inventory management and sustainability in coca-cola
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INVENTORY MANAGEMENT AND SUSTAINABILITY IN COCA-COLA
MANUFACTURING COMPANY IN MOGADISHU, SOMALIA
BY:
KHADRA MOHAMUD HUSSEIN
MBA/3 9699/ 131 /D F
A THESIS PRESENTED TO THE COLLEGE OF HIGHER DEGREES AND RESEARCH
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AW ARD OF A
DEGREE MASTER OF BUSINESS ADMINISTRATION IN BANKING
& FINANCE OF KAMPALA INTERNATIONAL UNIVERSITY
KAMPLA, UGANDA
NOVEMBER, 2014
DECLARATION
"This thesis is my original work and has not been presented for a degree or any other
academic award in any university or institution of learning
Name of Candidate: Khadra Mohamud Hussein
Signature: _ ___ ~ _ __,_ ______ _
Date: - ----=l8'-'-( __,_l lj_;),.O_ l 'j_,___ _ _
u
I
APPROVAL
"I confirm that the work reported in this thesis was carried out by the under my
supervision".
Name of Supervi
Signature:. _ _ 4---Jll-'-'-t--~---c::;__
Date: _ _ _J__ -1-::=.l-.!1.___J_ __ _J_.:,2::_::::s;~
ii
\
DEDICATION
I dedicate this research work to my beloved parents, siblings, fiancee, friends specially
dear uncle Mohamed Hussein who have supported me financially and imparts in me moral
values in my studies.
iii
ACKNOWLEDGEMENT
In the name of Allah, the most merciful the most gracious, the researcher thanks to Allah
the way has guided to him and given the ability, the knowledge and the wealth to write
this thesis.
I would like to acknowledge the varied assistance of the following persons in the course of
my research. 0
To the College of Higher Degrees and Research, Kampala International University, for
giving me all the skills and knowledge that has enabled me to do this research.
To the Deputy Vice Chancellor of College of Higher Degrees and Research, Kampala
International University Dr. Novembrieta R. Sumi! and Viva voce panel members who in
their various capacities made this studies possible.
To my research supervisor Dr. Ssendagi Mohamed for giving him all the necessary
comments that have made this work look the way it is now.
To the Coca-Cola parts, Managers and Customers who participated in this study. Your
generosity in providing relevant information for this study has made it as it is now.
To my beloved mother Zeinab Ali Farah, father Mohamud Hussein, siblings, fiancee who
have helped to shape me morally and spiritually most
•
Lastly, to individuals who contributed in one way or another towered the success of this
work.
"Thank you and Allah bless"
iv
TABLE OF CONTENTS Declaration ............................................................................................................................................ i
Approval .................................................................................................................................... ii
Dedication ............................................................................................................................... iii
Acknowledgement. ................................................................................................................ iv
Table of Contents .................................................................................................................... v
List of Tables .......................................................................................................................... .
Acronyms ................................................................................................................................ .
Abstract. ................................................................................................................................. vi
CHAPTER ONE .................................................................................................................................... !
INTRODUCTION ....................................................................................................................... !
I. I Background of the Study ......................................................................................................... I
I. 1.1 Historical Perspectives .................................................................................................... !
I. l .2Theoretical Perspectives ......................................................................................... .4
l. I .3 Conceptual Perspectives ........................................................................................ .4
l. l .4 Contextual Perspectives .......................................................................................... 6
1.2 Statement of the Problem ...................................................................................................... 7
1.3 Purpose of the study ........................................................................................................ .
1.4 Research Objectives .............................................................................................................. 8
1.4.1 General ................................................................................................................... 8
1.4.2 Specific .................................................................................................................. 8
1.5 Research Questions ............................................................................................................... 9
1.6 Null Hypothesis ..................................................................................................................... 9
1.6 Scope .................................................................................................................................... 7
1.6.1 Geographical Scope ................................................................................................ 7
1.6.2 Theoretical Scope ................................................................................................... 7
1.6.3 Content Scopc ......................................................................................................... 7
1.6.4 Time Scope .......................................................................................................... 10
1.7 Significant of the Study ................................................................................................................. 10
V
V
CHAPTER TWO ...................................................................................................................... 12
LITERATURE REVIEW .......................................................................................................... 12
2.0 Introduction ......................................................................................................................... 12
2. I Theoretical Review .............................................................................................................. 12
2.2 Conceptual Framework ......................................................................................................... I 5
2.3 Conceptual Review ....................................................................................................................... 16
2.4 Related Studies .................................................................................................................... 38
CHAPTER THREE .................................................................................................................. .43
3.0 Introduction ................................................................................................................................... .43
3. I Research Design .................................................................................................................. .43
3.2Research Population .............................................................................................................. .43
3.3 Sample Size ....................................................................................................................... .44
3.4 Sampling Procedures .......................................................................................................... .44
3.5 Research Instruments .......................................................................................................... .44
3.6 Validity and Reliability of the Instruments ............................................................................ .45
3. 7 Data Gathering Procedures ................................................................................................... 45
3.7.1 Before the administration of the questionnaires ...................................................... .45
3.7.2 During the administration of the questionnaires ...................................................... .46
3.7.3 After the administration of the questionnaires ......................................................... .46
3.8 Data Analysis ..................................................................................................................... .46
3.9 Ethical Considerations .......................................................................................................... .47
3. IO Limitations of the Study .................................................................................................... .48
CHAPTER FOUR ..................................................................................................................... 50
PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA ....................................... 50 V
4.0 Introduction ........................................................................................................................ 50
4. I Demographic prolik ofRespondents .................................................................................... 51
4.2 Level of Level of inventory management in Coca-Cola Company, Mogadishu, Somalia ............ 53
4.3 Level of Sustainability of Coca-Cola Company in Mogadishu Somalia ......................................... 60
vi
4.4 Relationship0
between Inventory Management and Sustainability of Coca-Cola
Company, Mogadishu Somalia .............................................................................................. 66
CHAPTER FIVE ....................................................................................................................... 69
FINDINGS, CONCLUSIONS AND RECOMMENDATIONS ..................................................... 69
5.0 lntroduction ......................................................................................................................... 69
5. I Findings .............................................................................................................................. 69
5. l. l Level of inventory management in Coca-Cola Company, Mogadishu, Somalia ........... 70
5.1.2 Level of Sustainability of Coca-Cola Company in Mogadishu Somalia .................... 70
5.1.3 Relationship between Inventory Management and Sustainability of Coca-Cola
Company, Mogadishu Somalia ................................................................................................ 72
5.2 Conclusions ......................................................................................................................... 72
5.3 Recommendations ................................................................................................................ 74
References ................................................................................................................................ 76
Appendices ............................................................................................................................... 58
Appendix IA: Transmittal Letter ................................................................................................. 79
Appendix I B: Tra,,smittal letter for the respondents .................................................................... 80
Appendix II: Clearance from Ethics Committee ........................................................................... 81
Appendix !VB: Questionnaire To Determine inventory management in Coca-Cola Company,
Mogadishu, Somalia ............................................................................................................................ 83
Appendix IVC:Questionnaire To Determine Sustainability of Coca-Cola Company in Mogadishu
Somalia .................................................................................................................................... 85
Appendix VIII: Researcher's Curriculum Vitae ................................................................................... 65
vii
LIST OF TABLES
Table 4.1: Demographic Characteristics of Respondents ...................................................... .37
Table 4.2: The Level of social economic development of women in Mogadishu, Somalia
··············································································· ............................... .40
Table 4.3 Level of social economic development of women in Mogadishu, Somalia .......... .43
Table 4.4: Correlation Analysis between Micro finance Institutions and socio-economic development of women in Mogadishu, Somalia ................................................. .46
Table 4.5: Regression Analysis between Micro finance Institutions and socio-economic development of women in Mogadishu, Somalia ........................................ .47
viii
ABSTRACT
The topic of the study was "Inventory Management and Sustainability of Manufacturing
Companies in Mogadishu, Somalia: A Case Study of Coca -Cola Company." The purpose
of the study was to investigate whether there is a relationship between inventory
management and sustainability of in coca-cola manufacturing companies in Mogadishu. It
was guided by three objectives. These are to examine the level of inventory management in
Coca-Cola Company, Mogadishu, Somalia, to examine the level of sustainability of Coca
Cola Company in Mogadishu and to determine if there is a significant relationship between
inventory management and sustainability of Coca-Cola Company, in Mogadishu. The study
was guided by Geoff Buxey theory of reconstructing management (2006). This study
employed the descriptive survey design specifically the descriptive comparative and
descriptive correlational strategies. A sample I 09 respondents was selected by the purposive
sampling technique to select managers' Simple random sampling technique for other
respondents. The researcher found out that the level of inventory management was (mean =
2.71) interpreted as high. The researcher also found out the level of sustainability of Coca
Cola Company was high (mean= 2.53) interpreted as high. in terms of relationship between
inventory management and sustainability, the researcher found out that there is a positive
significant relationship between inventory management and sustainability with (r = 0.842).
ix
1.0 Introduction
CHAPTER ONE
INTRODUCTION
This chapter contains the background, problem statement, purpose and objectives of
the study, research questions, hypotheses, scope and significance of the study.
1.1 Background of the study
I. 1. 1 Historical perspective
In traditional settings, inventories of raw materials, work-in-progress components
and finished goods were kept as a barrier against the possibility of running out of
needed items. However, large barrier inventories consume important resources and
generate hidden costs, as a result, many companies have changed their approach to
production and inventory management. Since at least the early 1980s, inventory
management leading to inventory reduction has become the primary target, as is
often the case in just-in-time (JIT) systems, where raw materials and parts are
purchased or produced just in time to be used at each stage of the production
process. This approach to inventory management brings considerable cost savings
from reduced inventory levels. As a result, inventories have been decreasing in
many firms (Chen and eta!, 2005).
Since the mid-l 980s the strategic benefits of the inventory management and
production planning and scheduling have become evident. The business press has
highlightec.! the success of Japanese, European, North American firms in achieving
of unmatched effectiveness and efficiency in manufacturing and distribution. In
recent years, many of the firms have raised the bar', yet again by coordinating with
1
other firms in their supply chains. For instance, instead of responding to unknown
and changeable demand, they share information so that the changeability of the
demand they observe is significantly lower (Silver and et al, 1998).
Most companies worldwide supply their products to a number of distributors and a
significant inventory that maintains 100 percent service level of supply to all
customers is emphasised. Currently, product forecasts presented by customers are
used to calculate monthly demand rate and the monthly cover of the products.
Products are then ordered according to the lead time of delivery and the monthly
cover obtained. This system is supposed to ensure that monthly cover is always
greater than the sum of on order stock so as to achieve a 100 percent service level of
supply to the customers" (Salami, 2000). Some of the merchandising companies
have inventory management to control and manage to their inventory because
inventory is the backbone of business. In this study the researcher focus on
merchandising companies only those operate in Mogadishu, Somalia, the
researcher made selection from Coca-Cola Company. All companies have
inventory management but some of them are not so good, while others have very
good inventory management of their business operations, in accordance with their
control system. (Aliet al 2012).
Inventory management deals with ordering and stock keeping of goods for sale,
production or distribution. In many cases, inventories are kept in many
environments, for instance, in the mining-industry of minerals, in factories of raw
m.aterials, parts, work in progress and finished products, and in warehouses, depots
and wholesale dealers of goods for distribution, and at shops and by retailers of
goods for sale. The main reasons why inventories are held are that it is
2
uneconomical to produce, to handle or to transport units one by one and that
consumers often do not accept a delay in the delivery of goods or only want to buy
goods that are on display or available in a shop, supermarket or department store
(Blanc, 2011 ).
In Africainventory management has become greatly developed to meet the
increasing challenges in most corporate entities and this is in response to the fact that
inventory is an asset of separate feature. The inventory management situation of the
Nigeria Bottling Company, Ilorin Plant has been made known using the EOQ
model. It was also seen that the Company through a well-built policy is able to
handle its idle stock without incurring unnecessary costs. A basis for inventory
planning and control was also provided in this study. Though, looking through the
inventory policy ofthc Company, it can be said to be dynamic to some extent but the
analysis and findings have revealed the need to remedy some situations in the
Company's management of inventory (Adeyemi&Salami ,2010).
1.1.2 Theoretical perspective
This study is based on reconstructing inventory management theory developed by
Geoff Buxey (2006). The theory states that inventory management is a complex
problem area owing to the diversity of real life-time situations in business entities.
Successful inventory management requires sophisticated methods to cope with the
continuously changing environment. However, it is noted here that the practical
implementation of inventory models lags behind the development of inventory
modelling. The assumption of this theory is that it is also necessary that some
quantity should be stored so that the manufacturer does not get out of stock. And
3
such being the nature of an inventory, it follows that inventory management must
deal with the logic which should underline this procedure for future production. The
theory is called reconstructing Inventory Management whereby the biasedangle of
established models neglects the impact of various ordering policies at the supplier's
end, where the promotion of cost-effective and responsive warehouse and transport
operations is paramount. As a rule, both areas benefit from stable resources
planning, based on cyclic orders and delivery schedules along fixed vehicle routes.
This theory developed is a merger of two different products combining the
functionalities of normal inventory system and 'point of sales' (POS) system that
later on affect the sustainability of aCompany.
