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Lyka Jane R. Roguel: Effects of Inventory Management Practices On The Performance of Feeds Dealer in Cavite

This document discusses the effects of inventory management practices on organizational performance. It defines inventory management as coordinating purchasing, manufacturing, and distribution to match supply and demand. Effective practices include economic order quantity modeling and materials requirements planning. The document reviews studies showing both positive and negative relationships between inventory management practices and metrics like profitability and cash flows. It proposes examining practices used by rice dealers in Cavite, Philippines and their impact on performance.

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Lyka Roguel
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232 views6 pages

Lyka Jane R. Roguel: Effects of Inventory Management Practices On The Performance of Feeds Dealer in Cavite

This document discusses the effects of inventory management practices on organizational performance. It defines inventory management as coordinating purchasing, manufacturing, and distribution to match supply and demand. Effective practices include economic order quantity modeling and materials requirements planning. The document reviews studies showing both positive and negative relationships between inventory management practices and metrics like profitability and cash flows. It proposes examining practices used by rice dealers in Cavite, Philippines and their impact on performance.

Uploaded by

Lyka Roguel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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EFFECTS OF INVENTORY MANAGEMENT PRACTICES ON THE PERFORMANCE

OF FEEDS DEALER IN CAVITE


Lyka Jane R. Roguel

Inventory plays an important role in every organization. Even those who do not

have financial background needs to have an understanding about the inventory

information in the company’s financial statement. The ability to understand the impact

on the income statement and cash flow statement of the company can help one improve

his ability to have the right item and the right quantity in the right place at the right time

(Muller, 2019). Inventory management is the ability of the management to organize the

availability of the items for their customers. Since the success of one’s business highly

depends on the ability of the organization to provide goods or services to their

customers while remaining financially viable, it is important for the management to have

a control over the purchasing, manufacturing, and distribution functions of the company.

Having a good inventory management practices helps the company to cover up for the

mismatch between the supply and demand processes, minimize the risk of failure to

supply, and minimize the overall cost in supply chain. (Wild, 2017). In order to ensure

that there is a continuity between function, the inventory management must tie together

certain objectives such as company’s strategic goals, sales forecast or demand

management, sales and operations planning, production planning, and materials

requirement planning. (Narayan, P., & Subramanian, J., 2009).

Inventory management practices includes the usage of Economic Order Quantity

(EOQ) which asks the questions how much of each item must be stocked, and when

should an order be released and for what quantity. EOQ can be used in conjunction with
various inventory management systems including Just-in-time(JIT) and EOQ models.

Activity-based costing, on the other hand, has been considered useful in the field of

warehousing operations, where various activities occur and conventional accounting

schemes fail to recognize the effect of these activities on the company's overall

profitability (Narayan, P., & Subramanian, J., 2009). Inventory management practice

also includes Materials Requirements Planning (MRP) which is the most common

planning tool used in the industry today. MRP is a method for measuring the materials

and components necessary for the development of a product. It requires tracking of the

materials and components on hand, determining what is needed, and then scheduling

their production or purchase. (Drexl, A., & Kimms, A. , 2013).

Inventory management practices plays an important role in the performance of

an organization. Organizational performance corresponds to how well an organization

performs to accomplish its vision, goal and objectives. It comprises real results or

outputs compared with intended outputs. The analysis focuses on three key results

which are the performance of shareholder value, the financial performance, and the

performance of the market. The evaluation of organizational efficiency is a critical

component of strategic management. Performance, however, is a very complex matter,

and a great deal of consideration needs to be paid to how it is measured. Performance

measures in the internal business process contribute to organizational performance.

These steps help answer the main question, "What do we have to excel at?”.

Examples include the time it takes to create or provide goods or services for the benefit

of the company and how much time does it takes to produce a new product and get it to

market. (Mastering Strategic Management, 2011).


