EFFECT OF INVENTORY MANAGEMENT ON FINANCIAL PERFORMANCE OF LISTED MANUFACTURING FIRMS IN KENYA
Abstract
This study aimed at investigating the inventory management and financial performance in the manufacturing firms listed in Nairobi Stock Exchange in Kenya. The research objectives were to determine if inventory holding costs affect the performance of the firm, to establish if inventory conversion period has an influence on the performance of manufacturing firms, to determine the effect of actual inventory on the performance of manufacturing firms and to study the effect of optimal inventory orders on the performance of these firms. This study was carried out through a descriptive and quantitative research design. The population of interest in this study constituted all manufacturing companies quoted at the NSE for the period of five years from 2012 to 2016; since the population was small a census was be done. The quantitative research approach was employed to arrive at the findings. The study applied panel data analysis with the aid of the STATA, 13. The study used coefficient of determination to evaluate the model fit of which it was found that the adjusted R2 was 0.776. This implied that 77.6% of the variations in financial performance are explained by the independent variables under study (Inventory Conversion Period, Inventory Holding cost, Actual Inventory per annum, and Optimal Inventory Orders) at a confidence level of 95%. The R value which was the correlation coefficient was 0.881 which showed that there was a strong correlation between the study variables Inventory Conversion Period, Inventory Holding cost, Actual Inventory per annum, and Optimal Inventory Orders. The study recommended that other studies should be done on the effect of inventory management practices and inventory forecasting techniques and how this can influence the financial performance of manufacturing firms and also other industry sectors.
Keywords: Financial performance, Inventory, inventory management
Full Text:
PDFReferences
Bhattacharya, Jighyasu &, Sourabh & Gaur, Jighyasu & Bhattacharya, Sourabh. (2011). Gaur The relationship of Financial and Inventory Performance of Manufacturing Firms in Indian Context. Calif. J. Oper. Manag.. 9. (Ashok, 2013).
Brigham, F., & Gapenski, G. (2013). Purchasing and Supply Chain Management, Pearson Education Ltd, England.
James Ng'ang'a, K. (2013). An Assessment of the Factors Influencing Effectiveness of Inventory Control; Ministry of State for Provincial Administration and Internal Security, Nairobi - Kenya. International Journal of Business and Commerce, 3(1), 33-53.
Moore, L. J., Lee S. M. and Taylor, B. W. (2003) Management Science, 4th Ed, Allyn and Bacon, Needham Heights MA
Munyao, G. Omulo, K. Mwithiga, M. and Chepkulei, H. (2015). Role of inventory management practices on performance of production department’ a case of manufacturing firms, International Journal of Economics, Commerce and Management, 3(5), 1625-1656.
Mwangi, W. & Thogori, M. N. (2015). The Role of Inventory Management on Performance of Food Processing Companies: A Case Study of Crown Foods Limited Kenya. European Journal of Business and Social Sciences, 4(4), 64 – 78.
Sawaya Jr. and Giauque (2006), Production and Operations Management Orlando FL: Harcourt Brace Jovanovich Inc.
Shafi Mohammad (2014) Management of inventories in textile industry: A cross country Research Review ‘, Singaporean Journal of Business Economies and Management Studies, 2:(7).
Sitienei, E. & Memba, F. (2015). The Effect of Inventory Management on Profitability of Cement Manufacturing Companies in Kenya: A Case Study of Listed Cement Manufacturing Companies in Kenya. International Journal of Management and Commerce Innovations, 3(2), 111-119
Stevenson, B. U (2010). Operations management, 10th edition, N.Y. McGraw-Hill Publishing Inc. 321-340.
Swaleh, L. A. & Were, S. (2014). Factors Affecting Effective Implementation of Inventory Management Systems in the Public Sector (A Case Study of National Aids Control Council). International Journal of Social Sciences Management and Entrepreneurship, 1(2), 17-32.
Thogori M. & Jane Gathenya, 2014. "Role of Inventory Management on Customer Satisfaction among the Manufacturing Firms in Kenya: A Case Study of Delmonte Kenya," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(1), pages 108-121, January.
DOI: http://dx.doi.org/10.61426/sjbcm.v5i2.741
Refbacks
- There are currently no refbacks.
This work is licensed under a Creative Commons Attribution 3.0 License.
PAST ISSUES:
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.