The Impact of Inventory Management on Financial Performance: Evidence from Nigerian Manufacturing Companies
- Project Research
- 1-5 Chapters
- Abstract : Available
- Table of Content: Available
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- NGN 5000
Background of the Study
Inventory management is a critical aspect of manufacturing operations, directly affecting production efficiency, cost control, and financial performance. Effective inventory management ensures optimal stock levels, reduces holding costs, and minimizes disruptions in production schedules (KPMG, 2024).
In Nigeria, manufacturing companies face challenges such as supply chain inefficiencies, high operational costs, and fluctuating demand, all of which underscore the importance of robust inventory management practices. Poor inventory control can lead to excess stock, wastage, or stockouts, all of which negatively impact financial performance.
This study evaluates the relationship between inventory management and financial performance in Nigerian manufacturing companies, highlighting best practices and identifying areas for improvement.
Statement of the Problem
Many Nigerian manufacturing companies struggle with inefficiencies in inventory management, resulting in financial losses and operational disruptions. While some companies have adopted modern inventory management systems, their impact on financial performance remains unclear.
Existing research often generalizes inventory management practices without considering the unique challenges faced by Nigerian manufacturers, such as infrastructural deficits and market volatility. This study addresses the gap by exploring how inventory practices influence financial outcomes in this context.
Objectives of the Study
- To analyze the relationship between inventory management practices and financial performance in Nigerian manufacturing companies.
- To evaluate the impact of inventory optimization on cost reduction and profitability.
- To identify challenges hindering effective inventory management in the manufacturing sector.
Research Questions
- What is the relationship between inventory management practices and financial performance in Nigerian manufacturing companies?
- How does inventory optimization impact cost reduction and profitability?
- What challenges hinder effective inventory management in the manufacturing sector?
Research Hypotheses
- Inventory management practices do not significantly influence financial performance in Nigerian manufacturing companies.
- Inventory optimization does not significantly impact cost reduction and profitability.
- Challenges such as supply chain inefficiencies do not significantly affect inventory management practices.
Scope and Limitations of the Study
The study examines inventory management practices and their financial implications in selected Nigerian manufacturing companies from 2020 to 2025. Limitations include data access constraints and reliance on company-reported performance metrics.
Definitions of Terms
- Inventory Management: The process of overseeing and controlling the storage and flow of goods within an organization.
- Financial Performance: A company’s ability to generate profit and maintain financial health through efficient operations.
- Inventory Optimization: Techniques and tools used to balance stock levels with demand, minimizing costs and maximizing availability.
