INVENTORY MANAGEMENT AND CUSTOMER SERVICE PERFORMANCE

A CASE STUDY OF CENTURY BOTTLING COMPANY LIMITED

INTRODUCTION

• Introduction

This chapter shows the background to the study, statement of the problem, purpose of the study, research questions, Significance, the scope of the study and definition of terms.

1.1 Background of the study 

Globally, Inventory Management was treated as a cost Centre, since Purchasing Department was spending money on inventory while Stores was holding huge stock of inventory, blocking money and space, Ramakrishna (2005) with the process of liberation and opening up of global economy, there has been a drastic change in the business environment, resulting in manufacturing organizations exposed to intense competition in the market place. Service companies’ worldwide has been working out various strategies to face the challenges and to cut down manufacturing costs to remain competitive (Blomqvist, 2006). Agadjanian (2014) stated that in Nigeria inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods (Lynch, 2005). Pandey (2002) with a just-in-time inventory system, items are not produced until they are needed by customers. Benefits to this system include reduced overhead and minimum storage requirements. There is also limited waste when perishable items are involved. Manufacturers of extremely expensive services, such as airplanes, use a just-in-time inventory system, but it is also employed for items such as wedding cakes (Hilton, 2000). 

In East Africa including Uganda, Kenya, Tanzania and Rwanda, inventories of raw materials, work-in-progress components and finished goods were kept as a buffer against the possibility of running out of needed items. However, large buffer inventories consume valuable resources and generate hidden costs. Consequently, many companies have changed their approach to production and inventory management. Since at least the early 1980s, inventory management leading to inventory reduction has become the primary target, as is often the case in just-in-time (JIT) systems, where raw materials and parts are purchased or produced just in time to be used at each stage of the production process. This approach to inventory management brings considerable cost savings from reduced inventory levels. As a result, inventories have been decreasing in many firms (Ellram, Tate, & Billington, 2004). Poor inventory management had become an issue of great concern since performance is regarded as the main stream for development of organizations. A truly effective inventory management system minimizes the complexities involved in planning, executing and controlling a supply chain network which is critical to business success. The opportunities available by improving a company’s inventory management can significantly improve bottom line business performance. According to Jayeff (1998) argued that from a financial perspective, inventory management is no small matter. Oftentimes, inventory is the largest asset item on a manufacturer’s or distributor’s balance sheet. As a result, there should be a lot of management emphasis on keeping inventories. The objectives of inventory reduction and minimization are more easily accomplished with modern inventory management processes that are working effectively for improved performance. 

The inventory management is much more complex than the initiated understood. In fact, in soft drinks industry the inventory control department is perceived as little more than a clerical function as it is probably not very effective. The result of this to inventory management is lots of material shortages, excessive inventories, high costs and poor customer service (Briers, 1995). Too much inventory and not enough customer service is very common, but unnecessary. There are proven techniques that can help accurately industry customer demand and to calculate the inventory needed to meet defined level of customer service. Using the right techniques for sales forecasting and inventory management help to monitor changes and respond to alerts when action needs to be taken. The right approach to inventory management can produce dramatic benefits in customer service with lower inventory (Kreg, Cristine, 2007). Modern inventory management in soft drinks industry such as Crown beverages, Riham Cola, House of Eden (U) Ltd, Kazire Health Products (U) Ltd among others utilize new and more refined techniques that provide for dynamic performance of inventories to maximize customer service with decreased inventory and lower costs. These improved approaches to inventory management are of major consequence to overall competitiveness where the highest level of customer service and delivered value can favorably impact market share and profits. However, on the other side Century Bottling Company Limited (Coca- Cola) uses different kinds of inventory management, what is not brought out is how such kinds affect on the profitability of the Company. This is therefore prompting the researcher to carry the study on the role of inventory management on profitability of an organization like Century Bottling Company Limited.

1.2 Statement of the problem

Detecting mismanaged inventory is seen in the rising amount of inventory than growth of sales, stock outs of items occurrence causing interruptions in production or delayed deliveries to customers, clerical costs for procuring, high expediting and maintaining inventories, much quantity in stock for some items and too little for others, long lead and cycle times, inefficient classification and coding of materials, items missing or misplaced and spoilage and obsolesce rates are too high (Martins, 2005). 

In order to continuously reduce costs and improve customer service performance, Crown beverages Limited has managed to introduce a variety of inventory control systems such as just in time, material requirements planning, economic order quantity (EOQ), and stock verification system among others. Despite the introduction of these techniques to manage it’s inventories, Crown beverages limited in the past years has been encountering high inventory holding costs, redundant stock; which has affected it’s level of profitability (Gidudu Suzan, 2016). Basing on the above, this study will assess the influence of inventory management on customer service performance of Century Bottling Company Limited.

1.3 General objective

To assess the influence of inventory management on customer service performance taking Century Bottling Company as a case study.

1.4 Specific objectives

1. To determine the influence of inventory planning on customer service performance of Century Bottling Co. Ltd. 
2. To examine the influence of inventory allocation on customer service performance of Century Bottling Co. Ltd. 
3. To assess the influence of inventory control on customer service performance of Century Bottling Co. Ltd. 

1.5 Research questions

1. What is the influence of inventory planning on customer service performance of Century Bottling Co. Ltd.? 
2. What is the influence of inventory allocation on customer service performance of Century Bottling Co. Ltd.? 
3. What is the influence of inventory control on customer service performance of Century Bottling Co. Ltd.? 

1.6 Scope of the study

1.6.1. Content scope 

The study will assess the influence of inventory management on customer service performance of Century Bottling Company Limited of an organization. Major emphasis will be put on determining the influence of inventory planning, inventory allocation and inventory control on customer service performance of Century Bottling Co. Ltd. 

1.6.2. Geographical scope 

The area of the study is Century Bottling Co. Ltd Mbarara which is located in Mbrara Municipality. Mbarara Municipality is made up of three divisions of Kakoba, Kamukuzi and Nyamitanga. Mbarara Municipality is found in Mbarara district in Ssouthwestern Uganda. Century Bottling Company Limited (Coca- Cola) Mbarara plant is situated in Mbarara industrial area near Makenke barracks, plot No.1 block 146 along Mbarara– Masaka road. The coordinates of the plant are 00 36 48S, 30 39 30E (latitude: 0.6132; longitude; 30.6582). The plant holds different kinds of inventories inform of raw materials, Semi-finished and Finished products. The plant started its operations in Mbarara in 1998 as part of the main plant in Uganda-Namanve situated in Kampala industrial area. 

1.6.3. Time scope 

The study will cover a period of four months specifically from May 2018 to August 2018. This is because the researcher is allowed this specific time. The study will consider information relating to the period of four years that is 2015-2018. This range of years is considered as sales at Century Bottling Co. Ltd that has been showing a decline despite of the many techniques used in the process of inventory management. Furthermore, the time is enough to provide more information for the study upon which conclusions and recommendations are based. 

1.7 Significance of the study

The study may be very significant to the different stakeholders that include; 

To the policy makers 

The current gaps identified in the study will help the policy makers in Uganda to determine the need of the inventory department in every organization. The research study will highlight some recommendations which can be adopted by the policy makers to improve performance. 

To the management 

The management and personnel officers of the organization will be able to design or implement inventory management systems which can effectively yield to operational efficiency. 

To the academicians 

The research study will be used as reference material to the future students who will study the same field of research. 

To the general body of knowledge 

The processes of the research improve the experience to the student. It empowers the student with knowledge and skills to carry out research programs in the future. The study is also a requirement for a bachelor’s Degree in Kyambogo University.

1.8 Definition of key terms

Inventory: – is the amount of goods, materials or parts carried out in stock or store house for example, work in progress (W.I.P), raw materials, financial goods resale MRO items.

Inventory management involves the planning, ordering and scheduling of the materials used in the manufacturing process. It exercises control over three types of inventories i.e. raw materials, work in progress, and finished goods. 

An organization: is a social entity that is goal directed, deliberately structured activity systems with an identifiable boundary.

Performance refers to ability of an enterprise to achieve such objectives as high profit, quality product, large market share, good financial results, and survival at pre-determined time using relevant strategy for action.

Inventory planning; is the process of determining the optimal quantity and timing of inventory for the purpose of aligning it with sales and production capacity

Inventory allocation: involves reserving stock for the customer. Until inventory is allocated to a sales order it is still available to sell and will be added to sales channels. Allocation removes the items from on hand inventory, but leaves them in stock.

Inventory control: – process whereby the investment in materials and parts carried in stock is required within pre-determined unit set in accordance with inventory policy 

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This chapter focuses on the review of the related literature in line with the study variables. The researcher mainly obtained the theoretical available written data by different authors about the variables under the study and the reviewed information is arranged as follows;

2.1 Inventory management 

Inventory management is a branch of management that deals with management of fixed and current assets. Also, it entails the management of daily operational supplies and in our case, agricultural inputs and outputs. Inventory is also a critical asset in any organization though according to Barnes (2008) inventory is looked at as a liability under the just-in-time (JIT) control system. He agrees with the way accountants treat inventory as an asset to the organization. In the statement of financial position, inventory appears under the current assets of the organization regardless whether it’s for profit or not for profit organization. Inventory plays a major role and its management goes a long way in helping a firm to grow as it relates to its external customers as well as the internal customers (Gibson, 2013). Therefore, inventory is essential in the operation of manufacturing companies such as Century bottling company limited, National Medical stores, Riham Cola among others since they may hold inventory as finished goods, work in progress or raw materials for further processing (Fellows and Rottger, 2005). Shapiro, (2009) also advises that inventory plays a vital role when it comes to demand planning and as a result, the organization needs to be versatile in its management of its inventory when it comes to periodic or seasonal inventories.