1.1.3 Conceptual perspective
Inventory management is pivotal in effective and efficient organizational
performance. It is also vital in the control of materials and goods that have to be held
(or stored) for later use in the case of production or later exchange activities in the
case of services. The principal goal of inventory management involves having to
balance the conl1icting economics of not wanting to hold too much stock, thereby
having to tie up capital so as to guide against the incurring of costs such as storage,
spoilage, pilferage and obsolescence and, the desire to make items or goods
available when and where required ( quality and quantity wise) so as to avert the cost
of not meeting such requirements (Adeyemi& Salami, 2010).
According to Kotler (2002), inventory management refers to all of the activities
involved in developing and managing the inventory levels of raw materials,
semi-finished materials (work in-progress) and finished good so that adequate
4
supplies are available and the costs of over or under stocks are low.It is a critical
component of operating performance, especially among retailers and manufacturers.
For example, retailers use recorded inventory quantities to forecast customers'
demands for goods, which in turn results in the issuance of purchase orders to
replenish store shelves.
The concept of inventory management on production volume adopted in this study
is derived from Adeyemi& Salami (2010). Accordingly, inventory management is
pivotal in effective and efficient organization. It is also vital in the control of
materials and goods that have to be held ( or stored) for later use in the case of
production or later exchange activities in the case of services. The principal goal of
inventory management involves having to balance the conflicting economics of not
wanting to hold too much stock. Thereby having to tie up capital so as to guide
against the incurring of costs such as storage, spoilage, pilferage and obsolescence
and, the desire to make items or goods available when and where required (quality
and quantity wise) so as to avert the cost of not meeting such Requirement.
According to Dan (20 l l ), sustainability is an initiative increasingly essential to the
core business modd of many companies. There are many diverse perspectives on
sustainability. Some companies consider it to be the burden of more government
regulations, new compliance requirements and higher manufacturing costs.
However, industry leading companies recognize that sustainability can actually be a
business driver for next-generation products, more efficient operations and
increased profitability. Many major manufacturing organizations now include the
topic of sustainability on their websites, in their marketing literature and investor
relation information - recognizing its value to customers, consumers and the public
5
at large.The high-lc\·cl commitment to sustainability is evident, but the success of
these programs will be driven by the implementation details. A challenge for many
manufacturers is determining where to focus sustainability efforts given global
operations with varying geographical expectations.
1.1.4 Contextual pcrspcdivc
Somalia has extended its econonuc engagement with foreign governments and
investors within the region and beyond. It is engaged in negotiations with Ethiopia
to finalize the first official bilateral strategic cooperation agreement. Because
Somalia is open for business as well as its well-established peace and stability as
well as its economic potentials that remain untapped thence very lucrative for
investment both foreign and Iocal.Djiboutian have invested heavily in Somalia's
economy, including about$ I 5 million in a Coca Cola factory which opened in 2012.
Somalia has used diplo111,1cy to help explore recent efforts to attract FD! from
Turkey, Malaysia. the UAE, Kenya, Egypt and China into Somalia's key sectors
such as livestock and fisheries. According to Trade and foreign investment minister,
Somalia is signalling to all potential investors that it is "open for business," having
progressed from a post-conflict situation to a state of political stability and
sustainable economic development. Underpinned by this transformation, Somalia is
now firmly in a period where it is able to encourage foreign investment (SDA,
2011 ). The Coca-Cola Company is the world's largest beverage Company,
refreshing consumers with more than 500 sparkling and still brands. Led Coca-Cola,
the world's most valuable brands including Diet coke, Fanta, Sprite, Coca-Cola
Zero, among others.
6
1.2 Problem Statement
Sustainability in any organisation is vital for the continual running of the business.
Despite this, mismanagement of items and low profit margin has become the order
of the day in most manufacturing companies. The mismanagement and other
adverse effects arc linked to lack of effective control of stock of materials for
production and operational activities. This poses a serious problem in terms of
sustainability, service delivery, low profit margin and inability to meet up with
customer demands. While there are many variations on sustainability programs of
manufacturing companics,Coca Cola Company inclusive, the core components of
an effective sustainability may include among others inventory and performance
management as it has been identified that companies have not identified stock
control as very crucial which has led to such practices as theft, pilferages, sho1iages,
wastages, inappropriate accounting and inadequate record keeping and other loses,
as they cannot account for the usage and management of specifically raw materials
and others like supplies, andproduction equipment. So Coca-ColaCompany as a
newly established Company (2012) in Mogadishumay face a great variety of other
inventory management problems that may negatively affectits sustainability in the
country. This study \\ill therefore analyse the effect of inventory management on
sustainability of mlmufacturing companies in Mogadishu, focusing on coca-cola
bottling Companyin Mogadishu.
1.3 Purpose of !he study
The purpose of the study was to investigate whether there is a relationship between
inventory management and sustainability of incoca-cola manufacturing companies
in Mogadishu.
7
1.4 Research Objl·ctivcs
1.4.1 General
This study im-cstigated the relationship between inventory management and
sustainability of in manufacturing companies in Mogadishu.
1.4.2Specific Objectives
1) To examine the level
2) of inventory management in Coca-ColaCompany, Mogadishu, Somalia.
3) To examine the level of sustainability of Coca-Cola Company in Mogadishu
4) To determine if there is a significant relationship between inventory
management and sustainability of Coca-ColaCompany, in Mogadishu.
1.5 Research Questions
1. What is the level of inventory management 111 Coca-Cola Company,
Mogadishu, Somalia?
2. What is the level of sustainability of Coca-Cola Company in Mogadishu?
3. Is there a significant relationship between inventory management and
sustainability of Coca-Cola Company, in Mogadishu?
1.6 Null Hypothesis
There is no signi licant relationship between the extent of inventory management and
sustainability of a Coca-Cola Company in Mogadishu, Somalia.
8
1.7 Scope of the study
1.7.lGeographical scope
The study was conducted within the capital city of Somalia, Mogadishu. Mogadishu
provided an optimal focus for this study because it is where most of the service in the
country. u
1.7.2Theorctical Scope
The study was underpinned by Geoff Buxey theory of reconstructing management
(2006).
1.7.3 Content scope
This study investigated the relationship between inventory management and
sustainability of in manufacturing companies in Mogadishu. It also examined the
level of inventory management in Coca-Cola Company, Mogadishu, Somalia, and
the level of sustainability of Coca-Cola Company in Mogadishu.
1.7.4Time scope
The time bound of this study was April 2013 up to April, 2014
1.8 Significance of the study
It will help the organization to develop and adapt to proper techniques of inventory
control. It will also enable the organization to understand the weaknesses imbedded
in inventory control that has always contributed to its poor performance.
9
This study will help the organization to determine rates of consumption and when
more stock is be ordered bv placing of orders.
This study could be helpful for all Manufacturing industry as findings and
recommendations provided in the conclusion of this research, they can know the
level effect of im·cntory management on production volume, further it can take
corrective actions.
The study also will help managers to !mow how inventory management and control
are managed and how they influence sustainability of an organisation.
Like any other research. the findings will be used as a reference as far as further
studies are concerned and 11ash off further research in inventory management and
sustainability of manufacturing companies.
The researcher's knowledge, skills and understanding will be improved through the
interaction with the respondents. And finally, it will enable the researcher to fulfil
the partial requirements 1,,r the award of the masters in Business administration by
Kampala International University.
10
CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
This chapter covers all reviews of literature related to the study. It is from studies
and observations made by other scholars/ researchers with more concrete
understanding of the research variables. Inventory control can significantly boost
customer service level.s while operating as a cornerstone of an effective
organizational performance which results into the sustainability of an organisation.
The related literature reviewed below is therefore in line with the research
objectives.
2.1 Theoretical review
Geoff Buxeys theory of reconstructing inventory management (2006) is focused on
in this research. He asserts the promotion of cost-effective and responsive
warehouse and transport operations is paramount. As a rule, both areas benefit from
stable resources planning, based on cyclic orders and delivery schedules along fixed
vehicle routes. This theory developed is a merger of two different products
combining the functionalities of normal inventory system and 'point of sales' (POS)
system. It can be considered as an intelligent 'point of sales' that peeps into the
inventory to know what to be sold and at what rate from time to time. This is
achieved through the use of a common database which acts as sales and inventory
tracker and at the same time a reservoir from which inferences can be drawn for
making critical reorder/sales decisions Again, the new system is also enriched with
11
the capability of sending alerts via SMS to stock controllers and administrators even
when they are far away from their offices. This capability makes it possible for the
administrator to have information about what happens at various branches of his
business outfits without visiting the branches. Finally, the theory gives real-time
information concerning stock level without manually counting the items on stock,
unlike the other inventory models that allow some critical transactions to be done off
line, only to be reconciled on a later day. As an online line system, it is possible to
have accurate and reliable information at all times for more effective stock
management. It can be considered as an intelligent 'point of sales' that peeps into the
inventory to know what to be sold and at what rate from time to time. This is
achieved through the use of a common database which acts as sales and inventory
tracker and at the same time a reservoir from which inferences can be drawn for
making critical reorder/sales decisions Again, the new system is also enriched with
the capability of sending alerts via SMS to stock controllers and administrators even
when they are far away from their offices. This capability makes it possible for the
administrator to have information about what happens at various branches of his
business outfits without visiting the branches. Finally, the theory gives real-time
information concerning stock level without manually counting the items on stock,
unlike the other inventory models that allow some critical transactions to be done off
line, only to be reconciled on a later day. As an online line system, it is possible to
have accurate and reliable information at all times for more effective stock
management.
Silver, (1981 ), notes that it is also necessary that some quantity should be stored so
that the retailer or manufacturer does not get out of stock. And such being the nature
of an inventory, it follows that inventory management must deal with the logic
12
which should underline this procedure. Apart from dealing with the logic. it also has
to deal with some costs that are associated with inventory which include ordering
costs (i.e. cost of replenishment and fresh orders), holding cost and stock out costs.
The discrepancy between theory and practice of inventory is partly caused by the
different goals of academics and practitioners. Much of the academic research is
aimed at rigorous analysis of underlying equations representing the inventory
problems and developing mathematically elegant decision models. This type of
theoretical work is most highly valued by the academic community. Therefore, there
is often less attention given to providing workable solutions to real problems. Most
of the time, the underlying mathematical equations will be made up of numerous
mathematical assumptions that make the models practically impossible to provide
any workable solution for real life problem (Zanakis, et al (1980).
13
2.2 Conceptnal frame work
A Conceptual framework showing the relationship between inventory management
and sustainability of coca-cola Company in Mogadishu Somalia
.Figure 1: Conceptual' Framework between Inventory Management and
Sustainability of Manufacturing Companies
INVENTORY MANAGEMENT
l Record keeping
Techniques used • EOQ • EDI
Costs of inventory
Performance measures
Key:
I
EOQ- economic order quant ity
EDI -Electronic data interchange
) ,~
Extraneous variables • Funds availability
• Technology updating
• Economic climate
• Government policy
• Skilled manpower
Source: Researcher (2014)
SUSTAINABILITY OF MANUFACTURING
COMPANIES
l ► Profitability
► Risk reduction
► Efficiency and accountability
A functional regression model derived from the conceptual frame work
Y=a +~1x1+ ~2X2
Where Y= Dependent variable
a =level of significance (0.05)
~= Beta
X1= Independent variables
14
The conceptual framework in the figure above shows that inventory management
have a direct effect on the sustainability of a manufacturing industry. The
independent variable directly affects the dependent variable which has been
conceptualised in terms of profitability, risk reduction, efficiency and accountability
which all results into effective performance in terms of quality and production.
However the relationship between the two variables can be revised and/or affected
depending on the funds availability, economic climate in the country, government
policies and skilled manpower as well as the level of technology used in updating
the system.
2.3 Conceptual review
2.3.1 Inventory Management
Inventories over the past years have been difficult to control and even up to day
through it's to some extent being brought down. This has always raised because they
are immovable and subject to decision made many persons including vendors and
customers. Joseph L. Cavinator (I 990). Over the past in the whole sale or retail
business or in productive facility, inventory was being recognized as boxes of parts
or as racks of closes. Material becomes inventory as its purchased and delivered to
the facility and placed in the store or holding area. Material represents a large part of
finished products cost 55% is the average in manufacturing organization. An
organization investment, in inventory can become excessive unless property
controlled. Mark A. Vonderembse and P. White (1998). According to Brain (2006)
both industry and government need to better understand and determine how to move
towards a sustainable future. Innovation plays a key role in moving manufacturing
industries towards sustainable production. Evolving sustainable manufacturing
15
initiatives - from traditional pollution control through cleaner production initiatives,
to a lifecycle view, to the establishment of closed-loop production - can be viewed
as facilitated by eco-innovation. Figure 5 provides a simple illustration of the
general conceptual relations between sustainable manufacturing and
eco-innovation. The steps in sustainable manufacturing are depicted in terms of their
primary association with respect to eco-innovation, i.e. with innovation targets on
the left and mechanisms at the bottom. The waves spreading towards the upper right
corner indicate the path dependencies of different sustainable manufacturing
concepts.
The stock control process focuses attention on factors related to time utility, supply
of quantity and quality materials used by the operations of the manufacturing
industry (Tosdal, 2006). Stock control procedures are those measures that are
adopted to determine how much stock an establishment can hold at a given time and
how they keep track ofit. This practice covers stock at every stage of the production
process, from purchases and delivery to using and reordering of items. This concept
revolves on the fact that stores, being a service oriented department, must provide
the entire organization with the right materials that are delivered and issued in the
right quantities and quality which must be available at the right time, right place and
at the right price (Levis, 2009). The objective of practicing inventory management is
to ensure that the conditions mentioned above are fulfilled by providing the
information necessary to take appropriate action at every stage of the production
process or operation. Stock control practice is a necessity if the manufacturing
industries are to offer a balanced assortment on the market; this means every item
held in the store should be controlled.
