May Acaye Inventory Management Dissertation

8/9/2019 May Acaye Inventory Management Dissertation

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MAKERERE UNIVERSITY

COLLEGE OF EDUCATION AND EXTERNAL STUDIESSCHOOL OF DISTANCE AND LIFELONG LEARNING

DEPARTMENT OF OPEN AND DISTANCE LEARNING

INVENTORY MANAGEMENT AND FINANCIAL PERFORMANCE

MANUFACTURING INDUSTRIES:A CASE OF UGANDA CLAYS LIMITED

ACAYE PHILIP KILAMA

06/U/9333/EXT

A RESEARCH REPORT SUBMITTED TO COLLEGE OF EDUCATION AND

EXTERNAL STUDIES, SCHOOL OF DISTANCE AND LIFELONG

LEARNING, DEPARTMENT OF OPEN AND DISATANCE

LEARNING IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE AARD OF

THE DEGREE OF BACHELOR OF

COMMERCE OF MAKERERE

UNIVERSITY

MAY, !0""

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DECLARATION

I, Acaye Philip Kilama declare that this work is original and has never been submitted to any

other institution for award of any degree where the work of others has been used, reference has

been made there of.

Signed !ate"

ACAYE PHILIP KILAMA

#$%&%'(((%)*+

#CANDIDATE$

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APPROVAL

I thereby certify that I supervised the candidate and his report is ready for eamination

Signed by.. !ate.

MR BYARUGABA PONTIUS

-S&P)/IS01

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DEDICATION

+o my dear parents r. Kilama 3ilson 0lal-deceased1, my mother rs. Kilama ary Adong,

my brother Aliker 3alter Kilama, my wife Akello Solina, my children4 5oel and 5ude, my sisters4

5enniffer, Agnes, Susan, 6etty and Irene4 and all relatives and friends who bore my absence

while I was at the university. I also appreciate the great support they gave me while at the

university and home preparing and working on this report.

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ACKNOLEDGEMENT

I wish to thank in a special way, the Almighty 8ather for availing me the grace and opportunity

to study up to this level, for the encouragement, gift of life and the strength to carry out this

research as it is absolutely difficult and time consuming.

y thanks go to the anagement and the entire Staff of &ganda 9lays :imited for the assistance

they rendered to me including sparing a lot of their time answering my ;uestionnaire.

y appreciation and acknowledgement goes to my family for all the support and encouragement

they rendered to me while at akerere &niversity.

I, also, in a special way, thank my supervisor r. 6yarugaba Pontius for his professional

supervision and encouragement.

I am grateful to 6ongomin oris, 0kwir !enis and Kikwiyakare 3alter for the professional

advice and editing of this research report.

y special thanks also go to the management and staff of akerere &niversity for giving me the

opportunity to carryout this research study and allocating me to r. 6yarugaba Pontius for

supervision.

I am greatly indebted to management and staff of


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LISTS OF ABBREVIATIONS

&9: &ganda 9lays :imited

A99A Association of 9hartered 9ertified Accountant

)0> )conomic 0rder >uantity

5I+ 5ust In +ime

!PS !ividends Per Share

)PS )arning Per Share

P6+ Profit 6efore +a

0) eturn on );uity

0A eturn on Assets

&IA &ganda Investment Authority

SPSS Statistical Package for Social Sceinces

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TABLE OF CONTENTS

!)9:AA+I0?..............................................................................................................................i

APP0/A:.....................................................................................................................................ii

!)!I9A+I0?................................................................................................................................iii

A9K?03:)!


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2.7.7.2 0ther lotDsiEing techni;ues................................................................................................@7

2.=. Inventory anagement...........................................................................................................@=

2.*.1. +,o in syste#s...................................................................................................................@$

2.*.2 -C analysis.........................................................................................................................@B

2.*.% +heory of constraints (+OC).................................................................................................@C

2.*.* Materials e!ire#ents Plannin' (MP) syste#.................................................................@C

2.$ 3hy 8irms Fold Inventory......................................................................................................@'

2.B !etermination of Inventory :evel...........................................................................................@'

2.C 8inancial performance of an organiEation...............................................................................2@

2.' Performance Indicators............................................................................................................2(

2.@# elationship between inventory management and financial performance............................27

CHAPTER THREE.....................................................................................................................2B3%0 RESEARCH METHODOLOGY.........................................................................................2B

(.@ 0verview..................................................................................................................................2B

(.2 esearch !esign......................................................................................................................2B

(.( +he Study Population...............................................................................................................2B

(.7 Sample Area.............................................................................................................................2C

(.= Sampling procedures%+echni;ues............................................................................................2C

(.$ Sources of !ata and 9ollection ethods................................................................................2C

(.B Procedures of 9ollection !ata.................................................................................................2C(.C !ata 9ollection Instruments....................................................................................................2C

(.C.@ Interviews.............................................................................................................................2'

(.C.2 >uestionnaires......................................................................................................................2'

(.C.( !ocumentary eviews..........................................................................................................2'

(.' !ata Analysis...........................................................................................................................2'

(.@# :imitation of the study...........................................................................................................2'

CHAPTER FOUR.......................................................................................................................(#DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF THE FINDINGS%%%%%(#

7.# Introduction..............................................................................................................................(#

7.@ 6ackground Information on espondents...............................................................................(#

7.@.@ 8indings on the sample se...................................................................................................(#

[email protected] 8indings on the ;ualifications of respondents......................................................................(@

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7.@.( 8indings on Age of espondents..........................................................................................(@

+able...............................................................................................................................................(@

[email protected]" 8indings on how long the respondents have worked for the company..............................(2

7.2 Inventory anagement System )mployed by &ganda 9lays :imited...................................((

7.2.@ esponse on the inventory management system employed by &ganda 9lays :imited.......((

7.2.2 esponse on maintenance of stock levels.............................................................................((

7.2.( esponse on maintenance of inventory levels for each item................................................(7

7.2.7 esponses on proper records of inventory............................................................................(7

7.2.= esponses on eistence of stock taking................................................................................(=

7.2.$ esponses on whether stock taking figures agree with the record figures...........................(=

7.2.B esponses on how often stocktaking is carried out..............................................................($

7.( 8indings on the Profitability :evels of the Industry................................................................($

7.(.@ esponses on the trend of profitability.................................................................................($7.7 8indings on the elationship between Inventory anagement and Profitability...................(B

7.7.@ esponses on the level of inventory management system in &ganda 9lays :imited..........(B

7.7.2 esponses on the level of profitability in &ganda 9lays :imited........................................(B

7.7.( esponses on whether inventory management significantly affected the financial

performance of &ganda 9lays :imited..........................................................................................(C

7.7.7 9orrelation between inventory management and financial performance -profitability1......(C

CHAPTER FIVE%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%&0

SUMMARY, CONCLUSION AND RECOMMENDATIONS%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%&0

=.# Introduction..............................................................................................................................7#

