CHAPETER ONE

1 Introduction
1.1 Background of the Study
Inventory refers an itemized caroling or list of tangible goods or property or the intangible
attributes or qualities. Inventory is the stock of any item or resources in company where as
inventory management is the process of reducing inventory cost, keeping inventory from under
or over stocking and determine order and reorder points in order to achieve organizational goals.
The general concept of inventory management concerned to reduce the cost of the company by
improving the efficiency or productivity of the system (Axe sson , 2008). Inventory management
was important financial implication.The financial manager was the responsibility to ensure that
inventories were properly monitored and controlled. Control over inventory includes of strong
and handling. Inventory need to be classified and properly verification and reporting are
possible. The storage and handling of inventory must be secure against damage, spoilage,
obsolescence and assurance of proper control inventory management requires close coordination
with subordinate (Guan, 2006).
Due to the fact that inventories are maintained in large sites by the organization it is important to
manage against will bêtes, deterioration, pilferage, storage costs, and obsolescence risk for price
decline amongst other. However it could be noted that what cause physical deterioration of
certain goods or raw materials is due to miss holding and improper storage
facilities(Rautroy&Koclali,2005).
The major aim of inventory management was for this organization are avoiding the excessive
and adequate level of smooth productivity and performing effectively using of inventory
( Khajain, 2003). Inventory was often the largest item in the current assets category and must be
accurately counted and valued at the end of each accounting period to determine a company
profit or loss.
In today’s competitive and social climate, inventory accounting methods and management
practice have become profit enhancing tools. Better inventory system can increase profitability
where as poorly conceived system can drain profits and put a business at a competitive
disadvantage (Thomas et al, 2001). Therefore, the aim of this study was to assess inventory
management practice of Was food complex company.

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1.2 Statement of the problem
Any large manufacturing company inventory place a great role to maximize company
profitability. Inventory capability directly determines the inventory levels required to achieve
desired service levels. More effective inventory management practice can also result in increased
sales revenue. To attain improved performance inventory managers must make more accurate
timely decision regarding when and how much to order. A company should maintain adequate
stock of material for uninterrupted production, for customers supply and other related service.
Some of the problems facing manufacturing companies today are the ability to provide quality
service to the customers whose root case lies in poor inventory management
(Manjrekar&Kamath, 2008).

For many organizations there are no doubt that inventory management enhances their operations.
Organizations with high level of finished goods inventory can offer a wide range of products and
make quick delivery from their backyards to the customers. There has been a question for
management about the efficiency of inventory management procedures in place resulting from in
consistencies of inventory levels leading to various weakness like losses that comes as a result of
overstocking, under stocking, expiry inventory failure to meet targets and low morale of a
company members ( Stanton, 2004).

Doble,(2000) argues that well and efficiently controlled inventories can contribute to the
effective operation of the firm and hence the firms overall profit. Proper management of
inventory plays a big role enabling other operations such as production, purchases, sales,
marketing and financial management to be carried out smoothly. Basic challenges however is to
determine the inventory level that works most effectively with the operating system or system
existing with the organization management.

Generally poor inventory management practices are overstocking, under stocking, bad issuing,
unqualified employee, spoil aging much, deterioration, will beage of materials and obsolescence.
Therefore, inventory management is important to reduce these problems.

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In manufacturing companies like Was food complex company, inventory management helps to
increase the quality and availability of inventories. It is also important to reduce costs. As a result
in the present day inventory management is a best mechanism for survival of companies by
reducing cash out flow .Therefore, the aim of this study was to assess inventory management
practice of Was food complex company.
1.3 Research question
The researcher was assessing the inventory management practice of the company from different
direction by raising the following research question.
1. What type of inventory control system does the company using.
2. What are the factor affecting the inventory management practice of the company?
3. What are the major challenges on implementation of inventory management?
4. How to support strength of the existing inventory management system?
1.4 Object of the study
1.4.1 General objective
The general objective of this study is to asses’ inventory management practice of was food
complex company
1.4.2 Specific objective
The specific objective of the study will be:
1. To identify the type of inventory control system applied by Hawassa food complex company.
2. To identify the factors that affecting the inventory management practice of was food complex
company.
3. To verify challenges that hinders the effective management of inventory.
4. To investigate how the existing inventory management system of the company support the
management and financial practice of the company.

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1.5 Significance of the study
The result of this study was significance in various respects. Firstly, the studies were drawing
some conclusions and identify the current practice of the organization’s inventory management.
Thus, it was gave signal to the operations management of the organization to take remedial
action. Secondly, it was help as a source of reference and a stepping stone for those researchers
who want to make further study on the area afterwards. Thirdly, it has been given the
researcher the opportunity to gain deep knowledge in inventory management and its attributes.
1.6 Scope of the study
The study was targeted to assess inventory management practice in Was food complex company.
And inventory management involves numerous of aspects and the object could not to cover
everything. Instead this study focused on few dimension of inventory management which
includes store department, production department, and purchase department of the organization
in order to investigate the issue in depth and to make the study manageable.
1.7 Limitation of the study
First limitation of study was used survey in collecting primary data, and systematic errors
expected to come up. Most surveys try to portray a representative cross-section of a particular
target population however, statistical errors expected to be occurred because of chance variation
in the elements selected for the sample.
The second limitation of study, it was limited to only one inventory management practice in Was
food complex company. This hamper the generalizability of the result obtained from this study.
The result could not be used generalize the whole service company and all inventory
management practice in Was food complex company. Because of there are infrastructural and
other factor like level of awareness of the patients difference between Was food complex
company and the rest of the company.
1.8 Organization of the Study
Generally the paper is organized into five chapters. The first chapter presents the introduction of
the study. The second chapter look into some previously conducted related studies and literatures
on the area. The third chapter talks about the methodology used in the study. The fourth chapter
dwells on analysis and interpretation of the data collected. The last and the fifth chapter surface
the summary and conclusions reac

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 CHAPETER TWO
2. Review Related Literature
2.1 Definitions and features of main variable
The term inventory refers to the stockpile of the products a firm is offering for sale and the
components that make up the product. In other words, inventory is composed of assets that
wassold in the normal course of business operations. The asset which firms store as inventory in
anticipation of need are raw materials, work in process ( Semi- finished goods) and finished
goods. The raw material inventory contains items that are purchased by the firm from others and
convert in the financial goods through the manufacturing (production process).They are normally
semi- finished goods that have various stages of production. Finished goods represent the final or
completed products which are available for sale ( Khanjain, 2003).

Inventory management is the stock of any resources used in organization. An inventory system is
the set of policies and controls that monitor level of Inventory and determine what levels should
be maintained stock replenished how large order should by convention manufacturing inventory
items that contribute to become part of a firm product output. Inventory includes materials that
are used in production and distribution process. Row material component parts assemble and
finished products are all parts of inventory as a balance sheet. In addition if an organization has
the wrong item inventory (Worsened, 1973).
The availability of right item at the right time and the right places supports the organizations
objective of customer service productivity profit and return on investment. This is true in m
manufacturing whole sales, retail, health care and educational organization inventory can be an
asset in a full sense of the work measure performance and productivity may differ among
organization but all need adequate inventory management. Inventory management is a key to any
manufacturing industry. It provides need to about the receipt and movement of goods the sell
removal or other disposition of goods and the precise valuation and states of goods remaining in
the inventory at any time. Effective inventory management allows distribute to meet during
exceed customer expectation of products (Altekor, 2005).