Managers cannot avoid inventory management because it forms the basis of their overall performance through elimination of uncertainties in their management. For the boards and management of manufacturing companies such as Mukwano industries limited, National Medical stores, among others to ascertain that they are performing above standards, inventory management metric measures should be above board so that they may maintain the management’s confidence (Shapiro, 2009). At Century bottling company, Just-in-time concept has been found to have some unwarranted hidden cost that increase the cost of doing business in some cases such as small suppliers to the company in the mechanized and aerospace industries. Inventory management on the other hand faces numerous barriers when it comes to holding costs, shortage costs and demand distributions for products under the detailed stock keeping unit (SKU) level (Porter, 2011).

However, the management of inventory is important because the firm will be keen to ensure that its assets and stock are well managed and demand forecasting is enhanced to avoid unplanned procurement. Inventory can double up as stock and assets respectively. Therefore, when an organization enhances demand forecasting, it enables the minimization of operational costs as well as customer satisfaction (Hines and Bruce, 2007). When this is done, it enables an organization plan for the future hence applying various variables that an organization can use for its goal achievement namely: demand and supply, cost and personnel requirements (Blanchard, 2010). Incorporation of inventory management and supply chain decision helps organizations rationalize their operations through ensuring the total supply chain cost is well managed. This may be an uphill task since integration of inventory management decisions and supply chain optimization model involves parameters and associations such as market demand variance, delivery time and stock outages impacts which are not easily signified in optimization model (Heckmann, Shorten and Engel, 2003) and (Shapiro, 2009). 

2.2. Customer service performance

Customer service continues to generate discussions among business executives and academics as it is believed to be a key driver for measuring the competitive success of business organisations (Pargelova 2010; Mithas, Krishnan, & Fornell, 2005). It has also been recognised as a strategic means by which a firm can achieve a superior financial performance among service organisations (Reichheld, 2004; Karimi, Sommers & Gupta, 2001). Provision of better services and marketing information availability are said to be important in satisfying customer needs in the insurance industry (Epetimehin, 2011). In Nigeria, however, studies have shown that customer service is a difficult challenge faced by financial institutions (Appah & Banabo, 2012; Banabo, Ndiomu & Koroye, 2011). For instance, insurance firms are faced with the difficulty of persuading customers of the quality of their services (Olumoko, Abass & Dansu, 2012). Similarly, transactions involving money transfer and long queues and huge crowds in the banking halls have also been identified as some of the major areas where the banks in Nigeria have been encountering challenges in customer service (Abefe-Balogun & Nwankpa, 2012; Ogunnaike, 2010). Morgan & Rego (2006); Fornell et al (2006) define customer service performance as a measure of a firms customer base in terms of size, quality and loyalty. Customer loyalty and product repurchase are as a result of customer service performance (Eckert, 2007). 

Among the several ways that an organization can employ to service its customers are through information management and customer collaboration (Langly and Halcomb, 1992) Satisfaction according to Eckert (2005) refers to the quality of the products, services, price performance ratios as well as when a company meets and exceeds the requirements of the customer. Manufacturing organizations may identify Customer service performance in terms of on-time delivery as well as meeting customer specification needs (Eckert, 2005). Variables such as customer needs (having the products immediately and on hand to satisfy the customer’s needs), vendor partnerships (sharing of information regarding sales, sales forecasts as well as amount of inventory) and data integrity (data on SKU and location which assists in overall inventory management) (lee & Kleiner, 2001) often define customer satisfaction among the manufacturing sector. Firms must respond to the changing customers needs in the increasing competitive environment (Zhang, 2005). Zerbini et al (2007) asserts that customer service performance is one of a firm’s milestones towards profitability. The main focus of companies today is to satisfy the customer which has an impact on the competitiveness of an enterprise (Rad, 2008). 

Customers’ expectations according to (Howgego, 2002) are largely dependent on the flexibility of the supply chain partners. Customer service performance dictates the ways in which customers are to be treated and the best practices to be observed. Having such standards in place and educating employees on directives can help encourage repeat business and improve overall business operations (McQuerrey, 2018). Setting customer service performance standards involves determining what customers’ experience should look like from the service model employee interaction, return policies and refund or exchange guidelines. Performing regular quality checks is part of maintaining a good customer service system. The structure is fluid: companies hire new employees, some employees leave, and there are changes in the level of performance from company’s team members. What this means is that the quality of an organisation’s customer service can improve or worsen from time to time (Jordan, 2015). At Century bottling company limited, customer service performance is measured with customer feedback. It’s usually quite easy to see how well organisation team is performing through the response they get from customers. If complaints are receive, that means there is some room for improvement and Century bottling company limited needs to come up with ways to do that. Even if the customer hasn’t said much or didn’t specify what they didn’t like about their experience, it should still have a look at how it currently operates and try to improve service (James, 2015).

2.3. Inventory management and customer service performance 

According to Lynch (2005), the main objective of inventory management is to minimize the total cost of relevant costs to ensure profitable operations. According to Pandey (2002), in many cases where inventory management decisions have been effective, inventory planning models have been effective; inventory- planning models have been developed and implemented focusing especially on the twin problems of inventory size and timing. Usually inventory management modes are defined to achieve a balance between the costs of acquiring and holding inventory. These costs are the ones that affect organizations profitability. These models are developed in order to help management maintain inventories of optimal level that will help the organization to realize profits. To be specific, the objective of inventory management models is to maintain adequate inventory levels of minimum inventory costs. They specify the economic order quantity and re-order point and if well observed, companies earn profits (Hilton, 2000). Economic order quality is the quality of inventory that should be ordered at once. They further noted that, the quantity of inventory ordered at once affects inventory ordering and holding costs and will ultimately have a bearing on profitability. For instance, if a few large orders are placed, annual ordering costs will be low, but annual holding costs will be high (Lynch, 2005). 

Conversely, if many small orders are placed over all ordering costs will be high but annual holding costs will be low. To be profitable, it is necessary to determine it increasing the order size to obtain large volume discounts and slightly lowering costs will be more off- set at a higher holding cost. The scholars agreed that profitability would only be achieved at optimum level of relevant costs i.e. holding costs and ordering costs (Lynch, 2005). According to Pandey (2002), this is the level of which an order for additional inventory should be placed, because inventory cannot be ordered and received instantly. Orders for additional inventories should be placed before current stocks are depleted. The re-order point must consider both the lead time required to replenish stocks after on order is placed and inventory demand during the lead time. Hilton (2000) agreed with other scholars and further observed that, because of the variation in lead-time and the daily demand for inventory, inventories are cushions to prevent “Stock out” and the resulting loss of sales or disruption of production. As already noted above, in a merchandising establishment, stock out costs includes the extra costs of processing back orders and opportunity cost of lost sales is frequently specified as the selling price less the invoice price, opportunity costs are considered greater if dissatisfied customers subsequently patronize other establishments. 

In this case, the profitability of Century bottling company limited remains fragile if no proper controls are considered .greater it dissatisfied customers subsequently patronize other establishments. In this case, the profitability of an organization remains fragile if no proper controls are ensured (Hilton, 2000). Excessive inventories are the enemy of retail profitability. For inventory management to be an effective profitability improvement tool, corporate culture must ensure that employees are empowered to make it successful (Laugero, 2002). Organizations like Mukwano industries limited fully realize the relationship between inventory production and profit. This organization with annual sales in excess of and 1 billion. Gibson (2008) says that inventory management is an important area of financial control, which is often neglected not knowing that a small percentage saving on inventory costs will represent millions of shillings on natural scale. All stocks represents on investment so they should keep to an absolute minimum. 

2.3.1. Inventory planning and customer service performance 

Inventory planning encompasses several parts of company’s logistics and operational capabilities. Accounting gets involved with monitoring and paying for inventory, the warehousing and logistics group is responsible for receiving and shipping the product and sales is responsible for selling the product to clients. Become familiar with the performance objectives of inventory planning to help create an efficient inventory planning process (George, 2018). Inventory planning uses sales forecasting and historical data to determine inventory levels that will meet customer demand. Without accurate inventory planning, orders can go unfilled for days, or even weeks, and customer service will suffer. Improper inventory levels threaten to affect repeat business, and will cause clients to look elsewhere for their product needs. Logistics managers should review inventory planning levels on a quarterly basis to make sure that customer demand will be met (Root, 2018). Purchasing and storing product costs money. But Mukwano industries limited can reduce its purchasing and holding costs with effective inventory planning. Purchasing agents work to determine the least expensive ways to purchase product, whether it be in bulk or just prior to use, and to create return policies with vendors that reduce the costs of holding on to unsold product. Create purchasing schedules that coincide with traditional peaks in business so that there is enough money in the budget to maintain proper inventory levels (Clarke, 2017). 