=.@ Summary of 8indings..............................................................................................................7#

=.@.@ Summary of the 8indings on Inventory anagement System in &ganda 9lays :imited....7#

=.@.( +he Summary of 8indings on the elationship between Inventory anagement System and

8inancial Performance -Profitability1............................................................................................7@

=.2 9onclusion...............................................................................................................................7@

=.( ecommendations....................................................................................................................72

eferences......................................................................................................................................77

Appendices....................................................................................................................................7$

Appendi A" >uestionnaire...........................................................................................................7$

Appendi 6" :etter of Introduction...............................................................................................=@

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L'() *+ )-.(

+able @" aor Shareholders in &ganda 9lays :imited..................................................................(

+able 2" Showing +rend of Profits In &ganda 9lays :imited-in G### Shs1....................................7

+able (" Inventory in metric tones...................................................................................................=

+able 7" Income Statement............................................................................................................22

+able B" Se of respondents...........................................................................................................(#

+able C" >ualification of respondents............................................................................................(@

7.@.( 8indings on Age of espondents+able '" Age of respondents.............................................(@

+able @#" Period of service in the company...................................................................................(2

+able @@" esponses on Inventory management systems..............................................................((

+able @2" esponse on whether stock levels are maintained.........................................................((

+able @(""Stock maintenance for each item...................................................................................(7

+able @7" Proper records of inventory...........................................................................................(7

+able @=" )istence of stock taking...............................................................................................(=

+able @$" Agreement between stock taking figures and record figures.........................................(=

+able @B" 8re;uency of stock taking..............................................................................................($

+able @C" Profitability trend...........................................................................................................($

+able @'" Profit argin of &ganda 9lays :imited -2##2D2##$ in G### Shs1................................(B

+able 2#" >uality of Inventory management system and profitability..........................................(B

+able 2@" Profitability in &9:.......................................................................................................(B

+able 22" )ffects of inventory management on performance of &9:...........................................(C

+able 2(" 9orrelation table showing the significance of the relationship between inventory

management and financial performance........................................................................................(C

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ABSTRACT

+he research study was aimed at establishing the effects of inventory management in

manufacturing industries, a case study of &ganda 9lays :imited. +he study was meant 4 to

evaluate the inventory management system in &ganda 9lays limited, to establish the profitability

level in &ganda 9lays :imited, and to establish the relationship between inventory management

and financial performance of &ganda 9lays :imited.

+he researcher used random sampling. Staff within &ganda 9lays :imited constituted the study

population. +hirty respondents were sampled. Primary data was collected by use of

;uestionnaires. Secondary data was from eisting literature and data was analyEed using

percentage scores and fre;uencies, the correlation analysis of the relationship between inventory

management and financial performance was done using SPSS and PearsonHs 9orrelation

coefficient was used.

+he findings revealed that the relationship between inventory management and the level of

financial performance has been fairly good, and on a raising trend. Fowever, inventory is the key

current asset with a substantial portion in the form of work in progress and spares and

consumables, which are not as li;uid as cash and receivables. +he company is working on

increasing its li;uidity levels by streamlining its processes to ensure better and effective

inventory management.

+he researcher recommends that, proper records of inventory of each item must be maintained

and ensure that rate of inventory turn over increased. +here is need for interdepartmental

coordination between arketing and Production to avoid having much inventory at year end.

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CHAPTER ONE

"%0 INTRODUCTION

In the late @'C#s, most manufacturing industries relied on Agricultural products for raw materials

and machinery, and as a result the problems plaguing the agricultural sector hampered both

production and marketing in manufacturing. Processing industries for cotton, coffee, sugar and

food crops were dominant , but &ganda also produced tetiles, tobacco, beverages, wood and

paper products, construction materials and chemicals.

In the late @'C#Hs, the government began to return some nationaliEed manufacturing firms to the

private sector in order to encourage private investment and increase on the effective and efficient

performance of these firms. +he primary aim was to promote self sufficiency in consumer goods

and strengthen linkages between agriculture and industry. 6y @'C', the government estimated

manufacturing output to be only about one third of the post independent peak levels achieved in

@'B# and @'B@.

0nly eleven out of eighty two manufacturing establishments surveyed by the inistry 0f

Planning and )conomic !evelopment were operating at more than (= capacity. 0verall,

industrial output increased between 5anuary @'C$ and 5une @'C' and the contribution from

manufacturing increased from only = to more than @@ during the same period.

+he manufacturing sector in &ganda comprises of Agricultural, manufacturing plants, food

processing, construction materials which include4 steel products, clay works and others.

+he companies involved in the manufacturing sector include but not limited to4 )ast African

Steel 9orporation, the two cement producing plants at +ororo and Fima, &ganda 9lays limited

which is the subect of this research.

@


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"%" B12*45 *+ )7 ()48

Inventories are materials and supplies that a business or institution carries or holds either for sale

or to provide inputs or supplies to the production process -Arnold @''C1.

Inventories eist in three different types4 finished goods, work in progress and raw material that

are used to facilitate business operations.

3hen too much of inventory is kept, it raises the operation costs through storage cost, damages

and so on. 0n the other hand, losses are likely to occur if too little inventory is kept due to an

interruption in operations. +herefore, a good operations manager is one who will easily strike a

balance of how much inventory of each type should be kept in order to gain a greater efficiency

in production or operations. +his therefore makes inventory management inevitable as it takes a

large portion of the operation managerHs ob.

Performance of an organiEation relates to how well or badly an organiEation is doing in relation

to the given or selected variables. +he variables could be sales turnover, environmental factors,

inventory management system, government policies like taes and others.

&ganda 9lays :imited was established in @'=# as a private limited company. +he companyHs

ownership has changed hands overtime

In @'$', 3estomat 9onstruction and )ngineering 9orporation -39)91 took over the company

due to its performance. Faving failed to maintain a certain standard, they in turn sold B= of the

company to ?ational Fousing and 9onstruction 9orporation -?F991 in @'BB.

In @''' ?F99 was @## owned by the


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T-. !: S7*;'52 T5 *+ P*+')( I5 U25 C.8( L'')#'5 >000 S7($

YEAR !00? !006 !00@ !00&

evenues 7,'#@,(@C C,'C7,@#7 B,'@=,##B B,='7,CC$

9osts 2,=2C,'@7 =,=2=,#2# 7,='B,$#B 7,#27,$@'

G*(( P*+') !,3?!,&0& 3,&@9,0& 3,3"?,&00 3,@?0,!6?

Source:Uganda Clays Ltd Management report, 2008

"%! S))5) *+ )7 P*-.

In modern businesses, it is inevitable for organiEation to function without inventories that is why

many firms recogniEe the need to have a developed and comprehensive inventory management

system in order to minimiEe inventory cost and maimiEe profitability.