Many previous researches have proven how inventory management practices

greatly affects the performance of a firm, whether it be big or small. For instance, based

on the study findings of Mwangi, L. (2016), inventory conversion period, management

efficiency, firm size, inventory conversion, and inventory days have a negative and

positive influence in the performance of the firm’s profitability. Sahari, S., Tinggi, M., &

Kadri, N. (2012), on the other hand, have concluded on their studies that there is a

positive relationship between inventory management and financial performance of the

firm. Furthermore, Bett, K. (2018) revealed that the Inventory management practices are

responsible for the operational performance indicators of the Small Medium Enterprises

(SMEs). However, based on his own judgement, most SMEs might be having these

practices on paper but not operationalized nor instituted.

According to Victoire, M. (2015), observation shows that there is a serious issue

with the inventory management practices in manufacturing organizations, especially in

the case of SMEs. With the companies having different inventory policies implemented,

ONIKOYI, I. A., AMNIM, F. F., OJO, S., & AJE, C. O. (2017) recommends to further

conduct a study regarding the best inventory management practices such as JIT, MRP

and EOQ. In addition, with Bett, K. (2018) having a second thought about SMEs actual

practices in its operations, the researcher have decided to conduct a study focusing on

knowing how small businesses manage their inventories, what practices do they use,

and how do their inventory management practices affects their performance. In this

study, the researcher have chosen to study on the inventory management practices of

rice dealers in Cavite. This paper intends to bring in the relevant problem of the feeds
dealers with regards to their inventory management and its effects on their

organizational performance.

References:

Sahari, S., Tinggi, M., & Kadri, N. (2012). Inventory management in Malaysian
construction firms: impact on performance. SIU Journal of Management, 2(1), 59-72.
Link:
https://www.researchgate.net/profile/Michael_Tinggi/publication/265349733_Inventory_
Management_in_Malaysian_Construction_Firms_Impact_on_Performance/links/56f097
7e08ae70bdd6c94ecc/Inventory-Management-in-Malaysian-Construction-Firms-Impact-
on-Performance.pdf

Mwangi, L. (2016). The effect of inventory management on firm profitability and


operating cash flows of Kenya Breweries Limited, beer distribution firms in Nairobi
county (Doctoral dissertation).
Link:
http://erepository.uonbi.ac.ke/bitstream/handle/11295/98572/Lydia%20Mwangi%20Final
%20Project%20Final.pdf?sequence=1&isAllowed=y

Bett, K. (2018). Inventory Management Practices and Operational Performance of Small


and Medium Enterprises in Kenya: a Study of Pharmaceutical Manufacturers in Nairobi,
Kenya.
Link:
http://erepository.uonbi.ac.ke/bitstream/handle/11295/105017/Bett_Inventory
%20Management%20Practices%20and%20Operational%20Performance%20of
%20Small%20and%20Medium%20Enterprises%20in%20Kenya-%20a%20Study%20of
%20Pharmaceutical%20Manufacturers%20in%20Nairobi,%20Kenya.pdf?
isAllowed=y&sequence=1

ONIKOYI, I. A., AMNIM, F. F., OJO, S., & AJE, C. O. (2017). Effect of Inventory
Management Practices on Financial Performance of Larfage Wapco Plc. Nigeria.
European Journal of Business and Management, 9(8), 113-122.
Link:
https://core.ac.uk/reader/234627780

Narayan, P., & Subramanian, J. (2009). Inventory Management-principles and


Practices. Excel Books India.
Link:
https://books.google.com.ph/books?hl=en&lr=&id=-
XKqiGceTp4C&oi=fnd&pg=PA1&dq=inventory+management+practices+book&ots=WsL
NShPucC&sig=2NwGF6AU4NUDcswTLpD_Wa8u6YI&redir_esc=y#v=onepage&q=inve
ntory%20management%20practices%20book&f=true
Drexl, A., & Kimms, A. (Eds.). (2013). Beyond Manufacturing Resource Planning (MRP II): advanced
models and methods for production planning. Springer Science & Business Media.

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