INVENTORY CONTROL MEASURES AND ORGANIZATIONAL PERFORMANCE ACASE STUDY OF MUKWANO GROUP OF COMPANIES, MAIN BRACH KAMPALA

BY

CHELOGOI SILAS

BSP/35093/113/DU

A RESEARCH REPORT PRESENTED TO THE COLLEGE OF ECONOMICS

AND MANAGEMENT SCIENCE IN PARTIAL FULFILMENT

OF THE REQUIREMENT FOR THE AWARD A DEGREE

IN PROCUREMENT AND SUPPLIES AT

KAMPALA INTERNATIONAL

UNIVERSITY

SEPTEMBER 2014. DECLARATION

I do declare that this report is of my own original work and has never before been submitted for any academic award where work of others have been used acknowledgements have been made.

NAME CHELOGOI SILAS

REG NO BSP/35093/113/DU

SIGNATURE: ...... C✓.t .~ ...... c1 r," ,1 DATE: ...... oriel...... C) ...... '. .. c,tf-..U. / 1 .....~ .. . APPROVAL

This report has been submitted for academic purpose with the approval of my main supervisor.

ii DEDICATION

I first of all dedicate this work to my beloved parents Ms Kokopchelimo Agnes and my late father John Chekwoti who worked hard to pay fees and other kinds of support towards my education.

I also dedicate to my lecturer Miss Orodriyo Proscovia who aided me in coming up with this work. It also goes to my wife Annet Chebet and the only beloved son Raphael Junior Chemutai and to finally to my friend's filex Mashandich and others

iii ACKNOWLEDGEMENT

Honor goes first to the almighty God for creating me and g1vmg me the knowledge that guided me throughout my studies, I also appreciate those who helped me in producing this report work for without their assistance nothing would have gone further especially my supervisor Ms. Orodriyo Proscovia whose efforts account most of the production of this proposal.

I also sent my heart appreciation to my parents brothers sisters and friends and patient wife for their efforts rendered to me towards my academic career.

Finally to all those who extended their spiritual, moral, love and financial support during my study at the university.

iv ABSTRACT

This research was carried out to analyze the various importance's of inventory control towards the organizational performance of mukwano group of companies. It is centered on the purposes of inventory control, costs incurred in inventory control, qualifications of the employees working in mukwano group of companies

V TABLE OF CONTENTS DECLARATION ...... i APPROVAL ...... ii DEDICATION ...... iii ACKNOWLEDGEMENT ...... iv

ABSTRACT ...... V TABLE OF CONTENTS ...... vi LIST OF TABLES ...... ix LIST OF FIGURES ...... x LIST OF APPREVIATIONS ...... xi

CHAPTER ONE ...... 1 INTRODUCTION ...... 1 1.1 Background of the study ...... 1 1.2 Statement of the problem ...... 2 1.3 Research objectives ...... 3 1. 3. 1 General objective ...... 3 1.3.2 The specific objectives ...... 3 1.4. Research questions ...... 4 1.4.1. General Research Questions ...... 4 1.4.2 Specific Research Questions ...... 4 1. 6 Scope of the study ...... 4 1.5.1. Content scope ...... 4 1.5.2. Geographical scope ...... 4 1.5.3. Time scope ...... 4 1. 6 Significance of the study ...... 5 1.6.1 To the organization ...... 5 1.6.2 To the Researcher ...... 5 1. 7. Conceptual frame work ...... 6

vi CHAPTER TWO ...... 7 LITERATURE REVIEW ...... 7 2.0 Introduction ...... 7 2.1 Definitions ...... 7 2.3 Reasons of inventory control ...... 14 2.4 Inventory classifications ...... 14 2.5 Costs incurred in obtaining and carrying inventories ...... 16 2.6. Concept of performance ...... 17 2.6.1 Concept of performance ...... 17 2.6.2 Performance indicators ...... 18 2.7 the relationship between Inventory management techniques and the performance of organizations ...... 20

CHAPTER THREE ...... 26 RESEARCHER METHODOLOGY ...... 26 3.0 Introduction ...... 26 3.1 Research design ...... 26 3.2 Area of study ...... 26 3.3 Target population ...... 26 3.4. Data analysis and presentation ...... 27 3.5. Methods of data collection ...... 27 3.6. Sample and size allocation/ distribution ...... 28 3. 7 Data analysis and presentation ...... 28 3.8 Data analysis ...... 29 3. 9 Limitation of the study ...... 29

CHAPTER FOUR ...... 31 DATA PRESENTATION, ANALYSIS AND INTERPRETATION ...... 31 4.0 Introduction ...... 31 4.1 Demographic characteristics' of the respondents ...... 31 4.2 Importance of inventory control in Mukwano Group companies ...... 33

vii 4.3. Challenges encountered in inventory control by Mukwano Group of Companies...... 36 4.4. Solutions to the challenges encountered in inventory control schemes by Mukwano Groups companies ...... 40

CHAPTER FIVE ...... 45 DISCUSSION, SUMMARY, CONCLUSION, RECOMMENDATIONS AND ...... 45 SUGGESTIONS ...... 45 5.0. Introduction ...... 45 5.1. Discussion of Findings ...... 45 5.1.1 Importance of inventory control ...... 45 5.1.2 Challenges encountered in outsourcing...... 46 5.1.3. Solutions to the challenges encountered in inventory control ...... 46 5.1.4. Relationship between inventory control and organizational performance. ·····················································································································47 5.2. Summary ...... 47 5.3 Conclusion ...... 48 5.4. Recommendations ...... 49 5.5 Areas of further study: ...... 49

REFERENCES ...... 50

APPENDICES ...... 51 APPENDIX 1: QUESTIONNAIRE FOR STAFF MEMBERS ...... 51 APPENDIX II: THE INTERVIEW GUIDE ...... 58

viii LIST OF TABLES

Table 1: Demographic characteristics' of the respondents ...... 31

Table 2: Showing Academic Qualification of the Respondents ...... 32

Table 3: Importance of inventory control in Mukwano Group companies...... 33

Table 4: Showing response to whether inventory control is important Mukwano Group of Companies ...... 33

Table 5: Showing the response to the importance of inventory control in Mukwano Groups of Companies...... 34

Table 6: Challenges encountered in inventory control by Mukwano Group of Companies ...... 37

Table 7: Showing the solutions to combat the challenges encountered in inventory control...... 40

Table 8: Showing the relationship between inventory control and performance of Mukwano Group of companies ...... 43

ix LIST OF FIGURES

Figure 1: Bar graph showing Age Distribution of Respondents ...... 32

Figure 2: Importance of Inventory control to organisation ...... 36

Figure 3: A Chart showing the number of respondents who strongly agreed and agreed with the Challenges encountered in the inventory control in percentages .. 39

Figure 4: Showing the solutions to combat the challenges encountered in inventory control ...... 42

Figure 5: Showing the relationship between inventory control and performance of Mukwano Group of companies ...... 44

X LIST OF APPREVIATIONS

MRP - Material requirement.

EDI - Electronic data interchange.

JIT Just in time.

FIFO - First in first out.

LIFO - Last in first out.

WIP - Work in progress.

xi CHAPTER ONE

INTRODUCTION

1.1 Background of the study Inventories over the past years have been difficult to control and even up to day though it's to some extent being brought down. This has always raised because they are immovable and subject to decision made many persons including vendors and customers. Joseph L. Cavinator (1984). Over the past in the wholeSale or retail business or in productive facility, inventory was being recognized as boxes of parts or as racks of closes. Material becomes inventory as it's purchased and delivered to the facility and placed in' the store or holding area. Material represents a large part of finished products cost 55% is the average in manufacturing organization. An organization investment m inventory can become excessive unless property controlled. Mark A. Vonderembse and P. White (1998).

Inventory control refers to a planned method of purchasing and storing the materials at the lowest cost without affecting the' production and 'distribution schedule. Inventories comprise of raw materials, consumable stores, machinery and equipment, general sto~·es, working progress and finished goods to be purchased and stored. Inventory control therefore is a scientific method of determining what when and how much to have in stock for a given period of time. N.A Saleem (1997). Organizational performance comprises of actual output or the results of an organization as a measure against its intended outputs (or goals and objectives). http/ /geogle.com.

