International Business Research; Vol. 12, No.

7; 2019
ISSN 1913-9004 E-ISSN 1913-9012
Published by Canadian Center of Science and Education

Inventory Management and Operational Performance of

Manufacturing Firms in South-East Nigeria
1 2 3
Stella Mbah , Jeffery Obiezekwem , Azuka Okuoyibo
1
Department of Business Administration, Chukwuemeka Odumegwu Ojukwu University, Anambra State,
Nigeria
2
Department of Entrepreneurial Studies, Chukwuemeka Odumegwu Ojukwu University, Anambra State, Nigeria
3
Department of Ports Management, Maritime University, Okerenkoko, Delta State, Nigeria
Correspondence: Stella Mbah, Department of Business Administration, Chukwuemeka Odumegwu Ojukwu
University, Anambra State, Nigeria.

Received: May 14, 2019 Accepted: June 10, 2019 Online Published: June 18, 2019
doi:10.5539/ibr.v12n7p76 URL: https://doi.org/10.5539/ibr.v12n7p76

Abstract
This study aims to ascertain the relationship between inventory management and operational performance of
quoted manufacturing firms in the south-east; one of the geographic regions with high industrialization prospects
in Nigeria. To achieve this, operational performance of manufacturing firms and their association with
components of inventory management; inventory cost, just-in-time approach, materials requirement planning and
strategic supplier partnership, was examined through a questionnaire. Three hundred and seventy-one copies of a
questionnaire issued to five hundred and thirty-eight sampled respondents of four quoted manufacturing firms in
the south-east region of Nigeria were properly filled and found relevant to the study. The study used SPSS and
Excel-based descriptive statistics to analyze the data collected. Regression analysis was used to test the
hypotheses of the study. Study results conclude that there is a positive significant relationship between; inventory
cost, just in time approach, materials requirement planning and strategic supplier partnership and operational
performance of quoted manufacturing firms in the south-east region, Nigeria. The study recommends among
others that, manufacturing firms in south-east Nigeria should adopt inventory practices such as strategic supplier
partnership, just-in-time approach, materials requirement planning and inventory cost control due to the
significant effect these practices have on operational performance.
Keywords: inventory, management, operational performance, manufacturing, firms, Nigeria
1. Introduction
1.1 Introduction to the Study
The success of companies in this contemporary competitive business environment requires them to improve
production considerably, minimize cost in their supply chains and provide efficient customer service to ensure
customer satisfaction. This could be achieved through efficient inventory management. As such, efficient
inventory management ensures large profit and retention of the available customer base. The achievement of
better customer service drives companies to structure their inventory management. At every stage of production
in manufacturing firms, there ought to be a balance in the level of inventory; not too high and not too low, so as
to reduce the cost of operating the firm and losses. (Hugo, Fettermann, Tortorella, & Testoni, 2016).
Providing the right quantity and quality of raw materials is one of the major goals of managing inventory
efficiently. However, one mitigation to achieving this goal is knowing when to order, the quantity to order and
frequency of ordering so that the organization always maintains the right level of raw material and finished
product at minimum inventory total costs (Wangari & Kagiri, 2015) without also having shortage or excess of
materials.
The process of quantifying the efficiency and effectiveness of inventory management could be mirrored by the
operational performance of firms. While a manufacturing firm’s ability to meet customer demands by adequately
supplying quality finished goods, eliminating waste and reducing lead time reflects a good operational
performance. Based on the foregoing, this research explored on inventory management and operational
performance of quoted manufacturing firms in the south-east geopolitical zone of Nigeria.