Freedman (2016), manufacturers develop their production schedules based on the inventory planning of their clients. Supply chain management is the process by which vendors and clients work together to make sure that the client has product when it’s needed, and the manufacturer has its supply ordering system in place to make sure it can meet production schedules. Supply chain management reduces holding costs for the manufacturer and the retail client, and helps ensure that product is in place to meet end user needs. While Bozeman (2011) says warehouse layout planning is essential to company efficiency. Where the product is kept in the warehouse dictates how quickly it can be found, how efficiently orders can be filled and the rate at which defective product can be returned to the manufacturer. Develop a warehouse layout that optimizes employee efficiency, increases profit and adds to customer satisfaction.

2.3.2. Inventory allocation and customer service performance

According to Abo, Tetsuo (2014), inventory allocation ensures regular supply of materials so as to enable uninterrupted production; it minimizes investment of capital on purchase of materials. It also reduces damage of obsolesce, reduces inventory carrying costs, avoids duplication in ordering the materials, avoids theft or loss of material, simplifies accounting of materials and it makes use of modern technique such as standardization; value analysis: input substitution which cut down the material costs. Zenz (2014), states that inventory allocation encourages reduction of production costs because of smooth flow of materials, efficient use of invested capital that is balancing of the three preceding elements in the cost of capital encouraging good financial management of inventory, optimal customer service that is quantity purchase (low production runs) assure optimal customer service and provide efficient scheduling of internal operations. According to Keichner (2010), the sales department depends on accurate inventory numbers to plan their sales strategies. A salesman on a retail sales floor must be able to produce the item that they are selling to the customers.  Production planning depends on an accurate inventory to schedule and plan the widgets that are produced by the manufacturing department each day. The planning department develops a schedule by consulting available inventory and resources to determine which orders are produced first and lastly ensure that the numbers are accurate for production planning. Bonny Conrad (2010), states that implementing an inventory allocation system allows businesses to keep a tighter lid on the products on their shelves. 

Once the inventory allocation system is in place, it is easy to determine how much of every product is on the shelf. This makes it easier for companies to manage their inventories and control their costs. Integrating the ordering system with inventory allocation makes it easier for companies to get the products they need from the factory to the store shelves.  A formal inventory allocation system can produce substantial savings for a company. These savings are realized in several different forms, depending on the particular situation of a company. Some common sources of such savings are lower purchase cost, lower interest expenses or an increase in the availability of internal funds, lower operating costs (clerical expediting, transportation, receiving etc.), lower production cost per unit, dependable delivery of production and the better customer service in the supply of goods (Elwood, 2017). Alan muhlemann (2012), states that inventory allocation encourages a stock item file, which consists of the basic information on all items with one record(or card in a manual system) for each item including basic information, ensure that stocks for a particular job are earmarked before actually issuing it to the job. Since some types of items go into quarantine on annual in stock only to be free for issue when some tests have been successfully completed and materials issued to a job back to a particular delivery can easily be traced and stocks of some items may be held at several locations. 

Muhlemann (2012), inventory allocation policy requires a set of rules for deciding how the  number held in stores to be controlled so that the stores objective will be met .one of the most commonly used for example is for moving parts and is based on the notion of a cost optimal reorder  level(for any particular part, the stores holding which  when reached will trigger the process of re-ordering) and cost optimal economic order quantity (the number to be ordered at any one time).This stock control monitors the usage and delivery of parts and uses the inventory policy to control replenishment (Kelly, 2017). Good inventory allocation system is essential to the success of a business, both for its own records and for records that will be reviewed by the IRS and other outside entities. Inventory allocation software aids management to easily track company investments and see where improvements might be made. Robin Lewis Montanye, (2010) notes that inventory allocation software helps the inventory manager to save time by keeping calculations up-to-date giving the manager easy access to the numbers that are needed for reporting and restocking information. 

According to Lee Morgan, (2010), with a proper inventory allocation system in place, it is easy to compare physical inventory counts to the numbers in the system. If there is a discrepancy, management will know about it immediately instead of the missing or excess items being overlooked for weeks or months. Chris Joseph, (2010), tighter inventory allocation can allow for the implementation of a leaner inventory management process such as just in time (JIT) ordering. With this technique, the lead time required to order materials and merchandise decreases, resulting in a more efficient process. For this to be successful, however, tighter inventory allocation is necessary because the margin for error is also lower. Buyers and other purchasing personnel can gain a better handle on how much inventory is on hand, taking much of the guesswork out of their purchasing decisions. Effective inventory allocation reduces expenses including cost of capital, storage and risks (including obsolescence, damage, theft and deterioration) plus the appropriate taxable amounts because it reduces the total amount of inventory required to manage the business. Kenneth (2010), points out that inventory allocation monitors the level of inventory and proactively manages obsolescence and deterioration by ordering in the appropriate quantities. Effective inventory allocation also reduces storage costs, because it orders enough inventory Well-defined inventory allocation policies can reduce the labor costs associated with managing the inventory. 

Kenneth (2010), an inventory allocation system in place you can easily track the movement of the inventories on daily basis, go down basis, date-wise, category-wise, item-wise, party-wise etc. This helps you to stock the materials in the required quantity and avoid overstocking. The inventory management system helps you to generate different kinds of reports on the available data which will help the management to take informed decisions. If this software is integrated with the POS system, then you will get data related to the daily sales of an item. With this information you can chart out the demand for a particular product. This helps you to stock the inventory related to the product in demand. Thus this software helps you to meet the demand in the market and increase the customer service performance. Ravishankar, (2016), notes that inventory allocation encourages maintaining a constantly available of raw materials, purchased parts and supplies that are required for the manufacture of products. Functional responsibilities include the requisition of materials for the purchase in economic quantities at the proper time and their receipts, storage and protection, issuing of materials to production upon authorized request and the maintenance and verification of inventory records (Tol, 2009).

2.3.3. Inventory control and customer service performance 

Inventory control is the process of maintaining sufficient stock of items to meet customer needs, weighed against the cost of carrying inventory to determine the appropriate inventory levels (Nair, 2015). It is senior management’s effort to discover and maintain the optimum level of investment in all types of inventories from raw materials and suppliers to finished goods so as to monitor changes in market demands with accuracy (Horngren, 2012). Inventory is considered to have originated from the military’s need to supply themselves with arms, ammunition, and rations as they moved from their base to a forward position (Harris, 2000). Inventory is held in order to forecasts future changes in customer needs as well as meet customer requirements. This helps in managing loopholes associated with inventory like having inadequate inventory which disrupts production while the other danger is that of excessive inventories because it introduces unnecessary carrying costs and obsolescence risks (Pandey, 2003). A lot of money is tied up in inventories and inventory control is now well recognized in most companies as being so vital because we are in a take off stage and entering still competition and therefore inventory control helps in maintaining optimal stock levels by identifying how much to order, when and how many to order to avoid over investment or under investment in inventories so that the business activities are not disrupted (Kakuru, 2008).

Inventory costs in an organization comprises of inventory carrying costs (opportunity costs, insurance, rent), ordering costs (transport charges, insurance on goods in transit, inspection of goods inwards) as well as the shortage costs (idle machines, labor, loss of sales). Members of the supply chain should find an optimum balance between supply chain inventory costs and customer satisfaction (Bertrand, Poutre & Luin, 2006). A study by Narkoty (2012) among the Ghana health services found out that inventory is one of the largest assets in the organizations and hence the need to manage it. Results of a study carried out by Nordin (2002) shows that inventory costs can be reduced by implementation of reordering points as well as appropriate Economic Order Quantities (EOQ). Studies by Lee and Centinkaya (2008) show that companies increasingly employ strategies such as Vendor Management Inventory (VMI) in an effort to control inventory carrying costs. According to Small Business resource (2013), organizations cash flows can only be improved through the reduction of excess inventory and the optimization of inventory levels.

Inventory control is part of supply chain which plans, implements and controls the efficient, effective forward and reverse flow of goods, services and related information between the point of origin and the point of final consumption in order to meet customer and legal requirements (Knott, 2005). Inventory as a business concept evolved only in the 1950’s. this was mainly due to the increasing complexity of supplying one’s business with materials and slipping out products in an increasing globalized supply chain and inventory management calling of experts in the field called inventory and supply chain logisticians (Richard, 2003). This can be defined as having the right time in the right quantity at the right time at right place for the right price in the right condition to the right customer and is the science of process and incorporates all industry sectors. The goal of inventory control is to manage the fruition of project life cycles supply chains and resultant efficiencies (Gareth, 2016). Harrison (2000) argues that it costs a firm more to get a new customer then to keep an existing one, simply because the existing customers are familiar with the company’s offering and for one satisfied with the product performance as well as  knowing the brand name. As a result focusing on the relationship between an organization and the customer is a means of having a successful inventory control strategy (Morgan, 2009) and therefore those organizations that can retain more customers by satisfying their better than competitor will have profitable products in the long run and not first in the short run. 

Oakland (2009) argues that it does not matter which type of organization you work in, a hospital, bank university, local government, airline, factory, competition will arise, competition for patients, customers, students, resources, passengers and funds respectively will arise. Very few people in most organizations remain to be convinced that inventory control is the most important competitive weapon where its management is learnt like any other skill, and in this case if proper inventory control attained, the organization is bound to win more customers for its production and services, steal business resources and be competitive in the market hence improvement in performance, reliability, delivery and a favorable price will prevail to customers and the organization. Knot (2005) argues that customers prefer acquisition of goods and services in time. That an entity which can deliver goods to customers in time and in good condition will be considered a good performing entity, high quality products and services is a value demanded by all customers, therefore maintaining optimal inventory levels and delivering high quality products/services to customers create a strong customer base for the organization which enables it to perform better than those which offer substandard services/ products (Harris, 2000). 