+he inability to manage inventory in a proper way has led &ganda clays limited to face a

problem of declining profitability in their operations and this has led to fluctuations in profits

-anagement report, 2##C1 &ganda 9lays limited. If the problem of poor inventory management

is not solved, profitability levels will continue declining and the company may run out of

business given the fact that there is an increasing number of similar industries producing same

products and those producing substitute products.

T-. 3: I55)*8 '5 )' )*5(

!006 !00@ !00& !003 !00!

Jear 0pening @##,### 2##,### 2##,### @##,### @##,###

Produce 2=#,### @##,### @##,### 2##,### @##,###

!emand =##,### 2##,### @##,### @##,### @##,###

JearDend inventory (##,### @##,### 2##,### 2##,### @##,###

S*4, ='8 ) !00

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"%6%3 T' S*=

+he study covered data on &ganda 9lays :imited inventory management processes and its

effects on financial performance for a period of four years-2##BD2#@#1.

"%? 4()'+')'*5/S'25'+'5 *+ )7 S)48

@.B.@ +he study is to ascertain the effect of inventory management on the financial performance

of the business, a case of &ganda 9lays :imited.

@.B.2 +he study will benefit researchers especially those who have an interest of broadening their

knowledge in inventory management and performance

@.B.( It is a preDre;uisite for partial fulfillment for the award of a degree of 6achelor of

9ommerce of akerere &niversity.

@.B.7 +he research will benefit &ganda 9lays :imited by providing a basis upon which action

could be taken to improve their efficiency in inventory management and financial performance

@.B.= 6enefit to other clay industries which will get baseline information about the effect of

defective inventory management and its net effect on profitability levels.

CHAPTER TO

!%0 LITERATURE REVIE

!%" INTRODUCTION

+his chapter analyEed the relevant literature on inventory management as studied by other

scholars and it has been discussed in relation to the research obectives.

Inventory is defined as any resources used to satisfy a current future need-ender and Stair

@'C=1. Inventory can also be defined as items available for sale in the ordinary course of

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business, which a company has in its possession and holds legal title to-:arry, 8lattery and

0Hcconor @'C71.

Inventory eists in three forms4 raw materials, work in progress and finished goods.

+his chapter deals with why firms hold inventory, inventory management definition and

obectives, techni;ues to be used in inventory management, inventory models and systems and

the costs to be associated with inventory management, inventory centre methods

!%! T8=( *+ I55)*8

According to eheshwan and


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2.3.1 Order Cycle Methods of n!entory

&nder this particular method, inventory on hand is reviewed periodically -say every @2 months1.

8or these items that are of low cost, a techni;ue called '#D$#D(# days can be used so that when

inventory falls to $# days, supply of fresh order is placed from (# days supply so as to boast

stocks to '# days supply -A99A,@''$1.

2.3.2. "areto #80$20% &'str'(ut'on

+his is an approach to stores management that emphasiEes that more epensive items be

controlled closely. It is based on the understanding that C# of the stocks are accounted for by

only @# of the stores items -A99A,@''$1.

2.3.3. )conom'c Order *uant'ty

+his is the ;uantity at which carrying costs and ordering costs are minimum and e;ual -:ucey,

@''71. According to Kakuru -@''C1, this is also the most commonly used approach to inventory

management. In production planning, the maor issue is usually how much production to

schedule. +he amount to order called order ;uantity usually causes problems to firms.

+herefore, the )conomic 0rder >uantity helps firms to determine the optimum level of inventory

held at one time -Pandey,@''=1. 3hen the level of inventory -0ptimum1 does not lead to sales

disruptions, this is an indicator that the firm is performing efficiently as customers are promptly

served and there eists no ecess inventory in stock for the firm to incur inventory holding costs.

Fowever, the )conomic 0rder >uantity -)0>1 model has got its disadvantages, as its

applicability in developing countries is not certain.

+here is a constant change in demand for products due to factors like prices, ;uantity, and

income. +his makes demand not to be known with certainty.

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0rdering and carrying costs are never constant. +he fact is that they keep on changing all the

time.

+here are other factors that affect the efficiency of the purchasing department and supplies lead

time keep on changing.

!%& B.5'52 I55)*8 5 C*()(

As stated earlier, inventory management is an attempt to maintain an ade;uate supply of goods

while minimiEing inventory costs. 3e saw a variety of reasons companies hold inventory and

these reasons dictate what is deemed to be an ade;uate supply of inventory.

+here are three types of costs that together constitute total inventory costs" holding costs, stock

out costs, setDup costs, and purchasing costs.

2.+.1 old'ng Costs

Folding costs, also called carrying costs, are the costs that result from maintaining the inventory.

Inventory in ecess of current demand fre;uently means that its holder must provide a place for

its storage when not in use. +his could range from a small storage area near the production line to

a huge warehouse or distribution center. A storage facility re;uires personnel to move the

inventory when needed and to keep track of what is stored and where it is stored. If the inventory

is heavy or bulky, forklifts may be necessary to move it around.

Storage facilities also re;uire heating, cooling, lighting, and water. +he firm must pay taes on

the inventory, and opportunity costs occur from the lost use of the funds that were spent on the

inventory. Also, obsolescence, pilferage -theft1, and shrinkage are problems. All of these things

add cost to holding or carrying inventory.

If the firm can determine the cost of holding one unit of inventory for one year - & 1 it can

determine its annual holding cost by multiplying the cost of holding one unit by the average

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inventory held for a oneDyear period. Average inventory can be computed by dividing the amount

of goods that are ordered every time an order is placed - $ 1 by two. +hus, average inventory is

epressed as $ %2. Annual holding cost, then, can be epressed as& - $ %21

2.+.2. Stoc- out Costs

+hese are costs associated with having inade;uate or no stock. Stock out costs are an essential

factor in inventory control and are difficult to estimate. If a firm runs out of stock, this leads to a

loss in the shortD term and damage of its good will in the long run. +he inade;uate inventory

level will basically mean stock outs and this could ultimately lead to the closure of the firm as

profits are lost continuously -ender and Stairn,@''71. +he avoidance of stock out costs is the

basic reason stocks are held in the first place -:ucey,@''$1 because inventories constitute a large

part of a firmHs current assets, proper management of inventories has to be emphasiEed.

.

!%&%3 S)U= C*()(

SetDup costs are the costs incurred from getting a machine ready to produce the desired good. In

a manufacturing setting this would re;uire the use of a skilled technician -a cost1 who

disassembles the tooling that is currently in use on the machine. +he disassembled tooling is then

taken to a tool room or tool shop for maintenance or possible repair -another cost1. +he

technician then takes the currently needed tooling from the tool room -where it has been

maintained4 another cost1 and brings it to the machine in ;uestion.

+here the technician has to assemble the tooling on the machine in the manner re;uired for the

good to be produced -this is known as a LsetDupL1. +hen the technician has to calibrate the

machine and probably will run a number of parts, that will have to be scrapped -a cost1, in order

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to get the machine correctly calibrated and running. All the while the machine has been idle and

not producing any parts -opportunity cost1. As one can see, there is considerable cost involved in

setDup.

