africa, agriculture is considered as the sector with the best potential to lead the socioeconomic development of countries on the continent. However, the sector is covered with many constraints that could be categorized as technological, socio-cultural, institutional, infrastructural, and economical. Among these problems, inventory management has been seen to be a factor directly related to the organizations performance. An organization can have all it takes to operate but if they lack knowledge of what is available and what is needed, this can lead to a serious problem in productivity. Therefore, this research work is then to identify the effect of inventory management on organizational performance.

The liberalization of markets across the globe has led to an increase in competition especially among the manufactured of goods and services (Shafie, 2004; Verstege and Amstel, 1991). Every organization is then trying to perform to their best in order to produce the best results required to overthrown the competitive environment. This can effectively be realized by putting in place an accurate and a reliable inventory management system.

Inventory management refers to keeping or maintaining the firm’s stocks at a level that a firm will only incur the least cost consistent with other management’s set objectives or targets (Kwadwo, 2016). Inventory management is about ensuring that all input materials of production available to the firm are maintained at a level where production is not interrupted as well as ensuring that operational cost is kept at a minimal level without affecting operation efficiency (Eneje, et al., 2012). Inventory management entails planning, organizing, controlling and directing. All these coordinated efforts are meant to ensure achievement of efficiency in all operations of the firm. Inventory management as explained by Lavely, (1996) as the active control program that permits to govern its running of the various departments in a firm. This includes the production, research and development (R&D), purchasing, marketing, human resource, accounting and finance. The main aim of inventory management is to ensure that organizations hold inventories at the lowest cost possible while at the same time achieving the objective of ensuring that the company has adequate and uninterrupted supplies to enhance continuity of operations (Mpwanya, 2005). A study carried out by Bhausaheb & Routroy, (2010) shows that companies are keen in managing their inventory so as to reduce costs, improve the quality of service, enhance product availability and ultimately ensure customer satisfaction. Results of a study carried out by Rosenfield & Simchi-levi (2010) shows that inventory management has a huge financial implication on both the customer satisfaction and financial performance of an enterprise.

Generally, when you are unaware of what you have, you cannot easily identify what you need. An effective inventory management can help the organization easily identify the gap between the available, and the unavailable(needs). inventory management is the most significant asset of every organization. This then implies that; any inventory problems can cause a direct failure on the results of the organization.

1.2 Problem Statement

Inventories are vital to the successful functioning of manufacturing and retailing organizations. They may consist of raw materials, work-in-progress, spare parts/consumables, and finished goods. It is not necessary that an organization has all these inventory classes. But, whatever may be the inventory items, they need efficient management as, generally, a substantial share of its funds is invested in them. Different departments within the same organization adopt different attitude towards inventory. This is mainly because the particular functions performed by a department influence the department’s motivation. For example, the sales department might desire large stock in reserve to meet virtually every demand that comes. The production department similarly would ask for stocks of materials so that the production system runs uninterrupted. On the other hand, the finance department would always argue for a minimum investment in stocks so that the funds could be used elsewhere for other better purposes, (Vohra, 2008:427). Inventory represents an important decision variable at all stages of product manufacturing, distribution and sales, in addition to being a major portion of total current assets of many organizations. Inventory often represents as much as 40% of total capital of industrial organizations (Moore, Lee and Taylor, 2003:321). It may represent 33% of company assets and as much as 90% of working capital, (Sawaya and Giauque, 2006:121). Since inventory constitutes a major segment of total investment, it is crucial that good inventory management be practiced to ensure organizational growth and profitability. According to Temeng et al (2010:195), historically, however organizations have ignored the potential savings from proper inventory management, treating inventory as a necessary evil and not as an asset requiring management. As a result, many inventory systems are based on arbitrary rules. Unfortunately, many organizations invest less in inventory and are not able to meet customer demands because of poor distribution of investment among inventory items (Temeng et al., 2010).

Problems of inventory management and control have been around for a very long time. The need to give out goods when they are readily available and then store it for times of shortage is perhaps the fundamental stock holding problem, which was tackled long ago by man. In an agricultural organization like CDC, inventory is conducted to ensure that the required machines are in place, which ones needs adjustments and replacements, which goods are ready to be given out, which will be ready with time, etc.

Based on the above analogy, the researcher was then motivated to carry out a study on the effect of inventory management on the organizational performance taking the case of Cameroon Development Cooperation TIKO

1.3 Research Questions

Mainly, this research work will seek to answer the question, what is the effect of inventory management on the organizational performance in CDC Tiko plantation?

Specifically,

1. What is the effect of inventory control on the organizational performance?
2. What is the effect of inventory cost on organizational performance?

1.4 Research Objectives

The main objective of this study is to examine the effect of inventory management on the organizational performance of CDC Tiko

In line with the main objective, the following specific objectives will be pursued

1. To examine the effects of inventory control on organizational performance?
2. To identify the effects of inventory cost on the performance of an organization?

1.5 Research Hypothesis

In order to identify the effect of the independent variable on the dependent variable, the following hypotheses are developed.

Main hypothesis:

There is an effect of inventory management on the organizational performance

Specific hypothesis

H1: Inventory control have an effect on the organizational performance

H2: Inventory costs have an effect on the organizational performance