INFLUENCE OF INVENTORY MANAGEMENT ON FINANCIAL PERFORMANCE OF THE NIGERIAN MONEY DEPOSIT BANKS
- Project Research
- 1-5 Chapters
- Quantitative
- Regression
- Abstract : Available
- Table of Content: Available
- Reference Style: APA
- Recommended for : Student Researchers
- NGN 5000
Background to the Study
Inventory is a stock pile of products that a company offers for sale in various components that make up the product, such as raw material stock, goods in process, finished goods in stores, and spares (Helen, 2016).
Inventory Management is defined by Stevenson (2020) as a framework used by businesses to control their inventory interest. According to Mohammad (2018), when determining a firm's inventory level, a manager should consider ordering costs, carrying costs, and stock out costs of inventory.
Inventory accounts for a sizable portion of an organization's investment. Inventories can account for up to 40% of an industrial organization's total capital (Moore, Lee & Taylor, 2016). It may account for up to 33% of an organization's total assets and up to 90% of working capital (Sawaya & Giauque, 2016).
Inventory Control Techniques/Systems is the process of managing inventory in order to meet customer demand at the lowest possible cost and with the least amount of investment. Youngho (2018) According to (Ellram, 2016), a successful inventory control program takes into account factors such as purchasing goods in proportion to demand, seasonal variation, changing usage patterns, and monitoring for pilferage. As a result, determining the approximate costs of carrying inventory is a critical step in the inventory control process. According to Langabeer and Stoughton (2020), costs include storage costs, inventory risks, and the loss-of-opportunity costs associated with tying up capital. Stevenson (2020) defined inventory management as a framework used by businesses to control their inventory interest. It entails recording and monitoring stock levels, estimating future demand, and deciding when and how to arrange. According to Deveshwar and Dhawal (2021), inventory management is a method that businesses use to organize, store, and replace inventory in order to maintain an adequate supply of goods while minimizing costs. According to Daniel and Assefa (2018), a Solomon (2015) study found that inventory management affects the competitive advantage of Nigerian money deposit banks. The same study concludes that the firm can compete on quality and timely delivery of customer orders. Competitive advantage is the result of critical management decisions that enable an organization to differentiate itself from its competitors (Balda, 2018).
Another survey in Nigerian found that 31% of inventory control system users in the banking sector improved their performance. 31 percent of the companies polled reported a decrease in customer complaints, while 25 percent reported an increase in delivery speeds. Customers are pleased not only with the improved service quality, but also with the company's ability to meet their changing needs in a timely manner (David, 2016). By implementing appropriate inventory control systems, a company can maintain a competitive advantage. According to Muiruri (2015), there is a growing need for business enterprises to adopt effective inventory management practices as a competitiveness strategy. Improper inventory management models have been observed to be very damaging to firm financial performance. Several firms, particularly in the banking sector, have been consistently accused of improper inventory controls and management, including: incorrect estimation, pilfering, slow response to customer demand, a lack of proper accounting recording systems, and an inability to find the required model to handle inventory (Wanko, 2018 and Olanrewaju (2016) discovered that companies face issues such as inconsistent deliveries, decreased consumer effective demand, and high production costs as a result of poor inventory management techniques, which leads to poor performance. Other authors, such as (Duru, Okpe, & Udeji, 2015), argue that inventory is the lifeblood of any manufacturing company. They maintain that inventory management has become mandatory on each and every manager responsible for production in an organization due to a shortage of materials to meet a sudden increase in customer demand, a reduction in profit margin, low returns on equity, material wastages, pilferage arising from excess stock, and sleep in communication chains that exist in most industries. Inventory is a critical resource for any corporate organization. Inventory, like any other business resource, is limited in supply; thus, effective management is required rather than neglect.
According to prior literature, there have been mixed and inconclusive results on inventory management in both developed and developing economies Martinez, (2015). Our current research looks at the impact of inventory management on the financial performance of Nigerian money deposit banks.
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