Fowzii Research
Fowzii Research
Fowzii Research
BY:
March, 2023
BALE-ROBE/ETHIOPIA
9
TABLE OF CONTENTS
LIST OF TABLES
LIST OF ACRON YMS
ABSATRCT
1. INTRODUCTION...................................................................................................................................1
1.1. Background of the study..............................................................................................................1
1.4. Objectives of the study.....................................................................................................................3
1.4.1. General objective...........................................................................................................................3
1.6. Scope of the study.............................................................................................................................4
1.7. Organization of the study..................................................................................................................4
2.1 Introduction.......................................................................................................................................5
2.2 Origin and Growth of Inventory management...................................................................................6
2.3. Definition of Inventory Management................................................................................................6
2.4 Types of inventory management........................................................................................................7
2.5 Objectives of inventory management................................................................................................8
2.6 Importance of inventory management..............................................................................................8
2.7 Function of inventory management...................................................................................................9
3.1. Description of the study.....................................................................................................................12
3.2. Research Design.............................................................................................................................12
3.3. sources Data....................................................................................................................................12
3.4. Methods of data collections............................................................................................................13
3.5. Population and sample size............................................................................................................13
3.6.Sampling Technique........................................................................................................................13
3.7. Methods of data analysis.................................................................................................................13
CHAPTER FOUR.....................................................................................................................................15
4. RESULTS AND DISCUSSION........................................................................................................15
4.1. Respondents’ Personal Information................................................................................................15
4.1.1. Respondents’ Sex distribution.................................................................................................15
4.1.2. Respondents’ educational level................................................................................................16
4.1.3. Respondents’ age distribution..................................................................................................16
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4.2. Inventory management of the Organization....................................................................................17
4.3. The policies and procedures of inventory management..................................................................18
4.5. Inventory management techniques of the organization...................................................................23
CHAPTER FIVE.......................................................................................................................................26
CONCLUSION AND RECOMMENDATION.....................................................................................26
5.1. Conclusion......................................................................................................................................26
5.2. Recommendation............................................................................................................................27
REFERENCES..........................................................................................................................................29
ii
LIST OF TABLES
iii
LIST OF ACRONMYS
iv
ABSTARCT
This study is “An Assessment of Inventory Management System; the Case of Seiko Mando
Farmers’ Cooperative Union, Bale Robe, Ethiopia.” On the other hand the data was gathered
from both primary and secondary data was used in this study. Primary data was collected
through questionnaire; secondary data was collected from the literature on the subject and from
published and unpublished materials and other journals. The collected data was analyzed by
using both qualitative and quantitative methods. Data is described by using percentage, and
tables. According to the study there are internal and external factors that will affect Inventory
Management system of Seiko Mando. Finally based on the result of findings, conclusion and
recommendations are forwarded by the researcher in detail. Regarding coordination among
departments, the work of the union is performed on time and the customer orders satisfied. As a
result, the level of input supply inventory is increased as well as its profit increase. there is
qualified man power, good inventory management policies and procedures and the union
carefully purchased raw materials select the right items, the right quantity and the right price
that are help to attain its own objective. To solve the problem the union should take the
following major action. The management of the union should give attention for material
displaced a very where in the department of the union. That is they should prepare appropriate
storage area, so that deprecation, this can be minimize.
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CHAPTER ONE
1. INTRODUCTION
Inventory consists of the most important element of any system dealing with the supply,
manufacture and distribution of goods and service. The concept of inventory management is very
old but it came in light when HarrieF.W, published his work on classical order size model and
the work was extended by (RymendF.F,etal,2006).But only after the second world war with the
development of operational research and computer technology that the theoretical concepts got a
practical application.
Holding inventory is often interpreted as carrying an asset, but also means carrying risk in terms
of obsolescence, deterioration, axed quality faults in financial terms inventory impacts the
balance sheet, cash flow, profit and loss account. Operationally inventory affects production
efficiency and on time delivery (coldratte,2009) identifies inventory a key component for
measuring business performance in manufacturing environment.