2.4. Related studies 

In a study done by Kolias (2011), in order to test inventory-performance link using construction firms listed in Bursa Malaysia, it was found that there is a positive correlation between inventory turnover and customer service performance as a result of the nature of investments. These findings indicate that manufacturing enterprises employing modern inventory management techniques are consistently more profitable than their counterparts.

Another study suggesting a positive relationship between inventory management and performance was Eroglu and Hofer (2011), which used the Empirical Leanness Indicator (ELI) as a measurement for inventory management. They argued that inventory leanness is the best inventory management tool. Lean production considers inventory as a form of waste that should be minimized and has become synonymous with good inventory management Their study on USA manufacturing firms covering the period 2003-2008 found that leanness affects profit margins.

A survey by Romano (2011) on 351 management accountants by the National Association of Accountants (NAA) in a cross-section of industries to assess current inventory management practices in the U.S indicated that: just-in-time inventory management techniques are increasing in popularity, as are automated time-phased inventory re-order system. The survey further established that 85 percent of respondents have no plans to change their inventory controls and that actual business experience is relied upon more than inventory quantitative models. Also, the survey established that some inventory management practices such as assessing inventory levels and balancing stock-out costs against expenses related to higher inventory levels are seldom used in practice. 

Lazaridis & Dimitrios (2005) in their study of 131 companies listed on the Athens Stock Exchange showed that mismanagement of inventory will lead to tying up excess capital at the expense of profitable operations and suggested that managers can create value for their firms by keeping inventory to an optimum level. 

Also, Rajeev (2008) in his study of 91 Indian Machine Tool Enterprises to evaluate the relationship between inventory management practices and customer service performance established that effective inventory management practices have a positive impact on the customer service performance of businesses and also have an eventual effect on the performance of the overall businesses processes. 

Juan & Mertinez (2002) in their study of 8872 small and medium-sized Spanish firms also demonstrated that managers of firms can create value by reducing the number of days of inventory. Effective inventory management processes helps increase improves customer service; reduces inventory and distribution costs; and enables businesses track items and their expiration dates consequently balance between availability and demand (Pandey, 2004).

2.5. Chapter summary

With reference from the above literature about inventory control and customer service performance, it indicates that there is need to solicit more data concerning inventory management and customer service performance so as to fill the gap and bring more light and understanding on whether inventory control influence service performance. It is therefore expected that there is a significant relationship between inventory control and service performance in organizations and therefore the researcher aims at investigating the impact of inventory control on service performance.

CHAPTER THREE

METHODOLOGY

 3.0 Introduction

This chapter presents the research methodology which include; Research design , study population, study area, study variables, instruments of data collection, data processing, administration of  instruments, sources of data and data  analysis.

3.1 Research design

Thornhill et. al (2003) defined a research design as a general plan on how the researcher plans to answer the research question. The study will use descriptive research design. This kind of research design aims at generating information after the incident has occurred (Yin, 2014). The research design will look at the reasons why the situation behaves the way it is. The design will exploit both qualitative and quantitative approaches. Baron (2011), qualitative research design helps to capture qualitative data, based on qualitative aspects that may not be quantified. It aids in discovering the motives and desires or what people think and how they feel about a given subject or situation. Qualitative approach will include use of interviews, while quantitative approaches will involve use of descriptive statistics generated with frequency tables, graphs, and Charts. Quantitative research is the systematic empirical investigation of observable phenomena via statistical, mathematical or computational techniques (Mugenda & Mugenda, 2003). These approaches will be adopted to enable the researcher get and analyze relevant information concerning people’s opinions about the impact of inventory management on profitability of organizations such as Coca-Cola Company.

3.2 Study Area

The area of the study will be Coca- Cola plant- Mbarara which is located in Mbrara Municipality. Mbarara Municipality is made up of three divisions of Kakoba, Kamukuzi and Nyamitanga. Mbarara Municipality is found in Mbarara district in Ssouthwestern Uganda. Century Bottling Company Limited (Coca- Cola) Mbarara plant is situated in Mbarara industrial area near Makenke barracks, plot No.1 block 146 along Mbarara– Masaka road. The plant holds different kinds of inventories inform of raw materials, Semi-finished and Finished products. The plant started its operations in Mbarara in 1998 as part of the main plant in Uganda-Namanve situated in Kampala industrial area.

3.3 Study population

The researcher will obtain information from Coca- Cola plant- Mbarara staff, and Coca- Cola clients who directly order to purchase the company products from its premises. The researcher will involve all these categories in the study because she believes that they possess the necessary study information. The study population will include respondents from Human resource, procurement, Marketing, production and finance departments of the company as well as direct company clients that will be selected during the study process.

3.4 Sample size

The researcher will use a sample size of 50 respondents because as it is large enough for the study to obtain reliable information. The study will determine the sample size of the respondents by using the following formulae.

P= (F/N) x n.   

Where; 

F= Number in the category

N = Total population.

P = Number of respondents in the category obtained from the group

n = Total number of the respondents 

Table 1: Sample size    

3.5 Sampling method

The researcher will employ purposive in addition to simple random sampling during the process of data collection from the study respondents. The study will use purposive sampling techniques because it is assumed to allow the researcher to select a sample with experience and knowledge about the study variables and this method will be used to select staff but non manager respondents and clients’ respondents from the study area. However, Snowball Sampling will be used during the selection of managers from the study area of Coca- Cola plant- Mbarara as the researcher will first select one manager who will help her in the way of getting in touch with another respondent until the total number of the respondents in the same category is obtained.

3.6 Data sources

Both primary and secondary data will be the main sources of data to be used in the study. 3.6.1. Primary source

Concerning the Field data method, the study will use a questionnaire and interview guide to obtain information concerning the study under investigation.

3.6.2 Secondary source

The researcher will collect secondary information from different sources like; text books, internet, newspaper, magazines, and journals. This information will be reviewed by visiting places like libraries and internet cafes and this type of information will be used to supplement the collected data from different categories of the respondents. 

3.7 Data collection and instruments 

The study will employ two instruments during the process of data collection and these are as follows;

Self-administered questionnaire; The questionnaire tool will be inform of both open ended and closed ended in nature and this will be self-administered where the researcher will allow to fill the questionnaire in the study field as per respondents’ responses. The tool will be used to collect information from respondents other than clients of the company. The questionnaire method of data collection will be used because of being cheap and that the method collects responses with minimum errors and high level of confidentiality.

Interview guide; an interview guide will be also drafted with a set of questions that the researcher will ask during an interview and this will be unstructured (open ended) in nature.  The researcher will personally record the provided responses as per the study respondents during the process of carrying out an interview. The tool will be used to collect information from respondents especially the clients of the company.

3.8 Procedures of Data Collection

Before data collection, the researcher will ensure the approval of the research instruments especially the questionnaires; will obtain the introductory letter from the university; will introduce herself to the authorities, will seek participants’ consent and make appointments when to meet them for data collection, and the data collected will be analysed. This is will give respondents confidence to provide relevant information.

3.9 Ethical Considerations

The researcher will collect data upon seeking respondents’ consent after revealing the type of information needed and the purpose to avoid potential concealment of vital information.

The researcher also will maintain confidentiality of respondents’ information; and will report the true findings of the study without any bias.

3.10 Data analysis and presentation.

The collected data will be edited as this will involve sorting of the collected information in order to get information that is relevant to the study variables. At this stage all the responses will be looked through by the researcher while giving codes to the answered options. Data will then be entered into the computer and analyzed by the use of Statistical Package for Social Scientists (SPSS) program that will be used to develop frequency tables, graphs and pie-charts.  However, qualitative data will be analyzed by developing themes (headings) or sub themes, which will be derived from the study objectives. Both quantitative and qualitative techniques will be used during data analysis. 

3.11 Limitations of the study

The study will also be faced with a problem of not finding all respondents in the time of the study due to them being too busy with the organization work. The researcher however will make appropriate time table with the top company managers that will suite all the respondents during the process of data collection for reliable and valid information 

There will be too much pressure as a result of limited time for the researcher. However, the researcher will devote most of the time on the research. 

Financial constraint since research requires money for printing and transport. However, the researcher will minimize the costs as lowest as possible.

CHAPTER FOUR

PRESENTATION, ANALYSIS AND INTERPRETATION OF STUDY FINDINGS

4.0 Introduction 

The chapter presents and discusses the findings of the study. The findings serve to reinforce the existing knowledge proven about inventory management and organization performance. The chapter involves presentation, analysis and interpretation of the study results. Data presented, analyzed and interpreted according to the research objectives. It is presented in the form of tables and figures basing on the responses got from the study respondents that were selected during the process of data collection. The discussion of findings has been arranged in accordance with demographic characteristics of respondents’ and objectives of the study as were formulated in chapter one of this report. 

4.1 Background information of the respondents 

The background information of the study was considered by the study so as to establish how different characteristics of the people could differently understand inventory management and organization performance. Regarding the background information, the following data was revealed by the study as follows. 