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http://ibr.ccsenet.org International Business Research Vol. 12, No. 7; 2019

1.2 The Study Problem

The application of taking inventory in real-life business scenarios, ought to influence the company’s operational
performance, despite the shortcomings of the techniques used; periodic review, continuous review, materials
requirements planning systems (MRP), Just-In-Time (JIT) and enterprise resource planning (ERP). It is for this
reason that this study examines to ascertain how significant the relationship between inventory management and
operational performance of selected manufacturing firms in the south-east geographic region of Nigeria is. The
south-east region of Nigeria is chosen for this study because of the industrialization prospects of this region
through manufacturing firms and entrepreneurial ventures. The region also boasts of a conducive environment
for business and investment. In this study, profound and clearer variables and analysis on the relationship
between inventory management and operational performance of quoted companies in Nigeria are presented.
This research work will be significant to manufacturing companies in developing policy frameworks that will
facilitate faster implementation of the best inventory management practices.
The elements of the study problem are illustrated by answering the following questions:
1. How significant is the relationship between inventory cost and the operational performance of quoted
manufacturing firms?
2. To what degree is the relationship between just-in-time approach and the operational performance of quoted
manufacturing firms significant?
3. To what extent is the relationship between material requirement planning and the operational performance of
quoted manufacturing firms significant?
4. How significant is the relationship between strategic supplier partnership and the operational performance of
quoted manufacturing firms?
1.3 Objectives of the Study
The study aims at examining the relationship between inventory management and the operational performance of
quoted manufacturing firms in the south-east geo-political zone of Nigeria. The specific objectives include:
1. Determine the extent of the relationship between inventory cost and the operational performance of quoted
manufacturing firms.
2. Ascertain the degree of the relationship between the just-in-time approach and the operational performance of
quoted manufacturing firms.
3. Investigate the degree of the relationship between materials requirement planning and the operational
performance of quoted manufacturing firms.
4. Determine the extent of the relationship between strategic supplier partnership and the operational
performance of quoted manufacturing firms.
1.4 Hypotheses
The study consists of the following hypotheses stated in null form:
Ho1: Inventory cost has no significant relationship with the operational performance of quoted manufacturing
firms.
Ho2: Just-in-time approach has no significant relationship with the operational performance of quoted
manufacturing firms.
Ho3: Materials requirement planning has no significant relationship with the operational performance of quoted
manufacturing firms.
Ho4: Strategic supplier partnership has no significant relationship with the operational performance of quoted
manufacturing firms.
1.5 Limitations and Originality
In course of the study, there were limited existing research conducted in the present study area available for
review. Thus, this study adds to existing research by ascertaining the effect of inventory management on the
operational performance of manufacturing firms in the south-east, Nigeria.
2. Literature Review
Inventory management and performance have attracted much attention in academic research. For instance, (Shin,
Ennis, & Spurlin, 2015) examined the effect of inventory management efficiency on the profitability of
manufacturing firms in the US. The manufacturing firms in the US studied were established from the
Compustat database using North America industry classification system (NAICS) code.1280 manufacturing
firms were sampled for a 3 years interval from 2005-2008 in what made up the first of the two datasets used for
this study, while 959 firms were sampled in an 8 years interval from 2005-2012 in what made up the second
dataset. The study used a profit margin as evaluation metrics to measure firms’ profitability while inventory
selection ratio was used as evaluation metrics for inventory management efficiency. Evaluation of profitability
and inventory management efficiency was done in two different analytical domains in this study. In the first
domain, the dataset was classified based on the size of the firm into three groups while in the second domain, the
dataset used was classified based on firms’ level of assets. Result of the study shows that a positive relationship
between profitability and inventory management exists, with a higher significant impact of inventory efficiency
on profitability based on the firm size as compared to the impact of inventory efficiency on profitability based on
assets size.
In (Naliaka & Namusonge, 2015), the role of inventory management on the competitive advantage of Unga
group limited, Kenya, was investigated. To do justice to this, the effect of inventory lead time, inventory
control/practices on the competitive advantage of the quoted manufacturing was determined. Furthermore, the
extent of adoption of information technology in inventory management of Unga limited was assessed. Based on
stratified and simple random sampling technique, 30 respondents issued a questionnaire instrument for the study
were selected from all 289 employees of the quoted manufacturing firm. A statistical package for analysis (SPSS)
based descriptive statistics were used to analyze the collected data. From the study, it could be deduced that the
competitive advantage of manufacturing firms in Kenya is dependent on information technology, inventory
control systems/practices and inventory lead time.
The study by (Munyao, Omulo, Mwithiga, & Chepkulei, 2015) was most specifically objective in finding out the
inventory management techniques used by textile, rolling mills and food beverage manufacturing firms in