Inventory management refers to the events or activities that affect inventory during the process
of transferring in put resources and material involves all activities put in place to ensure that
customer have the needed product or services. It coordinates the purchasing, manufacturing and
distribution function to meet the marketing needs and organizational needs of availing the
product to customers.
Achieving inventory management is a for runner to inventory management which is concerned
with the means used to balance the inflicting organizational objective on the overall level of
stock held to determine optimum inventory level for each (Dabbker,2000).
Good inventory management in any manufacturing organization saves the organization from
poor quality production, the displeasure of customer, loss of profit and good social responsibility
which in turn have a direct effect in performance of the firm. lf inventory is not adequately
maintained, production cannot meet the aspiration of customers which is loss of revenue to the
organization and makes the organization performance low. Thus, good management of
inventory, essential to achieving business objective and building competitive advantage.
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Therefore, this study is focused on the investigations of inventory management system: The case
of Seiko Mando farmers’ cooperative union, bale robe, Ethiopia.
Inventory is one of the main part of the major business’s physical assets that is ready to use or
was ready for sale. It can be the raw materials, working progress, good and finished goods
Ackah & Ghansah,2016).It is necessary to have physical stock in the system to take care of the
anticipated demand because non availability of materials when needed will lead to delays in
production or projects or services delivered. However, keeping inventory is not free because
there are opportunity costs of“carrying”or“holding”inventory in the organization. Thus, the
paradox is that we need inventory, butit is not desirable to have inventory. It is this paradoxical
situation that makes inventory management a challenging problem area in materials
management P. Vrat (2014).
From general objective of the study, the following specific objectives was developed and lead
the study.
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1.5. Significance of the study
The researcher has an expectation, the study will provide a clear picture about the value or
importance of inventory management of the Union and to identify problem concerning inventory
management. It is believed that the study will clearly reflect, what to see any opportunities to
utilize, to give relevant recommendation, suggestion and solution that help top management as
well as the organization to make good decision concerning about inventory management and
help in designing a better systematic form for inventory management system. In addition, to give
an overview of the union use of inventory management to external bodies.
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CHAPTER TWO
2.1 Introduction
Inventory management systems are central to how companies track and control inventories.
Having the ability to measure inventory in a timely and accurate manner is critical for having
uninterrupted business operations because inventory is often one of the largest current assets on a
company’s balance sheet. Two inventory management systems exist: perpetual system and
periodic system. Each system has its pros and cons, and companies may choose based on their
own needs for inventory control and available company resources.
Perpetual inventory system: are uses a permanent inventory account to track inventory purchases
and uses. When a company buys inventories during a business cycle, the purchase directly
increases the balance of the inventory account. Conversely, when a company sells goods from
existing inventories, the sale directly decreases the balance of the inventory account. Under the
perpetual inventory system, companies are able to maintain a continuous record to changes in
inventory and thus, have up to date information about their inventory holdings at any point in
time.
Perpetual system application: the application of perpetual inventory system relies on the use a set
of accounting records on related accounts including inventories, cash or account payable, sales
and cost of goods sold.
Periodic inventory system: are uses temporary purchase account, and an inventory account used
only on a periodic basis. When a company buys inventories during a business cycle, the purchase
goes to the purchase account without affecting the inventory account at the time. Later, when a
company sells goods from the existing inventories, it does not track the inventory reduction
through the inventory account as it occurs, and the sale also does not affect the purchase account.
At the end of a business cycle, the purchase account is closed and its balance added to the
beginning inventory. To determine the ending inventory balance companies must conduct a
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physical inventory count. Periodic system application: is through the use both accounting
recorted and physical inventory count.
Inventory are stock of raw materials, work in process and finished good, that appear at numerous
points throughout a firms production and logistic channel (Ballsu, 2006). According to chase
(Jocobs, etal, 2006) inventory is the stock of any item or resource used in an organization.