16
Keth et al. (1994) stated that inventory management and control helps managers to
check on their sustainable programs that keep them in business in future and stable
on the market. This is derived at through infonnation got and passed to the managers
and inform them on how much of a good to re-order, when to re-order the good, how
frequently orders should be placed and what the appropriate safety stock is, for
minimizing stockouts. Thus, the overall goal of inventory is to have what is needed,
and to minimize the number of times one is out of stock.
Drury (1996) defined inventory as a stock of goods that is maintained by a business
in anticipation of some future demand. This definition was also suppo1ied by
Schroeder (2000) who stressed that inventory management has an impact on all
business functions, particularly operations, marketing, accounting. and finance. He
established that there are three motives for holding inventories. which are
transaction. precautionary and speculative motives. The transaction motive occurs
when there is a need to hold stock to meet production and sales requirements. A firm
might also decide to hold additional amounts of stock to cover the possibility that it
may have under estimated its future production and sales requirements. This
represents a precautionary motive, which applies only when future demand is
uncertain. The speculative motive for holding inventory might entice a firm to
purchase a larger quantity of materials than normal in anticipation of making
abnormal profits. Advance purchase of raw materials in inflationary times is one
form of speculative behaviour.In traditional settings, inventories of raw materials,
work-in-progress components and finished goods were kept as a buffer against the
possibility of running out of needed items. However, large buffer inventories
consume valuable resources and generate hidden costs. Consequently, many
17
companies have changed their approach to production and inventory management
(Sahari, Tinggi, &Kadri, 2012).
According to (Rich 1991) the level of technology used in the development of the
inventory system is a · very crucial technology that interfaces with several
development tools. The technology has interface that is compatible with virtually all
Database Management System (DBMS). But the DBMS employed in this work is,
which is used to design back ends of the system (i.e data and knowledge base).
According to Dennis & Meredith (2000), identifying the correct kind of production
and inventory management (P &IM) system for a manufacturing firm can be a
difficult and complex task. Since the investment in a P&IM system is large and
remains fixed over a considerable length of time, the correct system choice is critical
to both a firm's short and long-term profitability.
According to Silver(l 998),the effectiveness of inventory management attempts to
answer three key questions on an item-by item basis are; how often should the
inventory status be determined, that is, what is the reviewinterval? When should a
replenishment order be placed and how large should the replenishment order be?
Many firms within the high technology capital equipment sector arc subject to a
rather unique set of challenges when it comes to materials management. Some
critical aspects of the situation that they face can include long procurement
lead-times for raw materials, short assembly lead-times, extreme volatility in
demand, and individually customized orders for products, and short product life
cycles. These factors make materials management rather difficult. Traditional
inventory control methods often do not take some of these critical aspects into
account (Abhyankar, 2000).
18
The Inventory Management function is accountable for tracking all assets, from
Mainframe based to Data Network based, that are connected to the data center or
data network. In each case, the Inventory Management Systems must be able to
classify the asset and its serial number, Associate the asset with its owner and
location, Relate the asset to its vendor, Track the maintenance level of the asset; and,
Provide the asset's Problem and Change history (Bronack, 2012).
Many food companies have been under pressure to streamline their supply chain,
minimize large inventories, and cut holding cost on inventory. In the past, inventory
management has focused on not running out of finished goods. This caused
manufacturers to stockpile large amounts of raw materials, work in process, and
finished goods. The extra finished goods would be to protect them from going out of
stock (Eckert, 2007).
While Ballou (2004 ), inventory are stockpiles of raw materials, supplies,
components, work-in-process, and finished goods that show at numerous points
throughout a firm's production and logistics channel. According to Pandey (1999),
inventory management is stock of the product a firm is manufacturing for sale and
the components that makes up a product. Firm hold inventory in a form of raw
material, work in progress, finished goods and supplies. These inventories facilitates
production and sales operation, shield against the risk of unpredictable changes in
usage and delivery time and take advantage of quality discount and price
dissatisfaction.
2.2 Techniques of inventory control
According to Zenz techniques of inventory control are manual system,
computerized system, ABC analysis, maximum and minimnm (Economic order
19
quantity) and Barcoding according to Lysons and Farrington 2006.
Manual system
According to Zenz(l 987), this is a Basic and sound system of inventory control
which is the assembling of pertinent data to provide economic ordering points and
ordering quantities. This is done with the help of an inventory ledger which ranges
from simple to complex form depending on the nature ofbusiness. Data in this form
include; Detailed identification of item ,List of suppliers ,List of purchase orders
,Monthly rate of usage for past several years , Delivery time, Minimum order
quantity, Bin balance available for issue to production, It's likely that manual
inventory technique will completely vanish.The major advantage associated with
this technique is that risks like computer viruses which distort the information in soft
copies and also harking in the system to gain access to confidential Company's
information is greatly eliminated.
Computerized system
Records management under a computer system is easier and accurate than manual
system. The computerized system uses code numbers which respond to specific
items. Each item in inve;1tory is loaded and any adjustment made to the items is
effected through use of items code number. Most computerized systems make an
inventory adjustment each time an order for a patiicular item is processed, for either
an internal requisition or an outside sale. When an item is ordered, the amount of
remaining them in inventory is adjusted accordingly. The adjustment is a decrease in
total inventory (Zenz, 1987). This technique has an advantage of ensuring that
orders made are quickly met and also reduces costs involved in too much paper work
and travel costs for delivery of order documents as opposed to the manual system.
20
ABC Analysis
According to Lysons and Farrington 2006, page 319, a household will buy many
items in the course of a year. The weekly shopping will include a number of basic
food items such as bread; milk, vegetables and so on.
These basic food items many accounts for the bulk of the annual expenditure in
shops. Because these items are so important in the household budget. It's wo11h
taking care to choose a shop that gives good value. The information about prices
changed elsewhere can be obtained from advertisements and visits to other super
markets. In ABC Analysis, these items are known as class A items. They merit close
to day control because of their budgetary importance.
Other items such as replacement rubber washers for water taps may be needed
occasionally. A pocket of washers costs between 30 and 50 pence spending hours
comparing prices of these at different suppliers doesn't make economic sense. The
possible saving is at most a few pence and a year or more may elapse before another
pocket is needed. Items like these that account for only a small portion of spending
arc known as class C items.
Class B is a set of items that is intermediate between class A and class B is a set of
items that is intermediate between class A and C, they should be regularly reviewed
but are not as closely controlled as class A items. This technique has an advantage of
catering for all levels of income earners as stocks are classified and also enables the
organization to under the priority items that need to be given first attention as they
are the heart of operations within an organization, also entails an understanding
within the organization on which items are to be handled with great care to avoid
losses and damages.
21
The Italian Statistian Vilfredo Pareto (1848-1923) discovered a common statistical
effect. About 20 percent of the population own 80 percent of the nation's wealth.
About 20 percent of employees cause 80 percent of problems. About 20 percent of
items account for 80 percent of firm's expenditure. The terms "Pareto" analysis and
"ABC" analysis.
Economic Order Quantity
Inventory control analysts have developed a number of techniques which can help
both small and large-scale businesses manage inventory effectively. The most basic
is the Economic Order Quantity (EOQ) model. This involves establishment of
maximum and minimum inventory levels. Theoretically the minimum inventory
level could be Zero, meaning the last unit of inventory would be used up at the
moment a new shipment arrives. But practically a point is set where the inventory
order is placed if this point has reached such that the organization would not run out
of inventory as it wants for new shipments (Brain, et al (2006) This involves a
trade-off between the two fundamental components of an inventory control cost.
Inventory-carrying cost (which increases with the addition of more inventory), and
order-processing cost (which decreases as the quantity ordered increases). These
two cost items are traded off in determining the optimal warehouse inventory
quantity to maintain for each product. The EOQ point is the one at which total cost is
minimized by maintaining product inventories as close to the EOQ Point as possible.
This technique helps the organization to know when an order is to be placed to
reduce stock outs and customer complaints. Also enable the organization to know
the items that are highly consume such that they may order accordingly. Inventories
are an essential investment with clear benefits that a business cannot afford to
22
ignore, however, investn1ent in inventories involves costs. Total inventory costs are
classified as ordering (set up) costs and carrying costs. (Kakuru, 2007)
2.2.1 Types of inventory
According to the Viale (1996) there are five basic types of inventory:
Raw material: all the purchased parts and direct material that go into the end
product. This type of inventory has value added to it as it flows together as
subassemblies, assemblies and finally into the shippableproduct.
Work-in-process: this is inventory in the process of being assembled into final
products. Raw material are released from inventory and moved to a work center.
People ( direct labor) and /or machine are used to add value of putting products.
These parts may be restocked temporarily nntil withdrawn for use later in the
production process. While they are in this state, they may be referred to as
semi-finished assemblies.
Finished goods: these are shippable inventories ready to be delivered to distribution
centres, retailers, wholesalers or directly to customers.
Distribution inventory: this is inventory held at point as close to the
customer as possible. Distribution point, such as warehouses or stores, may be
owned and operated by the manufacturer or may be independently owned and
operated. However managing inventories is necessary regardless of ownership, so
the term "distribution center" is used throughout this book to indicate intermediate
storage locations, pending delivery to the final customer.
23
Maintenance, repair and operating (MRO) supplies: these terms
are held by most companies. These inventories are often low cost, and include office
and operating supplies and services. It is obvious, therefore, that all organizations
whether manufacturers, wholesalers, retailers, banks, hospitals or even the federal
reserve-have same inventory concerns.According to Viale (1996) the major reason
for managing inventory is to reconcile the following potentially conflicting
objective:
Maximizing customer service: In accurate customer forecasts a multitude of
changes to the original customer order and an overall lock of account management
are major cause of poor customer service in terms of time delivery not suppliers not
purchasing. The result is excessive inventory which ultimately leads to inventory
write offs and high product cost and lower profit margins.
The more accurate the individual product-sales forecasting is, the smaller the
forecast error, and the less inventory need to be ca1Tied to maintain a specified level
of customer services. By carrying fewer inventories the capacity of machine
required to build products is better utilized. Inventory is not built before it is needed,
thus avoiding the mistake committing capacity of machines too early. By carrying
fewer inventories, generally less space used, and it is not used too early.
Maximizing the efficiency of purchasing and production: There are instances
when inventories are held due to cost efficiencies in procurement and production In
manufacturing, long production runs (large lot sizes) of single product are usually
much more efficient than short runs. Managers are often measured by the amount of
production they produce, which acts as an incentive for longer production runs.
24
Long runs results in inventory that sits for long period of time. Theoretically, this
inventory presented miscommitted capacity and reduction in machine flexibility.
Remember, if you can't ship the product, don't build it-no matter what benefits long
runtimes are.
Minimizing inventory investment: Inventories tie up cash that the Company could
use elsewhere in the business. Excess inventory can create a negative cash flow
something that must be avoided. This is why the financial people work to keep
inventories as possible.
Maximizing profit: Profit can be maximized by increasing revenue or decreasing
cost one of the best ways to do this is by proper management of inventory.
Companies should focus on inventory management toreduce the risk of supplier's
failure or uncertainty. Safety and buffer stocks are held to provide some protection
against such contingencies for example drought and floods or snow, strikes,
transport breakdown, crop failures, wars and similar factors. This exist as a result of
variability in demand or supply. Raw materials, purchased parts or MRO buffer
stocks give some protection against the variability of supplier performance due to
shut downs, strikes, lead time variations, late deliveries to and from supplier, poor
quality units that cannot be accepted and so on. (Johnson and Fearon, 2006).Ensure
rapid replenishments of items in constant demand, such as maintenance of suppliers
and office stationary. This entails keeping track of inventories which are constantly
and highly consumed during the process of controlling inventories. This allows for
constant availability of inventories that are regularly demanded. (Lysons&
Farrington, 2003).
25
Hedge against anticipated shortages and price increase especially at times of high
inflation. Inventory control fights against stock outs and therefore the issue of price
increments at times of inflation are minimized since the inventories are always
available even during seasons when they could be scarce, given the inventory
control is at work. (Zenz, 1987).Transit or pipeline is used to stock the supply and
distribution pipelines linking an organization to its suppliers and customers as well a
internal transpo1iation points. They exist because of need to move materials from
one point to another. Obviously, transit inventories are dependent on location and
mode of transport (Johnson &Fearon, 2006). '
Seasonal inventories. If demand follows a seasonal pattern, inventories can be
accumulated during low sales periods and depleted during high usage periods to
avoid problems associated with adjusting capacity. (W.C Benton, Jr. 2007). Also
stocks of inventories at major stocking points throughout the system make it
possible to carry on each activity independently. This is to say, the presence of
inventories allows for each work centre to begin at the same starting time.
(Michiel,e/. al., 1980).
Because of the high cost of carrying inventory, many systems have been developed
to reduce stock. Japanese manufactures have spearheaded lean supply chain
practices, including just-in-time systems. Neve1iheless, it useful to understand the
nature and costs of inventories so that appropriate politics and procedures can be
developed for specific organizational needs. North American organizations have
begun to rely heavily on material requirements planning systems that have similar
goals of reducing inventories wherever possible by having accurate, timely
information on all aspects of the users' requirements, through coordination of all
26
departments, and rigorous adherence to the system. (Lenders el. al.,2006).