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2.2 Theoretical Review
Inventory management is deals about identifying every item of stock. And it is a primary about
specifying the size and placement of stock goods. Inventory management is defined as a science
based art of insuring that just enough inventory stock is held by an organization to meet demand
(Barry, 2006).
Inventory is the availability of any stock or resource at right quantity and quality used in an
organization. Inventory management system is the set of policies that controls and monitors
inventory level and determine what level should be maintained how large orders should be made
and when stock replenished so as to support the operation of business (Miller, 2010).
The availability of materials whenever and wherever required were essential for the procurement
storage, sales, disposal or use of material can be referred as inventory management. Individual
responsible for inventory management have to know the space they have for storage and provide
information when materials reach at their minimum level and utilize available storage
resourcefully (Saxena, 1999).
Inventory management involves planning, organizing and controlling the flow of materials from
their initial purchase unit through internal operation to the service point through distributions
(Stephenson, 2003).
Inventory constitutes one of the largest and most tangible investments of any organization which
also decides their success operation. Inventory management plays a vital role in the growth and
survival of an organization in the sense that failure to an effective and efficient management of
inventory was mean that the organization was fail to meet objectives. Customer desired allows
been a vital issue in a company not only to maintain sells but also survive as a company (Gold
by, 2003).

Inventory management refers to all the activities and organizations involved in maintaining
inventory for their operation, so that adequate supplies were available and the cost of over or
under stock were low (kotler,2002).
Inventory management is required at different location with in multiple locations to protect the
regular and planned course of operation against the random disturbance of running out of
materials. The scope of inventory management covers replenishment lead time, carrying cost of
inventory, inventory forecasting, inventory valuation, inventory visibility, future inventory
pricing, physical inventory, available physical space for inventory quality management,
replacement and returns. Balancing these competing requirements leads to good inventory

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management system. Which is an ongoing process as the business needs shift and react to the
wider environment (Ellram& chio,2003).

All organizations keep a supply of inventory for the following reasons.

To maintain independence of operations: supply of materials at a lowest work centers allows that
flexibility in operation allows management to reduce the number of steps. The time that it takes
to do identical operations would naturally vary from work unit to work unit. The sum total
performance of an organization is the collective performance work situation located at different
localities or units. Therefore to meet business goal effective and efficient inventory management
at all work situation is crucial.

To meet variation in product demand: If the demand for the product or service is known
precisely .it may be possible to provide service exactly to meet the demand. But demand is not
completely known, because we cannot have full information about customer, and Safety or
buffer stock must be maintained to absorb observation.

To allow flexibility in services provision scheduling: A stock of inventory receives the pressure
on the service provision to get the goods out. This leads to longer times which permit service
planning for smooth flow and lower cost operations through larger size productions.

To provide safe guard for variation in inventory delivery time: When material in ordered from
vender delays can occur for variety of reason.

To take advantage of economic purchase order size: There were costs to purchase materials. The
larger each order is the lower ordering cost the material, because of the bulk purchase.
Organization has to decide the quantity and time to procure materials economically. Materials
have to purchase compare the ordering and storing costs. The most economically point were
materials to be procured is at the lower cost of storage and order cost. Inventory management
place a decisive role in the enhancement efficiently and effectively of business enterprise.

2.2.1 Challenges of inventory management

1. Conflicting objectives across various segments of each company.

2. The tentative nature of both supply and demand.

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In the case of conflicting objectives, some parts of business sheet to increase inventory and other
parts to decrease. For Inventory is one of the biggest numbers on their balance sheet. effective
inventory control and management is a vital function to help insure the continued success of
distribution and manufacturing and companies .The effectiveness of inventory control is
typically measured by how successful accompany is at reducing inventory investment meeting is
customer service goals and achieving maximum through put and cost containment .

The concept of inventory management is determining what items to stock, how many of each
item should be kept on hand and when orders should be placed for more however inventory
management is much more complex in practice. The factory’s that complicate the process fall in
to broad categories example, the sales department priorities the deliveries of products in the best
time frame to satisfy customer’s predictability In the case of supply and demand, difficulties
system. For instance supplier performance , supply chain distribution , scarcity of materials , the
of products and shrinkage contribute to the need to establish buffer stocking levels to provides
safety days of lead time supply on the demand decide ,the overall economic environment ,new
products and innovations and high traffic sales volume for same items and seasonal sales traffic
for others .(supply chain efficiency through collaboration ). Those encourage the business to
keep finished goods stocks high.
The purchasing department achieves volume discount on large batch and off season purchases
this increase inventory. Production wants all parts and raw materials to be available to keep line
efficiency high and run large batch sizes, this also increase inventory .Conversely product
developers and finance department trend watchers often want to keep inventory low to advance
inventory, because sitting on stock ties up cash flow. .All of these complications to consider
inventory control and management is fundamentally amounts to walking affine line between
meeting customer needs and stocking the least amount of inventory possible .Because inventory
is the sales and production process is important to stock enough of it to avoid paying the
opportunity costs of lost sales and diminished customer satisfaction and loyalty.

2.2.2 Objectives of inventory management

All organizations keep a supply of inventory for the following reasons.
To maintain independence of operations: supply of materials at a lowest work centers allows that
flexibility in operation allows management to reduce the number of steps. The time that it takes
to do identical operations would naturally vary from work unit to work unit. The sum total

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performance of an organization is the collective performance work situation located at different
localities or units. Therefore to meet business goal effective and efficient inventory management
at all work situation is crucial.

To meet variation in product

Inventory plays a great rate for company’s development. Inventories are materials and supplies
that a business or institution carries either for sale or to provide inputs or supplies to the
production process. All business and institution require inventory. According to step N. Chap
man. Inventory management will have achieve the following objectives
Maximum customer service

Low cost plant operation

Minimum inventory investment

Customer service

The ability of accompany to satisfy the need of customers. Inventory management the term is
used to describe the availability of items when need and is a measure of inventory management
effectiveness. The customer can be purchase a distributes another plant in the organization or the
work situation.

Operating efficiency
Inventories help make a manufacturing operation more operations in a sequence have different
rates of output and to be operated efficiently inventories must build between them.

By lessening production manufacturing can continually produce an amount equal

2.2.3 Inventory cost

Item cost

According to Lloyd M. Clive item cost is the price paid for a purchased item .Which consists of
the cost of item and any other direct costs associated in gifting the item in to the plant. These
could include transportation, custom duties and insurance .The inclusive cost is often called the
landed price. For an item manufactured in house the cost include direct material, direct labor and
factory.

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Carrying costs
All expanses in carried by the firm because of the volume inventory carried. They can be three
categories
Capital costs money invested inventory is not available for other uses and represents a lost
opportunity cost. The minimum cost would be interest rate and it may be much higher depending
on investment opportunity for them.

Storage costs; - it requires space, workers and equipment’s.

Risk cost including obsolescence, loss of product value resulting from a model or style change
technological development. Damaged inventory while being held or moved, pilferage goods lost,
Strayed or Stolen, Deterioration that rots or dissipates in storage of whose shelf life is limited.