Whereas (Mosich, 2007) inventory is can be defined as the amount of raw materials, finished
goods and work in process to be stocked for the smooth running of a plants operation. So a
manufacture company will hold stocks as the adequate amount of material resource in a
transformation system. Many authors have defined the word management in different ways.
According to (Plunket,etal,2009) defined management as the process of setting and achieving
goals through the execution of five basic management functions (Planning, organizing, staffing,
directing and controlling) that utilize human, financial and material resources. Therefore,
inventory management is the process of tracking product orders, keeping adequate amount of
products on hand and organizing products in Warehouse and retail location. And also inventory
management is the active control program which allows the management of sales, purchases and
payments.
Inventory management is an approach for keeping track of the flow of inventory. It starts right from the
procurement of goods and its warehousing and continues to the outflow of the raw material or stock to
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reach the manufacturing units or to the market, respectively. The process can be carried out manually or
by using an automated system. When the goods arrive at the premises inventory management ensures
revving, counting, sorting, arrangement, storage and maintenance of these items, i.e. stock, raw material,
components, tools, etc., efficiently. Inventory management refers to the process by which you track the
amount of product you have on your warehouse shelf, in store or sitting with other retailers and
distributors. This enables you to succeed in having the right number of units in the right place, at the right
time and for the right price. When effectively tracking and controlling your physical inventory, you will
know how many of each item you have, when you might be running low on products and whether you
should replenish that item in order to keep selling it. And as a busy business owner, you should be able to
do all of this at a glance. This enables you to make good purchasing decisions quickly and easily. It’s
where having the correct inventory management system comes in, too, as we will learn later.
Bar-code inventory management: it is automated and simplified version. The management can
find out the stock remaining with just one click on a computer device. The scanned bar codes
enable the software to maintain a track of all the purchases and the flow of inventory.
Continuous inventory management: it links the bar code and radio frequency identification with
the accounting inventory system, inventory received and point of sales systems along with the
production system, to trance the path of inventory movement. It is mostly beneficial for
accounting purpose. This is also termed as perpetual inventory inventory management.
Periodic inventory management: it is a manual process, which is used for determining the closing
inventory value, for putting it up in the ledger at the end of the financial year. Depending on the
organizational need, it can also be analyzed quarterly. However, it is a time consuming way,
since the inventory has to be physically counted.
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2.5 Objectives of inventory management
Inventory management is performed to simplify the operational activities. There are five
objectives of inventory management.
- Preventing dead stock or perish ability: with an optimal inventory level, the chances of
wastage in the form of goods spoilage or dead stock.
- Optimizing storage cost: It reduces the chances of maintaining excessive stock, even the
requirements are predetermined, which ultimately cuts done the unnecessary
warehousing costs.
- Maintaining sufficient stock: Now, the production department need not worry about the
shortage of raw material or goods because of its constant supply.
- Enhancing cash flow: Inventory has a significant impact on the cash flow of the
company. With effective inventory management, the organization can ensure sufficient
liquid cash to enhance its operational efficiency.
- Reducing the inventories’ cost value: When there is a constant purchase of goods or
stock, the organization can ask for discounts and other benefits to decrease the purchase
price
Enables Enterprise Resource Planning (ERP): The enterprise resource planning software
accumulates and links the different business operation. These are inventory procurement,
warehousing, production, human resource, finance, marketing and sales to one another. In this
process, inventory management contributes its part of providing the necessary data.
Proper Warehouse Management: The barcode system, last in first out and First in first out
techniques provides a clear picture of the past and present inventory available with the company
to optimize the warehousing functions. Efficient inventory valuation: It provides for proper
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evaluation of the different types of inventory, i.e., stock in hand, opening and closing stocks, raw
material, finished goods, etc. This data is also used to prepare the cost sheet.
Planning: It is basic function of management. It deals with chalking out a future course of action
and deciding in advance the most appropriate course of actions for achievement of
predetermined goals.