4.1.1 Gender composition of the respondents 

The gender of respondents was established. The study targeted both male and female respondents which gave a variety of findings that were not biased making it gender sensitive.

Figure 4.1.1: Showing gender composition of respondents 

Source: Primary data 

As illustrated in figure 4.1.1, the study found out that the majority of the respondents were male as compared to the female. The number of males who participated in the study was represented 41(82%) as compared to a less number 09(18%) of the female respondents. The less involvement of women at Century bottling company could be that most of the work done requires more energetic people since it is mostly manual and can best be done by men. In addition, most of the covered respondents in the stores department were male as at least 28 out of the 30 respondents who were selected in the same department were men and only 02 female respondents. 

4.1.2 Age composition of respondents 

The age composition of the study respondents was also an important factor in the process of understanding inventory management and organization performance in Century bottling company. This was so because different age groups were assumed to understand the study variables differently yet considered vital to the study. According to the study findings the respondents views were as in table 2. 

Table 4.1.2: Age composition of the respondents 

Source: Primary data

The table above 4.1.2 shows that most of the respondents were between the ages of 40 – 50 accounting for 23(46%). This implied that these were likely to understand better the relationship between inventory management and performance of public organizations in Uganda especially Century bottling company which were in position to provide to the study information as majority reported to had stayed dealing in a public organization for a long time. The other category of the respondents were in the age range of 30 -40 as reported by 15(30%) of the study respondents and these respondents’ views were very important for the study as most of them were participating in the managing of inventories at the organization who were the employees of Century bottling company selected in the study area. 

More, 10(20%) of the study respondents were in the category age of 51 & above. These respondents’ views were so great in the process of analyzing the study variable that helped to understand the problem. Finally 02(04%) of the respondent indicated to be of below 30 years as these were of the least in number. The age composition of the study respondents could therefore be an important factor in generating valid information in relation to the issues of inventory management and performance Century bottling company.

4.1.3 Marital status of the respondents 

The marital status of the respondents was also covered and analyzed to assess their views in relation to the study variables of inventory management and performance of organizations in Uganda especially Century bottling company. This contained of those who were married, single, widowed, and separated/divorced.

Table 4.1.3: Showing marital status of the respondents

Source: Primary data

As seen in the table 4.1.3 above, majority of the study respondents constituting 29(58%) were married and these were followed by respondents who were single as reported by 19(38%) of the respondents finally 02(04%) were widowed as none of the study respondents reported to fall under the category of Separated/divorced. All these respondents of the study regardless of their status were willing to provide the information that was required by the study that helped in understanding the study problem that was under research. The gender distribution of the respondents implied that most of the people participating in public organizations are stable with families as they cannot easily leave their areas of operation in the process of providing their services to organizations.

4.1.4 Level of education of respondents 

In order to get information from all categories of people, those that have attained primary, secondary, tertiary, and university levels of education were all approached during the study process. This established the levels of education of the respondents as indicated in table 4. 

Table 4.1.4: Showing level of education of the respondents

Source: Primary data

The table 4 above shows that most of the respondents had attained University level of education with 26(52%), followed by 11(22%) of the study respondents who had attained tertiary level of education then secondary level as was indicated by 08(16%) of the respondents, finally 05(10%) of the respondents who cited that had attained primary level of education. The study on further understanding showed that all the study respondents who had attained secondary and primary levels of education were mostly people in the stores department as some were also performing differing tasks like offloading and loading the trucks at the organization. The above findings show that secondary leaver take a lead in participating as compared to those with primary level, tertiary levels of education and University level of education. This is a manifestation that the information was from literate people and who understood the relationship between the study variables.

4.2 Inventory management 

4.2.1 Inventory Planning

Respondents asked to show their level of agreement concerning inventory planning. The results were obtained and are presented below;

Table 4.2.1: Inventory Planning

Source: Primary Data

Table above show that majority of study respondents (90%) agreed with inventory planning has helped the company to always plan for its inventory operations, 6% of them disagreed while 4% of them were not sure. This implies that as a result of inventory planning in the operations of Century bottling company, the company always plans before operations are started. Findings also indicate that majority of the respondents (92%) agreed with trust and collaboration has improved due to inventory planning, 4% of the study respondents disagreed, 4% of the respondents were not sure. Majority of the study respondents (50%) agreed with inventory planning has enabled contract terms and conditions to be reviewed, while 28% of them agreed, a significant percentage (22%) were not sure. The study findings as indicated in the table above show that majority of the respondents (54%) agreed with Inventory planning has enabled us to have a back-up plan, while 30% of them disagreed, 16% of the respondents were not sure. However, most of the responses were positive implying that as a result of the application of inventory planning in the operation, there are several plans that have been put in place in case the first plan does not materialize.

The study findings as indicated in the table above, majority of the respondents (44%) agreed with as a result of inventory planning, sales forecasting is used to determine inventory levels, 42% of the respondents disagreed, 14% of the respondents were not sure. However, from the results most of the respondents were on a positive side. According to the table above, most of the respondents (50%) of the respondents agreed with inventory planning has enabled the company to use historical data to determine its inventory levels, 38% of them disagreed and only 12% of them were not sure. This implies that the application of inventory management has enabled the company to be able to determine it’s inventory levels since most respondents were in agreement with the statement. Table above also indicate that 52% of the respondents agreed with due to inventory planning in our organisation, orders are all fulfilled, 32% of the respondents disagreed, 16% of the respondents were not sure. The table indicates that, most of the respondents (54%) of them agreed with inventory planning has enabled plans to be followed in company operations, 32% of them disagree, 16% of the study respondents were not sure. This implies that store management has enabled the organisation to be effective in it’s operations. 

4.2.2. Inventory allocation 

The study sought to investigate the level of agreement of respondents on inventory allocation. Obtained results are presented in table 4.2.2 below;

Table 4.2.2: Inventory allocation

Source: Primary data (2018)

The table above indicates that 40(80%) of the respondents strongly agreeing and the 10(20%) agreeing with Inventory allocation has enabled regular supply of materials in the organisation. Study findings in the table above shows that, 24(48%) of the respondents strongly agreed with inventory allocation has enabled minimal investment of capital on material purchase, 9(18%) of them agreed. The remaining 17(34%), (2) 4% of the respondents disagreed, were not sure respectively while no respondent strongly disagreed. 

Findings in table above indicated that there is reduced damage of obsolesce with 13 (26%) of respondents agreeing and (5)10% of them strongly agreeing although at a lower rate since (20)40% of the respondents were not sure, (7)14% of them disagreed though non strongly disagreed. From the table above, (25)50% of the study respondents strongly agreed with reduced inventory carrying costs, (16)32% of them were not sure, none of the respondents strongly disagreed while (5)10% of the respondents strongly disagreed, 8% of them agreed. 

Study findings revealed that there is reduced production costs with the ranking of (30)60% of responses strongly agreeing, (10)20% 0f them agreed, (5)10% of the respondents however was not sure. The remaining (3)6% of the respondents strongly agreed and only (2)4% of the study respondents disagreed. (24)48% of the study respondents strongly agreed with there is no loss of material or theft, (15)30% of them agreed, while (8)16% of the respondents were not sure, only (3)6% of the respondents disagreed and no respondent strongly disagreed. 

Table above also shows that (16)32% of the study respondents strongly agreed with movement of material is tracked, (15)30% of them were not sure, while (8)16% of the respondents agreed, only (9)18% of the respondents disagreed and no respondent strongly disagreed. The table above shows (30)60% of the study respondents strongly agreed with it is easy to determine the number of materials, (10)20% of the respondents disagreed. The remaining (5)10% of the respondents each agreed and strongly disagreed while no respondent was not sure. 

4.2.3. Inventory control

The study sought to investigate the level of agreement of respondents on inventory allocation. Obtained results are presented in table 4.2.3 below;

Table 4.2.3: Inventory control

Source: Primary data (2018)

The table above that (25)50% of the respondents strongly agreed with a responsible official authorizes purchase, (15)30% of them agreed, (10)20% of the respondents strongly disagreed and none of the respondents was not sure or disagreed. Study findings as indicated in table above reveal that 21(42%) of the respondents agreed with goods are inspected on receipt, (12)24% of them strongly agreed compared to (5)10% of the respondents who disagree and another (5)10% of them that strongly disagree, though (7)14% of the respondents were not sure. 

Results show that majority of the respondents 25(50%) strongly agree with maximum attention is put on high value inventories, (15)30% of them disagree, (10)20% of the respondents agree. Also, most of the respondents 28(56%) agree while (22)44% of them strongly agree with there is limited under stock situations. None of the respondents were not sure, disagreed or strongly disagreed. 

Table shows that (27)54% of the study respondents strongly agree with there is limited damaged goods while (23)46% of the respondents agree. None of the respondents were not sure, disagreed or strongly disagreed. The table above shows that, (35)70% of the respondents strongly agree with all store staffs are highly skilled while (15)30% of them strongly disagree. None of the respondents were not sure, disagreed or strongly disagreed. 

Findings in table above indicated that there is high expenses of making requisitions with 13(26%) of respondents agreeing and (5)10% of them strongly agreeing although at a lower rate since (20)40% of the respondents were not sure, (7)14% of them disagreed though non strongly disagreed. Study findings in the table above show that, (24)48% of the respondents strongly agreed with purchase orders are always written, (9)18% of them agreed. The remaining 17(34%), (2)4% of the respondents disagreed, were not sure respectively while no respondent strongly disagreed. 