Inventory control can significantly boost customer service levels while operating as a cornerstone of an effective organizational performance. Inventory system offers comprehensive reporting capabilities to keep the organization on top Inventory control status can help the organization bring out creation of new or improved purchasing policies, pricing' methods and even enhance customer

1 service. Therefore with the help of proper inventory, the organizational performance will always be at its peak.

Mukwano group of companies is the leading manufacturer of fast movmg consumer goods (FMCG), producing a wide variety of high quality affordable market leader brands in soaps, edible cooking oil and fats, detergents, beverages, personal care products and plastics. The groups' headquarters is located on Mukwano road in Kampala, Uganda's capital city. The co-ordinates of the company headquarters are 001850N, 325923E latitudes: 0.3137, longitude: 325923). The group has manufacturing facilities and Assets in Masindi District, Lira District and Kampala, Uganda's Capital city. Mukwano group also maintains manufacturing assets in Mombasa, Kenya and Dar -es­ salaam, Tanzania among other locations.The group was established in 1986, aJthough it did not start operations until 1989. Today, the group is involved in five (5) main areas of business. Its products are found almost every household in the greater Eastern African region. It employs over 6000 people in the region. It's among the top 10 biggest and the most compliant tax payers in Uganda. They have a motto "continued quest for excellence", a vision "to become the supplier of choice for fast moving consumer goods in East and central Africa", Their core values are: To touch the lives of families in East and central Africa every day, to also gather evaluate customer feedback to continuously improve quality of their products and services to their customers and takes employees as an asset of the organization. http:/ /google.com. The Mukwano group of companies controls their inventory using both manual and computerized systems.

1.2 Statement of the problem

Given that inventory control is considered a key factor in ensuring organization performance positively, a reasonable number of organizations have performed. poorly leading to organization to breakdown. Therefore this calls for organizational responsible departments to exercise rightful practices of

2 inventory control so as to ensure organizational performance in a positive and successful way. Hence inventory control, is a key factor in ensuring organizational success.

Traditional views of inventory management tend to focus on inventory at the item level and to be reactive in nature, often seeking to optimize inventory performance at a single location at the expense of the overall system (Closs, 1989). Despite this growth in value and importance of more rigorous inventory techniques, many organizations continue to rely on simple, item based approaches (Thonemann, Brown, & Hausman, 2002). Under these traditional approaches to inventory management, inventory levels for an item are determined by simple formulas that balance inventory holding, ordering, and stock out costs (Thonemann et al., 2002). Such approaches are considered simpler due to a lack of sophistication and because decisions on the individual inventory item levels are often made without considering other items. They go on to identify the use of simplistic inventory stocking policies as one of the common pitfalls of supply chain management. The lack of and evident need for "real world" evidence related to the use of a system approach to inventory management, especially as a means for addressing supply chain disruptions in Mukwano, served as the motivation for this study.

1.3 Research objectives

1.3.1 General objective

The general objective of the study was to establish the inventory control measures on organizational performance.

1.3.2 The specific objectives

To examine the classifications of inventory in Mukwano group of companies in Mukwano road, Kampala Uganda

3 To investigate the costs incurred in obtaining and carrying inventories in Mukwano group of companies in Kampala Uganda

To examine the relationship between inventory control and performance

1.4. Research questions

1.4.1. General Research Questions

What are the techniques of inventory control?

1.4.2 Specific Research Questions i. What are the classifications of inventory in Mukwano group of companies in, Mukwano road, Kampala Uganda? ii. What are the costs incurred in obtaining and carrying inventories m Mukwano group of companies Kampala Uganda? iii. What is the relationship between inventory control an performance at Mukwano Group of Companies?

1.6 Scope of the study

1.5.1. Content scope

The study covered the impact on inventory control measures on organizational performance.

1.5.2. Geographical scope

The study was conducted at Mukwano group of companies Ltd located at industrial area in Kampala district.

1.5.3. Time scope

The study covered a period of six month that is from March to september 2014.

4 1.6 Significance of the study

1.6.1 To the organization

It helped the organization to develop and adapt to proper techniques of inventory control.

It also enabled the organization to understand the weaknesses imbedded in inventory control that has always contributed to its poor performance. This study helped the organization to determine rates of consumption and when more stock is be ordered by placing of orders.

1.6.2 To the Researcher

The study helped the researcher to understand the techniques of inventory control.

Enabled the researcher to come up with the powerful techniques and approaches that led to excellent organizational performance regarding inventory control.

5 1.7. Conceptual frame work

Independent variables Dependent variables

Inventory and stores Performance management ~ractices -Efficiency and effectiveness Classification of inventories Information -Better a customer service monitoring -Finished goods Reputation

Information . -Raw materials Technology management -Goods in process

Inventory carrying cost

-Loading costs

-unloading costs

-Transportation costs

-Acquisition costs

-Holding costs

Adopted from Asiima David dissertation Stuart Bishop University 2012

6 CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

In this chapter, there will be review of several literature and studies pertaining inventory and organizational performance.

2.1 Definitions

Inventory control

According to N.A Saleem 1997, inventory control refers to a planned method of purchasing and storing the materials at the lowest cost without affecting the production and distribution schedule inventories comprise of materials, consumable stores, machinery and equipment, general stores working progress and finished good to be purchased and stored. Inventory control therefore is a scientific method of determining what, when and how much to have in' stock for a given period time.

Organizational performance

According to http:// organizational performance.com, organizational performance comprises of actual output or the results of an organization as a measure against its intended outputs (or goals and objectives). 2.2 Techniques of inventory control

According to Gary J. Zenz techniques of inventory control are manual system, computerized, system, ABC analysis, maximum and minimum (Economic order quantity) and Barcoding according to Lysons and Farrington 2006.

7 Manual system

Basic to sound system of inventory control which is the assembling of pertinent data to provide economic ordering points and ordering quantities. This is done with the help of an inventory ledger which ranges from simple to complex form depending on the nature of business. Data in this form include:

Detailed identification of item

List of suppliers

List of purchase orders

Monthly rate of usage for past several years

Delivery time

Minimum order quantity

Bin balance available for issue to production.

It's likely that manual inventory technique will completely vanish.

Computerized system

Records management under a computer system is easier and accurate them manual system. The computerized system uses code numbers which respond• to specific items. Each item in inventory is loaded and any adjustment made to the items is effected through use of items code number. Most computerized systems make an inventory adjustment each time an order for a particular item is processed, for either an internal requisition or an outside sale. When an item is ordered, the amount of remaining them in inventory is adjusted accordingly. The adjustment is a decrease in total inventory.

8 ABC Analysis

This means classifying items according to value. We have A - Class items which are of high value and account for 6 to 80 percent of the total inventory although they represent only 10 to 20 percent of the inventory items. B - Class items. Are not high priced and have a general inventory value of 10 to-15 percent while representing 20 to 25 percent of items in inventory. C- Class items. Made up oflow value items which account for 5 to 10 percent of inventory value and 60 to 65 percent of inventory items. Less concern would obviously be directed to low value items as compared to high class items.

Maximum and minimum (Economic order quantity)

Involves establishment of maximum and minimum inventory levels .. Theoretically the minimum inventory 1vel could be Zero, meaning the last unit of inventory would be used up at the moment a new shipment is recurred. But practically a point is set where the inventory order is placed if this point has reached such that would not run out of inventory as it waits for new shipments.

Barco ding

Invented in the 1950s, barcodes accelerate the flow of information throughout the business. The familiar example of the use of barcodes is the electronic point of sale epos, which is when retail; sales are recorded by scanning product. barcodes at checkout tills. It verifies, checks and charge transactions, provides, instant sales, reports and monitorized and charges prices and tends inter and intra store messages and data.