For every item carried in inventory, the costs of having' it must be less than the costs
of not having it. Inventory exists for this reason alone. Inventory costs are real; but
are not easy to quantify accurately. The relevance of cost elements in a given
situation depends on the decisions to be made. Many costs remain fixed when the
order size of only one item is doubled, but the same costs may well become variable
when 5,000 items are under consideration. The main types of inventory costs are
described below.
Carrying, holding , or possession costs include handling charges; the cost of
storage facilities or warehouse rentals; the cost of equipment to handle charges; the
cost of storage facilities or warehouse rentals; the cost of equipment to handle
inventory; storage, labor, and operating costs; insurance premiums; breakage;
pilferage; obsolescence ; taxes; and investment or opportunity costs. In short, any
cost associated with having, as opposed to not having, inventory is included.
Ordering or purchase costs include the managerial, clerical, material, telephone,
mailing, fax, e-mail, accounting, transpmiation, inspection, and receiving costs
associated with a purchase or production order. What costs would be saved by not
ordering or by combining two orders? Header costs are those incurred by
identifying and placing an order with/ a supplier. Line item costs refer to the cost of
adding a line to a purchase order. Most orders will involve one header and several
line item costs. Electronic data interchange (EDI) and / Internet-based ordering
systems try to reduce ordering or purchase costs significantly aswell as reduce lead
time at the same time. (Leenders Jonson and Flynn Fearon, 2006).
27
Setup costs refer to all the costs of setting up a production run. Setup costs may be
substantial. They include such learning-related factors as early spoilage and low
production output until standard rates are achieved as well as the more common
considerations, such as setup, employees' wages and other costs, machine
downtime, extra tool wear, parts (and equipment) damaged during setup, and so on.
Both the purchaser's and vendors' setup costs are relevant. It should be pointed out
that the reduction of setup costs and times permits smaller (Michie! R Leendcrs,
Harold E. Fearron& Wilbur B. England 1980).
Stockout costs are the costs of not having the require parts or materials on hand
when and where they are needed. They include lost contribution on lost sales (both
present and foture), changeover costs necessitated by the shortage, substitution of
less suitable or more expensive parts or materials, rescheduling and expediting
costs, labor and machine idle time, and so on. Often, customer and user goodwill
may be affected, and occasionally penalties must be paid. The impact of stockouts
on customers will vary. In a seller's market, an unsatisfied customer may not be lost
as easily as in a buyer's market. In addition, each individual customer will react
differently to a shortage.
In many organizations, stock out costs is very difficult to assess accurately. The
general perception, however, is that stock out costs are substantial and much larger
than carrying costs. Stock out costs, here discussed as they relate to inventory, are
similar for late delivery or quantity shortfalls.
28
Variations in delivered costs are costs associated with purchasing in quantities or
at times when prices or delivery costs are higher than at other quantities or times.
Suppliers often offer items in larger quantities or at certain times of the year at price
and transpo1iation discounts. Purchases in small quantities or at other times may
result in higher purchase and transpo1tation costs, but buying in larger quantities
may result in significantly higher holding costs. The quantity discount problem will
be discussed in (Leenders Johnson & Flynn Fearon 2006).
Many inventory costs may be hard to identify, collect, and measure. One can try to
trace the individual costs attributable to individual items and use them in decision
making. Usually such costs will be applicable to a broader class of items. A second
approach is to forecast the impact of a major change in inventory systems on
various cost centres. For example, what will be the impact on stores of a switch to
systems contracting or vendor-managed inventories for some low-value items? Or
what would be the impact of a just-in-time system on price, carrying, ordering, and
stock out costs? Because most inventory models are b_ased on balancing carrying,
order, and stock out costs to obtain an optimal order and inventory size, the quality
and availability of cost data are important considerations (Leenders, Fearon&
England, 1980).
2.3.2 Sustainability of Coca-Cola Company
Sustainability is comprised of a complex combination of business and
manufacturing initiatives that must be synchronized into a cohesive vision. There is
no single, unified approach that will address sustainability for every Company.
Establishing an infrastructure that supports and enables sustainability objectives is
29
critical to achieving success. The implementation of a performance management
system that provides a mechanism for collecting, visualizing, analyzing and
rep01iing key sustainability information such as carbon emissions and water usage is
fundamental to this infrastructure.
However, it is important to recognize that production management and execution
solutions are not only limited to the performance management aspect of
sustainability, but also can provide benefits in other key areas. Finding a solution
that can deliver sustainability benefits via energy profiling, resource management,
batch genealogy tracking, and order management will enable the success of
sustainability programs and ultimately determine how the strategic goals are
converted to practical implementation plans utilizing available tools to achieve
overall sustainability benefits.It is relatively easy to collect an analogy process value
on a flow measurement at a distillation column. The information related to
sustainability is typically not as straightforward. This is why many companies do not
have this data available today in a usable form. Most sustainability metrics require
not only measured values but calculations of varying complexities with multiple
inputs and outputs.Ideal sustainability monitoring includes the ability to collect and
store large volumes of process data. Scalable calculation engines can provide the
ability to build calculations without the need for complex programming languages,
allowing users to collect basic data and calculate sustainability performance
measurements within manufacturing locations and across the enterprise.With these
tools, sustainability information can then be viewed in a number of different ways
depending on the needs of the specific end-user. For example, a corporate resource
that monitors sustainability data from 20 locations across the world may prefer a
30
Key Performance Indicator (KP!) graphic that simply provides a graphical alert if
something requires action.
Manufacturing industries are in a position to help overcome global business risks
challenges, but their future contributions will depend on how well they adopt and
integrate the eco-innovative approaches and economic approaches like inventory
management when modifying their production patterns (Charter and Clark, 2007).
This requires a broad perspective on what is understood by the sustainability of
manufacturing and a strong focus on identifying areas in which eco-innovative
solutions can substantially reduce environmental impacts. Furthermore, industry
must recognise that because the main features of any innovation are determined
early in the innovation process (Reid and Miedzinski, 2008), important benefits of
eco-innovation may be Jost if broad environmental aspects do not have priority from
the beginning of the process.
Reducing energy usage at an individual location can involve a variety of areas from
steam usage to electrical efficiencies. Reducing energy usage across an organization
may incorporate the entire supply chain and may include a much broader spectrum
of functions such as transportation of raw materials and products, shutdown and
turn-around scheduling, etc. There is not a single approach which addresses energy
usage for all users, but finding Dexible tools adaptable to specific Company
requirements is easier than it sounds.Forexample, some tools can be used to
facilitate the energy usage reduction eff01is by giving users the capability to manage
to an ideal profile. Unit startup is an example where tools like this can be utilized
with regards to reducing energy costs. Energy costs can be high during startups, so
establishing a preferred profile and then tracking performance to this profile can
31
help identify areas to target for energy reduction opportunities. Because deviations
from the profile are quickly identified, this also provides operations with the
opportunity to make immediate adjustments to save energy throughout the
remainder of the startup process (Gregory, 1988).
Assigning production resources in a logical way that maximizes the effective use of
operational equipment can also help reduce associated energy costs. Once a batch
production run is complete, energy usage data can be included as a part of the
cohesive batch record and further analyzed for future efficiency improvement
opportunities.
There are many ways to approach energy reductions leveraging industry solutions.
The power of batch record and analysis tools can be used both within batch and
continuous processes to identify and help realize energy usage reduction
opportunities. The reductions may not seem significant when viewed as an
individual location and a single production run where you are saving a small amount
of energy used. However, consider this as an on-going effort over the course of
annual production campaigns and then expand it to all production facilities within an
enterprise and the energy usage reductions can become quite significant.
Profitability
Since inventory is an important entry into the balance sheet of an organization
especially in merchandise business, policies and directives should be properly and
specifically tailored to safeguard its proper management. Successful management of
inventory will definitely improve on the profitability of the Company through
improved efficiency in operations and reduction in wastage through pilferage and
32
misuse. Petroleum products are especially susceptible to wastage through spillages,
leakages and evaporation due to their liquid from characteristics (Kakuru, 2007).
The high value of the product and case to resell also makes petroleum products very
susceptible to theft. In this regard, the management of Petro City Uganda ought to
have a very strict and clear policy to safeguard, its inventory.
According to Bateman and Zeithaml (1990) preliminary controls take place before
operations begin and include policies, procedures and rules designed to ensure that
planned activities will be carried out properly for profitable purposes. Taylor and
Glezen (1991) stated that financial statement accounts have financial asse1iions
embodied in them. For these assertions to be valid policies and procedures must
exist to assure that the recording, Processing, summarizing and repo1iing data in
these financial statement accounts are consistent with assertions. For example, if a
Company has no sound policies and procedures for recording credit purchases in a
proper and timely way, it has no reasonable assurance that the existence, occurrence,
completeness, rights and presentation assertions for purchases and accounts payable
are valid. Likewise weak policies and procedures will lead to internal control and
likelihood of theft and wastage of inventory.
Various types of inventory in stock of current resources will be very prominent in
the balance sheet of any business (Kakuru, 2007). These include stocks of raw
materials, work-in-progress, finished goods and supplies such as stationery. Though
inventories are idle resources, they play as major role of smoothening out business
activity thereby enabling the business to be flexible in purchasing, operations and
making. Ross, Westerfield and Jordan (2003) noted that a retailer's inventory could
33
represent over 25% of the assets. This implies committing huge amounts of business
resources in idle stocks thus successfi.il inventory management will be mandatory
for survival of the business.
Risk reduction
In many ways, the efforts to reduce raw material usage parallel the energy usage
reduction efforts outlined above. Raw materials include feed streams and additives
that are used to make products as well as natural resources that are required as part of
the process (e.g., water) but may not be a component of the final product. Improving
production equipment efficiency is one way to reduce raw material usage.
Measuring and managing usage data via by profiling against operational limits as
well as historical data can identify opportunities to more efficiently use valuable
natural resources. Alerts can be generated when real-time opportunities to reduce
raw material usage becorne available and can prompt operator action at the control
system level. Alternately, once oppmtunities are identified via data analysis,
advanced process control tools can be used to provide multi-variable control
incorporating optimized raw material usage into the solution.
Tools that help identify opportunities for raw material usage reduction and provide
enabling support for implementing key responS\:S are critical to overall
sustainability efforts. The ability of solutions to help users quickly identify issues,
diagnose root causes and associate products with the specific raw materials and
process equipment used to manufacture them can prove valuable as part of the
overall sustainability program.
34
Efficiency
A properly designed internal control system encourages adherence to prescribed
managerial policies. It also promotes operational efficiency, protects the business
assets from waste, fraud and theft, and ensures accurate and reliable accounting data.
For large companies internal auditing department independently appraises the firm's
financial and operational activities. In addition to reviewing for errors and
regulations, the internal audit staff attempts to uncover wasteful and inefficient
situations. To be effective, the internal staff must be independent of operating
fonctions and should report top a high ranking executive or to the firm's board of
directors.
Manufacturing companies sustain in business through effective product Innovation
and Development.As companies begin to develop new products and alter existing
products to reduce usage and waste, the agility of the entire manufacturing process
must be improved. The ability to quickly adapt existing procedures and equipment
to enable manufacturing of new and improved products is essential to maintaining
competitiveness. Collecting and analyzing production information and comparing
batch profiles as discussed in the sections above can be very valuable to both process
engineers and product development teams as they assess new products and
determine how they impact production. According to Keth (2006), a more unique
application of production management and execution solutions as related to product
innovation is efficiently handling the associated changes required in procedures and
operating instructions. For example, a Company determines that a new supplier can
provide a single compound that takes the place of two compounds normally used in
production, leading to a favorable environmental impact. Implementing this
improvement may require changes to manual documents, modifications within
35
multiple systems, and involvement by numerous resources with potentially limited
availability.
Effective solutions provide a platform from which the changes required in the
standard operating procedures and operating instructions as a resull of changes
associated with modified production can be handled with relative ease. This
flexibility can help reduce the time needed to introduce new products and make
production changes, meaning that sustainability gains are realized sooner.
Technology of this nature can be an important part of manufacturing efforts to assess
and produce new products helping companies deliver new products to customers as
quickly as possible.
2.4 Related studies
According to American Institute of Certified Public Accountants (1963 ),
management has the responsibility for devising, installing and supervising an
adequate system of internal control. Any system regardless of its fundamental
soundness may deteriorate if not reviewed periodically. The system of internal
control must be continuing supervision to determine whether prescribed policies are
being interpreted properly carried out, changes in operating conditions have made
the procedures cumbersome, absolute or inadequate and effective corrective
measures are taken promptly where breakdowns in a system appear.
Blanc (2007) states that inventory is idle goods commg up for use or sale,
inventories are reserved in many environments, for instance, in the mining-industry
of minerals, in factories of raw materials, pmis, work in progress and finished
products, and in warehouses, depots and wholesale dealers of goods for distribution,
36
and at shops and by retailers of goods for sale.
According to Pandey (I 999), inventory management is stock of the product a firm is
manufacturing for sale and the components that makes up a product. Firm hold
inventory in a form of raw material, work in progress, finished goods and supplies.