4.3 Customer service performance

The study sought to investigate the level of agreement of respondents on customer service performance. Obtained results are presented in table 4.3.1 below;

Table 4.3.1: Customer service performance

Source: Primary data (2018)

Study findings as indicated in table above reveal that 21(42%) of the respondents agreed with inventory operations are profitable, (12)24% of them strongly agreed compared to (5)10% of the respondents who disagree and another (5)10% of them that strongly disagree, though (7)14% of the respondents were not sure. Results show that majority of the respondents 25(50%) strongly agree with costs are maximized, (15)30% of them disagree, (10)20% of the respondents agree. 

Table shows that (27)54% of the study respondents strongly agree with there is customer satisfaction while (23)46% of the respondents agree. None of the respondents were not sure, disagreed or strongly disagreed. Findings in table above indicated that there is quality of services at the organization with 13(26%) of respondents agreeing and (5)10% of them strongly agreeing although at a lower rate since (20)40% of the respondents were not sure, (7)14% of them disagreed though non strongly disagreed. 

Table above shows that (24)48% of the study respondents strongly agreed with operational efficiency and effectiveness, (15)30% of them agreed, while (8)16% of the respondents were not sure, only (3)6% of the respondents disagreed and no respondent strongly disagreed. From the table above, (25)50% of the study respondents strongly agreed with time delivery of orders is good, (16)32% of them were not sure, none of the respondents strongly disagreed while (5)10% of the respondents strongly disagreed, 8% of them agreed. 

Table above also shows that (16)32% of the study respondents strongly agreed with there is customer loyalty, (15)30% of them were not sure, while (8)16% of the respondents agreed, only (9)18% of the respondents disagreed and no respondent strongly disagreed. The table above indicates that 40(80%) of the study respondents of the respondents strongly agreeing and the 10(20%) agreeing with customer expectations are met. 

The table above shows that, (35)70% of the respondents strongly agree with there is good customer care while (15)30% of them strongly disagree. None of the respondents were not sure, disagreed or strongly disagreed. The table indicates that majority of the study respondents 31(62%) agreed with there are limited complaints while the remaining 19(38%) strongly agreed. However, no respondent disagreed, was not sure or strongly disagreed. 

Study findings revealed (30)60% of responses strongly agreeing with customer demands are met, (10)20% 0f them agreed, (5)10% of the respondents however was not sure. The remaining (3)6% of the respondents strongly agreed and only (2)4% of the study respondents disagreed. 

The table above shows that, (38)76% of the respondents strongly agree with increased purchasing while 12(24%) disagreed. None of the respondents agreed, were not sure or disagreed. The table above shows that, 42(84%) of the respondents strongly agree with repeated purchasing while (8)16% disagreed. None of the respondents strongly disagreed, were not sure or disagreed. 

The table above shows that, (37)74% of the respondents strongly agree with brand loyalty, 13(26%) agree. None of the respondents strongly disagreed, were not sure or disagreed. The table above that (25)50% of the respondents strongly agreed with there is good feedback, (15)30% of them agreed, (10)20% of the respondents strongly disagreed and none of the respondents was not sure or disagreed. 

A regression model was run to analyze the effect of inventory management on the customer service performance.

The study conducted a multiple regression analysis from the regression equation thus: 

OP = a + β1P + β2I + β3C + e 

Where OP = customer service performance, P= inventory planning, I= inventory implementation, C = inventory control.

Table 4.3.2: Regression Output

Adjusted R squared is coefficient of determination which tells us the variation in the dependent variable due to changes in the independent variable, from the findings in the above table the value of adjusted R squared was 0.633 an indication that there was variation of 63.6% on the customer service performance of Century bottling company due to changes in changes in inventory planning, inventory implementation, inventory control at 95% confidence interval. R is the correlation coefficient which shows the relationship between the study variables. From the findings shown in the table above there was a strong positive relationship between the study variables as shown by 0.694.

From the results in the above table the established regression equation was  

OP = 0.555 + 0.023 X1 + 0.112 X2 + 0.105 X3

This revealed that changes in inventory planning, inventory implementation, inventory control to a constant zero, customer service performance would be at 0.555. 

A unit change in inventory planning would lead to increase in customer service performance by a factor of 0.023.

A unit increase in inventory implementation would lead to increase in customer service performance by a factor of 0.112 and unit change in Inventory control would lead to increase in customer service performance by a factor of 0.105.

CHAPTER FIVE

SUMMARY OF FINDINGS, DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS

5.0 Introduction 

This chapter contains summary of findings, discussion, conclusions, recommendations and suggestions for further studies. The discussion of the study findings, conclusions and recommendations were done in accordance with the study objectives as follows. 

5.1. Summary of findings

5.1.1 The influence of inventory planning on customer service performance. 

The study revealed that inventory planning has helped the company to always plan for its inventory operations, trust and collaboration has improved due to inventory planning, contract terms and conditions are reviewed, inventory planning has also enabled the organisation to have a back-up plan, there are several plans that have been put in place in case the first plan does not materialize. The study findings revealed agreed that as a result of inventory planning, sales forecasting is used to determine inventory levels, inventory planning has enabled the company to use historical data to determine its inventory levels, orders are all fulfilled and planning has enabled plans to be followed in company operations. This implies that the organisation has improved customer service performance through inventory planning.

5.1.2 The influence of inventory allocation on customer service performance

The study revealed that inventory allocation has enabled regular supply of materials in the organisation, it has enabled minimal investment of capital on material purchase, there is reduced damage of obsolesce, reduced inventory carrying costs, there is reduced production costs, there is no loss of material or theft, movement of material is tracked, it is easy to determine the number of materials. This implies that inventory allocation has improved customer performance. 

5.1.3 The influence of inventory control on customer service performance 

Study findings indicated that a responsible official authorizes purchase, goods are inspected on receipt, maximum attention is put on high value inventories, there is limited under stock situations. There are limited damaged goods, all store staffs are highly skilled and there is high expenses of making requisitions and purchase orders are always written. This implied that Crown beverages limited has engaged inventory control in an effort to improve customer service performance. 

5.2 Discussion of the study findings 

5.2.1 The influence of inventory planning on customer service performance. 

Table 4.2.1 showed that inventory planning has helped the company to always plan for its inventory operations, trust and collaboration has improved due to inventory planning, contract terms and conditions are reviewed, inventory planning has also enabled the organisation to have a back-up plan, there are several plans that have been put in place in case the first plan does not materialize. The study findings revealed agreed that as a result of inventory planning, sales forecasting is used to determine inventory levels, inventory planning has enabled the company to use historical data to determine its inventory levels, orders are all fulfilled and planning has enabled plans to be followed in company operations. This implies that the organisation has improved customer service performance through inventory planning.

Inventory planning encompasses several parts of company’s logistics and operational capabilities. Accounting gets involved with monitoring and paying for inventory, the warehousing and logistics group is responsible for receiving and shipping the product and sales is responsible for selling the product to clients. Become familiar with the performance objectives of inventory planning to help create an efficient inventory planning process (George, 2018). Inventory planning uses sales forecasting and historical data to determine inventory levels that will meet customer demand. Without accurate inventory planning, orders can go unfilled for days, or even weeks, and customer service will suffer. Improper inventory levels threaten to affect repeat business, and will cause clients to look elsewhere for their product needs. Logistics managers should review inventory planning levels on a quarterly basis to make sure that customer demand will be met (Root, 2018). 

5.2.2 The influence of inventory allocation on customer service performance

The table 4.2.2 in chapter four revealed that inventory allocation has enabled regular supply of materials in the organisation, it has enabled minimal investment of capital on material purchase, there is reduced damage of obsolesce, reduced inventory carrying costs, there is reduced production costs, there is no loss of material or theft, movement of material is tracked, it is easy to determine the number of materials. This implies that inventory allocation has improved customer performance. The findings agree with Tetsuo (2014), inventory allocation ensures regular supply of materials so as to enable uninterrupted production; it minimizes investment of capital on purchase of materials. It also reduces damage of obsolesce, reduces inventory carrying costs, avoids duplication in ordering the materials, avoids theft or loss of material, simplifies accounting of materials and it makes use of modern technique such as standardization; value analysis: input substitution which cut down the material costs. Zenz (2014), states that inventory allocation encourages reduction of production costs because of smooth flow of materials, efficient use of invested capital that is balancing of the three preceding elements in the cost of capital encouraging good financial management of inventory, optimal customer service that is quantity purchase (low production runs) assure optimal customer service and provide efficient scheduling of internal operations. According to Keichner (2010), the sales department depends on accurate inventory numbers to plan their sales strategies. A salesman on a retail sales floor must be able to produce the item that they are selling to the customers.  Production planning depends on an accurate inventory to schedule and plan the widgets that are produced by the manufacturing department each day. The planning department develops a schedule by consulting available inventory and resources to determine which orders are produced first and lastly ensure that the numbers are accurate for production planning. Bonny Conrad (2010), states that implementing an inventory allocation system allows businesses to keep a tighter lid on the products on their shelves. 