Ordering cost
These cost associated with placing an order with placed an order either with the factory or with a
supplier ordering cost in factory including the following;-
Production control costs: - The annual cost and effort expanded in production control depends
on the number of orders placed not only the quantity ordered.

Set up and tear down cost: - Every time an order is issued work centers have to set up to run
the order and tear down the setup of the end of the run. These costs do not depend up on the
quantity ordered but on the number of order placed per year.

Lost capacity cost: - Order is placed at work center the time taken to set up is lost as productive
output time. These costs represent a lot of capacity and are directly related to the number of other
placed.

Purchase order cost:-Cost is incurred to place the order. These cost include order preparation,
follow u expediting receiving, authorizing payment and the accounting cost of receiving and
paying the invoice

Stock out cost

During the lead time exceeds forecast we can expect a stock out. A stock out can potentially be
expansive because of back order costs, lost sales and possible lost customers. Stock out is
reduced carrying extra inventory to protect against those times when the demand during lead
time is grater that forecast.

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Capacity associated costs
When output levels must be changed their cost for over time, hearing, Trans, extra shifts and
layoffs .These capacity associated costs can be avoided by leveling production item in slack
period for sale peak period.
Purchase cost
The purchase cost of an item is the unit purchaser if it is obtained from an external source or the
unit production costs if it produced internally. For the purchase items it is the purchase cost less
modified for different quantity levels manufacturing items the unit cost include labor and factory
over had ( Saxena , 2003 )
Stock out cost (shortage cost)
This is the cost as a result of not having items in storage. This can bring a loss of goods will
profit loss or incur back order cost and delay in the customer services. Shortage costs result when
demand exceeds the supply of inventory on hand. These costs can include the opportunity cost of
not making sales, loss of customer good will late charges and similar costs. If the shortage occurs
in an item carried for internal use the cost of lost production or down time is considered a
shortage cost. Stock out can potentially be expansive because of back order cost , lost sales and
possible lost customer stock outs can be reduced by carrying extra inventory to protect against
those time when the demand do lead time is greater than forecast ( LioydmClive, 2008).

2.2.4 Inventory control and purchasing

The level of inventory that should be maintained is the major area of conflict between purchasing
and inventory purchasing managers favorable large quantity purchase the amount for being large
quantity enables reduced unit cost. Inventory manager strives to prevent material accumulation a
head of production. There for inventory control and purchasing should work together to optimize
the inventory level and minimize total costs. Continual communication is necessary regarding
lead time changes, stock outs, suppliers, production schedule changes and quality problems.
Deliveries of purchasing material was delayed it inventory control is late in requisitioning

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needed materials. This delay lead to premium transportation costs to speed material delivery.
Purchasing is constantly trying to expedite delivers (Effort purchasing manual 2003)
2.2.5 Inventory control system
Inventory control assists receiving and stores operation by ordering materials in quantities related
to standard unit load capacities. This is essential for effective material control, reduced material,
and obsolete materials. Reducing the damage to materials during in house handling will decrease
inventory control problems .Reserving personal can also assist inventory control by promptly
rejecting shipments of unordered and unacceptable materials.
2.2.5.1 Fixed internal methods
The replenishment of all items interval and the supplies will arrive according to the lead time.
The advantage of fixed interval system are as all items are replenished at one time , there is
considerable reduction in the volume of work and as large number of similar items is purchased .
This method is suitable for re ordering items which a steady consumption such as production
materials for continuous production at a specific rate items which are available only during a
certain time of the year. Imported items for which license are given only at fixed interval.
2.2.5.2 Period coverage system
This enables to get the material requires during different periods of the year at the right time
especially the production program varies from period to period. The system is effective when
items are grouped with their recorder period and the progress in respect of each group was
received once a weak or fortnight as considered necessary .the usual shortage reports from stock
control and stores was additional help to procurement (Nair, 2003).

2.2.5. 3 The Just In time (JIT) system

The operating Concept of the systems to gear factory output tightly to distribution demand for
finished goods, to gear individual feeder production units tightly to gather and to gear the supply

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of production inventories to the manufacturing demand schedule. This means that all materials in
the system. Including production inventories are maintained at absolutely minimal levels
(Doppler & Burti,1996).

2.2.5.4 The economic order quantity

One guidance for determined the most advantageous order quantity comes from an analysis of all
incremental case associated with order quantity cost are grouped in to two categories. The nation
of an economic order quantity (EOQ) is that the appropriate quantity may be the one that tends to
minimize all the cost associated with the order candying cost, act visit ion costs and the cost of
material itself. The economic order quantity concept simply says that the sum of all the indirect
cost associated with inventory was minimized on an annual basis if the material for which the
graphics if drawn is drown is order6ed consistently in the quantity the correspondents with the
law point on the curve. This level of quantity is called the economic order quantity. (Tony, 1998)
Assumption of economic order quantity
A side from the real world problem of constant changing requirements, expending partial
shipments, splitting costs, and soon, there are several assumptions underlying the basis EOQ
model, Four of them is list below.
 Demand and lead time are known and constant.
 Replenishment is instantaneous at the expiration of the lead time.
 Purchase cost do not very with the quantity ordered
 Ordering and carrying cost expression include all relevant costs

The assumption is usually valid for finished goods where demand is in dependent and fairly
uniform. However, there are many situations where the assumptions, assumptions are not valid
and the Economic order quantity concept is no uses. A national requirements planning, the lost
for lot decision rule is often uses but there are also several levels will use that is variations of the
economic order quantity. (Tang, 1998)

2.2.6 Safety stock

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Safety stock is needed to maintain production operation and to deliver finished goods arise. This
stock also a chives a reduction of emergency purchases at higher prices and extra transportation
charges for speedier modes of transportation. Two factories play an important role in the system
of inventory control. The first factors are that demand is never certain and is at best distributed
over a certain range of days. Hence accompany can tackle this situation by polices such as
treating demand more than the average demand or maintain inventory levels more than previous
period.
Safety stock is needed because of quantity uncertainty that is the number of scrap or imperfect
items the order is going to contain.
There for, the stock comes in use when rejection at the time of receipt or goods due to damage or
standard quantity (Ahuja , 1998).
2.2.7 Inventory storage system
According to Doubler& Burt,(1996) a planned and organized sore system is a basic ground to
serve consistent service for manufacturing division, and for economic stores operation. To do so,
Doubler specifies two basic systems that can be used in physically controlling stores system. A
single organization often uses both systems at the same time. This combined store depends up on
the nature of production and the way in which materials are used. This system is called random
access store system.
2.2.7.1 CLOSED STORE SYSTEM
A closed store system is one in which all materials are physically stored in a closed or controlled
area. The general practice is to maintain physical control by locking the storage area whenever
there are no activities as rule there is no other than the stores personnel is permitted in the stores
are. Materials enter and leave they are only with the accompaniment to an authority document
(requisition). This system afford maximum physical security and to ensure tight accounting
country of inventory.
2.2.7.2 Open store system
Open store system is applied in highly mass production types of operation exhibiting a
continuous and predictable demand of the same materials. In plants using open system, no store
room as such exists each material is stored as closed to its point of use as is physically possible.