These inventories facilitates production and sales operation, shield against the risk
of unpredictable changes in usage and delivery time and take advantage of quality
discount and price dissatisfaction.However, many studies investigated in the area of
inventory management like An analysis of process industry production and
inventory management systems in USA, Inventory Management Delivering Profits
through Stock Management, Inventory management: A Tutorial, Canadian
publications, practical applications and suggestions for future research and
Inventory Management in Malaysian Construction Firms: Impact on Performance,
but the effect of inventory management on production volume in manufacturing
companies in Mogadisht1 has not beeninvestigated in our country.
Successful Inventory Management
Various types of inventory in stock of current resources will be very prominent in
the balance sheet of any business (Kakuru, 2007). These include stocks of raw
materials, work-in-progress, finished goods and supplies such as stationery. Though
inventories are idle resources, they play as major role of smoothening out business
activity thereby enabling the business to be flexible in purchasing, operations and
making. Ross, Westerfield and Jordan (2003) noted that a retailer's inventory could
represent over 25% of the assets. This implies committing huge amounts of business
resources in idle stocks thus successful inventory management will be mandatory
for survival of the business.
37
Inventories are an essential investment with clear benefits that a business carmot
afford to ignore, however, investment in inventories involves costs. Total inventory
costs are classified as ordering (set up) costs and carrying costs. (Kakuru, 2007)
Ordering costs include administrative costs in preparing and dispatching orders,
communication with suppliers, placing orders into warehouses. These are costs
incurred right from the time the orders of inventories are placed to when the order is
actually received and placed in the business premises. Normally, the ordering costs
per order decrease with increase in the size of the order due to the economics of scale
and vice versa.
Carrying costs are expenses incurred to keep the inventories in the business, from
the time of receipt to the time they enter production or marketing functions like
storage costs, opportunity costs of funds tied up in inventories and risk that the
inventory will become obsolete. The costs increase as more inventories are
maintained. For instance, Petro City Uganda will store petroleum inventories in
huge tanks at its depot. Some product will also be stored at the government reserve
tanks in Jinja town and both of these will involve some cost storage. Due to high
price of petroleum products, huge sums of funds will be tied up and insurance for the
product will necessary. Losses due to pilferage and leakages will be inevitable.
According to Ross, et al. (2000, inventory management involves acqumng the
inventory, selling and collecting the sales proceeds smoothly. Brealey, Myers, and
Marcus (2004) site the following as the features of inventory management. Optimal
inventory level involves trade-off between carrying costs and order costs, carrying
38
costs involves storage costs and tied up capital cost, inventory level decrease when
storage/interest costs increase and inventory level increase when restocking costs
increase and Inventory level is not directly proportional to sales
In general the level on inventory should always depend on the forecast of sales
which like any other forecast is subject to unce1iainty. Ross, et al (2003 ), notes the
basic goal of inventory management as minimizing the sum of carrying costs and the
stocking costs ( or shortage or ordering costs)
Managing stock-outs
Stock-outs demonstrate a failure in inventory management and can be very
expensive to a business due idle resources and loss of sales. In any business,
stock-outs should be avoided by all means. Riggs (1987), cite accelerated demand,
extended lead time and a spurt in demand coupled with delivery delay as the
conditions that contribute to stock-outs after a replenishment order has been placed.
The most used approach ion attaining the goals of inventory management is the
Economic Order Quantity (EOQ) analysis which used the EOQ model. The size of
order that minimizes the total inventory cost while assuring liquidity to the business
is called the Economic order quantity (Kakuru, 2007). The EOQ model makes the
following assumptions:The rate of usage (demand) of the product over the planning
period is known with certainty and is constant,The inventory is replenished
periodically over the time. Such replenishment is instantaneous and there is no lead
time between the ordering and receipt of inventories in the business, Ordering costs
per order are known with certainty and fixed and Carrying costs per unit of
inventory are !mown with ce1iainty and fixed.
39
Successful inventory management helps to minimizing Wastage: Wastage in
inventory especially petroleum products will refer to losses due to pilferage,
leakages, spillages and evaporation. Good inventory management through internal
control systems will ensure that these losses are minimized. Wastage is classified
under the carrying cost in inventory management. Other carrying costs include
space, insurance, and opportunity cost of holding inventory (Brealey et al., 2004).
However, for an ideal quantity of inventory, the latter three will be more or less like
fixed costs. This leaves the losses due to spoilage, and theft as the controllable
variable of carrying cost. Internal controls will ensure that these losses are
minimized or eliminated altogether.
Gaps identified
The literature presented in this study is rich with works on independent variable
(inventory management) and performance of organisation in different aspects such
as productivity, profitability among others. This provides a theoretical foundation
for the field of inventory management and makes it one of the most developed fields
ofoperations research. However, it is noted here that the little has been discussed
about sustainability of manufacturing companies in particular in regard to their
inventory management practices. Hence this research is prepared to fill that gap
between practical implementation of inventory management models, development
of inventory modelling and how this influence suitability of the company by
profitability, risk reduction, efficiency and accountability.
Similarly, much of the literature is aimed at analysing the theoretical models of
inventory which is mostly valued by the academic community but often less
information on the work solutions that may be required in organisations. In this
regard, manufacturing companies need such information to improve their
40
performance so that they can continue with their routines, ultimately leading to
sustainability. Therefore, this study, explores the effect of inventory management
on sustainability of manufacturing companies in Mogadishu and no other researches
have been conducted in the same area.
41
CHAPTER THREE
METHODOLOGY
3.0 Introduction
This chapter focuses on the methodology of the study. The chapter consists of eight
sections: section one discussed the research design, section two focused on the target
population followed by research instruments and procedure for collecting data, while
the fifth section highlighted how toanalyze data, the sixth section focused on ethical
consideration followed by limitation of the study.
3.1 Research Design
This study employed the descriptive survey design and descriptive correlational
strategies. Descriptive studies are non-experimental researches that describe the
characteristics of a particular individual, or of a group. It deals with the relationship
between variables, testing of hypothesis and development of generalizations and use
of theories that have universal validity. It also involves events that have already
taken place and may be related to present conditions (Kothari, 2004 ). Fmiher,
descriptive surveys are used to discover causal relationships ( descriptive
correlational), differences (descriptive comparative), to provide precise quantitative
description and to observe behavior (Treece and Treece, 1973).
3.2Research Population
The target population of this study consisted of 150 of which 20 of them are
managers, 130 are employee in Coca-Cola Companyin Mogadishu, Somalia.
42
3.3 Sample Size
In analysis of the nature of the target population of 150 managers and employee of
Coca-Cola Company in Mogadishu-Somalia, a sample size of 109 will be selected.
This was arrived using the Sloven's formula which states as following:
n = N/l+N(e 2).
Table 3.3 Respondents of the study
Category Total Sample size
Target Population
Employees Managers Employees Managers
Coca-Cola 130 20 95 14
Grand total 150 109
3.4 Sampling Procedure
The study used purposive sampling technique to select the branches of coca-cola
Company and their managers. Simple random sampling technique was used to select
the employees. A list of employees and managers of coca-cola Company was
obtained; the names of employees especially subordinate employees were put in rote
and were randomly selected. This technique was used because it allows for easy
generalizability of the findings and offers least bias.
3.5 Research instruments
The research tools that were utilized in this study include the following: (I) .fc1ce
sheet to gather data on the respondents' demographic characteristics or profile (age,
gender, education level and experience); (2) researcher devised questionnaires to
determine the levels of inventory management and sustainability of coca-cola
manufacturing companies in Mogadishu. The response modes and scoring are as
43
follows:.for inventory management are indicated as: Strongly agree (4); agree (3);
disagree (2); strongly disagree (I). The researcher devised questionnaires to
determine the levels of sustainability of coca-cola manufacturing companies in
Mogadishu.
3.6 Validity and Reliability of the Instruments
The questionnairewas given to three lecturers to judge the validity of questions
according to the objectives. After the assessment of the questionnaire. the necessary
adjustments were be made bearing in mind the objectives of the study. Then a
content validity index (CVI) which was 0.85 wascomputed using the following
formula.
No.of quesl ionsdeclaredvalid CVI ---~---------
to lalN o.o f questionsinthequestionnaire
A minimum of0.75 of CV! was used to test validity. To ensure the reliability of the
instrument, the researcher usedthetestre-test method. The questionnaire was given to
IO people and after two weeks, the same questionnairewasgiven to the same people
and the Cronbach's Alpha was computed using SPSS. The minimum Cronbach's
Alpha coefficient of0.79 was used to declare an instrument reliable (>0.75).
3. 7 Data Gathering Procedures
3.7.1 Before the administration of the questionnaires
Before the administration of the questionnaires the researcher took an
introductory letter from the CHDR (College of Higher Degrees and Research), the
researcher first got authorization from the proposed case study (coca-cola Company,
Mogadishu) to conduct research and review the questions to avoid errors and ensure
that only qualified respondents were approached.
44
3. 7.2 During the administration of the questionnaires
The respondentswererequested to sign and answer the questionnaires, the researcher
and research assistants emphasized retrieval of the questionnaires within five days
from the date of distribution, and all returned questionnaireswere checked if all are
answered.
3.7.3 After the administration of the questionnaires
The data gatheredwascoded and entered into the computer and statistically treated
using the Statistical Package for Social Sciences (SPSS).
3.8 Data Analysis
During data analysis, data was mainly analysed using SPSS, a statistical package for
social scientists. The data was analysed and obtained the descriptive statistics such as
frequency tables, percentages and also data from each questionnaire is categorized
and edited for accuracy and completeness of information. The information obtained
was further triangulated with information from secondary sources for meaningful
interpretation and discus~ion. The following mean ranges and descriptions wereused
to interpret responses:
J?or the level of Inventory Management
Mean Range Response Mode Interpretation
3.26-4.00 Strongly agree Very satisfactory
2.51-3.25 Agree Satisfactory
1.76-2.50 Disagree Unsatisfactory
1.00-1.75 Strongly disagree Very tinsatisfactory
For the level of Sustainability of coca-cola manufacturing companies
Mean Range
3.26-4.00
2.51-3.25
Response Mode
Strongly agree
Agree
45
Interpretation
Very satisfactory
Satisfactory
1.76-2.50
1.00-1.75
Disagree
Strongly disagree
Unsatisfactory
Very unsatisfactory
A Pearson correlation co.efficient was used to test the hypothesis on correlation at
0.05 level of significance using al-test was employed. The regression analysis was
carried out to determine the influence of the independent variables on the dependent
variable.
3.9 Ethical Consideration
The research process was guided by sound ethical principles which included the
following:-
Objectivity: The researcher ensured objectivity when carrying out the research and
any attempt to bias results was considered unethical and was therefore avoided.
Respect: The researcher ensured that t respect for the respondents was applied. The
type of respect was encompassed respecting where the opinion of the respondents
including the opinion to terminate the interview was allowed and whenever they
could feel uncomfortable to continue, questioning style especially for very personal
and sensitive questions.
Also the researcher promised the respondents that -their identity could not be
disclosed as there is no writing of names on the questionnaires and that everything
was lo be confidential. The researcher gave the respondents the true facts about the
research in order to make informed decisions about participating or not.
3.10 Limitations of the study
In view of the following threats to validity, the researcher allowed 0.05 level of
significance. Measures are also indicated in order to minimize if not to eradicate the
threats to the validity of the findings of the study.
46
Extraneous variables which were beyond the researcher's control such as
respondent's honesty , personal biases and uncontrolled setting of the study Testing
the use of research assistants could bring about inconsistency in the administration
of the questionnaires in terms of time of administration, understanding of the items
in the questionnaires an~ explanations given to the respondents. To minimize the
threat, the research assistants were oriented and briefed on the procedures to be done
in data collection.
Attrition/Mortality: Not all questionnaires may be returned completely answered
now even retrieved back due to circumstances on the part of the respondents such as
travels, sickness, hospitalization and refusal/withdrawal to participate. In
anticipation to this, the researcher reserved more respondents by exceeding the
minimum sample size.
The respondents were also reminded not to leave any item in the questionnaires
unanswered and were closely followed up as to the date of retrieval.
47
CHAPTER FOUR
PRESENTATION, ANALYSIS AND INTERPRETATION OF RESULTS
4.0 Introduction
In this chapter, the researcher presents an analysis of the study; this was done with
an aim of providing answers to the research questions and interpretation of each of
these findings in light of the research objectives. Tables, percentages frequencies
and other statistical tools were used to help the analysis and interpretation of the
findings. The purpose of analysis was to search for the broader meaning of answers
to the research study, which helped to draw conclusions and make recommendations
useful Coca-Cola Company regarding inventory management. The chapter analyses
data collected effects of inventory management and sustainability of Coca-Cola
Company in terms of profitability, risk reduction, efficiency and accountability and
the relationship that exists between the two variables, In answering the following
research questions, the tables were structured to contain the data on the profile of the
respondents in terms of gender, age, level of education, employment status and year
of service. This was analyzed using frequencies and percentages. Purposely, the
study analysed and interpreted the following research objectives. To examine the
level of inventory management in Coca-Cola Company, Mogadishu, Somalia, to
evaluate the level of sustainability of Coca-Cola Company in Mogadishu and to
determine if there is a significant relationship between inventory management and
sustainability of Coca-Cola Company, in Mogadishu. These objectives were
analysed using descriptive statistics and t-test and Pearson's correlation coefficient.