Mombasa county, Kenya. A sample size of 45 manufacturing firms from 150 was adopted based on the stratified
random sampling technique. Copies of the questionnaire were used as the major instrument for data collection.
Result of the study showed that action level methods, just-in-time, periodic review technique, material
requirement planning 1 and economic order quantity are the most frequently adopted inventory management
technique with action level being the most adopted method notwithstanding the efficiency of material
requirement planning 1 in production performance.
(Mukopi & Iravo, 2015) examined effect of four inventory management components; lean inventory system,
strategic supplier partnerships, information technology in inventory management, and legal policies on the
performance of the procurement function of sugar manufacturing companies in the Western Kenya Sugar Belt.
This examination was carried out through copies of a questionnaire issued to 30 procurement personnel selected
from 100 personnel of the four quoted sugar manufacturing companies in Kenya. In this study, the four inventory
management components were employed as the independent variables while the performance of the procurement
function was employed as the dependent variable. Result of the study based on descriptive statistics and
regression analysis showed a very significant relationship between the independent variables and the effect of
inventory management on the performance of the procurement function of sugar manufacturing companies in the
western sugar belt.
(Otundo & Bichanga, 2015) in their study sought to objectively evaluate the effects of different inventory
management practices; forecasting practices, inventory categorization practices and vendor managed inventory
on the operational performance of Kisii County Government, Kenya. A sample of 38 respondents was selected
for the study. Descriptive statistics were employed in analyzing the data. The study established that the effect of
forecasting practice on operational performance is dependent on the level of supply and supply request of the
various units responsible for quality services to customers. The study also revealed that the positive effect of
forecasting practice on operational performance would be very much enabled by efficient inventory policies.
Furthermore, it was noted that the quality of services to customers is the most effective of inventory
categorization on operational performance.
(Oballah, Waiganjo, & Wachiuri, 2015)investigated the effect of four variables of inventory management
practices; inventory shrinkage, inventory investment, inventory turnover, and inventory records accuracy on
organizational performance of Kenyatta National Hospital, Kenya. 74 respondents from the category of
pharmacists; stores and supply officers; store managers, assistants and clerk; and stock controllers were issued
copies of the questionnaire from which data for the study was generated. From a descriptive study design
perspective adopted by the study, the study revealed a negative effect of inventory shrinkage on organizational
performance and a positive effect of inventory investment and inventory records accuracy on organizational
performance of the quoted national hospital.
Studies on the inventory management and performance relationship of firms have produced mixed results. In
(Panigrahi, 2013), a significant negative linear relationship between inventory conversion period and
profitability was obtained. (Folinas & Shen, 2014) found no link between inventory turnover and financial
performance. (Onchoke & Wanyoike, 2016) found a significant positive influence of internal inventory security
procedural practices, inventory auditing and computerized inventory control, on procurement performance. In
(Lwiki et al., 2013), the study result revealed that there a positive correlation between inventory management
and return on sales exists. These varying results show the different relationships that exist between inventory
management and performance of different firms. Thus, this study is based on the reality of inventory
management and performance of firms, which contribute greatly to the growth of Nigeria’s economy. In today’s
competitive market place where companies face a dilemma of whether to hold or not to hold inventory due to;
perceived high inventory cost, excess materials and products and incompetent information technology
infrastructure, it is important to look at the affinity between inventory management and operational performance
of manufacturing firms so as to come up with policy frameworks that would enhance implementation of
balanced inventory management practices for greater productivity.
3. Study Methods
3.1 Population and Sample
The survey research design was employed in this study. The study location is South-east region of Nigeria. Four
quoted manufacturing firms; Nigeria Breweries Plc. Enugu, PZ Cusson, Aba, Seven-up Bottling Company, Aba
and Cutix Cable Industry, Nnewi was studied. The target population of the study consisted of staff from human
resource, procurement, marketing, production and finance departments of the companies. A sample size of 538
was mathematically determined from 5223 target population using Godden’s (2004) formula. Simple random
sampling technique was employed to select the staff from the various departments for the study. The reason for
using simple random sampling technique was to give every individual equal opportunity of being selected for the
study.
The study used copies of a structured questionnaire to elicit information from the sampled respondents. The
copies of the questionnaire contained questions that utilize the 5-points Likert rating scale (Strongly agree, agree,
undecided, strongly disagreed and disagreed).
A total of five hundred and thirty-eight copies (538) of questionnaires were distributed to the respondents, out of
which three hundred and seventy-one were properly filled and found relevant to the study. Descriptive statistics,
correlation analysis and multiple regression analysis were employed in analyzing the data.
Table 1. Characteristics of the study sample
Frequency Percentage
GENDER
Male 224 60.4
Female 147 39.6
Total 371 100.0