2.2.7 .3 Random access store system

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It is a unique type closed system employed by a relatively small number of large firms. In this
system, no material has a fixed storage location. When an item enters the stores room, it is stirred
in the available shelf suitable for its requirement. The item is drawn from stores the storage stock
is available for physical storage requirement.
2.2.8 Determination of Stock Levels
Carrying of too much and too little of inventories is detrimental to the firm. If the inventory level
is too little, the firm will face frequent stock-outs involving heavy ordering cost and if the
inventory level is too high it was unnecessary tie-up of capital. Therefore, an efficient Inventory
management requires that a firm should maintain an optimum level of inventory
Where inventory costs are the minimum and at the same time there is no stock-out which may
result in loss of sale or stoppage of production. Various stock levels are discussed as such.
(KulkarniPV, stayaprasad ,2004)
(a) Minimum Level
This represents the quantity which must be maintained hand at all times. If stocks are less than
the minimum level then the work will stop due to shortage of materials. Factors such as lead
time, rate of consumption & nature of material are taken into account while fixing minimum
stock level:
(b) Re-ordering Level
When the quantity of materials reaches at a certain figure then fresh order sent to get Material
again. The order is sent before the materials reach minimum stock level. Re-ordering level or
ordering level is fixed between minimum level and maximum level. The rate of consumption,
numbers of days require to replenish the stocks, and maximum quantity of materials required on
a day is taken into account while fixing re-ordering level.
(c) Maximum Level
It is the quantity of materials beyond which a firm should not exceed its stocks. If the quantity
exceeds maximum level limit then it was overstocking. A firm should avoid overstocking
Because it will result in high material costs. Overstocking will mean blocking of more working
14 capitals, more space for storing the materials, more will betage of materials and more chances
of losses from obsolescence. (KulkarniPV, stayaprasad ,2004)

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2.2.9 Inventory Codification
A code eliminates the duplication of items in a store to achieve tight physical control of
inventories. It makes entries in bin cared. Stock control, cards and account records easy and
helps in developing a uniform method of a good codification systems should serve the needs of
purchasing, ware housing, computerization of inventories levels and financial analysis and help
in controlling procurement delays. Stock outs situation receptive small orders, control sourcing
of inventories and order quantities. It should help further in prevailing patterns of total
expenditures, and serve as an important decision making tool. The code, store location code,
Item descriptions, and inventory level.(saxena, 2003).
2.2.10 Types of inventories
Most organization uses the same general classifications of inventories. The classifications are
organized based on the location of inventory in value adding process or the inventory
characteristic based on its purpose.
A. Raw materials
A raw material inventory refers to all items that act as in put to an organization value adding
processes. These goods after being received are transformed before becoming a distinct and
identifiable part of the finished goods. These are items purchased from supplier to be used input
to the production process (Ellram&Chio ,2000)
B. Finished goods
Finished goods refer to the stock of finished and identifiable products. They are typically stored
at the factory while awaiting sale and shipment .They can include goods had in ware house
owned and managed by the manufacturer or goods maintained on the buyers pant floor which are
on consignment. Those finished goods are final completed products available for sale
distribution storage or shipment (Ellram&Choi, 2000)
C. Supplies
Supplies are inventory items consumed in the normal function of the organization. They are not
part of the final product .All materials used by organization that do not become part of the
finished goods are referred to as supplies These items are needed in both manufacturing and
service organization (Ellram& Choi, 2000).The ideal inventory processes consists of
manufacturing a product to a customer’s specifications ounces’ an order is placed. This is called
a make to order operation and characteristic of customized equipment. Inventory is a major area
of asset deployment that should provide a minimum return for the capital invested the following
are careful examination of under lying inventory commitments.

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2.2.11 Inventory functionality
(Stevenson, 1999) puts the function of inventories in the following form.
1. To meet anticipated customer demand
2. To smooth product in requirements firms may experience seasonal pattern in demand of
the buildup of inventories during at seasonal periods to meet its very high requirement
during certain periods, these inventories are aptly named seasonal inventories.
3. To decouple operations, historically manufacturing firm have used inventories as buffers
between successive operation to maintain continuity of production that would otherwise
be disrupted by events such as breakdown of equipment and accident that cause apportion
at operation to shutdown of temporarily.
4. To project against stock outs, delayed delivers and expected increase in risk of shortage
lays can occur because of weather conditions, supplier stock outs, delivers of wrong
material and quality problem. The risk of shortage can reduce by holding safety stocks
which are stocks in the excess of overage demand to compensate for variability in
demand and lend time.
5. To take advantage of order cycles to minimize purchasing and inventory cost of a firm
after buy quantities that exceed immediate requirements this necessitates storing some or
the entire purchased amount for later use, similarly, it’s usually economical to produce in
large rather than small quantity again the excess output must store for later use.
2.2.1 2 Symptoms of poor inventory management
The following are the symptoms of poor inventory management (Aggarwal, 2002)
Periodic server back order continuously growing inventory quantities while the order backlog is
remaining constraint.

High rate of customer turn over and order cancellations.

Frequent need for uneconomical production runs to meet sales requirements.

Excessive machine down time because of material shortage.

2.3 Empirical Review

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According to wild,(2002) inventory management is a key activity which organizes the
availability of material for the smooth on going operation. It coordinates purchasing,
manufacturing, storing and distribution functions to meet the marketing needs and customer
satisfaction. This roles includes the supply of new products consumables, spare parts obsolesce
items, and all other item that help satisfactory operation to customers. Inventory enables to
support customer satisfaction by making the operation with high quality.

According to..Fariza,( 2015) today, logistics networks and supply chain are seen as a matter of
survival and competitive advantage. Effective supply chain management has become a potential
way nowadays to improve performance through matching supply chain practices and competitive
advantages in the competitive world. There are many researches were conducted on the area of
supply chain practices and its implication towards supply chain performance. However the
researched finding seems contradicting. These contradicting finding may results from different
reasons such as the level of management commitment, the costs incurred and also due to its level
of workers skills. Inventory management across the supply chain is a big challenge for
improving coordination among value chain. Controlling inventory is need of the hour as it
formulates the business success/failure as competition is intense, growing day-by- day. This
research conceptualizes and develops the role of inventory management strategies and inventory
management practices in fostering supply chain performance. The relationships among different
factors are going to be tested in proposed framework using Structural Equation Modeling (SEM )
to improve the performance of the supply chain. The insight from this proposed framework will
help supply chain managers in implementing inventory management strategies and practices to
enhance the overall performance of supply chain.
According to Tamilarasu,( 2015) inventory management recognizes that supply chains are
usually operated by independent against with individual preferences. Game theory is the
methodological tool to determine how the players will behave when they each seek to maximize
their own well fair.This study implies the techniques are designed to manipulate the behavior one
firm to the advantage of another .for examples buyback and quantity discount contracts can be
used by a supplier to increase her profits at the expense of the retailer profits.
According to.AartiDeveshwar&DhawalModi,( 2013). Too much inventory and not high enough
customer service is very common, but unnecessary. Inventories should neither be excessive nor
inadequate, the objective of inventory management is therefore to determine and maintain the
optimum level of investment in inventories which help in achieving the required objective this
study provides substantive support for previous findings in the inventory control literature and