If the firm purchases part or raw material, then an order cost, rather than a setDup cost, is

incurred. 0rdering costs include the purchasing agentMs salary and travel%entertainment budget,

administrative and secretarial support, office space, copiers and office supplies, forms and

documents, longDdistance telephone bills, and computer systems and support. Also, some firms

include the cost of shipping the purchased goods in the order cost.

If the firm can determine the cost of one setDup - 1 or one order, it can determine its annual

setup%order cost by multiplying the cost of one setDup by the number of setDups made or orders

placed annually. Suppose a firm has an annual demand -D 1 of @,### units. If the firm orders @##

units - $ 1 every time it places and order, the firm will obviously place @# orders per year -D % $

1. Fence, annual setDup%order cost can be epressed as -D % $ 1.

!%&%&% P47('52 C*()

Purchasing cost is simply the cost of the purchased item itself. If the firm purchases a part that

goes into its finished product, the firm can determine its annual purchasing cost by multiplying

the cost of one purchased unit -P)by the number of finished products demanded in a year -!).

Fence, purchasing cost is epressed asPD.

?ow total inventory cost can be epressed as"

+otal N Folding cost O SetDup%0rder cost O Purchasing cost

or

+otal N& -$ %21 O -!% $)OPD

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If holding costs and setDup costs were plotted as lines on a graph, the point at which they

intersect -that is, the point at which they are e;ual1 would indicate the lowest total inventory cost.

+herefore, if we want to minimiEe total inventory cost, every time we place an order, we should

order the ;uantity ->)that corresponds to the point where the two values are e;ual. If we set the

two costs e;ual and solve for $ we get"

& -$%21N-!%$)

$ N 2D %&

+he ;uantity $ is known as the )conomic 0rder >uantity -)0>1. In order to minimiEe total

inventory cost, the firm will order $ every time it places an order. 8or eample, a firm with an

annual demand of @2,### units -at a purchase price of Shs 2= each1, annual holding cost of Shs

@# per unit and an order cost of Shs @=# per order -with orders placed once a month1 could save

Shs C## annually by utiliEing the )0>. 8irst, we determine the total costs without using the )0>

method"

$ N Shs @#-@###%21 O Shs @=#-@2,###%@###1 O Shs 2=-@2,###1 N Shs (#$,C##

+hen we calculate )0>"

)0> N 2-@2,###1-Shs @=#1%Shs @#N $##

And we calculate total costs at the )0> of $##"

$ N Shs @#-$##%21 O Shs @=#-@2,###%$##1 O Shs 2=-@2,###1 N Shs (#$,###

8inally, we subtract the total cost of $ from $ to determine the savings"

Shs (#$,C## (#$,### N Shs C##

?otice that if you remove purchasing cost from the e;uation, the savings is still Shs C##. 3e

might assume this means that purchasing cost is not relevant to our order decision and can be

eliminated from the e;uation. It must be noted that this is true only as long as no ;uantity

@2


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)0> is an eample of the fiedDorderD;uantity model since the same ;uantity is ordered every

time an order is placed. A firm might also use a fiedDorder ;uantity when it is captive to

packaging situations. If you were to walk into an office supply store and ask to buy 22 paper

clips, chances are you would walk out with @## paper clips. Jou were captive to the packaging

re;uirements of paper clips, i.e., they come @## to a bo and you cannot purchase a partial bo.

It works the same way for other purchasing situations. A supplier may package their goods in

certain ;uantities so that their customers must buy that ;uantity or a multiple of that ;uantity.

'/edorder'nter!al model

+he fiedDorderDinterval model is used when orders have to be placed at fied time intervals such

as weekly, biweekly, or monthly. +he lot siEe is dependent upon how much inventory is needed

from the time of order until the net order must be placed -order cycle1. +his system re;uires

periodic checks of inventory levels and is used by many retail firms such as drug stores and

small grocery stores.

S'ngleper'od mode.

+he singleDperiod model is used in ordering perishables, such as food and flowers, and items

with a limited life, such as newspapers. &nsold or unused goods are not typically carried over

from one period to another and there may even be some disposal costs involved. +his model tries

to balance the cost of lost customer goodwill and opportunity cost that is incurred from not

having enough inventories, with the cost of having ecess inventory left at the end of a period.

"artper'od (alanc'ng

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PartDperiod balancing attempts to select the number of periods covered by the inventory order

that will make total carrying costs as close as possible to the setDup%order cost.

3hen a proper lot siEe has been determined, utiliEing one of the above techni;ues, the reorder

point, or point at which an order should be placed, can be determined by the rate of demand and

the lead time. If safety stock is necessary it would be added to the reorder point ;uantity.

eorder point N)pected demand during lead time O Safety stock

+hus, an inventory item with a demand of @## per month, a twoDmonth lead time and a desired

safety stock of two weeks would have reorder point of 2=#. In other words, an order would be

placed whenever the inventory level for that good reached 2=# units.

eorder point N @##%month Q 2 months O 2 weeksM safety stock N 2=#

!%@% I55)*8 M525)

Inventory management refers to the process of managing the stocks of finished products, semiD

finished products and raw materials by a firm. Inventory management, if done properly, can

bring down costs and increase the revenue of a firm.

Fow much one should invest in inventory management +he answer to this ;uestion depends on

the volume and value of inventory as a percentage of the total assets of a firm. +he importance of

inventory management varies according to industries. 8or eample, an automobile dealer has

very high inventories, sometimes as high as =# per cent of the total assets, whereas in the hotel

industry it may be as low as 2 to = per cent.

+he process of inventory management is a continuous one and there are various kinds of

solutions available. It is advisable to employ specialiEed staff for inventory management.

@=


27/60

+he inventory management process begins as soon as one has started production and ordered raw

materials, semiDfinished products or any other thing from a supplier. If you are a retailer, then

this process begins as soon you have placed your first order with the wholesaler.

0nce orders have been placed, there is generally a short period of time available to a firm to put

an inventory management plan in place before the supplies are delivered. Inventory management

helps a firm to decide in advance where these supplies should be stored. If a firm is getting

supplies of smallDsiEed goods, it may not be much of a problem to store them, but in the case of

large goods, one has to be careful so that the warehousing space is optimally utiliEed.

8rom invoices to purchase orders, there is lot of paperwork and documentation involved in

inventory management. Several software programs are available in market, which help in

inventory management.

Inventory management systems are used to determine when to place orders and in what

;uantities, these management systems have an obective of minimiEing investment in inventory

without necessarily impairing production -


28/60

represent relatively low value of the business and one under simple management. +hey represent

@= of the value of the business and =# of stock. 9 items represent relatively low value and

simple control -Pandey, @''=1. &nder the A69 analysis, there is more concentration on

important items and less control on less important items -Pandey @''=1

6efore the A69 analysis is implemented, the following steps will be involved4

9larify the items of inventory, determining the epected use in units and price per unit.

