THE INFLUENCE OF INVENTORY MANAGEMENT PRACTICES ON ORGANIZATIONAL FINANCIAL PERFOMANCE: CASE STUDY: NATIONAL MICROFINANCE BANK HEADQUARTERS DAR ES SALAAM

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ABSTRACT

A large majority of organizations worldwide commit large amounts of funds to inventory management which constitutes most significant part of their current assets. The organizations strive, through their departments of - purchasing, production, sales and finance, to manage inventories efficiently and effectively so as to avoid unnecessary tying of capital. The aim of inventory management is to minimize costs of ordering, carrying and not carrying sufficient inventory. Poor inventory effects include - remarkable differences between stock records and physical stock, inadequate records and recording, availability of obsolete and obsolescence stores, greater complaints from customers due to unfulfilled orders, disorganized stores, damaged stocks and loss of financial resources. This study assessed the influence of Inventory Management Practices on Organizational Financial at the National Microfinance Bank Headquarters Dar es Salaam.

The study conducted a survey of the National Microfinance Bank at the NMB Headquarters. The questionnaire targeted a selected sample of the NMB staff. Pursuant to that, the study strived to answer three questions – i) What are the factors that affect inventory management practices in organization?; ii) What is the effect of inventory management practices on return on equity?; and iii) What is the effect of inventory management practices on return on sales?

The study found out that, among crucial factors affecting inventory management practices in NMB were - skills and knowledge among staff; involvement of management in procurement planning; and existence of procurement policies which are adhered to by staff in the implementation of inventory management processes. The study also revealed corresponding growth in sales and profits in 2013 which resulted in constant growth of business with big value generated by NMB through its ROE and ROS. The results have led to shareholders earning TZS 34 billion in form of dividends while GoT received TZS 79.6 billion as income taxes, PAYE, SDL etc; NMB paid staff salaries and emoluments at TZS 99.7 billion; and spent TZS 1.05 billion in sponsorships, Public Relations donations etc. to other stakeholders and the public.


TABLE OF CONTENTS

ABSTRACT
TABLE OF CONTENTS
LIST OF TABLES
LIST OF FIGURES

CHAPTER ONE
OVERVIEW OF THE STUDY
1.0       Introduction
1.1       Background Information on the Problem
1.2       Statement of the Problem
1.3       Research Questions
1.3.1    General question
1.3.2    Specific questions
1.4       Research Objectives
1.4.1    General objectives
1.4.2    Specific objectives
1.5       Significance of the study
1.5.1    Respondent Organizational benefits
1.5.2    Academic Areas benefits
1.5.3    Government/Policy Makers benefits
1.6       Scope of the Study

CHAPTER TWO
LITERATURE REVIEW
2.0       Overview
2.1       Theoretical literature review
2.1.1    Conceptual definition
2.1.2    Inventory Management Practices
2.1.4    Relationship between Inventory Management practices and Financial Performance
2.2       Empirical studies

CHAPTER THREE
RESEARCH METHODOLOGY
3.1       Overview
3.2       Research Design
3.3       Area of the Study
3.4.      Sample size and Sampling techniques
3.5       Data types and collection techniques
3.6.      Data collection methods
3.6.1    Questionnaire method
3.6.2    Documentary sources
3.7       Validity and Reliability
3.8       DATA ANALYSIS
3.9       DATA PRESENTATION

CHAPTER FOUR
FINDINGS, ANALYSIS AND DISCUSSION
4.0       Introduction
4.1       Profile of the study respondents
4.2       Factors Affecting Inventory Management Practices at NMB
4.3       Effects of Inventory Management Practices on NMB’s Financial Performance
4.5       Effect of Inventory Management Practices on ROS

CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1       Summary of Findings
5.2       Conclusions
5.2.1    Factors that Affect Inventory Management Practices in Organization
5.2.2    Effect of Inventory Management Practices on Return on Equity
5.2.3    Effect of Inventory Management Practices on Return on Sales
5.3.1    On Factors Affecting Inventory Management Practices
5.3.2    Effect of Inventory Management Practices on ROE
5.3.3    Effect of Inventory Management Practices on Return on Sales
REFERENCES


CHAPTER ONE


OVERVIEW OF THE STUDY

1.0         Introduction

This chapter presents an introduction to the Influence of Inventory Management Practices on Organizational Financial Performance: The Case of The National Microfinance Bank Headquarters Dar es Salaam. It also casts some light on the financial performance of NMB. It provides background information to the NMB, its organization, structure and sheds light on the problem addressed by the study. The chapter goes on to present objectives of the study, the research questions that the study is answering together with its significance, scope, limitations, delimitations and it also shows how the study was organized.


1.1         Background Information on the Problem

Inventory is one of the real assets. It is the lifeblood of any business by ensuring that organizations keep customer by improving responsiveness to orders made by customers and improved in-house services to other employees. Therefore, organizations need to be keen when managing inventories to ensure that its doesn’t suffer by tying up working capital or fail to retain customers due to shortage of products or failure to provide a required service. But how many companies balance between the two objectives?


The current competition in Business World has lead to the organization to be very keen in managing their inventories and the means associated with inventory management practices. The inventories generally comprise of finished goods, semi finished goods and raw materials that together need effectiveness and efficiency in managing which later will guarantee the profitability in the organization (Jessop, 1999).


Magad and Amos (1989) assert that the primary objective of inventory management is to improve customer service. This is done through protection against stock out due to  demand  variability  in  the  market  place.   The  inventories  generally  are  very.....


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