AGE
18-30 years 178 48.0
31-40 years 94 25.3
41-50 years 63 17.0
51years and above 36 9.7
Total 371 100.0

MARITAL STATUS
Married 176 47.4
Single 290 44.5
Separated/divorced 30 8.1
Total 371 100.0

EDUCATIONAL QUALIFICATION
O’LEVEL 160 43.1
OND/NCE 154 41.5
B.Sc./HND 41 11.1
M.Sc./MBA 6 1.6
PhD/Others 10 2.7
Total 371 100.0
3.2 Sources of Data Collection
Data for the survey conducted was sourced from primary sources. Primary data was obtained from the study
sample of selected staff of the quoted manufacturing firms in the south-east region of Nigeria, using
questionnaire
3.3 Measure of Variables of the
Study
The study variables consist of one dependent variable and four independent variables:
(1) Independent variables:
The independent variables are components of inventory management, which include: Inventory Cost,
Just-in-Time Approach (JITA), Material Requirement Planning (MRP) and Strategic Supply Partnership (SSP).
(2) Dependent variable: operational performance of manufacturing firms (OPMF)
Relationship between inventory management and operational performance of manufacturing firms was evaluated
using multiple regression analysis. The regression model used is represented as;
Y = α + β 1 X 1 + β2 X 2 + β3 X 3 + βn X n + ẹ (1)
Where:
Y= Operational performance of manufacturing firms (OPMF)
α= Constant Term β=
Beta coefficients X1=
Inventory Cost
X 2= Just-in-Time Approach (JITA)
X 3= Material Requirement Planning (MRP)
X 4= Strategic Supply Partnership (SSP).
ẹ= Error Term
3.4 Statistical Methods
The researchers used the SPSS program to analyze the study data collected from the questionnaire to test
hypotheses and achieve the objectives of the study. It gave means, standard deviations and correlations of each
independent and dependent variable. The statistical methods include frequencies, the mean, standard deviations
and simple regression.
3.5 Reliability of the Instrument
The questionnaire was pre-tested through a pilot study to ascertain their effectiveness in getting the information
needed. The research instruments were test-retested on a sample of ten respondents drawn from other
manufacturing firms not used in the study. Cronbach-Alpha test was used to verify the stability and internal
consistency in the questions in the questionnaire. The result of the alpha coefficient value was 0.751, which
shows that there is a high degree of consistency for all questions.
4. The Results
SPSS and EXCEL were used to analyze the study data and to identify the descriptive characteristics of the
dependent and independent study variables and the results of the hypothesis test. Table (2) presents the
descriptive statistics of the variables of the study. Each hypothesis and descriptive statistics of their variables are
shown in table 2 and table 3:
4.1 Statistics of the Variables of the
Study
Table 2. Descriptive statistics of the variables of the study
N Min Max Mean Std. dev.
Inventory cost 371 9 30 21.20 4.301
JIJA 371 11 30 20.22 4.086
MRP 371 10 30 20.14 4.275
SSP 371 8 29 19.26 4.002
OP 371 11 30 22.54 3.208
Valid N 371
Table 2 provides information about the mean and standard deviation of the variables used in the study. Low
values of standard deviation for each of the variables indicate a consensus on statements associated with each of
the variables.