5.2.3 The influence of inventory control on customer service performance 

Table 4.2.3 indicated that a responsible official authorizes purchase, goods are inspected on receipt, maximum attention is put on high value inventories, there is limited under stock situations. There are limited damaged goods, all store staffs are highly skilled and there is high expenses of making requisitions and purchase orders are always written. This implied that Crown beverages limited has engaged inventory control in an effort to improve customer service performance. The above agrees with Nair (2015) who noted that inventory control is the process of maintaining sufficient stock of items to meet customer needs, weighed against the cost of carrying inventory to determine the appropriate inventory levels. It is senior management’s effort to discover and maintain the optimum level of investment in all types of inventories from raw materials and suppliers to finished goods so as to monitor changes in market demands with accuracy (Horngren, 2012). Inventory is considered to have originated from the military’s need to supply themselves with arms, ammunition, and rations as they moved from their base to a forward position (Harris, 2000). Inventory is held in order to forecasts future changes in customer needs as well as meet customer requirements. This helps in managing loopholes associated with inventory like having inadequate inventory which disrupts production while the other danger is that of excessive inventories because it introduces unnecessary carrying costs and obsolescence risks (Pandey, 2003). A lot of money is tied up in inventories and inventory control is now well recognized in most companies as being so vital because we are in a take off stage and entering still competition and therefore inventory control helps in maintaining optimal stock levels by identifying how much to order, when and how many to order to avoid over investment or under investment in inventories so that the business activities are not disrupted (Kakuru, 2008).

5.3 Conclusions 

The study concluded that inventory planning has helped the company to always plan for its inventory operations, trust and collaboration has improved due to inventory planning, contract terms and conditions are reviewed, inventory planning has also enabled the organisation to have a back-up plan, there are several plans that have been put in place in case the first plan does not materialize. The study findings revealed agreed that as a result of inventory planning, sales forecasting is used to determine inventory levels, inventory planning has enabled the company to use historical data to determine its inventory levels, orders are all fulfilled and planning has enabled plans to be followed in company operations. This implies that the organisation has improved customer service performance through inventory planning.

The study revealed that inventory allocation has enabled regular supply of materials in the organisation, it has enabled minimal investment of capital on material purchase, there is reduced damage of obsolesce, reduced inventory carrying costs, there is reduced production costs, there is no loss of material or theft, movement of material is tracked, it is easy to determine the number of materials. This implies that inventory allocation has improved customer performance.

The study revealed that a responsible official authorizes purchase, goods are inspected on receipt, maximum attention is put on high value inventories, there is limited under stock situations. There are limited damaged goods, all store staffs are highly skilled and there is high expenses of making requisitions and purchase orders are always written. This implied that Crown beverages limited has engaged inventory control in an effort to improve customer service performance.

The study established regression equation as  OP = 0.555 + 0.023 X1 + 0.112 X2 + 0.105 X3 and this revealed that changes in inventory planning, inventory implementation, inventory control to a constant zero, customer service performance would be at 0.555. A unit change in inventory planning would lead to increase in customer service performance by a factor of 0.023. A unit increase in inventory implementation would lead to increase in customer service performance by a factor of 0.112 and unit change in Inventory control would lead to increase in customer service performance by a factor of 0.105.

5.4 Recommendations

In light with the above study findings and conclusions, the following recommendations are made as under; 

Since inventory management techniques do not normally lead to immediate efficiency of the Organization for improved performance, the study recommends management in public organizations to always carry out forward planning, centralize the purchase and store function, carry out stock taking exercise periodically and if such factors are adopted together then performance and efficiency of the Organization will be greatly influenced positively. 

It is also recommended that whether or not a perpetual/continuous stock control system is maintained, there should be continuous annual stock-taking at the organization. To this, procedures can be prescribed for this with emphasis on identifying damaged, slow moving, and obsolete stock and cut-off procedures. In addition, inventories at Crown beverage limited should be continuously checked with actual stocks held by independent officials, and inquires made into all reconciling differences. If this is done, theft challenge associated with inventory management will be minimized at the organization premises.

The study also recommends top management in most organizations to emphasize on the proper inventory management techniques and measuring of efficiency deviations to identify weaknesses in the process of managing inventories. In addition, the study recommends managers in organizations especially those in developing countries like Uganda to always undertake forward planning, this is because they will be able to know when the incoming needs can be scheduled for delivery and also takes into account current backlogs so that delivery schedules are realistic which will minimize inventory management costs. 

5.5 Suggested areas for further research

The researcher recommends that further studies be done on; 

1. The effect of materials handling techniques on employees efficiency in public organizations 
2. The relationship between labor turnover and employees‟ efficiency among public organizations in Uganda. 

APPENDICES

APPENDIX I: QUESTIONNAIRE FOR THE COMPANY WORKERS

I am NDUHUKIRE CATHERINE, a year three Bachelor of Procurement and Logistics Management at Kyambogo University carry out a study on “inventory management and profitability of an organization: a case study of Century Bottling Company Limited – Mbarara Branch”. Your feedback is very important as your inputs will be used for academic purposes only. I greatly appreciate if you could take a few minutes to provide me with information. Your response will be kept confidential and it will not be divulged to any person or institution outside this corporation. 

Thank you in advance

SECTION A: BIOGRAPHIC DATA 

(N.B Answer by Ticking where applicable) 

1. Gender 

       (a). Female                                                        (b). Male 

2. Age 

(a) Below 21                                                             (b) 21-30

(c) 31-40                                                                   (d) 41& above 

4. Education Level 

1. Primary                                                          (b)  Secondary 

(c) Tertiary                                                             (d) University 

      (e)     Others (Specify) ——————————————————

5. Period spent in the organisation

(a) 1-3years                                                                 (b) 3-5yrs

(c) 5-7yrs                                                                   (d) 7yrs & above 

SECTION B: INVENTORY MANAGEMENT  

(i). Inventory Planning

Key; Where SA-strongly agree, A- agree, UD- undecided, SD-strongly disagree D-disagree

(ii). Inventory allocation 

Key; Where SA-strongly agree, A- agree, UD- undecided, SD-strongly disagree D-disagree

(iii) Inventory control

Key; Where SA-strongly agree, A- agree, UD- undecided, SD-strongly disagree D-disagree

Section C: Customer service Performance

THANK YOU FOR YOUR TIME

APPENDIX II: INTERVIEW GUIDE FOR THE COMPANY CLIENTS

I am NDUHUKIRE CATHERINE, a year three Bachelor of Procurement and Logistics Management at Kyambogo University carry out a study on “inventory management and profitability of an organization: a case study of Century Bottling Company Limited – Mbarara Branch”. Your feedback is very important as your inputs will be used for academic purposes only. I greatly appreciate if you could take a few minutes to provide me with information. Your response will be kept confidential and it will not be divulged to any person or institution outside this corporation. 

Thank you in advance

1. 1. Gender of the respondent.
   2.    Marital Status of the respondent.
   3.   Age of the respondent.
   4.    Education Level of the respondent.
   5. Inventory control ways used at Coca-Cola Company. 
   6. Whether inventory control methods influence the profitability of the Company. 
   7. Whether the company is faced with challenges in inventory management?

• Recommendations on the impact of inventory management on profitability of private organizations in Uganda.

• Conclusion on the impact of inventory management on profitability of Coca Cola Company? 

THANK YOU VERY MUCH

CHAPTER FIVE

DISCUSSION OF FINDINGS, SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.0 Introduction 

This chapter contains discussion of the study findings, summary, conclusions, recommendations and suggestions for further studies. The discussion of the study findings, summary, conclusions and recommendations were done in accordance with the study objectives as follows. 

5.1 Discussion of the study findings according to objectives 

5.1.1 Techniques of inventory management used at Century bottling company. 

The study showed that the common techniques of inventory management used at Century bottling company include; two bin system, Fixed order quantity, Periodic review systems, ABC analysis and Economic order quantity (EOQ).these ensure that the issue of inventories from the stores that were previously purchased to the user departments and arrangement of some organization inventories according to the order of their importance. 

These study findings can be compared with Pandey (1995) who argued that since most organizations maintain different types of inventories with different value, minimum attention is devoted to different items with the highest value. The difference involves different classes of inventory which leads to the inventory control model by importance and exception or ABC analysis (Richmond, 1969). The ABC analysis involves the following:-Classify the items of inventory determining the expected used in units and price per unit for each item, determine the total value of each item by price and units, rank items according to value, and determine Percentage (%) ratio or units of each item to total items and value. Also, Wood Frank (1996), the way materials are valued has implication on the firms reported profit and the material usage and balance therefore different inventory profit reported by firms. The different materials valuation techniques include Last In First Out (LIFO), First In First Out (FIFO), average cost method and net realizable value.

5.1.2 Challenges faced by the Century bottling company in managing inventories

Also, it was indicated by the study that there are challenges faced by Century bottling company in the process of managing inventories as none of the study respondents was able to disagree with the same statement. The study on further findings established the following challenges among others were faced by Century bottling company as loss of inventories, prolonged lead time, increased operation costs and stock-outs due to poor inventory management techniques among other challenges faced by organization in the process of managing its inventories at the organization. 