18
fresh insight about inventory management. Present study reveals that business economy and
efficiency can be enhanced due to effective and frequent inventory control. This study will also
investigate the relationship between inventory management strategic and inventory management
practices towards supply chain performance. The result of this finding will help organization in
assessing their level of inventory control and also was a guideline what they need to do in order
to outperform their organizational performance by using a proper inventory management
practices as a tool. Hopefully this study will able to fill in the knowledge gap in the area of
inventory management especially the proper Technique of inventory control in assisting the
organizations to outperform their performance and make them closer to achieve business
excellence. According to Cynthia, (2015) inventory management is a critical management issue
for manufacturing companies the study found that inventory management affects the
performance of the procurement function of sugar manufacturing companies in the western sugar
belt. Use of a lean inventory system improves the performance of the procurement function. A
strategic relationship with supplier’s inventory management is important in the performance of
the procurement function. Finally legal policies in the sugar industry contributed to the
performance of the procurement function of the sugar manufacturing companies in the western
sugar belt.
2.4 Knowledge gap
The above mentioned scholars have concentrated their studies in the developed countries and this
levels a gap for the author to carry out the same in developing country like Ethiopia. But, they
focus on study to investigate effect on inventory management practice on organizational
performance in public health institution. They focus also inventories form a significant portion of
the current assets of manufacturing enterprise. So, they focus the other product, product pricing,
product differentiation, demand and supply various products and service a study gap on
inventory management in Was Food Complex Company evaluation of inventory management
practice not to be successful.

19
 CHAPTER THREE
3 .RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the research problem and help the
researcher to collect data that would be conduct in the study. The researcher data was collected
through means.
3.1 RESEARCH DESIGN
The study wasadopting a descriptive research design since the study intendeds to gather
quantitative and qualitative data that describes the nature and characteristics of inventory
management on organization efficiency. The descriptive research wasapplied to explain the
existing situation in the study area (Wasfood complex company).
3.2 Data type and Source of Data
The data was gathered for study was primary data. Primary data was collected mainly from
employees of inventory management and related department of the company.
Primary data was gathered from respondents in Was food complex company there was assumed
to give firsthand information on the subject under study.
3.3 Method of data collection
The primary data (from primary sources) will be collected by the researcher used through
Questionnaires. The questionnaire would be designed based on the consideration of the skill and
knowledge of members and attends would be made to make the question easily understandable to
the respondents.
3.4 Sampling and Sampling Procedure
The research was targeted to study inventory management practice of the company. The research
especially focused on the company inventory management and other treated department in
estimated to have targeted population 350 employees (population size).
The needed number of individuals from respondents was selected used non-probability sampling.
This technique permits the research to have complete freedom of selecting individual who can
provide relevant data.

20
3.5 Sampling size
In Was Food Complex Company there were target of population 350 employees. Among these
30 employees was selected purposely by the researcher. In purposely sampling the sample is
determined by according to the knowledge of researcher judgmentally about the group to be
sampled as stated above by (ARAY et.al, 2002). So from those total employees sample 30
employees were directly related with my research finding work in their activity. The rest
employees were not much concerned with inventory. Therefore, for the researcher it was better
to use this approach to be effective in the assessment of inventory management practice in Was
food complex company.
3.6Method of data analysis
After collected the necessary data or information from primary sources, the researcher was
analyzed the data by using descriptive statistics. Descriptive statistics is the method of collection,
organization, presentation, analysis and interpretation of a group of data either sample data or
complete information, without an attempt to make prediction based on the data. Descriptive
statistics is used to analysis the data by percentage and tabulation. Therefore the collected
information from primary data was analyzed by descriptive statistics.

21
 CHAPTER FOUR
4. Data analysis, Interpretation and presentation
In this chapter data were collected by using questionnaire are analyzed and interpreted by using
table and percentage for close end questionnaires and also interpreted open end by using
statement from employers of Dire Dawa food complex company there are 30 questioners are
distribute to employees taken from the inventory management section. Out of 30 respondent 28
questionnaires are returns the remaining 2 questionnaires cannot be return. Some respondent not
fill full open end questionnaires and their occupation. Therefore, depend on the response of 28
respondents were filled and returned the questionnaire based on their experience.
4.1 Demographic Analysis
The first part of the questionnaire consists of the demographic information of the
participants. This part of the questionnaire requested a limited amount of information related to
personal and professional characteristics of respondents. Accordingly, the following variables
about the respondents were summarized and described as follow:
Table 4.1: Personal information
N O Questioner No of respondent P e r c e n t a g e
1 y e
s
Male 1 7 6 0 . 7 1 %
Female 1 1 3 9 . 2 9 %
Total 2 8 1 0 0 %
2 A g e
20-29 1 7 6 0 . 7 1 %
30-39 7 2 5 %
40-49 4 1 4 . 2 9 %
Total 2 8 1 0 0 %
3 Level of education
10 completed - -
Level 1 - -
Level 2 2 7 . 1 4 %
Diploma 7 2 5 %
Degree 1 9 6 7 . 8 5 %
Total 2 8

22
 4 Service year in the company
1 - 5 2 3 8 2 . 1 4 %
6-10 5 1 7 . 8 6 %
11-15 - -
16-20 - -
Above 20

Total 2 8 1 0 0 %
Source: own survey, 2021
As it can be seen from the above that the majority (60.71%) of respondents are male and the rest
(39.29%) are female .As the result of law female participation in inventory management and
(60.71%) of respondents are between the age of 20-29, (25%) of respondents found between age
of 30-39 and (14.29%) of the respondents are age of 40-49 years. Majority of the respondents is
young and active age workers. Therefore majority of the respondents in Wasfood complex have
good work experience. As a result respondents make good contribution for their company. And
also show that the level of education majority (67.85%) of the respondent are degree, (25%) of
their respondent are diploma and (7.14%) of the respondent are level 2.Due to greater gap
between degrees, diploma, level 2 and other the respondents varies in quality on inventory
management.
Shown from the above table work experience of respondents of Wasfoodcomplexcompany
indicates that (82.14%) of the respondents have 1-5 year work experience and (17.86%) of
respondent have 6-10 years’ experiences. It implies that workers experience is one factor to
improve quality of production performance.