Leaders /fear on (1997), points out purchasing systems as one of the techniques of controlling inventories. The terms stockless purchasing and systems contracting are often used inter changeably. Actually, stockless purchasing systems are a special sub set of systems contracts where the

9 purchaser's stock is taken over by a supplier. The supplier's delivery system is so reliable and fast that there is no need for any safety stock on the purchaser's premises. Typical applications include, but are not limited to office, electrical, plumbing and building maintenance supplies of a relatively standard nature. Coupled with ADI and direct delivery to the place of use, the stockless systems not only help reduce inventory levels, but also purchasing, receiving, handling, invoicing, and payments costs. Determining order quantities and inventory levels is another technique. In the following sections, some relatively simple theoretical models used to determine order quantities are discussed. The application of these models depends on whether the demands or usage of the inventory is dependent or indecent. Dependent demand means the item is part of larger comment or product, and its users are dependent on the production schedule for the larger comments. Independent demand means the usage of the inventory item is not driven by the production schedule (Peter and Watter Man, R, 1998). Minimum-Maximum Inventory Levels. Theoretically the minimum inventory levels could be zero. The last unit of inventory would be used at the moment a new shipment arrives. The maximum inventory would then be the correct ordering quantity or economic order quaintly. This buffer system is not as popular as it once was for it tends to encourage the maintenance of excess inventories. The optimum model: According to the van Horne ( 1989), a company should introduce policies to reduce lead time, regulate usage and thus minimize safety status. Therefore the finance manager should ensure that only an optimum amount is invented in inventory to achieve the trade of between profitability and liquidity (Pandey 1995). Materials management is there a managerial process of counting planning, coordinating, control, monitoring and motivation. Materials requirements planning (MRP) . One of the assumptions behind the lotyizing models just described is that demands for the item belong purchased or mode is independent of all other demands. This situation is true for most manufacturers finished goods. However, sub assemblies, raw materials and parts do not exhibit this

10 independence. Demand for these items is dependent on the assembly schedule for finished goods. Similarly, many MRO items depend on maintenance schedule. Recognition of the existence of demand dependence lies behind the techniques known as materials requirements planning (MRP).MRP systems attempt to support the activities of manufacturing, maintenance or use by meeting the needs of the master schedule. In order to determine needs, MRP systems needs can be accurate bill of materials for each final product or project. These bills can take many forms but it is conceptually advantageous to view them as structural trees. Seven general types of structural tree can identified. Process industries as oil refiners and drug and food manufacturer generally take a few raw materials and make a much larger number of end products. Manufacture/assemblies such as the automobile companies make a number of components purchase others and assemble them into end products (Hellen, 1993). Assemblers, such as electronic companies, buy components and assemble them into finished products. Each type of firm can use MRP profitably but the greatest benefits usually accrue to the middle group because of the greatest complexity of its operations. The goals of MRP are to minimize inventory, to maintain a high service coverage and to co­ ordinate delivery schedules for manufacturing and purchasing activities. These a:tms often conflict in other systems but under MRP are achievable simultaneously. The feature and ability of modern MRP systems to allow rapid re-planning and searching and in response to the changes of a dynamic environment are responsible for attractiveness of MRP. Just in Time Purchasing Emerges. It means the uninterrupted flow of 100% acceptable materials delivered on due date as option cost 100% of time. The cited authors relate this definition for dozens of techniques including supplier certification materials, requirements planning, (MRP) manufacturing resources planning, (MRP 11) bar coding systems, contracting, electronic data interchange (EDI) value analysis a:t1.d work simplification. This type of purchasing production and inventory control has the great advantage of locating and fixing quality problems

11 immediately. Ingle makes the point, "it is like large rocks under the water in a lake". If the water level is too high one can see these and necks and avoid the danger. Similarly if the inventory is small, the defects are spotted and corrected immediately. There 1s less scrap and remark and quality improved dramatically. The supplier provides fulltime on site personnel who attend design-engineering meeting, investigates their products and use the company's purchase orders to affect delivery.

Inventory recording technique ; Inventory recording is under tal<:en to reduce the error relating to inventory accountability and accuracy in a firm's investment in inventories. Wood Frank (1996) indicates the stock accounting is important in any firm as it registers the changes in the level of stock held to realize maximum value and avoid typing up funds. Inventory recording may take forms stock taking and sport checks which are process of physically counting, weighing or otherwise measuring the quality of each item in stock and recording system should reduce the discrepancies between stock in record and the physical stock. Inventory storage and issues; Stock is vital tool to achieve an efficient inventory management system. Since there is storage and issue of inventory, the cost of obsolescence and fraud, management should ensure performance of all storage and issue functions. Stock valuation; According to Wood Frank ( 1996), the way materials are valued has amplification 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. The chosen materials valuation should be used consistently in order to meet the requirements of the consistency policy of accountability any change should be reported and its impact on the reported profits (Millichamp, 1996). Firms should therefore identify and employ the stock valuation method, which is in line with their objective and the legal and accounting framework.

12 Inventory models; Inventory models aim at minimizing materials costs. The order quantity that minimizes the cost of holding stick is determined. The key issue is the determination for when to order and how much to order. Materials models range from those concerning stock files and investment or stock records to economize costs calculated according to a number of formulas (Holstein 19681).

Trial and error technique ; According to Pandey, this is the simplest method of material control. In this case, management determines the level of inventory basing on the prices, orders and value of items of inventory. Material controlling is accessing the need for material and then taldng appropriate action to meet this need (Lau A., and Snell, 2006). Two Bin System ; the two-bin system involves the storage of each item in two storage bins. In case the first bin is emptied, an order must be placed for re- supply. The second bin will contain sufficient quantities to last until fresh delivery is made. However, since this is not based on any format analysis of stock usage, it may result in holding too much or too little stock. ABC-Analysis model; Since most organizations maintain different types of materials with different value, minimum attention is devoted to different items with the highest value( Pandey 1995). The difference involves of the different classes of inventory 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 1-,nit 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. Therefore proper ABC analysis leads to better control over materials and consequent reduction in cost associated with materials (Jordan 1997).

13 2.3 Reasons of inventory control

According to Lysons and Farmington (2003), the reason for inventory control is: To reduce the risk of supplier's failure or uncertainty safety and buffer stocks are held to provide some protection against such contingencies for example drought and floods.

To protect against lead time uncertainties such as suppliers replenishment and lead time are not known with certainty.

Meet unexpected demands ordemands for customization products as with a give production.

Ensure replenishments of items in constant demand, such as maintenance of suppliers and office stationary.

Hedge against anticipated shortages and price increase especially at times of high inflation.

2.4 Inventory classifications

According to Lysons and Farmington (2006) page 316, they include Raw materials, goods in unprocessed stage waiting for conversion into a product. For example fruits and milk.

Components and assemblies. These are inventory waiting to be incorporated into an end product.

Consumables, supplies which do not form part of a saleable products, classified as indirect and subclass-office such a stationary.

Finished goods, products manufactures for resale and for dispatch

According to Kakuku (2007), raw materials inventories are those inputs from suppliers that have not yet entered the manufacturing or transformation

14 process. Those inventories are essential in helping a firm/ organization to overcome problems faced by purchasing departments. Suppliers often fail to deliver expected inputs to their internal inefficiencies. The business itself may fail to acquire inputs in time because its procurement function is sluggish and inefficient. Some times, the problems may be due to environmental factors well beyond the suppliers and the business itself. If there were no inventories of raw materials, any disruption in supply would be automatically passed on to operations functions. Operations would stall, as there would be no inputs to transform.

According to Pandey (2002), work in progress (WIP) is products that have been partially finished. These are semi finished products at various stages of production and these inventories provide a link between input and output stages. They represent products that need more work before they become finished products.

