THE INFLUENCE OF INVENTORY MANAGEMENT PRACTICES ON ORGANIZATIONAL FINANCIAL PERFORMANCE
A large majority of organizations worldwide commit large amounts of funds to inventory management which constitutes most significant part of their current assets. The organizations strive, through their departments of – purchasing, production, sales and finance, to manage inventories efficiently and effectively so as to avoid unnecessary tying of capital. The aim of inventory management is to minimize costs of ordering, carrying and not carrying sufficient inventory. Poor inventory effects include – remarkable differences between stock records and physical stock, inadequate records and recording, availability of obsolete and obsolescence stores, greater complaints from customers due to unfulfilled orders, disorganized stores, damaged stocks and loss of financial resources. This study assessed the influence of Inventory Management Practices on Organizational Financial at the National Micro finance Bank Headquarters Dar es Salaam.
The study conducted a survey of the National Microfinance Bank at the NMB Headquarters. The questionnaire targeted a selected sample of the NMB staff. Pursuant to that, the study strived to answer three questions – i) What are the factors that affect inventory management practices in organization?; ii) What is the effect of inventory management practices on return on equity?; and iii) What is the effect of inventory management practices on return on sales?
The study found out that, among crucial factors affecting inventory management practices in NMB were – skills and knowledge among staff; involvement of management in procurement planning; and existence of procurement policies which are adhered to by staff in the implementation of inventory management processes. The study also revealed corresponding growth in sales and profits in 2013 which resulted in constant growth of business with big value generated by NMB through its ROE and ROS. The results have led to shareholders earning TZS 34 billion in form of dividends while GoT received TZS 79.6 billion as income taxes, PAYE, SDL etc; NMB paid staff salaries and emoluments at TZS 99.7 billion; and spent TZS 1.05 billion in sponsorships, Public Relations donations etc. to other stakeholders and the public.