These findings are in line with Kanyunyuzi (2011) who observed that excessive levels of stock are undesirable because they increase the risks of inventory becoming obsolete, stock loss through damage and theft, increased storage costs like rent, insurance and unnecessary tie up of the firm’s funds. He further state that a firm would be foregoing profits when it continues maintaining excessive levels of inventory, which implies that the probability position of the firm is being threatened in the long run since funds are not being invested in other profitable ventures.

5.1.3 Relationship between inventory management and organizational performance 

The study indicated that there is a relationship between inventory management and performance of Century bottling company. This is because respondents explained that proper managing of inventories reduces on the risk of stock-outs, increases efficiency of the organization and that materials can be easily identified especially in the stores when needed by the user departments in the organization. Most of the respondents still argued that proper inventory management reduces on labor with its associated costs which improves performance of the Organization. 

The study respondents claimed that inventory management techniques have a positive influence on the performance of Century bottling company. They went ahead and said that as such techniques of managing inventories help in proper planning of the materials needed by identifying the gap between the desired and the actual level of materials, allocation of resources, purchasing, sales and employment of staff and everything concerned to human resources management all of which reduces on the costs incurred by the organization in the procurement departments for improved performance of the organization. However some of these respondents said that the positive relationship of the inventory management techniques on the performance of Century bottling company depends on how the techniques are used by the users at the organization plus the prevailing conditions like power inform of electricity. 

These results indicate that proper use of inventory management techniques like application of Periodic review system reduces on stock out costs in organizations when properly employed. This was further evidenced by the study respondents who were able to say that “proper use of Periodic Review Systems can improve on the performance of public organizations like Century bottling company. 

The study findings also revealed that there was a high level of agreement as the results indicate that all the respondents did not disagree that recording of inventories at the Organization was helping in proper decision making as the distribution left none of the respondents who were in disagreement with the same statement. In conclusion, results indicate that since almost all the decisions made by the Organization management in the process of managing inventories aim at influencing the stores department of the organization for better Organization results as recording of materials greatly influences the Organization’s performance. Qualitative results from the majority of interviewed participants on the matters concerning whether inventory management techniques have any influence on performance of stores department of the organization revealed that the influence between the two variables of inventory management techniques and the performance of Century bottling company exists. This is because respondents explained that good management of inventories reduces on the risk of stock-outs, increases efficiency of the organization and that materials can be easily identified especially in the stores department when needed by the user departments of the organization. Most of the respondents still argued that proper inventory management reduces on labor with its associated costs leading to improved performance of the Organization. 

Also that, 04(08%) of the respondents indicated inventory management having a negative relationship on the performance of Century bottling company. These same respondents believed that, inventory management involves a lot of costs, inconsistence as there is over charging of departments, use of highly skilled workers in charge of managing inventories, theft, obsolescence among others all of which increase on the costs hence reducing much of the on the performance of the organization in question especially in the stores department. These same study respondents further cited that purchasing of items after the departments have ordered for goods from the organization among the inventory management techniques influence the organization’s performance in terms of expenditure negatively as most of the study respondents indicated that such increases on the organization’s expenditure. 

However, basing on most of the study respondents as eluded in table above, the study therefore established that there is a positive relationship between inventory management and performance of public organizations like Century bottling company  as was revealed by majority 46(92%) of the covered respondents during data collection process

The above study findings can be related with Ronald, H. (1999), who reported that inventory exists for this reason alone, the relevance of the decision to be made. Carrying, holding or possession costs. These include handling charges, labor and operating costs, insurance premium, breakage, pilferage, obsolescence, taxes and investment or opportunity costs. In short any cost associated with having as opposed to not having inventory is included. Other costs may include ordering costs, or purchase costs, set-up costs, stock out and price variation costs.

5.2. Summary

The common techniques of inventory management used at Century bottling company include; two bin system, Fixed order quantity, Periodic review systems, ABC analysis and Economic order quantity (EOQ). These ensure that the issue of inventories from the stores that were previously purchased to the user departments and arrangement of some organization inventories according to the order of their importance. 

The study established the following challenges among others were faced by Century bottling company as loss of inventories, prolonged lead time, increased operation costs and stock-outs due to poor inventory management techniques among other challenges faced by organization in the process of managing its inventories at the organization. 

There is a relationship between inventory management and performance of Century bottling company. This is because of proper managing of inventories reduces on the risk of stock-outs, increases efficiency of the organization and that materials can be easily identified especially in the stores when needed by the user departments in the organization. 

5.3 Conclusions 

That the common inventory management techniques used at Century bottling company  include; Two bin system, Fixed order quantity, Periodic review system, Economic Order Quantity (EOQ) and ABC analysis, which ensure recoding of all the purchased and issued inventories to the user departments of the Organization, issue of inventories from the stores that were previously purchased to the user departments and arrangement of some organization inventories according to the order of their importance. That proper inventory management techniques play an important function on the performance of public organizations like Century bottling company. This is because respondents explained that proper managing of inventories reduces on the risk of stock-outs, increases efficiency of the organization and that materials can be easily identified especially in the stores when needed by the user departments in the organization. In addition, it is concluded that the kind of relationship between inventory management techniques and performance of public organizations in Uganda can either be positive or negative depending on how the techniques of inventory management are used and how it is applied. Lastly, the study concludes that the challenges faced by Century bottling company in the process of managing inventories include; loss of inventories, prolonged lead time, Increased Operation costs, stock-out costs among other challenges faced by the organization. 

5.4 Recommendations 

In light with the above study findings and conclusions, the following recommendations are made as under; 

Since inventory management techniques do not normally lead to immediate efficiency of the Organization for improved performance, the study recommends management in public organizations to always carry out forward planning, centralize the purchase and store function, carry out stock taking exercise periodically and if such factors are adopted together then performance and efficiency of the Organization will be greatly influenced positively. 

It is also recommended that whether or not a perpetual/continuous stock control system is maintained, there should be continuous annual stock-taking at the organization. To this, procedures can be prescribed for this with emphasis on identifying damaged, slow moving, and obsolete stock and cut-off procedures. In addition, inventories at Century bottling company should be continuously checked with actual stocks held by independent officials, and inquires made into all reconciling differences. If this is done, theft challenge associated with inventory management will be minimized at the organization premises.

The study also recommends top management in most organizations to emphasize on the proper inventory management techniques and measuring of efficiency deviations to identify weaknesses in the process of managing inventories. In addition, the study recommends managers in organizations especially those in developing countries like Uganda to always undertake forward planning, this is because they will be able to know when the incoming needs can be scheduled for delivery and also takes into account current backlogs so that delivery schedules are realistic which will minimize inventory management costs. 

5.5 Suggested areas for further research

The researcher recommends that further studies be done on; 

1. The effect of materials handling techniques on employees efficiency in public organizations 
2. The relationship between labor turnover and employees‟ efficiency among public organizations in Uganda. 

QUESTIONNAIRE FOR THE COMPANY WORKERS

I am NDUHUKIRE CATHERINE, a year three Bachelor of Procurement and Logistics Management at Kyambogo University carry out a study on “inventory management and profitability of an organization: a case study of Century Bottling Company Limited – Mbarara Branch”. Your feedback is very important as your inputs will be used for academic purposes only. I greatly appreciate if you could take a few minutes to provide me with information. Your response will be kept confidential and it will not be divulged to any person or institution outside this corporation. 

Thank you in advance

SECTION A: BIOGRAPHIC DATA 

(N.B Answer by Ticking where applicable) 

1. Gender 

       (a). Female                                                        (b). Male 

2. Age 

(a) Below 21                                                             (b) 21-30

(c) 31-40                                                                   (d) 41& above 

4. Education Level 

1. Primary                                                          (b)  Secondary 

(c) Tertiary                                                             (d) University 

      (e)     Others (Specify) ——————————————————

5. Period spent in the organisation

(a) 1-3years                                                                 (b) 3-5yrs

(c) 5-7yrs                                                                   (d) 7yrs & above 

SECTION B: INVENTORY MANAGEMENT  

(i). Inventory Planning

Key; Where SA-strongly agree, A- agree, UD- undecided, SD-strongly disagree D-disagree

(ii). Inventory allocation 

Key; Where SA-strongly agree, A- agree, UD- undecided, SD-strongly disagree D-disagree

(iii) Inventory control

Key; Where SA-strongly agree, A- agree, UD- undecided, SD-strongly disagree D-disagree

Section C: Customer service Performance

THANK YOU FOR YOUR TIME

INTERVIEW GUIDE FOR THE COMPANY CLIENTS

I am NDUHUKIRE CATHERINE, a year three Bachelor of Procurement and Logistics Management at Kyambogo University carry out a study on “inventory management and profitability of an organization: a case study of Century Bottling Company Limited – Mbarara Branch”. Your feedback is very important as your inputs will be used for academic purposes only. I greatly appreciate if you could take a few minutes to provide me with information. Your response will be kept confidential and it will not be divulged to any person or institution outside this corporation. 

Thank you in advance

1. 1. Gender of the respondent.
   2.    Marital Status of the respondent.
   3.   Age of the respondent.
   4.    Education Level of the respondent.
   5. Inventory control ways used at Coca-Cola Company. 
   6. Whether inventory control methods influence the profitability of the Company. 
   7. Whether the company is faced with challenges in inventory management?

• Recommendations on the impact of inventory management on profitability of private organizations in Uganda.

• Conclusion on the impact of inventory management on profitability of Coca Cola Company? 

THANK YOU VERY MUCH