Finished goods are completed products, which are ready for sale. They link production to marketing or consumption for unanticipated failure in production and also meet unpredictable variables in customer demand (Pandey, 2002). Finished goods inventory allows the firm flexibility in its production scheduling and in its marketing (Van Horne 2002)

According to stock and Lambert (2001), said that inventories can be categorized into six distinct forms that are: Cycle stock is inventory that results from the replenishment process and is required in order to meet demand under conditions of certainty, that is, when the firm can predict demand and replenishment times (lead times) almost perfectly: In-transit inventories. In­ transit are items that are en route from one location to another. They may be considered part of cycle stock even through they are not available for sale and / or shipment until after they arrive at the destination: Speculation

15 stock. Speculation stock is inventory held for reasons other that satisfying current demand.

For example, materials may be purchased in volumes larger than necessary in order to receive quantity discounts, because of a forecasted price increase or materials shortage, or to protect against the possibility of a strike: Seasonal stock. Seasonal stock is a from of speculative stock that involves the accumulated of inventory before a season begins in order to maintain a stable labour force and stable production runs or, in the case of agricultural products, inventory accumulated as the result of a growing season that limits availability throughout the year: Dead stock is inventory that no one wants, at least immediately. The question is why any organization would incur the costs associated with holding these items rather than simply disposing of them. One reason might be that management expects demand to resume at some point in the future. Alternatively, it may cost more to get rid of an item that it does to keep it. But the most compelling reason for maintaining these goods is customer service for good service delivery toward an organization. Perhaps an important buyer has an occasional need for some of these items, so management keeps them on hand as a goodwill gesture.

2.5 Costs incurred in obtaining and carrying inventories

Acquisition costs, theses are costs incurred in placing an order and they are incurred irrespective of order size. For example cost of an order will be the same irrespective of whether 1 or 1000 tones like primary placement and post placement costs.

Holding costs, costs incurred in handling, they are of two types and include Costs proportional to the value of the inventory such as financial costs, costs of insurance and losses in value due to deterioration, obsolescence and pilfering. Costs proportional to the physical characteristics of inventory such as storage costs, labor and clerical costs relating to store records and documentation.

16 Costs of stock, these are incurred due to being put of inventory. They include Losses of production output.

Costs of idle time and fixed overheads spread over a reduced level of output. Costs of .any action taken to deal with stock outs like buying from another stockiest at an enhanced price switching production and obtaining substitute materials.

Loss of customer's goodwill due to inability to supply or late delivery. The above costs with the help of effective inventory control techniques can be managed for good organizational performance. Lysons and Farmington 2006.

2.6. Concept of performance

Performance is a measure of the results achieved. Performance efficiency is the ratio between effort extended and results achieved. The difference between performance and the theoretical performance limit is the performance improvement zone. Performance assumes an actor of some kind but the actor could be an individual person or a group of people acting in concert. The performance platform is the infrastructure or devices used in the performance act (Malcolm, S.2005).

2.6.1 Concept of performance Performance is a measure of the results achieved. Performance efficiency is the ratio between effort extended and results achieved. The difference between current performance and the theoretical performance limit is the performance improvement zone. Performance assumes enactor of some kind but the actor could be an individual person or a group of people acting in concert. The performance platform is the infrastructure or devices used in the performance act (Malcolm, S. 2005).

According to Liker (2003) there are two main ways to improve performance: improving the measured attribute by using the performance platform more

17 effectively, or by improving the measured attribute by modifying the performance platform, which in turn allows a given level of use to be more effective in producing the desired output. Performance can be_measured by obtaining the magnitude of quantity, such as length or mass, relative to aunit of measurement, such as a meter or a kilogram. Performance involves performance improvement is the concept of organizational change in which the managers and body of an organization put into place and manage a programme which measures the current level of performance of the organization like inventory management and then generates ideas for modifying organizational and infrastructure which are put into place to achieve higher output. The primary goals of organizational inventory management are to increase organizational land efficiency to improve the ability of the organization to deliver goods and or services (Ronald 1999). Performance improvement at the operational or individual employee level usually involves processes such as statistical. At the organizational level, performance improvement usually involves softer forms of measurement such as customer surveys which are used to obtain qualitative information about performance from the viewpoint of customers.

2.6.2 Performance indicators According to Halachmi, A, & Bouckart G. (2005); argued that financial ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms. In some cases, ratio analysis can predict future bankruptcy. Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used: Liquidity ratios provide information about a firm's ability to meet its short-term financial obligations. They are of particular interest to those extending short­ term credit to the firm. Two frequently-used liquidity ratios are the current ratio (or working capital ratio) and the quick ratio. The current ratio is the ratio

18 of current assets to current liabilities. Short-term creditors prefer a high current ratio since it reduces their risk. Shareholders may prefer lower current ratio so that more of the firm's assets are working to grow the business. Typical values for the current ratio vary by firm and industry. For example, firms in cyclical industries may maintain a higher current ratio in order to remain solvent during downturns.

One drawback of the current ratio is that inventory may include many items that are difficult to liquidate quickly and that have uncertain liquidation values. The quick ratio is an alternative measure of liquidity that does not include inventory in the current assets. The current assets used in the quick ratio are cash, accounts receivable, and notes receivable. These assets essentially are current assets less inventory. The quick ratio often is referred toes the acid test. Finally, the cash ratio is the most conservative liquidity ratio. It excludes all current assets except the most liquid: cash and cash equivalents. The cash ratio is an indication of the firm's ability to pay off its current liabilities if for some reason immediate payment were demanded. Asset turnover ratios indicate how efficiently the firm utilizes its assets. They sometimes referred to as efficiency ratios, asset utilization ratios, or asset management ratios. Two commonly used asset turnover ratios are receivables turnover and inventory turnover. Receivables turnover is an indication of how quickly the firm collects its accounts receivables. The receivables turnover often is reported in terms of the number of days that credit sales remain in accounts receivable before they are collected. This number is known as the collection period. It is the accounts receivable balance divided by the average daily credit sales. Another major asset tu,nover ratio is inventory turnover. It is the cost of goods sold in a time period divided by the average inventory level during that period. The inventory turnover often is reported as the inventory period, which is the number of days worth of inventory on hand, calculated by dividing the inventory by the average daily cost of goods sold. Financial leverage ratios provide an indication of the long-term solvency of the firm.

19 Unlike liquidity ratios that are concerned with short-term assets and liabilities, financial leverage ratios measure the extent to which the firm is using long term debt. Debt ratios depend on the classification of long-term leases and on the classification of some items as long-term debt or equity. The times interest earned ratio indicates how well the firm's earnings can cover the interest payments on its debt. This ratio also is known as the interest coverage. Profitability ratios offer several different measures of the success of the firm at generating profits. The gross profit margin is a measure of the gross profit earned on sales. The gross profit margin considers the firm's cost of goods sold, but does not include other costs. Dividend policy ratios provide insight into the dividend policy of the firm and the prospects for future growth.

2. 7 the relationship between Inventory management techniques and the performance of organizations According to Likert (2003) manual perusal of the inventory levels on a daily basis is one of the ways to facilitate re-ordering under computerized system. Under this plan a print out is generated of all items in inventory and is examined by the inventory manager, who decided when and how much to order based on usage rates and expected future needs. ABC analysis and minimum and maximum meters of establishing inventory review plans are vital and useful for both manual and computerized systems. Vilfredo (1848-1023) an Italian Swiss engineer and economist believes that a 20 percent of a country's population does 80 percent of the work. Today's inventory control manager refines Pareto's arguments into three priority categories A, B and C. The A items may number onlyl0 or 20 percent of the inventory's total number of items. The B items number perhaps onlyl0 to 15% of the total inventory. The C items number perhaps 65 percent of all items in inventory. Typical advantages that have resulted are concentrated on class A and B and on using larger order quantities on C. reduced purchasing department costs through processing of fewer orders. Reduced receiving and inspection cost through the elimination of the handling and processing of materials as well as paper work for many small