23
 Table 4.2 Inventory Control Mechanism
Q u e s t i o n s A l t e r n a t i v e No of respondent P e r c e n t a g e
Does the organization use inventor control mechanism Y e s 2 8 1 0 0 %
N o - -
T o t a l 2 8 1 0 0 %
If your answer is yes for the above question which type of inventory control mechanism A B C 7 2 5 %
Two bind method - -
Fixes periodic order 1 5 5 3 . 6 %
J u s t i n t i m e 3 1 0 . 7 1 %
Fixed order quantity 3 1 0 . 7 1 %
Three Bin Method - -

T o t a l 2 8 1 0 0 %
Source: own survey 2021
The above table question number 5, indicates that 28(100%) of respondent are response yes.
this in dictates that the majority of respondent were said yes with the percentage of (100%). The
respondents are responded the company used all inventory control system reducing the damage
to materials during in house handling will decrease inventory control problem. From the above
findings majority (53.65%) fixed periodic order inventory management techniques at Wasfood
complex company are presented. It implies that the highest percentage of
respondentswasrecorded at least in agreement with items like the company uses fixed period
order to minimize the total inventory holding cost and ordering cost.
Table 4.3 what way is best to manage inventory in the company
C a t e g o r y N o r e s p o n d e n t P e r c e n t a g e
customer delivery 1 3 4 6 . 4 2 %
product turn around 5 1 7 . 8 5 %
Inventory control personnel 1 0 3 5 . 7 %
T o t a l 2 8 1 0 0 %
Source: own survey 2021
The above table 4.3 indicates that the majority respondents response that is customer delivery
with the percentage of (46.42%) this indicates that the company is the best management
inventory, because it provide a frame work for customer service as processed and an outcome in
the company. and the other (17.85%) respondents are responded product turnaround is a change

24
 in direction the time spent to implement and product or a place where a vehicle can be turned to
go back in other direction, while (35.7% ) respondents responded inventory control personnel. It
implies that customer delivery provides the ability of a company to satisfy the need of the
customer.
Table 4. 4 response of respondent regarding to factor affecting inventory management
system
Do you think that there is a factor which affects inventory management system? R e s p o n s e R e s p o n d e n t s P e r c e n t a g e ( % )
Y e s 2 2 7 8 . 5 7 %
N o 6 2 1 . 4 2 %
T o t a l 2 8 1 0 0 %
If your answer is yes for question number 8 which factors affecting Inventory management system? R e s p o n s e R e s p o n d e n t s P e r c e n t a g e
F i n a n c e 1 1 3 9 . 2 8 %
S u p p l i e r 5 1 7 . 8 5 %
Product type 7 2 5 %
L e a d t i m e 5 1 7 . 8 5 %
T o t a l 2 8 1 0 0
Source: own survey, 2021
As shown above (78.57%) majority of respondents responded yes, there is a factor affecting by
inventory management system and the remains (21.42%) are say that there is no factors affecting
inventory management system.
As shown in the above table (39.28%) majority of respondents responded that the company
affects inventory management in finance while, (17..85% ) respondents responded supplier is a
significant factors affecting inventory management but,( 25% ) of the respondents responded that
the company factors affecting inventory managements product type and (17.85% ) of that the
company factor affecting inventory managements lead time. Therefore finance is one factor for
production in the company to reduce productivity power and not to manage the financial asset
appropriately.

Table 4.5 what kind of inventory the company hold

25
C a t e g o r y N o r e s p o n d e n t P e r c e n t a g e
R a w m a t e r i a l 9 3 2 . 1 4 %

W o r k i n g p r o c e s s 4 1 4 . 2 8 %
S u p p l i e s 3 1 0 . 7 1 %
F i n i s h e d g o o d 1 2 4 2 . 8 5 %
T o t a l 2 8 1 0 0 %
Source: own survey 2021
Managed in the company and portray the importance of ensuring an effective trend of the
question was again posed to respondents requiring them to establish items that generate more
inventories in the company stores and warehouses. Findings indicate that (32.14%) revealed that
company raw materials generate more inventories, (42.85%) referred to finished goods,
(14.28%) said work-in-progress, (10.71%) referred to supplier. It implies that that finished goods
generate comparably more inventories in the company compared to others, the findings most
importantly give an out-lay of the forms of inventories management; because for instance if raw
materials, finished goods and others are not effectively managed, what will the company be left
with in its trend of production.

26
 Table 4.6, Response of respondent about spoilage product

Does the company have spoilage product? R e s p o n s e Number of respondent Percentage (%)
Y e s 2 4 8 5 . 7 %
N o 4 1 4 . 2 8 %

Total 28 100%
If yes for question 11 What is the mechanism to remove spoilage product? R e s p o n s e Number of respondents Percentage (%)
By discarded 3 1 0 . 7 1 %
By selling at lower price 1 0 3 5 . 7 %
By recycle production process 1 5 5 3 . 5 7 %

T o t a l 28 1 0 0 %

Source: own survey, 2021

As indicated on the above table (85.7%) of respondents said yes and (14.28%) of the respondents
said no. This indicates the company faces the highest spoilage products. Spoilage product which
is completed fully or partially do not met the specification required by the customer result reduce
the company product. Therefore, the company production is affected by spoilage product.
The above table indicates that majority (53.57%) of the respondents respond that company used
to remove the spoilage by recycle production process the company remove the defective product
by recycling production process in order to increase company products and reduce cost, (35.7% )
of the respondents respond that the company used to avoid the spoilage by selling at lower price
because customer do not wants this defective products and (10.71)% of the respondents respond
the company remove the defective product by discarded.
Therefore the company used for removing the spoilage products by using recycling the
production process method.

27
 Table 4.7 Regarding to the company in which department more focus to control and
regulate inventory system performance.
R e s p o n s e R e s p o n d e n t s Percentages (%)
In which department more focus to control and regulate systems of performance? Production department 1 2 4 2 . 8 5 %
Selling department 8 2 8 . 5 7 %
Purchasing department 3 1 0 . 7 1 %
Logistic department 3 1 0 . 7 1 %

Property administration 2 7 . 1 4 %
T o t a l 2 8 1 0 0 %
Source: own survey, 2021
As shown above table majority (42.85%) of the respondents responded that the company focuses
on production department because the company aim that produce large amount of product in
order to get profit. (28.57%) of the respondents response the company more focus on selling
department and( 10.71%) of the respondents focus on purchasing department because of to
control purchasing raw material which is factor of production performance. The rest of others
(10.71%) more focus logistic department during distribution of inventory and (7.14%) of the
respondents focus on property Administration.
Therefore the company production systems focus only one department as a result company
production system is affected by focus on single departments because production department
related with others.
Table 4.8 Regarding to raw material inventory level reordered.
At which inventory levels do the company reordered? R e s p o n s e R e s p o n d e n t s Percentage (%)
At minimum inventory level 4 1 4 . 2 8 %
At medium inventory level 1 5 5 3 . 5 7 %
At zero level 2 7 . 1 4 %

At maximum inventory level 7 2 5 %

T o t a l 2 8 1 0 0 %
Source: own survey, 2021
As shown above table (53.57%) responded company re order raw materials at a medium level.
and (14.28%) of the respondents responded that the company reordered at minimum raw material

28
 inventory level this represents the quantity which must be maintained hand at all-time .(25% ) of
the respondents responded that the company re order when the raw material inventory at
maximum level the quantity of material beyond which a firm should not excessed its stock if the
quantity excessed maximum level it wasover stocking. (7.14%) of the respondent responded that
the company re order when the raw material inventory at zero level. Therefore the companies
reorder at a medium level of stock the company hold a medium level of stock for which the
market highly demanded.
Table 4.9 result from using inventory management
What result from using inventory management in your company? R e s p o n s e Number of respondents P e r c e n t a g e ( % )
employee feel empowered 8 2 8 . 5 7 %
l o w e r c o s t 1 5 5 3 . 5 7 %
warehouse layout become optimized 1 7 . 8 5 %
5

Total 28 100%
Source: own survey, 2021
As shown above table (28.57%) of the respondents responded that the company result from
employee feel empowered good inventory management solution save time. Less time spent on
managing inventory result in greater productivity (53.57%) of the majority the respondents
responded that the company result from lower cost. and (17.85%) of the respondents responded
that the company result from warehouse layout become optimized. Whorehouse location is
optimal in the company the first place to meet service level commitments. It implies that
Inventory management approach keeps reorders accurate and lower cost by preventing inventory
overstock in the company.