48
4.1 Profile of Respondents
Respondents were asked to provide information regarding their gender, age,
education level, years of service at the Company. Their responses were summm-ized
using frequencies and percentage distributions as indicated in table 4.1;
Table 4.1: Demographic characteristics of Respondents
Category Frequency Percent
Age 18-30 yrs 45 42
31-40 YRS 32 29 - ---
41-50 YRS 22 20 ---
Above 50 YRS 10 9 -- -~---Total 109 100
Sex Male 75 69 ----
Female 34 31
Total 109 100 -
Education level Certificate 12 11 --·- "----
Diploma 28 26 - ---
Bachelor's degrees 39 36 ------- - - ---Masters 22 20
Ph.D 8 7 - -
Total 109 100 ---Working Less than 1 year 34 31 experience 1-2 years 61 56
3-4years 14 13 --
Total 109 100 ---
Source: Primary Data (2014)
For the validity of this research, the researcher tempted to find out the characteristics
of the respondents in Coca-Cola Company so that the findings on the performance
and sustainability of the Company could be genuinely analysed with observable and
background material.
Results in the table above indicate that the respondents age in this sample were
dominated by those between 18-30 years (42%), suggesting that most of the
49
employees in the Company are youths who are assumed to be physically capable and
productive in the manufacturing Company. These were followed by those between
31-40 with 29% and 41-50 years with 20% respectively. There were a few
respondents within the age bracket of above 50 years (9%). The analysis in the
variations of the age bracket indicates that Coca-Cola Company employs mixture of
different adults who are considered to be responsible and mature with reasonable
academic qualifications.
In regard to sex, Table 4.1 reveals that majority of the respondents were males75 (or
69%). While 34 (31 %) were female. The study was dominated by male respondents
and given the socio-cultural beliefs of Somalia, women are less engaged in the
business sector and their education levels are quite low compared lo their male
counterparts. The results concur with the study conducted by World Bank, (2001)
who found out that women make up about 22% of the formal sector, and dominate
the informal economic sector which is principally made up of home-based
enterprises (Soetan, 1995) due lo socio-cultural and religious norms and values.
Regarding level of education, respondents holding degrees were the majority with
39 (36%), diploma holders with 26(26%), Masters 22(20%), while PhD holders
were 8(7% ). The results i·evealed that most respondents employed at the Company
are education with a bachelor's degree, masters and some with PhDs, this indicates
that Coca-cola being an international Company, its sets its minimum education
requirements of al least a diploma during recruitment and those with certificates
were the lower employees working as cleaners and loading stock. The findings
agree with earlier scholars Venniker (2000) who identified education as an
50
investment and increases the stock of skills and productive knowledge embodied in
human resource. Respondents with PhD were mostly consultants and Board
members.
As to employment experience majority had worked in the Company between 1-2
years (61 %), less than one year were 34% and 3-4yeas were only 14. This is based
on the fact that most respondents had worked for the Company for a small period of
time because the Company itself has just been established in the Company in 2012
hence only four years in existence. However, majority respondents were
experienced and knowledgeable concerning the study.
4.2 Level of inventory management in Coca-Cola Company, Mogadishu,
Somalia.
This section covers data and its analysis and interpretation about the level of
inventory management in Coca-Cola Company in Mogadishu. This is in response to
research question one and data specifically include responses in the questionnaire.
Data under this sub-division incorporates both the questionnaire and unstructured
interviews responses. Further, in this theme, the SPSS Pearson's correlation analysis
results are covered about selected statistical data reflected in the table below;
51
Table 4.2:Record keeping -
Item Means Std. D Interpretation Rank
Record keeping -· -
Coca-Cola use EOQ as the most effective 3.65
method to calculate stock levels .789
Very high 1 -
The Board of Directors regulates key inventory .789 -related policies to strike the right balance
3.35 between customer service and cost effective
Very high 2
product inventory. - - - - -·---- ---- -. -
Optimal order is calculated on a regular basis for 3.00
improving the process. .912
High 3 ---Backorders are created for partial orders of inventory
3.00 .971
High 4 ·-·
Stock levels are calculated on a regular basis to 2.89
make them up-to-date .976
High 5 -- --Managers have access to excess and obsolete
2.88 stock
.798 High 6
-·-- --Only production sourcing managers determine .749 the optimal frequency for producing ordering 2.35 Low 7
products Obsolete/excess stock is linked directly to .571 targeted action plans to regulate and control all 2.34 Low 8 the inventory in all departments
-------- - - --- ·- - - -·-··· A cross-fonctional team determines the optimal
2.24 .567
Low 9 frequency for producing ordering products.
-- - - ~- -·-Average Mean 2.85 .872 High -- --- "'' ----------- --
Source: Primary data (2014)
Means range 3.26-4.00 2.51-3.25 1.76-2.50 1.00-1.75
Interpretation strongly agree agree disagree strongly disagree
Level very high high low very low
-
Results in table 4.2 above illustrate that the mean responses of record keeping. The
results reveal that concerning whether Coca-Cola use EOQ as the most effective
method to calculate stock levels, this was ranked the highest with (mean = 3.65)
interpreted as very high. The results reveal that coca cola use economic order
quantity. Concerning whether the Board of Directors regulates key inventory
--related policies to strike the right balance between customer service and cost
52
-
effective product inventory, this ranked second with (mean= 3.35) interpret3d as
very high. In terms of whether the optimal order is calculated on a regular basis for
improving the process, and concerning whether backorders are created for partial
orders of inventory, these had the same mean, that is, (mean= 3.00), interpreted as
high.
Concerning whether stock levels are calculated on a regular basis to make them
up-to-date, this was ranked 5th with (mean = 2.89) interpreted as high. Regarding
whether managers have access to excess and obsolete stock, this was ranked 6th with
(mean = 2.88) interpreted as high. Concerning whether only production sourcing
managers determine the optimal frequency for producing ordering products, this
was ranked 7th with (mean= 2.35) interpreted as low. On the other hand, regarding
whether obsolete/excess stock is linked directly to targeted action plans to regulate
and control the entire inventory in all departments, this was ranked 8th with (mean ~
2.43) interpreted as low. The last ranked item under this construct was concerned
with whether a cross-functional team determines the optimal frequency for
producing ordering products with (mean ~ 2.24) interpreted as low.
Results show that most respondents agreed to the constructs in the question about
record keeping as a construct of inventory management. They agreed that Stock
levels are calculated on a regular basis to make them up-to-date and that the
Company use EOQ as the most effective method to calculate its stock levels. In
addition to that, respondents strongly agreed that the Board of Directors regulates
key inventory -related policies to strike the right balance between customer service
and cost effective product inventory, they also agreed that optimal order is
calculated on a regular basis for improving the process, that obsolete/excess stock is
linked directly to targeted action plans to regulate and ·control all the inventories in
53
all departments and Backorders are created for partial orders of inventory. However,
according to the respondents, they disagreed with the statements that a
cross-functional team determines the optimal frequency for producing ordering
products, and that only production sourcing managers determine the optimal
frequency for producing ordering products. This was attributed to the fact that
mostly, managers report to the board which controls major inventories in the
Company to regulate the policies and procedures to be followed specifically since
the Company's routines involves regular sales and purchases. The average mean on
record keeping is (2.85) which reflect a high level of consistency in keeping records
of the Company.
Table 4.3:Costs of Inventory -· - -- - -
terns I C
1
p I p C
Mean Std.D Interpr e tation Rank "------ ---- _,_ , ----- - ------
oca-cola Company has a scheduling procedure .789 or production process of different levels of 2.82 High 2
roduction to reduce costs of it_s inventories nventory management attempts to reconcile the
2.35 .749
Low roblem of storage costs and ordering costs
4
oca-cola Company use reorder quantities for .571 High
ts inventory items 2.83 I
_, __ --s erial numbers are used on inventory items .567 C onsidering the numbering requirements of the 2.78 High 0
.)
' ompany -- -
C
A ~- -- . ·- ----- - ------ - - --------
verage mean 2.69 .798 High -
Source: Primary data (2014)
Results in table 4.3 reveal the mean responses pertaining costs on inventory. The
results reveal that concerning whether Coca-Cola Company use reorder quantities
for its inventory items, this was ranked first with (mean= 2.83) interpreted as high.
Concerning whether Coca-Cola Company has a scheduling procedure for
production process of different levels of production to reduce costs of its
54
-
-Items
inventories, this was ranked 2nd with (mean= 2.82) interpreted as high. Concerning
whether serial numbers are used on inventory items considering the numbering
requirements of the Company, this was ranked 3rd with (mean= 2.78) interpreted as
high. The last ranked item was concerned with whether inventory management
attempts to reconcile the problem of storage costs and ordering costs with (mean =
2.35) interpreted as low.
Results from table 4.3 above indicate that majority of the respondents agreed to most
of the items regarding the costs of inventory at coca-cola Company. They agreed
that the Company has a scheduling procedure for production process of different
levels of production to reduce costs of its inventories and also use reorder quantities
for its inventory items. Similarly, it was agreed that serial numbers are used on
inventory items considering the numbering requirements of the Company as a cost
reduction measure. On the other hand, respondents disagreed that inventory
management attempts to reconcile the problem of storage costs and ordering costs as
there may other factors contributing to this like efficiency and productivity of staff
in the control stores.
Table 4.4:Performance Measures
Mean Std.D Interpretatio n Rank --
Coca-Cola track its inventory department by 2.72
.749 High
department ----
All inventories from different departments are 2.62
tracked by their agencies .789
High 2
·- ~- ---- --- ---- - - --------- -·---~ --- ----- - ---·· Inventories are regularly checked from all
2.47 stages of production on a regular basis
.798 Low 3
- ------ ---Average mean 2.60 High
----Source: Primary data (2014)
55
Results in the table 4.4 reveal the mean responses concerning performance measures
on inventory management. The results show that concerning whether Coca-Cola
track its inventory department by department, this item was ranked the highest with
(mean = 2.72) interpreted as high. On the other hand, concerning whether all
inventories from different departments are tracked by their agencies, this was ranked
second with (mean = 2.62) interpreted as high. The last ranked item under this
construct was concerned with whether inventories arc regularly checked from all
stages of production on a regular basis with (mean = 2.4 7) interpreted as low.
Results in the above table show that coca-cola tracks its inventory from their
respective departments ai1d are also traced by their agencies. However, respondents'
registered negative responses that inventories are regularly checked from all stages
of production on a regularly basis explaining that sometimes there is a breakdown in
the control system which makes it difficult for a regular operation.
Table 4.5: Summary of Findings on the Level of Inventory Management - .
Constructs Mean Intcroretation Rank - -· Record kee12ing 2.85 High 1 Costs of inventory 2.69 High 2 Performai1ce measures 2.60 High 0
.) ··--·-
Average mean 2.71 High Source: Pnmary data (2014)
The overall average mean for level of inventory management was 2. 71 according to
the findings which is interpreted as high. The Company use Economic order
Quantity as the most effective method to calculate stock levels because it is effective
in keeping the stock levels updated. Such findings are backed by citation of Brain
(2006) that the most basic technique of inventory control is the Economic Order
Quantity (EOQ) model because it involves establishment of maximum and
56
minimum inventory levels. Theoretically the minimum inventory level could be
Zero, meaning the last unit of inventory would be used up at the moment a new
shipment arrives. But practically a point is set where the inventory order is placed if
this point has reached such that the organization would not run out of inventory as it
wants for new shipments, Findings also showed that stock levels are calculated on a
regular basis to make them up-to-date because inventory management by daily
updates is useful to determine the level of sales expected. In this regard, sales and
marketing department of the Coca-Cola Company pay closer attention to the growth
pattern of inventory usage. In addition, the Company through a well-built policy by
the management is able to handle its idle stock without incurring unnecessary costs
and the policies laid by the board are dynamic to a great extent. Managers also
have access to excess and obsolete stock and obsolete stock is linked directly to
targeted action plans to regulate and control the entire inventory in all departments
of production. However, there is still a gap in the management of storage costs and
ordering costs; this was evidenced by the responses that Coca-cola bas a scheduling
procedure for production process of different levels of production.
57
4.3 To Evaluate the Level of Sustainability of Coca-Cola Company in
Mogadishu
Sustainability of Coca-cola Company was the dependent variable in this study and a
questionnaire was developed to examine the level of sustainability of the Company
and four point Liker! scale was also used to analyse the data collected (responses)
indicating the extents to which they agree or disagree with each question. To
measme this variable, it was categorised into three; risk reduction, profitability and
efficiency in performance all relating to the independent variable. Therefore
respondents' responses were analyzed using SPSS and summarized using means as
indicated in tables below;
Table 4.6:Risk Reduction --- ---- - - - ----- --- -- - ~- -
Item Effective t
reduces ris materials a
Meaus Std.D Interpretation Rank . ---- --- ------ - .
1pdating on inventories at the Company ks of making losses on both raw
nd products ------ -- --------Coca-cola trains their inventory control personnel
e performance and future ity of the Company.
rvicing of inventory control equipment
for effectiv sustainabil
Regular se puts the Co sustainabil
The Comp manage its
Average m
mpany in a better position of
ity
any recruits only qualified personnel to inventories to avoid loses
can ·--·---
Source: Primary data, (2014)
Means range 3.26-4.00 2.51-3.25 1.76-2.50 1.00-1.75
Interpretation strongly agree agree disagree strongly disagree
58
.769
2.88
.876
2.72
.789
2.61
2.59 .765
2.70
High
. --
High
High
High
High
Level very high high low very low
---- - ----
1
-- - - . --
2
0 j
4
-
Results in table 4.6 above reveal the mean responses concerning the risk reduction.