20 vale items. Reduced materials handling and internal traffic costs because of fewer and easier loads. The broad for determining inventory policy rests with general management because inventories figure prominently in a company's financial operations. However, the actual management of inventory is usually entrusted to subordinate departments. There is considerable variation in which a department manages inventory control procedures. The customers' service level that the firm wants to maintain and the stock out reveals that the leverage require defining as part of management's responsibility for inventory control. In a few companies an inventory control committee has been established to initiate broad control policies with the administration of the policies left to the purchasing department. Representatives of all the company departments affected by inventory control policies fit on such committees (Lei, D, Slocum and Pitts 1999).Like purchases Leenders/Fearon, (1997) assess that inventories may be classified in a varietyof ways including ABC analysis. Nature of items carried are frequency of use. Modern computer and word processing systems allow extensive automation of purchasing and inventory control. Control of all items is improved and a managerial time freed for the negotiations value engineering, research and other managerial tasks necessary to deal effectively with A and B items. Leenders/Fearon (1997) has a different description on inventory control. Many purchases cover repetitive items held in inventory. Thus inventory has a great influence on purchase-quantity decisions. The questions of how much to order, when and how much continuous improvements examinations along with the flows on quality and customer, employee and supplies satisfaction. It is important in making delivery inventory or purchase order size decisions to understand why inventories exist and what the relevant trade off- are. The rapidly changing environment within which an inventory complicates inventory management and purchasing planning is carried out. Inventories always seem to be too big, too small of the wrong type or in the wrong place. With changing economic conditions, what is too little is one period may easily become too much in the next. Because of the high cost of carrying inventory many systems

21 have been developed to reduce stocks (Hellen, 1993). Japanese manufactures have spearheaded such efforts in mass production industries. Suppliers often located very near the plant deliver directly to the point of use in the plant and at very frequent interval. The use of Kanbans and a variety of just in time inventory management schemes have revolutionized manufacturing thinking about all form of inventories. Never the less it is useful to understand the nature and costs of inventories so that appropriate policies and procedures can be developed for specific organizational needs (Michael, E. Porter, 1994).Inventory exists for this reason alone, the relevance of the decision to be made. Carrying, holding or possession costs. These include handling charges, labour 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 ( Ronald, H. 1999),According Halachmi and Bouckart (2005) inventories have the following purposes including :to provide and maintain good customer service; to smooth the floor of goods through the productive process, to provide protection against the uncertainties of supply and demand and to obtain a reasonable utilization of people and equipment.

Transit or Pipelines Inventories are used to stock the supply and distribution pipelines linking an organization to its suppliers and customers as well as internal transportation points. They exist because of the need to move materials from one point to another. Obviously transit inventories are dependent on location and mode of transportation. A decision to use a distant supplier will probably create a far larger raw materials transit inventory than one to use a local supplier with truck delivery. In just in time (JIT) production a variety of means are used to reduce transit inventories including the use of local supplies, small batches in special containers and trucks specifically designed for side loading in small quantities (Ronald .H,1999).However

22 Alvesson (2001) argued that cycle inventories arise because of management decision to purchase, produce or sell in lots rather individuals units or continuously. Cycle inventories accumulate at various points in operating systems. The size of the lot is a tradeoff between the cost of handling inventory and the cost of making more frequent orders and set ups. A mathematical description of this relationship, the economic order quantity is very vital. In JIT the need for cycle inventory is reduced by set up cost and time reduction. Malcom, S. (2005) Buffer or uncertainty or safety stocks exist as a result of uncertainties in demand or supply. Raw materials, purchased parts or MRO buffer stocks give some protections against the uncertainty of supplier performance due to shut down, strikes, led time variations, late deliveries to and from suppliers, poor quality units that can not be accepted and so on. Work in process buffer inventories protect against machine break down, employee illness and so on. Finished goods buffer protect against unforeseen demand or production failures. Management efforts to reduce supply uncertainty may have substantial pay off in reduced inventories. Ronald, H (1999), Purchasing or production solutions may also permit order quantities to be reduced, the other factor that has an immediate and direct effort on average stock level. Both purchasing and production can concentrate efforts on acquiring or making batches of a smaller size, without increasing the unit price or cost (Note that this is reversal of the Western belief in the efficacy of large batch sizes in order to reap the apparent advantages of economies of scales).

Large batch sizes mean making goods in large quantities, ahead of immediate demand and hence lead to a build up of inventories. The EOQ/EBQ equation was of rational attempt to tackle the root causes of the problem. The Japanese, on the other hand saw that it is the times and cost of setting up (or preparing) machines and processes for production could be reduced, then batch sizes could be made smaller and in line with immediate short term demands. Large batch sizes also have implications with regard to the management of time. It takes a longer time to produce the whole batch thus tying up capacity to

23 produce goods in quantities that are not needed immediately. Longer lead­ times and longer periods of time laid in stock are the outcome of many products. The point to emphasize is that lead-time may not be independent of the quantity decision, an assumption of most stock control techniques(Colvin and Slevin, 2007).Increasingly, large online advertising buyers can't cost­ effectively buy enough audience reach. Publishers have an "inventory performance problem" in that 20 percent of their audiences generate 80 percent of page views. Buyers find the problem is just being passed on them. It seems that for large online buyers in particular, 80 percent of their campaign frequency goes to only 20 percent of their target audience. That 20 percent audience share is becoming saturated with messages from the top online advertisers. There's almost no way to effectively segregate, buy, and deliver audience-coordinated campaigns across multiple publishers, portals, and networks. As a result, every time the buyers try to extend their reach, they end up receiving more frequency against that saturated 20 percent. This means lots of wasted impressions and lots of wasted money (Halachmi and Bouckart, 2005) .According to Ronald, H ( 1999), inventories are stockpiles of raw materials, supplies, components, work in process and finished goods that appear at numerous points throughout a firm's production and logistic channel. Inventories are frequently found in such places as warehouses, yards, shop floors, transportation equipment and on retail store shelves. Having these inventories on hand can cause between 20 and 40 percent of their value per year. Therefore, carefully managing inventory levels makes good economic sense in relation to the performance of the business organization. Even though many strides have been taken to reduce inventories through just in time, time compression and quick response purchases applied throughout the supply channel, the annual investment in inventories by manufacturers, retailers and merchants wholesalers. Inventory management process is the science-based art of controlling the amount of stock held in various forms, within a business to meet economically the demands placed up one that business. The aim of inventory control system is to maintain the quantities of stock held by a

24 business at a level which optimizes some management criteria such as minimizing the costs incurred by the whole business enterprise for improved performance (Halachmi and Bouckart, 2005).Malcolm, S. (2005) Buffer or uncertainty or safety stocks exist as a result of uncertainties in demand or supply. Raw materials, purchased parts or MRO buffer stocks give some protections against the uncertainty of supplier performance due to shut down, strikes, led time variations, late deliveries to and from suppliers, poor quality units that cannot be accepted and so on.

25 CHAPTER THREE

RESEARCHER METHODOLOGY

3.0 Introduction

This chapter was to show the methods of research used in the study. It therefore contained research design, study area, target population sample size and allocation on, data analysis and presentation, methods of data collection and the limitations of the study.

3.1 Research design

Here, a case study was used to focus on particular areas. The study entailed the use of quantitative approach to ascertain the relationship of inventory control and organization performance. This was obtained by the help of respondents, feedback. The results were therefore used to draw up bar graphs. Quantitative analysis was later used to interpret quantitative data inform of highest and lowest data obtained.

3.2 Area of study

The study was conducted at Mukwano group of companies' headquarters in Mukwano road, in Kampala Uganda. Its co-ordinates are 001850N, 325923E (latitude: 0.3 137), longitude 325923)

3.3 Target population

This was the population to which the researcher ultimately wanted to generalize the results of the study. Amin (2005) page 235. The target population of my study were the staff of Mukwano group of companies in Mukwano road, Kampala Uganda and its customers.

26 3.4. Data analysis and presentation

In the start of the study, the data was collected by use of interviews and questionnaires. This data was then analyzed by the use of Microsoft word, excel and bar graphs and line graphs.

Thereafter, a question was made sure that all the data was interpreted into quantitative form in an accurate manner.

3.5. Methods of data collection

Secondary data

A secondary data is a statistical material which does not originate by the researcher but which was obtained from someone else's records. For example newspapers, magazines, internet and also from different books but it's good for guidance so as to be perfect doulas et al (2003).

