INVENTORY MANAGEMENT PRACTICES AND OPERATIONAL PERFORMANCE OF SELECTED FLOUR MILLS COMPANIES IN NIGERIA

ABSTRACT

Inventory management is one of the most important functions of manufacturing firms. The flour mills companies operating in Nigeria are facing the problems of determining appropriate inventory level that should be kept to ensure that customer needs are met and production process is not interrupted. Striking a balance between overstocking and running out of stock has been a serious challenge to the flour mills companies in Nigeria. As a result of the negative effects of inventory shrinkage, poor management and control of inventories, operations are hampered, customers are dissatisfied and consistent drop in the productivity of the companies are recorded. This study examined the relationship between inventory management practices and operational performance of flour mills companies in Nigeria.

The study adopted cross-sectional survey and causal research design. The target population comprised 2,237 staff of the selected flour mills companies. A stratified random sampling technique was used to select the sample size of 776. A structured self-administered survey questionnaire was adapted, validated and used for collecting data for the study. The Cronbach’s alpha coefficients for the constructs ranged between 0.783 and 0.971. The response rate to the 776 copies of the questionnaire administered was 82.6%. Data were analyzed using descriptive and inferential (Pearson Product Moment Correlation and Regression) statistics.

Findings revealed that inventory shrinkage had a significant negative effect on customers’ satisfaction of the selected flour mills companies in Nigeria (B = -.134; F_(1,640) = 82.196; R² = .114, p<0.05).Inventory investment had positive and significant influence on the competitive advantage of the selected flour mills companies in Nigeria (B = .590; F_(1,639) = 9.754; r = 0.723; R² = .522, p<0.05).There was a significant relationship between inventory control and the cost effectiveness of the selected flour mills companies in Nigeria (r = 0.775, p<0.05). Inventory turnover had positive and significant effect on the operational efficiency of the selected flour mills companies in Nigeria (B = .339; F_(1,639) = 6.948; R² = .364, p<0.05). There was significant relationship between inventory record accuracy and the customer service delivery of the selected flour mills companies in Nigeria (r = 0.559, p<0.05). Automated inventory system had positive and significant influence on the productivity of the selected flour mills companies in Nigeria (B = .614; F_(1,639) = 62.805; r = 0.691; R² = .477, p<0.05).

The study concluded that inventory management practices significantly influenced operational performance of flour mills companies in Nigeria. It recommended that the companies should ensure that stocks were sufficient to meet production requirements and customer demands at all times and avoid holding unnecessary surplus stocks that might increase holding costs and thus ensure enhanced customer satisfaction.

Keywords:    Inventory management practices, Operational performance, Cost effectiveness, Flour mills companies, Automated inventory system