Table 5 regarding inventory codifications

29
Does the company use coding system in the store? R e s p o n s e Number of respondent P e r c e n t a g e ( % )
Y e s 2 8 1 0 0 %
N o 0 0 %
T o t a l 2 8 1 0 0 %
If yes for question 16 which codification system being used? R e s p o n s e Number of respondents P e r c e n t a g e ( % )
Alphabetical codification 1 6 5 7 . 1 4 %
Numerical codification 1 1 3 9 . 2 8 %
Alpha numerical codification 1 3 . 5 7 %

Total 28 100%

Source: own survey, 2021

The above table indicates that out of the inventory management department, (100 %) respondents
responded as the company does codification of all items in the inventory. From these we can
understand that codification system of the company is almost good.
The above table indicates that majority (57.14%) of the employees respond that company used
codification system is alphabetical codification, (39.28%) of the respondents respond that the
company used numerical codification and (3.57%) of the respondents respond the company used
alpha numerical codification. Therefore the company used for codification system by using
alphabetical codification system to eliminate the duplication of item in the store.

Table 5.1 Response of respondent about enough storage area for all inventories

30
n o I t e m Alternative Respondents
Number of respondents percentage

1 8 Do you maintain enough& appropriate storage are for each inventory? Y e s 2 4 8 5 . 7 1 %

N o 4 1 4 . 2 8 %

T o t a l 2 8 1 0 0 %
Source: own survey, 2021
From the above table,(85.71%) of respondents showed that the company has maintain enough
storage area for all materials on the other hand (14.28% ) of respondents respond that the
company does not enough store space for all material. The results show that most of respondents
responses the company have enough storage area. It implies that the company has enough and
appropriate storage areas for each material in which the company holds its inventory and the
objective of the store room is to reduce loss and deterioration but, in the excessive inventory
enhance the charring cost of the company.
Table 5 .2 Response of respondent about storage system
no I t e m Alternative Respondents

Number of respondents percentage

1 9 What kind of storage system used in the company Random access store 5 1 7 . 8 5 %
Open store 8 2 8 . 5 7 %
Closed store 3 1 0 . 7 1 %
Both open and closed store 1 2 4 2 . 8 5 %
T o t a l 2 8 1 0 0 %
Source: own survey, 2021
From the above table 5.2 indicate that, (42.85%) of respondents response the company used both
open and closed store system and the reaming (28.57%) of respondents said that the company
use open store, open store applied highly mass production type of operation exhibition a
continuous and predictable demand of the material in the company and (17.85%) of respondents
are said random access store. Random access it is a unique type closed system employed by
relatively small number in the company. and ( 10.71% ) of respondents are said closed store ,
closed store in Was food complex company all material are physically stored in closed or
controlled area. There for as the researcher observed the organization used both open and
closed storage system because most of the company product that are not perishable.
Table 5.3 response of respondent about location of the store

31
Q u e s t i o n N o r e s p o n d e n t s P e r c e n t a g e
Does the location of the store is suitable for user department? Y e s 2 4 8 5 . 7 1 %
N o 4 1 4 . 2 8 %
T o t a l 2 8 1 0 0 %
Source: own survey, 2021
The above table indicates that the majority of the respondents (85.71%) are said that yes and the
remaining (14.28%) are said that the location of the store is not suitable for the department. It
implies that the location of store easily accessible, comfortable that inspire employees to
contribute better productivity of the store.
Table 5.4 response of respondent about inventory management technology
Q u e s t i o n N o r e s p o n d e n t s P e r c e n t a g e
What type of inventory management technology the company using? manual system 1 1 3 9 . 2 8 %
automated system 1 7 6 0 . 7 1 %
T o t a l 2 8 1 0 0 %
Source: own survey, 2021
The above table indicates that the majority of the respondents (60.71%) of indicated that the
nature of inventory system is fully automated. Example, radio frequency identification,
spreadsheet. Radio frequency identification tags are a technological breakthrough in inventory
management, providing real-time information that increases the ability to track and process
shipping containers, parts in warehouses, items on shelves and a whole lot more. This will lead
to effective customer service and firm can expect sales to increase Spreadsheet means the owner
can also setup the spreadsheet to calculate when ingredient need to be reordered .However
(39.28%) of respondents indicated the nature of inventory system is manual .example calendar
file, scheduled, supplier list the company wasused manual system allows the small business
owner to manage inventory with very little investment in system or training. It implies that
automated system technology which optimizes sales in every retail environment where it is
applied.

32
Table 5.5 response of respondent about cost associated with inventory
C a t e g o r y N o r e s p o n d e n t P e r c e n t a g e
stock out cost 1 0 3 5 . 7 1 %
high order/set up cost 1 3 4 6 . 4 2 %
high stock cost 5 1 7 . 8 5 %
T o t a l 2 8 1 0 0 %
Source: own survey 2021
The above table 4.3 indicates that the majority respondents response that is high order/set up
cost with the percentage of (46.42%), However (35.71%) of respondents indicated stock out cost
a loss of good will profit or loss or incur back order cost on delay in customer service. And the
other is away a cost associated with inventory is high stock cost with the percentage of (17.85%)
include the cost of the storage facility in the form of rent or depreciation, taxes, utilities, and
facility personnel in the company. It implies that this cost directly with the number of order
placed and not at all weigh the site of the order. The order cost included making analyzing,
material inspecting, material follow up order and doing the processing necessary to complete the
transaction.

4.2 Open ended question analysis

33
According to the open ended question respondents feel that the satisfaction of user departments
based in the right quantity, in the right quality, at the right time and at the right place are medium
satisfaction in the company
There are many overall of inventory management practice, some of them from the respondent
replies one of the most faced problem of inventory management practice are lack of qualified
professional worker and backwardness of the use of technological advancement for inventory
management system.
In addition problems of supplier relationship and customer satisfaction to the problem of
communication the customer and supplier raise misunderstanding in the term of order
requirement and specification of their need. Those are followed the loose of customers. other
source of problems budget constraint ,transport problem ,lack of material handling equipment
and also the company rules ,polices ,and principle of the organization affect inventory
management practice.

34
 CHAPTER FIVE
5. Summary, Conclusions and Recommendation
5.1 Summary of major finding
The main objective of the study was to assessment of inventory management practice in Was
food complex company. The study had been used both primary and secondary data in order to
come up with the study with better result. Regarding primary data questionnaire used to gain
with reliable evidence about the problem from concerned individual in this case structured
questionnaire were collected to the proposed sample department while secondary data was
collected from financial statement at the company.