This refers to data the researcher originates for the purpose Of inquiry at hand. Hence first hand and raw data was obtained by the researcher. Dr. S.P Gupta (2002) age 44. The following are the various methods used to collect primary data.

27 3.6. Sample and size allocation/ distribution SN Categories Number

1 Board of directors(BOD) 10

2 General staff members 18

3 Finance department 12

4 Human resource 8

Department

Total 48

Source (primary data)

3. 7 Data analysis and presentation

Direct personal interviews

Questionnaire This is a collection of data technique that involves exchanging wards verbally inform of questioning by interviewer and responded by interviewee, which can either be interviewees in a group or as an individual. Therefore, the customers and staff of Mukwano group of companies in Mukwano road; Kampala Uganda will also answer study questions on interview basis.

A fully constructed and printed questionnaire was sent to the respondents of Mukwano group of companies. In Mukwano road in Kampala Uganda either by post of mail and they are expected to fill at their convenient time and sent it back to the researcher by post or mail. There are two types of research and they include open ended and closed ended. In closed ended, the researcher asked questions which involved short responses from alternatives given. In open ended, the researcher called for free response in respondent's own words,

28 hence no clues of answers are given. Both the two questionnaire methods will both be applied in Muk.wano group of companies' in Muk.wano road, Kampala Uganda so as to cater for different categories. For example those who, can read and interpret and those who can not.

3.8 Data analysis

Data was analyzed and processed by the use of the following computer programs; Microsoft word, this enabled and made it easier to create a table and classified the different quantitative data. , Microsoft excel, this enabled the coming of accurate and well presented bar graphs and histograms. The histograms helped the researcher to know the relationship of inventory control and organizational performance in Mukwano group of companies. In Mukwano road, Kampala Uganda and this made it easier to understand and interpret the study results.

3.9 Limitation of the study

My study of inventory control m Mukwano group of companies m Mukwano road, Kampala Uganda was limited by the following;

Confidentiality, some of the information regarding inventory control in Mukwano groups of companies in Mukwano road Kampala Uganda was not realized since it's a tendency of mangers to help some information confidential.

Accessibility, some of the respondents to my questions were difficult to access like managers due to their busy time schedule which conflicted with mine. Time, the correspondents did not have enough time to respond to my questions hence limited my study

False information, some correspondents may deliver information which 1s false underling my study to be inaccurate.

29 Capital, my study required funds that was to facilitate my transport so as to reach to my area of study on time and also to give my respondents so as to give me direct information.

30 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.0 Introduction This chapter deals with analysis interpretation and presentation of the research finding.

The analysis and research findings were interpreted and analyzed basing on the research questions. The study was set to investigate the impact of outsourcing on the performance of Mukwano Group of companies. The findings were obtained through the use of a questionnaire, interviews and documents from Mukwano Group companies which were used as case study.

4.1 Demographic characteristics' of the respondents. Table 1: Demographic characteristics' of the respondents.

Respondent Frequency Percentage Male 25 64 Female 15 36 Total 40 100 Source: Primary Data

From the table above, it can be seen that the majority of respondent are male that is 25 respondent repressing 64% of the total respondents and 15 respondents are female representing 36% the respondent.

31 Figure 1: Bar graph showing Age Distribution of Respondents.

60 /

5040 j'~'.... /./,/' .r-- Ill BAER 30 / 20 · 10 ·; .·· 0 20-29 YRS 30-44 YRS 44 A BOVE

Table 2: Showing Academic Qualification of the Respondents.

Academic Qualifications Frequency Percentage Diploma 8 20 Degree 20 50 Postgraduate 12 30 Total 40 100 Source: Primary Data

From the above table it is seen that the majority of the staff in Mukwano Group of companies are degree holders representing 50% followed by postgraduate holders of 30% and then diploma holders of 20%. This implies that the staff of Mukwano Group of companies is well educated and therefore the information obtained from them can be relied upon for purpose of this study.

32 4.2 Importance of inventory control in Mukwano Group companies.

Table 3: Importance of inventory control in Mukwano Group companies.

Response Frequency Percentage Yes 30 75 No 6 15 Not 4 10 Total 40 100 Source: Primary Data

From the table above the response on it is evident that the Mukwano Groups of companies practice inventory control basing on 75% of the respondents who agreed 15% never agreed were not sure however this point of disagreement is less compared to those on the who agree therefore the finding of the research will be based on the facts presented and so any recommendation made will be applicable.

Table 4: Showing response to whether inventory control is important Mukwano Group of Companies

Response Frequency Percentage Yes 26 65 No 6 15 Not sure 8 20 Total 40 100 Source: Primary Data

From the table above 65% of the respondents agreed that inventory control is important for Mukwano Groups companies, 15% disagree, 20% were not sure. This therefore indicate that where those in agreement outweigh those in agreement. Those who say no and not sure present a substantial 35% can not be underestimated in providing recommendation.

33 Importance of inventory control to Mukwano Groups companies.

The first objective that was intended to establish the importance of inventory control in the performance of Mukwano Groups Companies.

Table 5: Showing the response to the importance of inventory control in Mukwano Groups of Companies.

Strongly Agree Not sure Disagree Strongly Importance Agree Disagree Total F % F % F % F % F % F % Better quality 16 40 10 25 2 5 4 10 8 20 40 10 of skilled 0 labour Risks sharing 20 50 4 10 8 20 2 5 6 15 40 10 and 0 transference Capacity 14 35 8 20 4 10 8 20 16 15 40 10 management 0 Increased 18 45 6 15 4 10 8 20 4 10 40 10 productivity 0 and efficiency Concentration 30 75 4 10 2 5 2 5 2 5 40 10 and core 0 business Lower costs 20 50 12 30 2 5 6 15 0 0 40 10 0 Improving 14 35 12 30 0 0 14 35 0 0 40 10 customer 0 services. Source: Primary Data

34 From the above it can be seen that in relation to the importance of inventory control 40% of the respondents strongly agreed that better quality of skilled labour is a key importance of inventory control, 25% agreed, 50% were not sure, 10% disagreed and 20% strongly disagreed.

Risk management had 50% of the respondents who strongly agreed, 10% agreed, 20% were not sure 5% disagreed and 15% strongly disagreed.

Capacity building had 35% of the respondents who strongly agreed, 20% agreed and disagreed respectively 10% not sure 15% strongly disagreed.

Increases productivity as an importance of inventory control had 45% of the respondents who strongly agreed 15% 10% were no sure 20% disagreed and 10% strongly disagreed.

Concentration on core business idea had 75% of the respondents who strongly agreed, 10% agreed 5% were not sure, Lower costs had 50% of the respondents who strongly agreed, 30% agreed 5% were not sure 15% disagreed and none strongly disagreed.

Improving customer care had 35% of the respondents who strongly agreed 30% agreed none were not sure and strongly disagreed 35% disagreed.

35 Figure 2: Importance of Inventory control to organisation

80 70

50 40 30 20 10 Err Series 1 0 !fili Series 2

Source: Primary data

From the above table it can be seen that in relation to the importance of inventory control to organization. According to the respondent who strongly agreed and agreed 84% are in line with concentration on core business; reduction of costs with 80% who strongly agreed and agreed.

4.3. Challenges encountered in inventory control by Mukwano Group of Companies. To the second objective that was intended to establish the challenges encountered in inventory control at Mukwano Group Companies.

36 Table 6: Challenges encountered in inventory control by Mukwano Group of Companies

Strongly Agree Not Disagree Strongly Importance Agree sure Disagree Total F % F % F % F % F % F % Unexpected 20 50 10 25 0 0 10 25 0 0 4 100 costs may occur 0 Failure to fully 25 62.5 10 25 4 10 1 2.5 0 0 4 100 execute 0 obligations Difficult to 25 37.5 19 47.5 0 0 4 10 2 5 4 100 reserve 0 Damage 20 50 10 25 2 5 4 10 4 10 4 100 reputation 0 Loss of 14 35 12 30 5 12. 1 2.5 10 25 4 100 managerial 5 0 Loss of 10 25 20 50 0 0 4 10 6 15 4 100 confidentiality 0 Source: Primary Data

The data collection above shows that

The challenge of unexpected costs 50% of the respondents who strongly agreed 25% agreed none of the respondents were not sure and strongly disagreed and 25% respondents disagreed.