!etermine the total value of each item by multiplying the epected units by its unit price

ank items according to value giving first rank to those with highest value.

9ompute the ratios -percentage1 of numbers of units of each item to the total units of all items

and the ratio of total value of each item to total value of items.

9ombine items on the basis of their relative value to form three categories A6 and 9 -Pandey,

@''B1.

2..3. 7ustn 'me system

+his is a new approach in inventory control that was developed by the 5apanese. +he aim of ust

in time is to have particular items of inventory, particularly raw materials delivered hours before

they are re;uired. +here is no need of holding stock and their needs to be close liaison between

the supplier and the producer.

According to :ucey-@''71, 5ust In +ime aims at producing the re;uired items of high ;uality at

the eact time they are re;uired.

)ugene and 6righam -@''B1, also emphasiEes that inventory is costly to the firms there is always

pressure to reduce inventory holding in a firm.

@B


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2..+ heory of constra'nts #OC%

+heory of constraints -+091 is a philosophy which emphasiEes that all management actions

should center on the firmMs constraints. 3hile it agrees with 5I+ that inventory should be at the

lowest level possible in most instances, it advocates that there be some buffer inventory around

any capacity constraint -e.g., the slowest machine1 and before finished goods.

2.. Mater'als eu'rements "lann'ng #M"% system.

+his system uses )conomic 0rder >uantity concepts and a computer to compare production

needs with available inventory levels and determine what to order, when to order and what

priorities to assign to ordering materials. +he computer basing on production needs, available

inventory and the time it takes a product to pass through various stages of production,

determines when orders should be placed and in what ;uantities.

aterial re;uirements planning forces the firm to plan accordingly and its obective is to lower

the firmHs investment in inventory without affecting production -


30/60

"recaut'onary mot'!e9 +his involves holding inventory to guard against unforeseen or

unpredictable changes in demand and supply forces in the market. 6ecause procurement of

materials may be delayed by such factors as transport, strikes, stocks of raw materials or finished

goods should be maintained to be used in periods of short supply.

Speculat'!e mot'!e9Stocks are held in either ecess or shortages to take advantage of price

fluctuation. A firm may over stock raw materials in anticipation of rise of prices of raw materials.

!%? D)'5)'*5 *+ I55)*8 L.

As seen from above, firms have different reasons as to why they hold inventory. )ffective

inventory management is essential in the operation of any business -6assin, @''#1.Fakansson

and Persson -2##71 identified three different trends in the development of logistics solutions

within an industry4 one trend is concerned with the increased integration of logistics activities

beyond organiEation boundaries with an aim to reduce cost items such as capital costs for

inventory and handling costs of flows. Inventory as an asset on the balance sheet of companies

has taken on increased importance because many companies are applying the strategy of

reducing their investment in fied assets like plants, warehouses, e;uipment and machinery, and

so on, which even highlights the significance of reducing inventory -9oyle et al., 2##(1. 9hanges

in inventory levels affect eturn 0n Assets -0A1, which is an important financial parameter

both from internal and eternal perspectives. educing inventory usually improves 0A, and

vice versa if inventory goes up without offsetting increases in revenue -9oyle et al 2##(1.

+he aim of inventory management is to hold inventories at the lowest possible cost, given the

obectives to ensure uninterrupted supplies for ongoing operations. 3hen making decisions on

inventory management, one has to find a compromise between the different cost components

@'


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such as the cost of supplying inventory, inventory holding costs and costs resulting from

insufficient inventories -Fugo, 6adenhorst T3eiss and /an ooyen 2##21.

According to 3ild -2##21, inventory control is an activity which organiEes the availability of

items to the customers. It coordinates the purchasing, manufacturing and distribution functions to

meet the marketing needs. +his role includes the supply of current items, new products,

consumables, spare parts, obsolescent items and all other supplies. Inventory management

enables a company to support the customer service, logistic or manufacturing activities in

situations where purchasing or manufacturing of the items is not able to satisfy the demand. :ack

of satisfaction could arise either because of the speed of purchasing or manufacturing is too

protracted, or because ;uantities cannot be provided without stocks .9lodfelter -2##(1 adds that a

good inventory control system offers the following benefits"

-a1 It maintains a proper relationship between sales and inventory. 3ithout inventory control

procedures in place, the store or department can become overstocked or under stocked.

-b1 Inventory control systems provide a business with information needed to take markdowns by

identifying slowDselling merchandise. !iscovering such items early in the season will allow a

business to reduce prices or make a change in marketing strategy before consumer demand

completely disappears.

-c1 erchandise control systems allow buyers to identify best sellers early enough in the season

so that reDorders can be placed to increase total sales for the store or department.

-d1 erchandise shortages and shrinkages can be identified using inventory control systems.

)cessive shrinkages will indicate that more effective merchandising controls need to be

implemented to reduce employee theft or shoplifting.

2#


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!% F'55'. =+*5 *+ 5 *25')'*5

8or organiEation management to be good, it must be achieving the targets that it sets. +herefore

financial performance is measured to know whether targets have been achieved, measuring

performance also is a useful means of control, and is a useful means if targets are to be attained

-:ockyer, uhitemann, and 0akland, @''C1

T-. &: I5* S))5)

Y 5 3" D-

!006 !00@ !00& !003 !00!

U(7(%000 U(7(% >000 U(7(% >000 U(7(% >000 U(7(%000

S.( 9,'C7,@#7 B,'@=,##B B,='7,CC$ $,(@#,$2= =,#(',#B=

9ost of sales -2,=2C,'@71 -=,=2=,#2#1 -7,='B,$#B1 -(,=72,#$(1 -2,C$7,=$#1

2@


33/60

G*(( =*+') &,&@9,0& 3,3"?,&00 3,@?0,!6? !,?6,@6! !,"?&,@"@

0ther operating

Income%epenses 2=,C#7 (#,B$( 2(,$'# -@2,77(1 2$,7B(

!istribution costs -2$=,7(C1 -@CC,7#21 -@2=,#@'1 -@(',$7(1 -C(,C$#1

Admin epenses -7(2,@'B1 -2C#,'C71 -('$,=2=1 -7=2,@#@1 -(#2,C2C1

0ther operating

)p -@,C#@,(#@1 -@,2@7,=($1 -@,(=@,##71 -@,2=,$$(1 -B#=,$'#1

O=)'52 =*+') ",9@,9@! ",66&,!&" ",?!",&09 909,?"! ","0,6"0

8inance cost -2@B,B$21 -((7,$#=1 -@C#,2$@1 -2C,(=(1 -@$,@@'1

P6+ @,B$C,@'# @,(2',$($ @,=7@,@7C CC@,(=' @,#'2,7'@

Income ta ep. -7$@,#(71 -(B$,C#'1 -=C(,==C1 -7@(,@B@1 -7$2,='(1

N) =*+') ",30?,"@6 9@!,!? 9@?,@90 &6," 6!9,9

!PS-&shs.1 7# C# @,### =## @,###

)PS -&shs.1 2$@ @'@ @'2 '7 @2$

Source:Uganda Clays L'm'ted 5ud'tor;s eport 2008

!%9 P+*5 I5')*(

&9:Hs overall li;uidity position has been fairly good, and on a raising trend averaging at #.'$

over the period. Fowever, inventory is the key current asset with substantial portion in the form

of work in progress and spares and consumables, which are not as li;uid as cash and receivables.