Concerning whether effective updating on inventories at the Company reduces risks
of making losses on both raw materials and products was ranked first with (mean =
2.88) interpreted as high. Concerning whether Coca Cola trains their inventory
control personnel for effective performance and future sustainability of the
Company, this was ranked 2nd with (mean = 2. 72) interpreted as high. Concerning
whether regular servicing of inventory control equipment puts the Company in a
better position of sustainability was ranked 3rd with (mean= 2.61) interpreted as
high. On the other hand, concerning whether the Company recruits only qualified
personnel to manage its inventories to avoid loses; this was ranked the least under
this construct with (mean ~ 2.59) interpreted as high.
Results from the study showed that coca-cola training their inventory control
personnel to effectively perform their duties and this is intended for the
sustainability of the Company by reducing on the risks that may be associated with
inefficiencies. Respondents further agreed that only qualified personnel arc
recruited to manage the Company's inventories and regular servicing of inventory
control equipment puts the Company in a better position of sustainability because
through this, even risks are easily detected and addressed promptly. Similarly, it was
agreed that effective updating on inventory reduce risks of making losses on both
raw materials and products because the Company puts major emphasis on this. The
average mean score is 2. 70 indicating that the level of controlling risks at coca-cola
Company is high.
59
Table 4.7: Profitability . - - - --- -------------·-··--
Item Means Std.D Inter pr etation Rank -
Coca-cola has the best inventory control .769
measures in place to increase profitability of the 2.85 High I
Company produce
.876 The level of customer satisfaction is high due to 2.66 High 2
proper inventory management --------. -
.789 The Company earn maximum revenues due to 2.59 High 3
having a variety of products on the market. ·-Clients receive new inventory alerts on new .765
product arrivals to increase sales hence 2.56 High 4
profitability - --- ------- ---- --· -- - .. - --Coca-cola uses its profits to allocate enough .678
financial resource to the inventory control section 2.04 Low 5
to eliminate risks. - - --- ---- -· ,._ -- ---·-· --Average mean 2.54 High
----------- . ---- ------- -· --- ----·- - -
Source: Primary Data (20 I 4)
Results in table 4.7 above reveal the mean responses pertaining profitability. The
results reveal that concerning whether Coca-Cola has the best inventory control
measures in place to increase profitability of the Companyproduce was ranked first
with (mean = 2.85) interpreted as high. In terms of whether the level of customer
satisfaction is high due to proper inventory management, this was ranked 2nd with
(mean= 2.66) interpreted as high. Concerning whether the Company earn maximum
revenues due to having a variety of products on the market, this was ranked 3rd with
(mean = 2.59) interpreted as high. Regarding whether clients receive new
inventory alerts on new product arrivals to increase sales hence profitability was
ranked 4thwith (mean = 2.56) interpreted as high. Concerning whether Coca Cola
uses its profits to allocate enough financial resource to the inventory control section
to eliminate risks, this was ranked the least with (mean= 2.04) interpreted as low.
60
- --
-
-
-
Results in the table above indicate that Coca-cola has the best inventory control
measures in place to increase profitability of the Company produce as was strongly
agreed by the respondents(mean= 2.85), they also agreed that clients receive new
inventory alerts on new product arrivals to increase sales hence profitability. In the
same way, respondents agreed that the level of customer satisfaction is high due to
proper inventory management and the Company earn maximum revenues due to
having a variety of products on the market. However, respondents disagreed that
coca-cola use its profits to allocate enough financial resources to the inventory
control section to eliminate risks. This was attributed to the Company's external
financial sources because of its wide scope and it needs external financial sources
perhaps for a short term being a new establishment in the country.
Table 4.8: Efficiency -- ~--· Item Means Std.D Interpretation Rank
All balances and checks in ·all
departments are reported regularly to the 2.50 .786 Low 1
top management for accountability - -
The market of Coca-Cola products is .789
always growing further in 2.32 Low 2
Mogadishu-Somalia
The potential demand for Coca-Cola .734
products is always much higher than what 2.28 Low 0 J
is produced now ~-~~- -
Average mean 2.36 Low --~
Source: Primary Data (2014)
Results in table 4.8 above reveal the mean responses pertaining efficiency. The
results show that pertaining whether all balances and checks in all departments are
reported regularly to the top management for accountability, this was ranked first
61
with (mean= 2.50) interpreted as low. Regarding whether the market of Coca-Cola
products is always growing further in Mogadishu-Somalia, this was ranked 2nd with
(mean = 3.32) interpreted as low. Concerning whether the potential demand for
Coca-Cola products is always much higher than what is produced now was ranked
the last under this construct with (mean = 2.28) interpreted as low.
As table 4.8 indicates, majority of the respondents disagreed with the statements that
all balances and checks in all departments are reported regularly to the top
management for accountability, the market of Coca-Cola products is always
growing further in Mogadishu-Somalia and that potential demand for Coca-Cola
products is always much higher than what is produced now. Respondents attributed
that although the policy at the Company is to make regular reports about the
balances and checks, the staff responsible sometimes fails due to internal factors and
perhaps due to motivational factors. This renders the level of efficiency low as
shown in the table that the average mean score for the level of efficiency is low
(2.36).
Table 4.9 Summary of Findings on the Level of Snstainability of Coca Cola
Company
Item Means Interpretation Rank
Risk reduction 2.70 High I
Profitability 2.54 High 2
Efficiency 2.36 Low 1 .)
--Average mean 2.53 High
-Source: primary data
Findings in table 4.9 indicate that the average mean value for the sustainability of
Coca-Cola Company is 2.53interpreted as high. This was explained that for any
human resource working in the stock control departments and inventory systems
62
they have to undergo staff training sessions so that they can efficiently perform their
duties with minimum risks that would result into losses for the Company. Again,
result showed that the Company recruits only qualified personnel to resourcefully
manage its inventories by setting up minimum qualification standards for applicants
during recruitment. Respondents added that the Company is very critical in the
department of inventory management since it's considered to be crucial for its
sustainability. Findings further established that clients receive new inventory ale11s
on new product arrivals to increase sales and profitability and this is done through
investing massive advertisement on all Medias. However, it was noted that at to a
ce11ain extent financial resources allocated to the inventory control section to
eliminate risks are not enough leading to inefficiencies.
4.4 Relationship between Inventory Management and Sustainability of
Coca-Cola Company, Mogadishu.
The third objective of the study was to investigate whether there is a significant
relationship between inventory management and sustainability of Coca-Cola
Company, Mogadishu. The researcher carried out correlation analysis between the
means oflnventory management and Sustainability, and fm1her carried out bivariate
regression analysis between Inventory management and Sustainability. The results
are shown in tables 4.10 and 4.11 below.
63
Table 4.10: Relationship between Level of Inventory Management and
Sustainability of Coca-Cola Company (Level of significance at 0.05)
- . -Variables correlated r-value Significance Interpretation Decision
On Ho Inventory management Positive and Rejected Vs 0.842 0.000 Significant Sustainability Source: Primary Data 2012
Results in Table 4.10 indicate that inventory management was positive and
significantly correlated with overall level of sustainability index(1~ 0.842, s1g.
=0.000). Therefore, at (sig. = 0.005) the null hypothesis was rejected and alternative
hypothesis was accepted. This implies that, there a significant relationship between
Inventory management and sustainability of coca-cola Company in Mogadishu
Somalia. This further . implies that, inventory management constructs are
strategically maintained for the productivity, profitability and sustainability of the
Company.
The findings in table 4.4 are in agreement with those of Douglas (2000) that to
achieve material and sustainable improvement in performance of a Company,
inventory management and performance must be aligned in well by updating the
system regularly and supply chain executives need to take a holistic,
cross-functional approach that aligns supply chain, finance, operations and other
affected stakeholders to a consistent, agreed-upon set of inventory performance
objectives.
64
Table4.11: Regression Analysis between inventory management and
sustainability of coca-cola company in Mogadishu Somalia.
-Variables Adjusted F Sig Interpretation Decision on Regressed r-value Ho
-Inventory 0.709 39.78 0.000 Positive an Rejected Management significant andSustainability - - - - . Coefficients Beta t Sig. Interpretation
Decision on Ho
-Constant 1.678 2.045 0.000 Significant effect Rejected Inventory 1.456 3.534 0.01 I Significant effect
Rejected Management - --·-Source: primary data.
The above table confirmed that there is significant relationship between inventory
management and sustainability of manufacturing companies. Given that (F ~ 39.78,
Sig .. -. 0.000), the hypothesis is rejected. The coefficient table revealed that. the rate
of sustainability independent of inventory management was (beta ~ 1.678). This
means that at zero level of inventory management, the level of sustainability in Coca
cola company is (beta = 1.678). The rate of change of sustainability to change in
inventory management was (beta~ 1.456). Since (beta= 1.678, sig. ~- 0.000 < 0.05)
and (beta= 1.456, sig. ~ 0.011 < 0.05), the results indicate that the values of beta
coefficients are different from zero. The results also indicate that inventory
management causes only 70.9% variations in sustainability in Coca Cola Company,
Mogadishu Somalia (adjusted r2 = 0.709).
65
CHAPTER FIVE
DISCUSSIONS, CONLUSIONS AND RECOMMENDATIONS
5.0 Introduction
This chapter presents the findings, conclusions, recommendations and suggested
areas that need further research following the study objectives. This study was set to
find out the relationship between inventory management and sustainability of
manufacturing companie~ using a case study of Coca-Cola Company in Mogadishu.
It was guided by three specific objectives) to examine the level of inventory
management in Coca-Cola Company, Mogadishu, Somalia, ii) to evaluate the level
of sustainability of Coca-Cola Company in Mogadishu, and iii)To determine if there
is a significant relationship between inventory management and sustainability of
Coca-Cola Company, in Mogadishu.
5.1 Discussion of findings
The study findings indicated that majority of respondents in this sample were mostly
young adults between 30 years and 40 years and these were mostly males. This was
attributed to the qualification standards of the Company whereby only qualified
personnel with a reasonable working experience were employed. Realistically
people under 3 0 years are considered to be less productive due to pride and lack of
experience because are mainly fresh graduates with minimum skills. On the other
hand the big percentage of male respondents attributed to socio-cultural and
religious beliefs that given females little priority in economic and education
perspectives.
66
5.1.l Level of inventory management in Mogadishu
Findings revealed that the level of inventory management in coca-cola Company is
high having come-up with an average mean value of2.89. It was established that the
Company uses the most effective techniques of inventory controls which establishes
maximum and minimum inventory levels. The implication of these results is that
updating inventories regularly helps the Company to be effective in its performance
as stock levels are calculated on a regular basis which makes it helpful determine the
level of sales ordinarily. Additionally. it was revealed that the board of directors
regulates key inventory -related policies to strike the right balance bet ween
customer service and cost effective product inventory meaning that inventory
management m Coca cola is monitored on a regular basis as it could be
recommended by expert managers and financial statement accounts have financial
assertions embodied in them. These findings are in line with those of Bateman &
Taylor (1990) who cited that preliminary controls take place before operations begin
and include policies. procedures and rules designed to ensure that planned activities
will be carried out properly. For these assertions to be valid policies and procedures
must exist to assure that the recording, Processing, summarizing and repmiing data
in these financial statement accounts are consistent with asse1iions. For example, if a
Company has no sound policies and procedures for recording credit purchases in a
proper and timely way, it has no reasonable assurance that the existence, occurrence,
completeness, rights and presentation assertions for purchases and accounts payable
are valid. Likewise weak policies and procedures will lead to internal control and
likelihood of theft and wastage of inventory.
67
5.1.2 Sustainability of Coca-Cola Company in Mogadishu
Findings established that the level of sustainability is also high (average
mean=2.52). This was attributed to constructs that were rated by respondents and
revealed that training of staff especially those in the respective departments of
inventory management is a priority. For any human resource working in the stock
control depaiiments and inventory systems they have to undergo staff training
sessions so that they can efficiently perform their duties with minimum risks that
would result into losses. In addition to recruiting qualified personnel as a
prerequisite for applicants, the Company is very critical in the department of
inventory management regarding experience and consistence in performance.
Further findings established that regular servicing of inventory control equipment
puts the Company in a better position for sustainability However, checks and
balances in all departments are not regularly reported to the top management which
could result in false entries in terms of accountability hence putting the Company a
risky point in the long run. It was also noted that at a ce1iain extent financial
resources allocated to the inventory control section to eliminate risks are not enough.
This was attributed perhaps because the Company is not yet fully established its self
in the country for fear of political instabilities although it was officially launched in
2012.
These findings 111 line with those of (Kakuru, 2007) that smce inventory
management 1s an important entry into the balance sheet of an organization
especially in merchandise business, sustainability will ofno question if management
well. Successful management of inventory will definitely improve on the
profitability of the Company through improved efficiency in operations and
reduction in wastage through pilferage and misuse.
68
5.1.3 Relationship between Inventory management and sustainability of coca
cola Company in Mogadishu
Results showed that there is a significant relationship between inventory
management and of sustainability of coca-cola Company. The null hypothesis was
rejected. This is attributed to the strategies employed by the management to keep its
market position on top by maintaining its inventories up to date although there were
some loopholes discovered like in the allocation of financial resources towards the
independent variable. Therefore inventory management and performance must be
aligned properly by updating the system regularly and supply chain executives take
inclusive approaches to a consistent, agreed-upon set of inventory performance
goals.