Organizing: It is the process of bringing together physical, financial and human resources and
developing productive relationship among them for achievement of organizational goals.
Organizing as a process involves:
Identification of activities.
Assignment of duties.
Staffing: Is the function of manning the organization structure and keeping it manned. Staffing
has assumed greater importance in the recent years due to advancement of technology, increase
in size of business, complexity of human behavior etc. staffing involves:
Remuneration
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Performance appraisal
Directing: It is the part of managerial function which actuates the organizational methods to
work efficiently for achievement of organizational purposes. Directing has following elements:
Supervision
Motivation
Leadership
communication
Comparison of actual performance with the standards and finding out deviation if any.
Corrective action
A perpetual inventory system or also known as a continual system keeps track of removals from
inventory on a continuous basis, so the system can provide information on the current level of
inventory for each item. When the amount on hand reaches a predetermined minimum, a fixed
quantity, A, is ordered. An obvious advantage of this system is the control provide by continuous
monitoring of inventory withdrawals. Another advantage is the fixed-order quantity:
management can determine an optimal order quantity. One disadvantage of this approach is the
added cost of record keeping. Moreover, a physical count of inventories must still be performed
periodically to verify records because of possible errors, pilferage, spoilage, and other factors
that can reduce the effective amount of inventory. (William J Stevenson. 2005:p209).
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CHAPTER THREE
3. RESEARCH METHODOLOGY
The researcher was used purposive sampling technique. The reason of using this technique is
appropriate to save cost and time. The target population of the study is employees, managers and
investors. The total populations of Robe town are 58 (employees, managers and investors). Out
of this, the researcher was used 15 respondents as a sample population.
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3.4. Methods of data collections
The data was obtained from two types of source. These are primary and secondary data source.
The researcher will use the primary data collection technique in order to get first-hand
information from the respondents. And the primary data was collected by preparing a
questionnaire. The questionnaire types which the researcher use was structured questionnaire.
These types of questionnaire was used to in value close ended questions and open ended
questions. And also the researcher widely use direct observation and unstructured interview
method in order to get reliable information because flexibility of questions to questioning and
the researcher is allowed too much freedom. The researcher in addition will use the secondary
data to be collected from the union.
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CHAPTER FOUR
Primary data analysis was collected from the union employees on the basis of structure
questionnaire and unstructured interview data. The respondents were selected based on their
employment status that controls inventory from store department, property department, logistic
department and purchase department.
Secondary data were collected from secondary resources such as different documents of the
union like annual reports, financial statements etc.
In this point of the study the data gathered from primary sources were analyzed and interpreted
as follows. A total of 32 questions were distributed to the employee of the union and all
respondents are returned.
Male 22 68.75%
Female 10 31.25%
Total 32 100
Source: Questionnaire
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As its can been seen from the above information the respondents 22(68.75%) are males and 10
(31.25%) are females. From this table the researcher gets that most of the employees are males.
Other 12 37.5%
Experience 2 6.25%
Total 32 100
Source: Questionnaire
As it can be seen from the above information 10(31.25%) of the respondents have degree and above,
8(25%) diploma, 12(37.5%) others and 2 (6.25%) have experience. From this information, the
researcher gets the organization have more employee who have diploma, degree and above. Hence,
most of the employees are educated. So that the union internal control over inventory is strong.
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4.1.3. Respondents’ age distribution
Table 3: Respondents’ age distribution
18-25 2 6.25%
26 – 35
14 43.75%
36 – 41
12 37.5%
Source: Questionnaire
42 – 66 According to this table
4 12.5%
information 2 (6.25%)
of the employees are
found at the age of
Total 32 100%
between18-25, 14
(43.75%) of the employees are found at the age between 26-35, 12 (37.5%) of the employees are
found at the age between 36-41 and 4(12.5%) of the employees are found at the age between 42-66.
As the researcher gets the organization has more employees at age between 26-35. Hence, most of
the employees of the union are young. From this, the researcher concludes that the union has strong
labour force in order to achieve its objective.