Subse;uently, &9:Hs cash and ;uick ratios average out at approimately #.=2. +he company is

working on increasing its li;uidity levels by streamlining its processes to ensure better and

effective inventory management. +he above statement is evidenced by the table below4

22


34/60

T-. @"8inancial atio Analysis

!00! !003 !00& !00@ !006

O=)'52 =+*5

+urnover growth rate (=.2( 2=.2( 2#.(= 7.2@ 2$.@7

P*+')-'.')8

uick ratio #.7C #.(# #.7( #.B@ #.$$

S*.58

Interest coverage ratio =$ 27 @# = '

!ebt service coverage ratio 2 @ @ @ @

+he inventory management system in an organiEation is measured periodically using standards

performance indicators. +hese indicators measure the effectiveness of inventory management.

Service level is one of the performance indicators. It is the percentage of items ordered or

re;uested that is filled from stock by the supplier or warehouse. 8rom public point of view the

higher the service levels, the better, as long as inventory costs do not rise to unsupportable levels

-6alunywa, @''=1.

9ustomer service level is the criterion that is being increasingly used. It is the proportion of

demandDmet eDstock per annum. Service levels to customers are the etent to which either

2(


35/60

finished stock can be supplied to them Goff the shelfH or the company is able to accept a certain

level of stock outs for defined periods of time -6alunywa,, @''21

Another performance indicator of inventory management is the average percentage of time out

stock. +his takes into account the number of times the organiEation runs out of stock of identified

items in a year -&IA, @''C1. In order to guard against stock out, the firm should keep a buffer

stock.

!etermining the safety -buffer1 stock level4 need to be done cautiously, such that the benefits

and costs arising out of keeping a safety stock is compromised, and does not defeat the overall

obective of an organiEation.

!%"0 R.)'*5(7'= -);5 '55)*8 525) 5 +'55'. =+*5

+he relationship between inventory management system and the financial performance of an

organiEation mainly manifests itself through the material re;uirements planning which is the

system of planning and scheduling the timeD phased material re;uirements for production

operations -Adam and )bert @''21 improved customer services and other advantages come at a

cost however. +hey also re;uire a realistic master production schedule to specify when various

end items will be completed. 8inally and perhaps most important, they re;uire a certain

discipline, then a commitment by schedules and employees to make the system work.

aterial re;uirement planning provides the following4

n!entory reduct'on9it determines how many of the components are needed and when, in order

to meet the master schedule. It enables the manager to procure those components, as needed,

thereby avoiding costs of ecessive inventory.

27


36/60

educt'on 'n product'on and del'!ery lead t'mes9by coordinating inventory procurement, and

production decisions, material re;uirements planning helps to avoid delays in production

eal'st'c comm'tments9by using material re;uirements planning production can give marketing

timely information about likely times to prospective customers.

ncreased eff'c'ency9 aterial re;uirements planning provide close coordination among various

work centers as product progress through them. aterial re;uirements planning is especially

useful in comple operations where new customer order are arriving for a variety of products and

were shop orders for various components are in different stages of completion. +hese numerous

transaction is accommodated through periodic system. &pdating with accurate shop status data4

material re;uirement planning such as pegging, cycle counting and time remarks helps to

stabiliEe a dynamic production environment by tracking which components are affected by

change, ensuring that the availability of material coincides with planned re;uirements and

freeEing the shortDterm production plan so that imminent shop schedules are more predictable

-Adam and )bert, @''21.

7ust n 'me9Is both a philosophy and set of methods for manufacturing, and emphases waste

reduction, total ;uality control and devotion to the customers. 5ust in time is a manufacturing

whose goal is to optimiEe processes and procedures by continuously pursuing waste reduction

-Adam and )bert, @''21. 5ust in time re;uires not only changes in the way a company handle its

inventory but also change in its culture.

Any step in the manufacturing process product for the customer is wasteful transport, storage,

work in progress inventories, finished goods inventories, ecessive paper processing and many

other activities that donHt add value to the product. 3asteful tasks increase costs and reduce

2=


37/60

competitiveness. +he obectives of ust in time is to reduce set up costs to the point that

economic order ;uantity -)0>1 N @ unit. If )0>N@, the immediate benefits are that in progress

inventories are reduced and fleibility to change over production from one product to another is

improved. Fowever reduction in production of siEed triggers which of events involving

motivation and focus on ust in time and on scrap and ;uality control.

5ust in time purchasing suggests an emphasis on timing, which is true, but it does not suggest the

broad philosophical under pinning of the system. 5ust in time purchasing calls for close

relationships with few longDterm suppliers, geographically close suppliers lose specifications and

contracts, and fre;uent deliveries of small, eact ;uantities. +ime underlying philosophy of ust

in time is continuous pursuit of waste reduction. &sing ust in time re;uires etra ordinary

discipline because ust in time works but under stable, reliable operating conditions.

CHAPTER THREE

3%0 RESEARCH METHODOLOGY

3%" O';

In this chapter, the researcher described how the research was conducted right from proposal

writing, preparation of data collection tools and there purposes, identification of the sample area,

sample respondents, details of the respondents and sampling strategy to be used, and finally the

procedure of collecting data.

2$


38/60

3%! R(7 D('25

+he research design used was cross section research design since the time given was not

sufficient due to the semester system program, in evaluating the relationship between inventory

management and financial performance of &ganda clays :td. +he information was collected by

use of both ;uantitative and ;ualitative approaches using primary data and available literature

concerning the variable.

3%3 T7 S)48 P*=4.)'*5

+he sample of thirty respondents was selected. 8ive were got from the senior staffs of &ganda

clay limited, ten from the line managers and fifteen from the operational -5unior1 staff as

indicated in the table below"

T-. 6: S=. =*=4.)'*5

C)2*8 *+ P*=. P*=4.)'*5 S=.

Senior )mployees = =

:ine managers @# @#

0perational-5unior1 staffs 2# @=

TOTAL 3@

30

Source:


39/60

3%6 S*4( *+ D) 5 C*..)'*5 M)7*(

Primary data was collected for purposes of drawing valid conclusions. +his data was obtained

using ;uestionnaires and interview guide.

Secondary data was collected for the purpose of drawing valid conclusions. +hese sources

included reviewing ournals, tet books and internal records of &ganda 9lays :imited.

3%? P*4( *+ C*..)'*5 D)

+he researcher took the following steps to collect the re;uired data"


40/60

3%%3 D*45)8 R';(

Samples of files were re;uested, particularly relating to inventory management and financial

performance including Audited reports of &ganda 9lays :imited.

