INVENTORY MANAGEMENT AND PERFORMANCE OF ORGANISATIONS: A CASE STUDY OF MUKWANO GROUP OF COMPANIES, KAMP ALA BY ALI REHEMA SWALEH BSP/34121/112/DF A RESEARCH REPORT SUBMITTED TO THE-COLLEGE OF ECONOMICSAND MAN t\GEMENT AS A PARTIAL REQUIREMENT FOR THE AW ARD OF THE DEGREE OF BACHELORS OF SUPPLIES AND PROCUREMENT MANAGEMENT OF KAMP ALA INTERNATIONAL UNIVERSITY NOVEMBER, 2013 DECLARATION I Ali Rehema Swaleh do hereby declare that the information given in this proposal is entirely my own original work except where acknowledge end that it has not been submitted before to any other University or Institution of higher learning for award of any degree. Signed .................. ~ ........................ ,,,_, Date ... 0.9. ............ rf..O..V..: ..... J..P../3 .......... APPROVAL l Ms Kabasinguzi Christine do hereby confirm and approve that a proposal titled Inventory Management and Performance of Organisations: a case of Mukwano group of companies has been under my supervision and is now ready for submission to Kampala International University. Signed: ~ ................. Date:- .... ~!.i1~~c;,.J.~.<?.(':?. ............ ii DEDICATION This dissertation is dedicated to my beloved parents Mr. & Mrs. Swaleh Ali for their parental care, financial _support, encouragement and advice and to my dear Brothers for the patience they accorded to me when I was pre-occupied with this work. iii ACKNOWLEDGEMENT Thanks to the almighty Allah for the life, opportunities and blessings He has given me. I am deeply indebted to a number of persons and Institutions for the moral, intellectual and material support. I am grateful to my supervisors Ms Kabasinguzi Christine for the inspiration, guidance, encouragement rendered to me during this research. In a special way, I also thank my friends, and all those I have not mentioned for the support and endless prayers during those rocky times. Last but not least, to the entire department of procurement, marketing and hospitality at Kampala international University for the patience and tolerance during the time I was busy putting together this piece of work. May Allah bless and reward them abundantly. iv ABSTRACT The research was set to examine the effect of inventory management on the performance of organizations with special attention to Mukwano group of companies, it was guided by three objectives .which included establishing strategies that purchasing entities can adopt in managing inventory the challenges encountered in inventory management in Mukwano group of companies and explore the effects of inventory in performance of organisations. The study adopted an analytical research design through the use of both qualitative and quantitative research approaches. The study involved 60 respondents who were contacted using the questionnaire. Data collection was done and presentation put in tables and graphs analysis was done based on the presentation. The study findings were that strategies for improving inventory management were training of stores staffs on handling inventory which had an agreement of 81. 7%, the challenges faced in the management of inventory were found to be numerous with poor demanding forecasting taking a lead with an agreement of 78.3%. It was finally established that inventory management has an effect on performance of Mukwano group 1;Vith efficiency and effectiveness in production taking a lead with 83.3% of the agreement according to respondents. The observation creates a situation of need not only for Mukwano group of companies but other organisations if performance is to be adequately realised in organisation. The status quo requires the adoption of the recommendations such as forecast of market for its products so that it stocks enough inventories to avoid under stocks and reduce on damaged inventory. Fixing the stock levels that is maximum, minimum and reorder levels for all items in stock in order to avoid inadequate stocks or stock outs suffered by the company, minimizing on its inventory expenses by using skilled labour, identifying the order quantity that minimizes total cost of stock holding, stock ordering and purchase costs in order to maximize profits. V TABLE OF CONTENTS DECLARATION ........................................................................................................................... i APPROVAL .................................................................................................................................. ii DEDICATION ............................................................................................................................. iii ACKNOWLEDGEMENT .......................................................................................................... iv ABSTRACT .................................................................................................................................... v CHAPTER ONE ............................................................................................................................ 1 INTRODUCTION ......................................................................................................................... 1 1.0 Introduction ................................................................................................................................... 1 I. I Background of the study ................................................................................................................ 1 l .2 Problem Statement. ........................................................................................................................ 3 I .3 Purpose of the study ....................................................................................................................... 4 1.4 Objectives of the study ........................... ,....................................................................................... 4 1.5 Research questions ......................................................................................................................... 4 1.6 Scope of the study.......................................................................................................................... 4 1.6.1 Timescope ................................................................................................................................. 4 I .6.2 Geographical scope..................................................................................................................... 4 1.6.3 Content scope ............................................................................................................................. 4 1.7 Sirrnificance of the study ................................................................................................................ 5 1.8 Conceptual framework ................................................................................................................... 5 CHAPTER TWO ........................................................................................................................... 7 LITERATURE REVIEW ............................................................................................................. 7 2.0 lnlrocluction ................................................................................................................................... 7 2.1. l Overview of inventory management.. .. : ....................................................................................... 7 2.2 Challenges encountered in inventory management in organisations ................................................ 8 2.3 Strategies that purchasing entities adopt in managing inventory .................................................... 11 2.4 Effects of inventory management in organisational performance .................................................. 17 CHAPTER THREE ..................................................................................................................... 20 METHODOLOGY ...................................................................................................................... 20 3.0 Introduction ................................................................................................................................. 20 3.2.2 Population of the study .............................................................................................................. 20 vi 3.3 Sample size ............................................._. .................................................................................... 20 3.3.2 Sampling procedure .................................................................................................................. 21 3.4 Data collection tools .................................................................................................................... 21 3.4. I Questionnaires ......................................................................................................................... 21 3.4.2 Interviews ............................................................................................................................... 21 3.5 Data Analysis .............................................................................................................................. 21 3.6 Validity and reliability of study .................................................................................................... 21 3.6.1 Validity ..................................................................................................................................... 21 3. 6.2