A union has several types of inventories, raw materials, input supplies, other products obtained from
farmers,
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Table 4: the term inventory management
No 12m 12 37.5%
32 100
Source: Questionnaire
Table 6 Show that 20 (62.5%) of the respondents response that they know the term inventory
management and 12 (37.5%)of the respondents response that they do not know the term inventory
management. From this information, the researcher can conclude that there is inventory management
in the union.
32 100
Source: Questionnaire
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Table 7, Shown that 24(75%) of the respondents response that union has polices and procedure to
keep inventory that avoid excess inventory and 8 (25%) of the respondents said that the union has no
polices and procedure to keep inventory level that ensure not going out of excess inventory. Hence,
the researcher concludes that, the union has policies and procedures to keep inventory that avoid
excess inventory.
32 100
Source: Questionnaire
As can be observed from table 8, 22 out of 32 or 68.75% respondents respond that the union has
optimal inventory and 10 out of 32 or 31.25% of respondents respond that the union has no excess
inventory or stocking. From this information the researcher conclude that there is optimal level of
inventory management, particularly from table 5 the union follows inventory management policies,
procedures and techniques.
Table 7: Time delivered inputs
26 81.25%
Some time
6df 6 18.75%
Is there store department there late deliver
delivery input inventory? y
19
099
Does not delivery 0 0
on time
Total
32 100%
Source: Questionnaire
As shown in table 9, 26 (81.25%) of the respondents response that the union store department
delivery inputs inventory delivery on time, 6 (18.75%) of the respondents response that sometime
late delivery and no anyone responds does not delivery on time the union. Hence, the researcher
concludes that the union is not faced problem of inventory obsolescent due to the fact that the
inventory is delivered on time.
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Table 8: Coordination among department Is there
23 78.19%
There the coordination
among property department,
6df 9 21.21%
logistic department, store There is strong coordination
department and purchase
department of the union?
Total
32 1 100
Source: Questionnaire
As shown table 10, 23 out of 32 or 71.875% respondents response that coordination among property
department, logistic department, store and purchase departments are strongly coordinated and 9
(28.125%) of respondents response that the union departments are satisfactory coordinated. No
anyone response that union department weak and low coordination for the question.
Due to respond of the respondents, there is strong coordination among the departments of the
union. Therefore, the researchers conclude that the work of the union is performed on time and
the customer orders satisfied on time. As a result, the level of sales inventory is increased as well
as its profit increase.
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4.4. Inventory control system
Both
12m 32 100%
Perpetual
0 0
Total
32 100%
Source: Questionnaire
As shown in table 11, 32 out of 32 or 100% respondents’ response that the union use Periodic
inventory system. But the union out of 32, 0% response the union use perpetual inventory system. As
per the response of respondents the union recorded inventory when it occur and every item
Has its own store ledger card and inventory counted periodically. The researcher understand that in
union there is a huge quantities and low unit price of its inventory
Annually
0 0
22
Total
32 100%
Source: Questionnaire
As can be shown from table 12, 28 out of 32 or 87.5% respondents respond that union count in
quarterly 4 (12.5%) respondents response that the union count its inventory in semi-annually. From
the above information, the researchers conclude that the union used periodic inventory system.
ABC
6 18.75%
Stock level
10 3 31.25%
Total
32 100%
Source: Questionnaire
As can be seen from table 13, 10 out of 32 or 31.25% respondents respond the union follows
economic order quality. This inventory management technique determines that how much inventory
is added. When inventory replaced and when to order determine that the recorder point at which an
order should be placed an inventory. 6 out of 32 or 18.75% respondents respond the union follow just
in time, and ABC technique, 10 out of 32 or 31.25% respondents respond the union follow stock
23
level its technique in order to guard over stocking or under stock kept material with the appropriate
level of the material by fixing stock level.
From this information, the researcher understand that the union follow good inventory management
techniques because in stock level technique there are re order level, minimum level maximum level
and economic order quantity or reorder quantity.