3%9 D) A5.8('(

+he data collected were sorted, organiEed, edited and coded to improve its accuracy and

relevancy4 and later presented in fre;uency tables and percentage fre;uencies for ease of analysis

and then finally draw inferences on the general population. +he fre;uency tables together with

correlation table for the relationship between he variables of the study were computed using

Statistical Package for Social Sciences- SPSS, /ersion @=1

3%"0 L''))'*5 *+ )7 ()48%

I encountered the following problems during the study4

8inancial constraints since am self sponsored. +his was because the researcher is both a

parent and a student who was also paying school fees for children at school.

!ifficulty in accessing the re;uired information

+here was also time limitation for carrying out research since the researcher is also a

working class and badly needed at his work place.

CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF THE FINDINGS

&%0 Introduction

+his chapter presents the findings on effect of inventory management system on the financial

performance of &ganda 9lays :imited. +he findings were from both primary and secondary

2'


41/60

sources. +he data collected was edited, coded, tabulated, analyEed and presented according to the

findings of the study.

Specifically, the study obectives involved the following"

i. +o evaluate the inventory management system in &ganda 9lays limited

ii. +o establish the profitability level in &ganda 9lays :imited

iii. +o establish the relationship between inventory management and financial performance

of &ganda 9lays :imited

&%" B12*45 I5+*)'*5 *5 R(=*55)(

&sing the ;uestionnaires, the researcher was able to get socioDeconomic information about the

respondents in terms of se, age and their respective educational levels as follows4

&%"%" F'5'52( *5 )7 (=. (

T-. ?: S *+ (=*55)(

S F458#N4-$ P5)2 #ualification 8re;uency-f1 Percentage -1!egree holders @2 7#

!iploma @( 7(

9ompleted Secondary level #= @B

+otal (# @##

S*4 ='8 ), !0""

(#


42/60

8rom the table C, it was established that 7# of respondents were degree holders, 7( had

diploma while @B had completed secondary level. +he findings revealed that &ganda 9lays

:imited employs mostly graduates and !iploma Folders because they are believed to be

hardworking, innovative and creative as compared to the secondary level leavers.

&%"%3 F'5'52( *5 A2 *+ R(=*55)(

T-. 9: A2 *+ (=*55)(

A2 -1) #8($ F458 P5)2 #


43/60


44/60

8rom the above findings, it revealed that management of stock in &ganda 9lays :imited was, to

some etent inappropriate.

&%!%3 R(=*5( *5 '5)55 *+ '55)*8 ..( +* 7 ')

T-. "3: S)*1 '5)55 +* 7 ')

R(=*5(( F458 P5)2 #


45/60

&%!%@ R(=*5(( *5 '()5 *+ ()*1 )1'52

T-. "@: E'()5 *+ ()*1 )1'52

R(=*5( F458 P5)2

Y( 2$ CB

N* #7 @(

T*). (# @##Source9 pr'mary data, 2011

8rom the table @=, CB of the respondents indicated that stock taking was carried out and @(

did not oblige.

&%!%6 R(=*5(( *5 ;7)7 ()*1 )1'52 +'24( 2 ;')7 )7 * +'24(

T-. "6: A25) -);5 ()*1 )1'52 +'24( 5 * +'24(

R(=*5( F458 P5)2

Agree @= =#Strongly Agree #C 2B

!isagree #= @B

Strongly !isagree #2 #$

T*). (# @##

Source9 pr'mary data 2011

8rom table @$, =# of the respondents agreed that the stock taking figures tallied%balanced with

record figures, 2B strongly agreed, @B disagreed while #$ strongly disagreed.

8rom the above findings, the researcher established that stock taking figures were not compatible

with those of the records, since most of the respondents disagreed with the reconciliation of

records and physical stock.

&%!%? R(=*5(( *5 7*; *+)5 ()*1)1'52 '( ' *4)

T-. "?" F458 *+ ()*1 )1'52

R(=*5( F458 P5)2 #


46/60

+able @B shows that 2# of the respondents indicated that stock taking was done monthly,

while maority indicated that it was done annually.

&%3 F'5'52( *5 )7 P*+')-'.')8 L.( *+ )7 I54()8+he researcher administered many ;uestions to establish the level of profitability in &ganda

9lays :imited. +he analyses of the responses are as below4

&%3%" R(=*5(( *5 )7 )5 *+ =*+')-'.')8

T-. "" P*+')-'.')8 )5

R(=*5(( F458 P5)2

Increasing #' (#

!eclining 2@ B#

9onstant ## ##+otal (# @##

Source9 pr'mary data, 2011

8rom table @C, B# of respondents said the trend of profitability was decreasing, (# said it was

increasing and nobody indicated that it was constant. +he researcher therefore established that

the profitability level of &ganda 9lays :imited was decreasing from time to time. +he following

data obtained from the past records of the company could support this4

T-. "9" P*+') M2'5 *+ U25 C.8( L'') #!00!!006 '5 >000 S7($

YEAR !006 !00@ !00& !003 !00!

evenues ','C7,@#7 B,'@=,##B B,='7,CC$ $,(@#,$2= =,#(',#B=

9osts -=,=2=,#2#

1

-7,='B,$#B1 -7,#27,$@'1 -(,=72,#$(1 -2,C$7,=$#1

G*(( P*+') &,&@9,0& 3,3"?,&00 3,@?0,!6? !,?6,@6! !,"?&,@"@

Source:Uganda Clays L'm'ted f'nanc'al report

&%& F'5'52( *5 )7 R.)'*5(7'= -);5 I55)*8 M525) 5 P*+')-'.')8

&%&%" R(=*5(( *5 )7 .. *+ '55)*8 525) (8() '5 U25 C.8( L'')

T-. !0" Q4.')8 *+ I55)*8 525) (8() 5 =*+')-'.')8

R(=*5(( F45'( P5)2(

/ery


47/60

T*). 30 "00

Source9 pr'mary data, 2011

+able 2# shows that the maority -=#1 of the respondents believed that the level of inventory

management in &ganda 9lays :imited was good, (( said it was very good whereas @B

believed it was poor.

&%&%! R(=*5(( *5 )7 .. *+ =*+')-'.')8 '5 U25 C.8( L'')

T-. !"" P*+')-'.')8 '5 UCL

R(=*5(( F45'( P5)2(

/ery


48/60

Inventory

anagement

Pearson 9orrelation@ .C#(UU

Sig. -2Dtailed1 .###

? (# (#

8inancial

performance

Pearson 9orrelation.C#(UU @

Sig. -2Dtailed1 .###

? (# (#

UU 9orrelation is significant at the #.#@ level -2Dtailed1.

+he relationship between inventory management and financial performance was statistically

tested. A strong positive relationship -rN.C#(U, pV#.#@1 was established. Since .C#( is close to @,

a very high positive relationship, significant at #.#@ level eisted between inventory management

and financial performance.