From the analysis the followings are the major findings:-

 The majority of the respondents are males and also they are in age range of 20-29. With
regard to their educational status majority of the respondents are degree holders.
 From the finding the majority of respondents feel that the organization use inventory
control system and for the question which type of system they respond the fixed periodic
order inventory management technique at Wasfood complex company.
 From the finding respondent feel that there is a factor which affects inventory system
(80%) and (36%) of respondents they feel there is a finance factor of the inventory
system.
 The finding show that the total percentage of respondents analyzed for store system,
shortage of and in appropriate storage place answered for enough and appropriate storage
area.
 The majority respondents responded challenge of inventory management practice one of
the most problem are lack of use of technology advancement of inventory management
system.
 The majority of respondent show that customer delivery is the best way management
inventory this indicate that the company uses the best management inventory system.
 The majorities of the respondents said that the company used recycling production
process spoilage and scrap.
 From the finding the major respondents agree that the company reordered at a medium inventory
level of stock for which the market highly demanded.
 Regarding to inventory codification system of the company (100%) of the proposed employees
responded as the company use codify item and the company used alphabetical codification item.

35
5.2 Conclusion
This study has been conducted on the company Was food complex company. The purpose `of
this study has been assessment of inventory management practice.
The study has been concluded the research major finding as follows
 From the study the organization is use inventory control system, which fixed periodic
order quantity in order to minimize the total inventory holding and ordering cost.
 As the studies indicate that finance is the factor that affects inventory management
system hence, this may be the cause to reduce productivity power of the company.
 The company use technology based inventory control system for effective
implementation of inventory management practice.
 The company uses different techniques to control inventory will betage during the
recycling production process that may occur due to scrap, spoilage products and bad storage as
well as other different reasons.
 The company reordered at a medium inventory level which state the level of inventory
should not be zero or stock out, because if the stock is zero the risk of stopping the production
may happen, which is difficult in the operation of the company and when there is medium
inventory order. There is high caring cost and defective row material in the store.
 Based on the major finding codification process have direct impact on the existing
classification of inventory affect the company operational activity classification of item based on
similar nature of inventory, which requires responsible personnel and consultation with purchase
and engendering department. Alphabetical codification system is eliminates the duplication of
item in the store achieve tight physical Control of inventory.
 Based on the major finding the availability of storage area is enough for all
inventory .from this data conclude that planed and organized store system is basic ground serve
consistent service for manufacturing division and economic store operation. The company has
used excess inventory in the store and there for the company can maintain its customer demand.
The company has enough and appropriate storage areas for each material in which the company
holds its inventory and the objective of the store room is to reduce loss and deterioration but, in
the excessive inventory enhance the charring cost of the company.
 The company used the technology of automated inventory management system because it
providing real-time information that increases the ability to track and process shipping
containers, parts in warehouses, items on shelves and a whole lot more. This will lead to
effective customer service and firm can expect sales to increase.

36
5.3 Recommendation
The following recommendations are provided for the organization which could use to enhance
inventory management practice of Wasfood complex company.

The researcher recommends the company its better if it used fixed periodic inventory control
system as the respondent feel fixed periodic inventory control system is the best in order to
minimize the company holding and ordering cost. Fixed periodic inventory system wasused in
the company and it helps the management and financial aspects of the company because it
reduces ordering cost of the company.
The finding indicates that financial factor wasthe major effect for inventory management practice
in the organization so the company needs to manage its financial asset appropriately and when
the company prepares financial budget it should be considering the inventory management
practice in mind.
The company better to implement automated system for inventory control and order processing
system and also inventory department should be facilitating all essential material handling
equipment
Storage area is the starting point and a great aspect of inventory control task that management
should give attention as a store is often equated with money and as money is locked up in store.
Appropriate store plays a vital role in the operation of company performance since it reduces
cost associated with inventory.
The company should use recycling production process for spoilage and scrap products to
improve inventory production system rather than discarded it.
The company should reorder inventory at the medium inventory level to facilitate the operation,
reducing carrying cost and eliminate idle time due to shortage of material. It is better to recycle
the production process scrap and spoilage product to increase production capacity and reduce
unnecessary cost.

37
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Stepheson .J ,19985 material management ,inventory control and logistics, 2nd ed.

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 APPENDIX
BSTL COLLEGE

DEPARTMENT OF MANAGEMENT
Questionnaire designed to collect data regarding assessment of inventory management practice at
Was food complex company. This questionnaire is prepared by third year student of Will be
University on the assessment of inventory management practice in Was food complex for writing
a paper for a partial fulfillment of the award of bachelor degree in management. So you are
kindly request to give accurate and relevant information for the success of this study .Your
answer was highly confidential, thank you in advance for completion in answering the question
by devoting and sharing your valuable time and idea.
Note: - A tick mark (x) for closed question and give clear description for open-ended question.
PART ONE: DEMOGRAPHIC CHARACTER OF THE RESPOND

1 .Age □ 20-29 □ 30-39 □ 4o-49 □ 50-59

□above 60

2. Sex □ Male □ Female

3. Level of education □ 10 completed□ level 1

□Level 2 □ Diploma □ Degree □Above

4. Service year in the company

□1-5 □ 6-10 □ 11-15 □ 16-20 □above 20

PART TWO: Question designed to assessment of inventory management practices

5. Does the organization use inventory control mechanism?

Yes □ No □

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6. If your answer is yes for question number 5, which types inventory control mechanism in your
organization?

□ ABC □two bin method □three bin method

□Fixed periodic ordering □just in time

□Fixed order quantity others ____________________

7. What way is best to manage inventory in your company?

□Inventory control personnel □ customer delivery

□Product turnaround □ tracking system

If any others specify ____________

8. Do you think that there is a factor which affects inventory management system?

Yes □NO □
9. If your answer is yes for question number 8, which factors more affecting inventory
management system?

□ Finance □ lead time □ product type

□Supplier

10. What kind of inventory does your company hold?

□Raw material □ finished goods

□Working process

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 □Supplies □ all

If any others specify

______________________________________________________________________________
_______________________________________________
11. Does the company have spoilage product?

□Yes □ No

12. If yes for question number 11, what is the mechanism to remove the spoilage?

□by discarded □ by recycle production □ by selling at lower price

Process

13. Company in which department more focus to control and regulate inventory system
performance

□Production department □ selling department

□Purchasing department □ loges tic department
Others, please specify ___________________________________________
14. At which inventory level does the company reordered?

□At minimum inventory level □At medium inventory level

□At zero inventories level □At maximum level

15. What result from using inventory management in your company?

□Employee feel empowered □ warehouse layout become optimized

lower cost

Others, please specify ___________________________________________

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16 .Does the company use coding system in the store?

Yes □ No □
17. If yes for question number 16, which codification system being used?

Alphabetical Codification □ Numerical Codification □

Alpha Numerical Codification □

Others, please specify ___________________________________________

18. Do you maintain enough & appropriate storage is for each inventory?

□Yes □ No

19. What kind of storage system the company used?

Random Access □ Open Store □ Close Store □

Both Closed and Open Store System □

20. Does the location of the store is suitable for users department?

□Yes □ No

21. What type of inventory management technology the company using?

□manual system □ automated system

if any others specify...................................................

22. What are the costs associated with inventory?

□High purchasing cost □ high order/set up cost

□High stock cost
if any others specify ____________

23. If you have additional comment or suggestion on the overall inventory management practice of the company please
specify._________________________
________________________________________________________________________________________________________
_______________________________________________________________________________________________________

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