Table 12: managing inventory
No 12m 4 12. 5%
Total 32 100%
Source: Questionnaire
As shown in table 14, 28 out of 32 or 87.5% respondents response that the union has manage its
inventory in appropriate way and 4 out of 32 or 12.5% of the respondents response that the union
does not manage its inventory in appropriate way. Hence, the researcher understands that the union
minimizes cost and obsolescent inventory because of the union manage its inventory in appropriate
way.
Table 13: Purchased inventory
32 100
Source: questionnaire
24
As can be observed from table 15, 32 (100%) respondents respond that the unions apply very careful
to buy the right item, at the right price and in the right quantity. Hence, the researchers conclude that
the union purchased the right items and the right quantities. Thus, help to minimize wastage
inventory. Additionally, union purchased at the right price that help to minimize cost.
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CHAPTER FIVE
5.1. Conclusion
Concerning the application of inventory management in union most of managing attempt to apply,
like:-
Regarding coordination among departments, the work of the union is performed on time and the
customer orders satisfied. As a result, the level of input supply inventory is increased as well as its
profit increase.
Regarding to purchase inventory, the union purchased the right items and the right quantities. Thus,
help to minimize wastage inventory. Additionally, union purchased at the right price that help to
minimize production cost.
Regarding to policies and procedures of inventory management, the union was follows policies and
procedures to keep inventory that avoid excess inventory that attain optimal level of inventory
management. Whereas, regarding to inventory control system the union used periodic inventory
system that control huge quantities and low unit price of inventory.
Based on information gathered from interview questioner and secondary data analysis the following
paragraphs are discussed the strength and weakness of the union.
First, there is strong coordination among department of the union. Thus, help to facilitate the
operational activities and the union can maintain optimal level of inventories due to avoid excessive
inventories. .
26
Second, there is qualified man power, good inventory management policies and procedures and the
union carefully purchased raw materials select the right items, the right quantity and the right price
that are help to attain its own objective.
27
5.2. Recommendation
Based on the findings the following recommendation are forward in order to solve the problems
identified and strength the existing section for effective inventory management. To solve the problem
the union should take the following major action.
• • The management of the union should give attention for material displaced a very where in
the department of the union. That is they should prepare appropriate storage area, so that deprecation,
this can be minimize.
• • Quantity and quality of inputs received should be specified before payment is authorized.
• • Inventory issues should be valued according to an acceptable method and the costs should
be accounted for in a manner that provides adequate information for management including variance
from standard.
• • There should be fully accountability for both units and birr for inventory quantity received
on hand and issued or sold.
• • Difference between book and physical inventories are as curtained differences adjusted and
the amount of over age or shortage should be properly accounted for.
• • Incoming shipment should be accepted only if the receiving department has authorization in
the form of a copy of purchase order.
• • All transactions pertaining to the issue of input sales of inventories quantity should be
accounted for and entered in the controlling period.
• • Terms, prices, and clerical accuracy of redoes invoice should be correct before payment is
all authorized.
• • Inventory quantity should be adequately protected against losses from theft, spoilage,
unauthorized withdrawal by employee.
28
• • The union should use material requirement plan since its fastness system thinking and
become the corner stone of input supply system with the limit of its methodology, it will review what
is needed, how many needed, when they are needed and when they should be order.
29
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30
APPENDIX
RIFT VALLEY UNIVERSITY
Dear respondents
The purpose of this questionnaire is to collect data for the research requirement for partial
fulfillment of B.A degree in accounting and Finance at Rift Valley University. Your
genuine response for the following questions is extremely important for the successful
completion of this paper, the information you provide is used only for the purpose
indicated and will be kept highly confidential.
I would like to thank you in advance for your cooperation and for enviable time.
Part one: general information
Education status
Diploma Degree Other specify Experience
Age 18 – 25 26 – 35 36-42 42- 66
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14. If no for question no.13 specify the reason?
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