5.2 Conclusion
5.2.1 Level of inventory management
Objective one of this study intended to examine the level of inventory management
in coca-cola Company in Mogadishu. Findings showed that Inventory management
has become highly developed to meet the rising challenges in manufacturing entities
and this is in response to the fact that inventory is an asset of distinct feature. The
inventory management situation of coca-cola Company has been revealed to be
effective and the most commonly used model is the EOQ model. It was also seen
that the Company through a well-built policy is able to handle its idle stock without
incurring too much costs. Findings indicated that the inventory policy of coca-cola is
dynamic to some extent but a cross-functional team is lacking to determine the
optimal frequency for producing ordering products. Also findings revealed that
there is a need to address some situation in the Company's inventory management
69
like financial resource allocation and daily update of the system. Therefore
responses showed that effective inventory management practice has a positive effect
on the profit margin of their Company. Such results are is in line with the notes of
Tasli (2011 ), inventory management reduces unnecessary costs and increases
revenue in a business and effective stock control increases the profit making of an
organization hence rendering its sustainability status strong on the market.
5.2.2 Sustainability of manufacturing companies -Coca Cola Company
It is similarly concluded that sustainability of coca-cola Companies the long-term
factor economically and in social dimensions, it also encompasses responsible
management of resources hence Coca-cola Company as a newly established
investment in Mogadishu need to pull-up in its stock control and inventory to
achieve its economic objectives and sustainability which is the profit margin and
satisfaction of its clients. Given !ha! the level of inventory management is still
maintained as reflected in the findings, inventory optimisation has been focused on
and this generates several options for estimating demand with greater accuracy and
this is attributed to the Company experience from other countries which helps the
one in Mogadishu to automatically create an analysis of the demand using history
for each product in other plants across the world.
70
Relationship between inventory management and sustainability of Coca Cola
Company
The results reflected a significant relationship between inventory management and
sustainability of coca-cola Company in Mogadishu. Considering the findings, it was
concluded that the Company creates an environment that appreciates the practice of
stock control basically to increase productivity which improves financial health, and
also helps the Company to meet customers' competitive priorities. Response
showed that customer support is high as regards to satisfaction obtained when goods
and services are rendered at the right quality, right time and at the right price, this
compliments the works of Anthony, Dearden, & Gorindarajan (2009), for an
organization to meet up with constant customer demand of quality products, it must
maintain consistency in quality product & service delivery to its clientele base for
the price paid and on time delivery too.
5.3 Recommendations
From the research findings, the following recommendations are suggested in line
with research objectives;
Emphasis should be nonnally placed on the economic order quantity model because
it was seen to be in the best interest of the Company in order to maintain an optimal
level of materials in store. the level that minimizes total cost of investment in
inventory. To achieve this successfully, different costs, which are associated with
inventory, should be segregated and accumulated in such a way that EOQ can be
easily determined.
71
There should be regular update, regular servicing of inventory control equipment
and all inventories should be regularly checked from all stages of production on a
regular basis to ensure profitability and sustainability of the Company.
The inventory control systems should show their levels that can be useful indication
of what level of sales to expect and the sales and marketing department of the
Company should pay closer attention to the growth pattern of inventory usage and
incorporate it in sales forecasting technique.
The Company should strategize its policies and also adopt policies that take into
consideration all its objectives and national economy in which demand of their
products stands as another factor. This should incorporate socio-economic resource
allocations geared towards maximising sales and profitability.
Materials management unit should also pay attention to sales grow1h over the years
and thus take into consideration, the apparent relevance of sales and production cost
in making decision with regards to inventory.
The government should practically ensure peaceful political atmosphere that
enables and attracts investment and that's a critical point for manufacturing
Company to fully establish their initiatives in the country for economic growth and
development.
72
REFERENCE
Aguilera (2007).Inventory Control Management .3 rd edition.New Delhi Tata MC
Graw-Hill.
Brain F. and Kenneth L. (2006).Purchasing and supply chain management,
7thedition , Pearson, education limited ,England.
Brinlee, D. (2000).Common inventory management problems. Retrieved March 29,
2013 from http:www.askdeb.com.
Campton .H.K. and Jesop D. (1989). Dictionary of purchasing and supply
management pifrom.
Chopra S. and Meindl (2001). Supply chain management, Prentice Hall.
Dan Roessler (2011 ). Improve sustainability using production management and
execution solutions. chemicals industry manager, aspen technology
Douglas, L. (2000). Inventory management.Women's enterprise center.
retrievedmarch 22, 2013 from http://
www.womensenterprise.ca.
E.A Silver (1988). Inventory management and production planning and scheduling
3rd Edition, John Willey and Sons.
Fleming, I. (I 992). "Stock control, or Insight", Vol. 5 No 4, pp. 9-11
Gary J.Z. (1987). Purchasing and the management of materials, 6'11 edition,
published simultaneously in Canada United States of America (U.S.A)
Geoff B. (2006). "Reconstructing inventory management theory", international
journal of operations &production management, vol. 26 Iss: 9, pp.996 -
I 012.
Gregory P. W.and Mark AV. (1988). Operations management 2nd edition West
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Publishing Company St. Paul, New York Los Angels SanFrancisco.
Hilton, R. (2001 ). Managerial accounting : creating value for dynamic Environment
(2nd Ed.) New York: Me Graw Hill, Inc.
Hoffman, R. A. and Henry. G. (1970). Inventories: Control, costing, and effect
upon income and taxes. New York : Ronald Press. International .Journal
of Production Economics.( 1999 December).
Joseph L. C. (1984 ). Pnrchasing and materials management, West Publishing
Company U.S.A.
Mmiin E. Amin (2005). Social science research conception methodology and
analysis, Makerere University Printer, Uganda problems of translation,
Interfaces", Vol. 10, pp. 103-110.
Rm11 A. (2009). Reaserch methods Rawat Publications New Delhi, India.
Rich. E. and K. Knight (1991). '"Artificial Intelligence", 2nd edition the United
States of America: McGraw-Hill, Inc.
Silver, E.A. (1981). "Operations research in inventory management", perations
research, Vol. 29 No. 4, pp. 628-45.
Zanakis, S.1-l., Austine, M. L, Nowading D. C. and Silver E. A. (1980). "From
teaching to implement inventory management.
74
APPENDIX IA
TRANSMITTAL LETTER l<'OR THE RESPONDENTS
Dear Sir/ Madam,
Greetings!
I am a Masters of Business Administration candidate of Kampala International
University. Part of the requirements for the award is a thesis. My study is entitled,
Inventory Management and sustainability of Manufacturing companies in
Mogadishu, Somalia, a Case study of Coca-Cola Company, Mogadishu. Within
this context, may I request you to participate in this study by answering the
questionnaires? Kindly do not leave any option unanswered. Any data you will
provide shall be for academic purposes only and no information of such kind shall
be disclosed to others.
May I retrieve the questionnaire within five days (5)?
Thank you very much in ·advance.
Yours faith fall y,
Ms KHADRA MOHAMUD HUSSEIN
75
APPENDIX II
CLEARANCE FROM ETHICS COMMITTEE
Date -------
Candidate's Data
Name ------
Reg.# ___ _
Course
Title of Study _____ _
Ethical Review Checklist
The study reviewed considered the following:
Physical Safety of Human Subjects
___ Psychological Safety
Emotional Security
_Privacy
__ Written Request for Author of Standardized Instrument
__ Coding of Questionnaires/ Anonymity/Confidentiality
___ Permission to Conduct the Study
Informed Consent
___ Citations/ Authors Recognized
Results of Ethical Review
_Approved
____ Conditional (to provide the Ethics Committee with corrections)
__ Disapproved/ Resubmit Proposal
Ethics Committee (Name and Signature)
Chairperson ____________ _
Members
76
APPENDICES III
RESEARCH QUESSTIONS
KAMPALA INTERNATIONAL UNIVERSITY
COLLEGE OF HIGHER DEGREES AND RESEARCH
Dear respondent,
I am KHADRA MOHAMUD HUSSEIN a student of Master of Business
administration al Kampala International University. Am carrying out a study titled
Inventory Management and sustainability of manufacturing companies in
Mogadishu, a case study of Coca-Cola Company. You have been chosen as a
respondent because the information you provide is very vital for this study. The
information provided will be treated with the utmost care and confidentiality.
Section A: Demographic characteristics of Respondents
1. Age
a) ---- I 8-30 years, b )--- 31-40 years, C)--- 41-50 years and d) -51 years and
above
2. Gender
-a) Male----
b) Female-----
3. Level of education qualification
a) Certificate
b) Diploma
c) Bachelors Degree
d) Masters degree
e) Ph.D
4. Length of service in this Company
a) Below 2 years
b) 3-5 years
c) 6-8 years
d) 9 years and
77
SECTION B: LEVEL OF INVENTORY MANAGEMENT
Direction 1: Please write your rating on the space before each option which
corresponds to your best 'choice in terms of inventory management in this
Company, Kindly use the scoring system below:
Response Mode Rating Description Lei~cnd
Strongly Agree (4) You agree with no doubt at all. SA
Agree (3) You agree with some doubt A
Disagree (2) You disagree with some doubt D
Strongly disagree (1) You disagree with no doubt at all SD
·- -· - --sin Item Response mode /rating - -- -- -----
Record keeping
---· -·---L Coca-cola use EOQ as the most effective method to SA A D SD
calculate stock levels
2, Stock levels are calculated on a regular basis to make
them up-to-date
- -- - - -- -,---~- - - --------0 The Board or Directors regulates key inventory -related _,.
policies to strike the right balance between customer
service and cost effective product inventory.
-- - ---4, A cross-functional team determines the optimal
frequency for producing ordering products
5. Only production sourci\1g managers determine the
optimal frequency for producing ordering products
6, Optimal order is calculated on a regular basis for
improving the process
7, Managers have access to excess and obsolete stock
8. Obsolete/excess stock is linked directly to targeted action
plans to regulate and control all the inventory in al
departments
----9, Backorders are created for partial orders of inventory
-----
78
- ------ ---- - --
- ------- - ---- ----------- - -- ---- -- ---Costs of inventory
II. Coca-cola Company has a scheduling procedure for production process of different levels of production
----12. Inventory management attempts to reconcile the problem
of storage costs and ordering costs
--- --13 Coca-cola Company use reorder quantities for its
inventory items
14. Serial numbers are used on inventory items considering the numbering requirements of the Company
-- -------Performance measures
---- ------·---------- -------- - - - - .
15. Coca-cola track its inventory by department
------ --- - ------ . -- - - - - - - ------ -· -------- - - ------ --- - -------- ---I 6. All inventories from different departments are tracked by
their agencies
-· - -- - ------ ----- - --- ------ --~- - -- - --17. Inventories are regularly checked from all stages of
production on a regular basis
--- ---
79
---
Section C: SUSTAINABILITY OF COCA-COLA COMPANY
Direction 1: Please write your rating on the space before each option which
corresponds to your best choice in terms of Sustainability of Coca cola
Microfinancc institution in your branch. Kindly use the scoring system below:
Response Mode Rating Description Legend
Strongly Agree (4) You agree with no doubt at all. SA
Agree (3) You agree with some doubt A
Disagree (2) You disagree with some doubt D
Strongly disagree (I) You disagree with no doubt at all SD
- -·----------- - ,_ - -- -s/n Item Response mode /rating
·- ----- -·-·-·-- - - -----Risk reduction
-- - .. ... ..• -·--- ---I. Coca-cola trains their inventory contrnl personnel for SA A D SD
effective performance and future sustainability of the
Company
-- . --- ------ - ----- ------·- -- - - . - - -·-·--!------
2. The Company recruits only qualified personnel to
manage its inventories to avoid loses
---- -·- --·- - - . -- ·- ----- --- -·-- -" Regular servicing of inventory control equipment puts J.
the Company in a better position of sustainability
---4. Effective updating of inventories at coco-coal reduce
risks of making losses for the Company
·--Profitability
--- --- ---4. Coca-cola has the best inventory control measures in
place to increase productivity of the Company
--------5. Clients receive new inventory alerts on new product
arrivals to increase profitability
6. Coca-cola allocate enough financial resource to the
inventory control section to eliminate risks.
7. The level of customer satisfaction is high due to proper
inventory management ----- - - - ------ _,.__ ____
80
. --~· 8. Coca-colaearn a lot of revenues/profits as a result of a
variety of products on the market.
Efficiency
--9. All balances and checks in all departments are reported
regularly to the top management for accountability
-10. The market of Coca-Cola products is always growing
fmiher in Mogadishu-Somalia
---~~- - ---11. The potential demand for coca-cola products is always
much higher than what is produced now
-- - -- ·-··
~
Thank you very much
81
RESEARCHER CURRICULUM vrr AE (CV)
PERSONAL DATA:
Name: Khadra Mohamud Hussein
Mother Name: Zeinab Ali Farah
Nationality: Somali
Place Of Birth: Mogadishu
Date Of Birth: 1991
Marital Status: Single
Gender: Female
Address: -l 256793365059
E-Mail: 1DMAAL38@.GMA I L.Corvr
Educational Background:
2013-Now :Master Of Business Administration And Banking & Finance In
Kampala International University
2011-2012
209-2012
2005-2008
:Diploma Of English At Somali University
:Bachelor Of Accounting and Finance in Simad University
:Secondary Certificate At Al-Hikrna Secondary School
82
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