Project Materials

THE INFLUENCE OF INVENTORY MANAGEMENT PRACTICES ON ORGANIZATIONAL FINANCIAL PERFOMANCE

ABSTRACT

The vast majority of organisations around the world invest heavily on inventory management, which accounts for the majority of their present assets. The organisations attempt, through their purchasing, production, sales, and finance divisions, to manage inventories efficiently and effectively in order to avoid wasteful capital tying. The goal of inventory management is to reduce the expenses of ordering, carrying, and not carrying enough inventory. Poor inventory effects include significant differences between stock records and physical stock, insufficient records and recording, the availability of obsolete and obsolete stores, increased customer complaints due to unfulfilled orders, disorganised stores, damaged stocks, and a loss of financial resources. This study examined the impact of inventory management practices on organisational financial performance at the National Microfinance Bank Headquarters in Dar es Salaam. The report conducted a survey of the National Microfinance Bank at its headquarters. The questionnaire was designed for a small group of NMB employees. Accordingly, the study attempted to answer three questions: i) What are the factors that influence inventory management practices in organisations?; ii) What is the effect of inventory management practices on return on equity?; and iii) What is the effect of inventory management practices on return on sale? According to the study, key factors influencing inventory management practices in NMB include staff skills and knowledge, management involvement in procurement planning, and the existence of procurement policies that staff adhere to when implementing inventory management processes. The analysis also found a commensurate increase in sales and profits in 2013, resulting in consistent business growth and significant value generated by NMB through its ROE and ROS. The results have resulted in shareholders receiving TZS 34 billion in dividends, while GoT received TZS 79.6 billion in income taxes, PAYE, SDL, and other fees; NMB paid staff salaries and emoluments totalling TZS 99.7 billion; and NMB spent TZS 1.05 billion on sponsorships, public relations donations, and other activities for other stakeholders and the general public.

Chapter one

Introduction

1.1 Background of the Study 

This chapter provides an overview of the impact of inventory management practices on organisational financial performance: the case of the National Microfinance Bank Headquarters in Dar es Salaam.

It also sheds light on the financial performance of NMB. It gives background information about the NMB, its organisation, and structure, as well as insight into the subject addressed by the study.

The chapter then presents the study’s aims, research questions, significance, scope, limitations, and delimitations, as well as how the study was organised.

Inventory is a real asset. It is the lifeblood of any business since it ensures that organisations retain consumers by enhancing responsiveness to customer orders and providing better in-house services to staff.

As a result, organisations must exercise caution while managing inventories to avoid depleting working capital or failing to retain consumers owing to a lack of items or failure to supply a required service. But how many companies strike a balance between the two objectives?

The current level of competitiveness in the business world has caused organisations to be extremely concerned with inventory management and the methods associated with it.

Inventories are often made up of finished items, semi-finished goods, and raw materials, all of which require effective and efficient management to ensure the organization’s profitability.