+o further establish the significance of the contribution of inventory management to financial

performance, the coefficient of determination -r21 was computed. Since rN#.C#(, r2N#.$77. +his

implies that effective inventory management contributed $7 on the levels of financial

performance of &ganda 9lays limited while ($ was contributed by other factors. +he

implication of the above relationship is that effective proper inventory management procedures

positively influences and financial performance and therefore reminds the management of

&ganda 9lays :imited of the need to effectively streamline local Inventory management

procedures and strategies so as to boost the levels of financial performance.

(B


49/60


50/60

@%"%! S48 *+ F'5'52( *5 )7 P*+')-'.')8 L. '5 U25 C.8( L'')%

8rom the findings, it was revealed that profitability in &ganda 9lays :imited was generally poor

and declining year by year. +his was supported by &ganda 9layHs :imited management report,

2##', which indicated an annual average fall in profitability of 2(.

@%"%3 T7 S48 *+ F'5'52( *5 )7 R.)'*5(7'= -);5 I55)*8 M525)

S8() 5 F'55'. P+*5 #P*+')-'.')8$

+he study established that the Inventory management system was positively related to financial

performance of &ganda 9lays :imited. +he significance of the relationship implied that

management of &ganda 9lays :imited out to place much emphasis in streamlining inventory

management as a means of achieving the desired levels of financial performance.

@%! C*5.4('*5

&ganda 9lays :imited had successes in areas of" completeness of routine inventory

transportation, working with each customer to develop an inventory delivery schedule that was

acceptable, customersH inventory levels are being kept to the optimum, customer service levels of

the company inventory distribution organiEation structure being appreciated by the customers

that management needs to address which were rated as being high

&ganda 9lays :imited faced declining levels of profitability. +his could have been due to

increase in the number of firms producing similar products, break down of machinery,

('


51/60

administrative weaknesses and improper management of the inventory system leading to

loopholes in serving the customers hence a drop in sales turnover.

+he study established a high positive relationship between inventory management and financial

performance. +he optimal management of inventories is a primary obective for all the firms

manufacturing make to stock finished goods. As a matter of fact, inventories have important

implications for both the financial and the economic performance of the company4 therefore it is

widely acknowledged that an optimal inventory management policy allows companies to achieve

higher productivity levels.

@%3 R*5)'*5(

anagement of &ganda 9lays :imited should ensure that inventory levels are being kept to the

optimum in addition to reDaligning the inventory management and distribution organiEation

structure.

+here is need for management of &ganda 9lays :imited to strictly observe the inventory

availability policy relating to safety stock, order cycle, and order ;uantities.

+he inventory level of an organiEation depends on its policy and position in the market4 and this

emanates from the marketing, production sales department on which decisions on how much to

produce depend. +herefore, there is need for management of &ganda 9lays :imited to ensure

that the activities of these departments be harmoniEed.

7#


52/60

&ganda 9lays :imited should engage in strategies that discourage or drive away competitors

through cutDthroat competitive strategies by reducing prices lower as compared to its competitors

or market skimming, looking for virgin markets in other regions where such products have not

reached, branding and packaging and providing other services to the consumers of your products

closer to them.

&ganda 9lays :imited should strengthen its esearch and !evelopment -W!1 !epartment in

order to work towards modification of their products. +his can only be done by investing much

in thus department to ensure innovativeness and creativity

7@


53/60

R+5(

@. 6arley peter,@'C'4 Successful stock control by manual system, grower press

2. Kakuru ), 2###4 8inancial management, akerere &niversity press, Kampala

(. :ucey +, @''$" 9osting !P Publications.

7. eigs and eigs,@'C'" Principles of Auditing Cthedition 6 Irwin Fomewood

=. Pandey I ,@''(4 8inancial management Bthedition /ikas publishing house

$. 9olin !rury, @''24 anagement and 9ost Accounting, ):6s, imprint

B. !avid 5obber and


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@=. 9oyle, 5. 5., 6ardi, ). 5., W :angley 5r, 9. 5.- 2##(1 +he management of business

logistics. A supply chain perspective. B thedition. South T3estern. +homson T:earning.

9anada.

@$. Fugo, 3. . 5., 6aden ForstD3eiss,5. A., W /an ooyen, !. 9. -2##21. Purchasing and

Supply management. 7thedition. Pretoria" 5. : /an Schailk Publishers.

@B. Fakansson : 5 W Persson, : P. -@'''1. 0perations anagement. Strategy and Analysis.

=th)dition. Addison T3esley. &SA.

@C. 3ild, +.-2##21.6est Practice in Inventory anagement. 2nd edition.6utterworthD

Feinemann.&K.

7(


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A==5'(

A==5' A: Q4()'*55'

I kindly re;uest you to fill in this ;uestionnaire as assistance towards accomplishing my research

proect, being one of the prere;uisites for the award of a 6achelors degree of 9ommerce. I

guarantee that the information provided in here shall purposely for academic and shall be treated

with strict confidentiality.

Jour assistance will highly be appreciated

PERSONAL DATA

Position held in the organiEation.

E4)'*5 ..

!egree !iploma

&A9) &9)

0thers -Specify1

A2

@CD 2= years 2$D(# years

(@D (= years ($D 7# years

77


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7@D 7=years 7$D == years

7. Fow long have you served in the organiEation

6elow 2 years 2 T 7 years

= T B years C T @# years

@@ T @( years Above @( years

B% INVENTORY MANAGEMENT SYSTEM IN UGANDA CLAYS LIMITED

=. 3hat inventory management system does your firm maintain -Please tick in the bo1

9omputeriEed anu anual 6oth

$. !oes your company maintain inventory levels for each item -+ick in the bo1

Jes ?o ?o

B. !oes your company keep inventory records -+ick in the bo1

Jes ?o ?o

C. !oes the company carry out stocktaking

Jes

7=


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?o

0thers -Specify1 .

'. !o physical stock taking figures agree with those of your records system

Strongly agree Agree

!isagree Strongly disagree

@#. Fow often do you carry out stocktaking

!aily 3eekly

onthly Annually

3hen need arises

C% INFORMATION ON THE PROFITABILITY LEVELS IN UGANDA CLAYS

LIMITED

@@. 3hat is the level%trend of profitability in your organiEation

-a1 Increasing

-b1 !eclining

-c1 9onstant

@2. +o what etent are you satisfied with the level of profitability

-a1 /ery good

7$


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-b1


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@B. In your own analysis, have you noticed any impact the inventory management system has

had on the general financial performance of &ganda 9lays :imited

Jes

?o

0thers -Specify1 .

@C. If yes, how do you rate the impact

Severe

oderate

?o impact

T751 8*4 8 47 +* 8*4 (=*5(( '5 )7'( A' (7, G* B.(( Y*4

7C


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Documents

May Acaye Inventory Management Dissertation