4.2 Hypotheses Testing and Result in Discussion

Table 3. Regression analysis of study hypotheses
Hypotheses T T.Sig. Result of Ho Result of H1
HO1 2.614 .040 rejected accepted
HO2 2.191 .005 rejected accepted
HO3 2.484 .013 rejected accepted
HO4 2.288 .023 rejected accepted

HO1: Inventory cost has no significant relationship with the operational performance of quoted manufacturing
firms.
The operational performance of firms was measured using the MRA method, where the relationship between
inventory cost and OPMF was measured by questions 1 to 5 in the questionnaire. Table 3 shows the result of the
relationship between inventory cost and OP, where the value of P-value sig. = 0.040, which is less than the
significant level a = 0.05, thus rejecting the null hypothesis and accepting the alternative hypothesis, that is,
Inventory cost has a significant relationship with the operational performance of quoted manufacturing firms.
HO2: Just-in-time approach has no significant relationship with the operational performance of quoted
manufacturing firms. The operational performance of firms was measured using the MRA method, where the
relationship between JITA and OP was measured by questions 6 to 10 in the questionnaire. Table 3 shows the
result of the relationship between JITA and OP, where the value of P-value sig. = 0.005, which is less than the
significant level a = 0.05, thus rejecting the null hypothesis and accepting the alternative hypothesis, that is,
Just-in-time approach has a significant relationship with the operational performance of quoted manufacturing
firms.
HO3: Materials requirement planning has no significant relationship with the operational performance of quoted
manufacturing firms. The operational performance of firms was measured using the MRA method, where the
relationship between MRP and OP was measured by questions 11 to 15 in the questionnaire. Table 3 shows the
result of the relationship between MRP and OP, where the value of P-value sig.= 0.013, which is less than the
significant level a = 0.05, thus rejecting the null hypothesis and accepting the alternative hypothesis, that is,
Materials requirement planning has no significant relationship with the operational performance of quoted
manufacturing firms.
HO4: Strategic supplier partnership has no significant relationship with the operational performance of quoted
manufacturing firms. The operational performance of firms was measured using the MRA method, where the
relationship between SSP and OP was measured by questions 16 to 20 in the questionnaire. Table 3 shows the
result of the relationship between SSP and OP, where the value of P-value sig. = 0.023, which is less than the
significant level a = 0.05, thus rejecting the null hypothesis and accepting the alternative hypothesis, that is,
Strategic supplier partnership has no significant relationship with the operational performance of quoted
manufacturing firms.
5. Conclusions and Recommendations
5.1 Conclusions
This work examined inventory management and operational performance of quoted manufacturing firms in
South-East Nigeria. Data were sourced from the employees and management of four quoted manufacturing
companies. The data generated were analyzed and the following was discovered. The study found that inventory
cost, just in time approach, materials requirement planning, and strategic supplier partnership have a significant
relationship with operational performance. The study, therefore, concludes that inventory management has a
significant positive relationship with the operational performance of the sampled quoted companies in South
East Nigeria.
5.2 Recommendations
The study recommends that manufacturing firms in Nigeria should adopt inventory management practices such
as strategic supplier partnership, just-in-time approach, materials requirement planning and inventory cost
control as they were found to have a significant effect on operational performance. Also, manufacturing firms
should adopt long-term relationships with suppliers and customers. This can be done by strategic
supplier/customer partnership to improve the overall operational performance of the firm.
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