62.5% of the respondents strongly agreed in respect to change failure by the outsourced firm to fully execute their obligation 25% agreed 10% disagreed, none of the respondents strongly disagreed and 2.5% disagreed.

Difficulty to reserve had 37.5% of the respondents who strongly agreed, 47.5% agreed non of the respondents disagreed 10% of the respondents were not sure

37 and 5% strongly disagreed 50% of the respondents strongly agreed with damages organizational reputation; 25% agreed 10% disagreed and 10% of the respondents strongly disagreed and 5% of respondents were not sure.

Less of managerial control to coordinate the function was commented on by 35% respondents who strongly agreed; 30% agreed 10% disagreed 15% strongly disagreed and non of the respondent were not sure.

Less of confidentiality as challenge to inventory control was agreed upon by 25% respondents who strongly agreed 30% agreed 10% disagreed 15% strongly disagreed and non of the respondents were not sure.

The following were brought in the employees as potential challenges to inventory control

• Poor needs assessment.

• Escalating administration cost.

• Non compliance by supplies in certain.

38 Figure 3: A Chart showing the number of respondents who strongly agreed and agreed with the Challenges encountered in the inventory control in percentages.

70 ~----0,·2;5------60 50 so 40 30 20 10 ::? Series 1 0 ml Series 2

Source: Primary data

39 4.4. Solutions to the challenges encountered in inventory control schemes by Mukwano Groups companies. Table 7: Showing the solutions to combat the challenges encountered in inventory control.

Strongly Agree Not Disagree Strongly Solutions Agree sure Disagree Total F % F % F % F % F % F % Identify 21 52. 10 25 4 10 0 0 5 12. 40 10 several 5 5 0 outsourcing alternatives Review and 17 42. 13 32. 4 10 6 15 0 0 40 10 strengthen the 5 5 0 outsourcing alternatives Understand 15 37. 14 35 5 12. 6 15 0 0 40 10 and determine 5 5 0 costs structure Understand 20 50 8 20 0 0 4 10 8 20 40 10 and engage 0 expert team Develop 20 50 8 20 0 0 4 10 8 20 40 10 rigorous 0 requests for proposal Source: Primary Data

In reference to the table above, 52.5% of the respondents strongly agreed with the solution of identify several inventory control alternatives, 25% agreed 10% were not sure 12.5% strongly disagreed and non of the respondents disagreed.

40 Review and strengthen the inventory control alternative for example for regarding strategic decision making had 42.5% of the respondents who strongly disagreed 32.5% agreed non of the respondents disagreed 10% were not sure and 15% strongly disagreed.

Understanding and enage expert team had 37.5% of the respondents who strongly agreed 35% agreed 12.5% were not sure, none of the respondents strongly disagreed and 15% disagreed.

Develop rigorous requests for proposals had 50% of the respondents who strongly agreed; 20% agreed non were non were not sure, 10% disagreed and 20% strongly disagreed.

However there were other suggestions

Identify internal human resource

Update company strategic plan

Develop strategic plan

Understand your cost structure.

41 Figure 4: Showing the solutions to combat the challenges encountered in inventory control

60 ~ -·-··--·-"" 52.5 50 50 50 42.5 40

30

20 1ll STROMGL Y AGREE AGREE 10

0 Identify Review and Understand U ndcrst,:md Develop SCVCl'J! strengthen and ,rnd cngngc rigorous out:·,ourcing the determine expert team r0CJUCSlS for alternatives outsourong costs proposal .:iltcrnuUves slructur0

From the graph it is prudent to mention that the suggestions raised by the researcher in regard to the solutions to the challenges encountered inventory control were warmly accepted by the researcher with over 70% who strongly agreed and agreed.

42 Table 8: Showing the relationship between inventory control and performance of Mukwano Group of companies

Strongly Agree Not Disagree Strongly Outsourcing Agree sure Disa[ree Total and F % F % F % F % F % F % performance

Improve 20 50 10 25 2 5 4 10 4 10 40 10 company 0 reputation Adoption of 15 37. 13 32. 4 10 6 15 2 5 40 10 global markets 5 5 0 Smooth 10 25 20 50 0 0 6 15 4 10 40 10 production 0 Increased 15 37. 14 35 5 12. 6 15 0 0 40 10 market share 5 5 0 Minimum loss 14 35 12 30 2 5 4 10 4 10 40 10 due to 0 deterioration Source: Primary Data

From the above table

In regard to the relationship inventory control and performance of Mukwano Group companies improves company reputation that is key aspect of performance had 50% of the respondents who strongly agreed; 12.5% agreed were not sure and 10% disagreed and 105% strongly disagreed

Smooth production had 25% of the respondents who agreed in regard to impact of outsourcing on performance, 50% agreed none where not sure, 15% disagreed and had 10% strongly disagreed.

Increased market share had 37.5% of the respondents who strongly agreed, 35% agree, 12% where not sure, 15% disagree and none strongly disagreed.

Finally 35% strongly agreed with minimum loss due to deterioration, 30% agreed, 5% were not sure, 10% disagreed and strongly disagreed.

43 Figure 5: Showing the relationship between inventory control and performance of Mukwano Group of companies

60

50 50 50

40

30 cf! STRONGLY AGREE

20 ill AGREE

10

0 Improve Adoption of Smooth Increased Minim.um loss company global production n1arl,etsharc due to reputation rnarkcls dctcriorallon

Source: Primary data

44 CHAPTER FIVE

DISCUSSION, SUMMARY, CONCLUSION, RECOMMENDATIONS AND

SUGGESTIONS

5.0. Introduction This chapter presents the Discussion, summary, conclusions, and recommendations made based on the study findings. They were made basing on the research questions. It also gives areas of further study.

5.1. Discussion of Findings. This section presents the summary of findings which were based on the research questions.

5.1.1 Importance of inventory control In relation with the first objective which seek to find out the impotence of outsourcing to organizations. It was found out that according to the respondents who strongly agreed and aged 84% are in line with concentration on core business this argument is in line with Bienstock and Mentzer, 1999; Bergsman, 1994 argues as a company grows, administrative functions also grow. Managing back-office operations and administrative functions take the time and energy out of any organization. Inventory control frees companies. from having to manage non-core functions, and puts the focus back on their core competencies. Entrepreneurs and enterprises alike have benefited from outsourcing repetitive and mundane tasks, and have had more time and opportunity to grow their business.

Reduction of costs with 80% who strongly agreed and agreed which is in line with Willcocks et al., 1995). In the theory, outsourcing for cost reasons can occur when supplies costs are low enough .that even with added overhead, profit and transaction costs suppliers can still deliver a service for' a lower

45 price. Once may wonder how an organization can achieve enough savings to cover an additional layer of overhead and still meet profit requirements yet perform a savings to cover an additional layer of overhead and still meet profit requirements yet perform a function for less than another organization already doing the function. Specialization and economies off scale are mechanisms used to achieve this level of efficiency Ashe, 1996, Quin et., 1990a, b; Roberts 2001). In fact, cost savings due to outsourcing can be quite significant In a survey of 7500 public organizations in Australia, the outsourcing of cleaning services saved an average of 46 over in-house performance of the service (Dombeger and Fernandez, 1999).

5.1.2 Challenges encountered in outsourcing. Considering the second objective which was to find out the challehge that are encountered, of the respondents who strongly agreed and agreed, it's evident that all the challenges that the researcher suggested in Table iv were being faced by mukwano Group companies failure to execute obligations carrying the most weight since it he\ad a total agreement of 84% this is in line with and loss of confidentiality 78%. The findings are in line with Labs 1998) who argue that. There would be a threat to security and confidentiality. If your company is inventory control processes like payroll, medical transcriptions or other confidential information , a company must be very careful in choosing which process it wants to outsource and to which provider. A possible loss of flexibility in reacting to changing business conditions, lack of internal and external customer focus and sharing cost savings may also be a disadvantage of outsourcing.

5.1.3. Solutions to the challenges encountered in inventory control The secede objective was to establish solutions to the challenges encountered in outsourcing management.

The solution to the challenges encountered in outsourcing management of were seen to include.

46 Identify several outsourcing alternatives,. Review and strengthen the outsourcing alternative, understand and dete4rmine cost structure, understand and engage expert team, Develop vigorous requests for proposals. If the above is critically put into place organizations will be able to operate with in logistics functions with less harm caused on the general operations.

5.1.4. Relationship between inventory control and organizational performance. In line with the third objective which set to establish the relationship between inventory control and organizational performance, it is clear that basing on the 72% of the respondents who strongly agreed with the points of relationship raised by the researcher. The points of relationship were.

Minimal loss due to deterioration, increased market share because of concentrating on core business, improves company reputation, smooth operation due to minimal interruptions to core business and adoption of global markets. That are key indicators of performance.

5.2. Summary Some conclusions were drawn after the analysis of data collected during the study concerning inventory control sand organizational performance at Nile breweries limited. These conclusions were based on the research questions of the study...

Based on the study finding it is clear that mukwano Group companies practices inventory control and of key importance according to the respondents.

• It was found out that the key aspects of importance that inventory control render to mukwano Group companies is concentration on core business because of less interruptions to non core activities and reduction of costs plus more others as enumerated above.

47 • The researcher found out that inventory control in mukwano Goup companies encounter a series of challenges among which include, unexpected cost , failure to execute obligations , loss of confidentiality, loss of managerial control managerial control' among other challenges.

• In line with the challenges the respondents proposed a ranged of measures in form of solutions can be taken to reduce on the challenges encouraging encountered and they included Identify several inventory control alternative, review and strengthen the inventory control alternative, understand and determine cost structure, understand and engage expert team, Develop rigorous requests for proposals.

• The findings established that indeed inventory control played a significant role in affecting the productivity in form of performance of the company most of the respondents especially those in the procurement department felt that if less stringent measures were ,put in place. regarding the inventory control', then this would go along way into streamlining the issues in regard and issues like, minimal loss due to deterioration, increased market share because 'of concentrating on core business , improves• company reputation, smooth operation due to minimal interruptions to core business and Adoption of global markets were viewed as key parameters of performance.

5.3 Conclusion According to the objectives set out' in this research, the, researcher observes that inventory control management has a positive impact on organizational performance as per the evidence showed by 'the findings of the organization such concentration on core activities, reduced costs, enhancing smooth operations, reputation, increased market share, adoption of global markets which are key avenues of performance . The findings also brought to the attention of researcher challenges that the outsourcing schemes face art Nile breweries and suggested the possible measures to curb the situation so as to

48 effectively line inventory control to increased performance at mukwano Group companies.

5.4. Recommendations The following recommendations were made.

Inventory control at mukwano Goup companies seems to be of importance and is working well so the procurement department and the entire company administration should review the parameters that make the current system work well and the points of challenges so as to appropriate measures that are key in streamlining the operation of the schemes so as to achieve value for money.

In line with the challenges faced in operating the scheme the researcher recommends that there should be a strong coordination of activities right from sourcing so as to establish a reliable contractor for a scheme this should be followed by linking the managerial capacities of both companies so as to have a coordinated and well managed scheme for the operation of the organization.

Mukwano company should also stipulate in clear terms the roles and responsibilities of the contractor in the contract (local purchases order so as to avoid contradictions in roles and' responsibilities pertaining the operations.

The researcher also recommends that the management of the mukwano Group of companies should adopt the measures raised by the respondents so as to clearly establish a route of operation for the organization

5.5 Areas of further study: 1. Just in time inventory management and organization performance

2. Inventory control and customer satisfaction

3. Inventory control and competitiveness in procurement.

49 REFERENCES

Dobler. D.W, Burt N.D. (1996) Purchasing and supply management, 6 th edition, McGraw-Hill, P,120.

Ellram M L, Zsidisin A.G, Sdisin A.G SigferdS.P , and Stanley J M. (2002). " The impact of purchasing and supply management activities on corporate success,"

Garry.Jenz (1987) purchasing and management of materials 6th edition, John/Wileys and sons, New York.

Lysons K and Farrington B(2006) Purchasing and supply chain management, 7th Edition, Prentice Hall, P. 168-169

Weele J.A (2005), Purchasing and supply chain management. Analysis strategy, planning and practice, 4 th edition, Thompson Learning. 234.

Broom Longenecker(1983) Small Business management 6th Edition, South Western Publishing Company, United States of America (USA).

50 APPENDICES

APPENDIX 1: QUESTIONNAIRE FOR STAFF MEMBERS Dear respondent

I am a student of Kampala International University pursuing Bachelor of supplies and procurement management Final Year. This questionnaire is designed to collect information aimed at evaluating the impact of inventory control measure on the organizational performance. The information obtained will be strictly for academic purposes and it will be treated with at most confidentiality. I kindly request you to fill this questionnaire.

Thank you very much for your time and co-operation

Section A: Personal data (Tick in the appropriate box provide)

1. Your age

Under 25 25-34 35-45 Above 45

✓

2. Gender

Male Female

✓

3. Marital status

Single Married Divorced Widowed

✓

51 4. For how long have you been working with Mukwano group of companies Ltd (U) ltd?

0-3years 4-6years 7-9years Over 9years

✓

5. What highest level of education you have attained?

Certificate Diploma Degree Professional Masters PHD qualification

✓

SECTION B: Inventory Control

(Tick as appropriate)

6. A responsible official authorizes purchase.

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

7. Goods are inspected on receipt.

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

8. You pay maximum attention to those inventories whose value is highest.

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

52 9. All store staffs of Mukwano group of companies Ltd are highly skilled.

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

10. Mukwano group of companies Ltd experiences under stocks situations

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

11. Mukwano group of companies Ltd get damaged goods from its stores

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

Section B: Inventory costs incurred in procurement process in Mukwano group of companies Ltd

12. Mukwano group of companies Ltd is faced with transportation and freight costs

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

53 13. Mukwano group of companies Ltd 1s faced with expenses of making requisitions

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

14. Mukwano group of companies Ltd is faced with costs of writing purchase orders

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

15. Mukwano group of companies Ltd is faced with costs of receiving materials

Strongly Agree Not sure I Disagree Strongly Agree Disagree

✓

16. Mukwano group of companies Ltd is faced with costs of checking on orders and maintaining records of the entire process.

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

54 17. Mukwano group of companies Ltd is faced with handling costs

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

18. Mukwano group of companies Ltd is faced with storage costs

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

19. Mukwano group of companies Ltd is faced with financial expenses of capital tied up in inventory.

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

55 Section D: The relationship between approaches of inventory control and general performance of Mukwano

20. The financial performance of Mukwano group of companies Ltd is as a result of a responsible official who authorizes purchase.

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

21. The financial performance of Mukwano group of companies Ltd is as a result of Goods inspected on receipt.

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

22. The financial performance of Mukwano group of companies Ltd is as a result of maximum attention paid w those inventories whose value is highest.

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

23. The financial performance of Mukwano group of companies Ltd 1s as a result of the skills of store staffs

Strongly Agree Not sure Disagree Strongly

56 Agree Disagree

✓

24. The financial performance of Mukwano group of companies Ltd is as a result of damaged goods from its store

Strongly Agree Not sure Disagree Strongly Agree Disagree

✓

57 APPENDIX II: THE INTERVIEW GUIDE

What is inventory control?

What type of inventory does your organization deal in?

Does your organization has inventory control measure

Which are the mostly used inventory control measures?

What are the different inventory control measures?

What is the relationship between inventory control and organizational performance?

What the advantages of inventory control

58