Effect of Raw Material Inventory on Operational Performance in An Emerging Economy: Insight from The Nigerian Manufacturing Sector

Authors

  • Marvel Ogah Lagos Business School, Pan Atlantic University, Nigeria
  • Gregory Asiegbu Lagos Business School, Pan Atlantic University, Nigeria
  • Nike Moradeyo Lagos Business School, Pan Atlantic University, Nigeria

Abstract

Inventory management in organizations comes with severe challenges, especially in emerging markets. The study examines the effect of the difficulties experienced in raw material management on quality, speed and flexibility, dependability, and cost in the Nigerian Manufacturing sector. This study empirically examines this relationship in a contemporary mixed methodological approach adopting survey and semi-structured interviews. Survey questionnaires were distributed to 703 inventory and supply chain managers in 22 manufacturing firms in Nigeria, while the interview was conducted for 25 managers from 9 manufacturing firms in Nigeria. The crystal-clear finding is that poor inventory management practices negatively affect the quality, speed, and flexibility of operations in Nigerian manufacturing. This contrasts with a second finding that dependability and cost are not statistically significant. We also discovered that difficulties manufacturing firms in emerging markets experience in managing their raw materials arise from government policies, high exchange rates, bureaucracy in importation and port Issues, inflation, infrastructural challenge, logistics and transportation challenges, poor management decisions, regulatory framework, and unstable exchange rate. In conclusion, our study highlights that inefficient raw material management severely affects the manufacturing firm's overall performance.

Keywords:

Raw Material, Operational Performance, Inventory Management, Inventory Control Techniques, Emerging Economy

Downloads

Download data is not yet available.

References

Adeyemi, S.L. & Salami, A.O. (2010). Inventory management: A tool of optimizing resources in a manufacturing industry – a case study of Coca-Cola Bottling Company, Ilorin plant. Journal of Social Sciences, 23(2), 135-142. https://doi.org/10.5325/transportationj.48.2.0040

Akindipe, O.S. (2014). The role of raw material management in production operations. International Journal of Managing Value and Supply Chains, 5(3), pp 37-44. https://doi.org/10.5121/IJMVSC.2014.5303

Almatrooshi, M. J. A., Khalifa, G. S., Ameen, A., Hossain, M. S., & Morsy, M. A. (2020). The role of knowledge oriented leadership and knowledge sharing to manage the performance of Ministry of Interior in UAE. International Journal on Recent Trends in Business and Tourism (IJRTBT), 4(2), 9-17.

Arbuckle, J. (2008). Amos 17.0 user's guide. SPSS Inc.

Atnafu. D. & Balda, A. (2018). The impact of inventory management practice on firm’s competitiveness and organisational performance: Empirical evidence from micro and small enterprises in Ethiopia. Cogent Business & Management, 5(1), pp 1503219. https://doi.org/10.1080/23311975.2018.1503219

Aylen, J., & Albertson, K. (2006). Markets in ferrous scrap for steelmaking. Ironmaking & steelmaking, 33(3), 203-212. https://doi.org/10.1179/174328106X101538

Basu, N., & Wang, X. (2011). Evidence on the relation between inventory changes, earnings and firm value. The International Journal of Business and Finance Research, 5(3), 1-14.

Belekoukias, I., Garza-Reyes, J. A., & Kumar, V. (2014). The impact of lean methods and tools on the operational performance of manufacturing organisations. International Journal of production research, 52(18), 5346-5366. https://doi.org/10.1080/00207543.2014.903348

Blazenko, G. W., & Vandezande, K. (2003). Corporate holding of finished goods inventories. Journal of Economics and Business, 55(3), 255-266. https://doi.org/10.1016/S0148-6195(03)00023-7

Cannon, A. R. (2008). Inventory improvement and financial performance. International Journal of Production Economics, 115(2), 581-593. https://doi.org/10.1016/j.ijpe.2008.07.006

Capkun, V., Hameri, A.P. & Weiss, L.A. (2009). On the relationship between inventory and financial performance in manufacturing companies. International Journal of Operations & Production Management, 29(8), 789-806. https://doi.org/10.1108/01443570910977698

Cheung, C.F., Wang, W.M. & Kwok, S.K. (2005). Knowledge-based inventory management in production logistics: a multi-agent approach. Proceedings of the Institution of Mechanical Engineers, Part B: Journal of Engineering Manufacture, 219(3), 299-307. https://doi.org/10.1243%2F095440505X28990

Chikán, A. & Whybark, D.C. (1990). Cross-national comparison of production—inventory management practices. Engineering Costs and Production Economics, 19(1-3), 149-156.

Dear, A. (1989). Improvement in management and control of inventory. Purchasing & Supply Management Journal, 1(5), 15-19.

Elsayed, K. (2015). Exploring the relationship between efficiency of inventory management and firm performance: empirical research. International Journal of Services and Operations Management, 21(1), 73-86. https://doi/abs/10.1504/IJSOM.2015.068704

Elsayed, K., & Wahba, H. (2016). Reexamining the relationship between inventory management and firm performance: An organizational life cycle perspective. Future Business Journal, 2(1), 65-80. https://doi.org/10.1016/j.fbj.2016.05.001

Eroglu, C., & Hofer, C. (2011). Lean, leaner, too lean? The inventory-performance link was revisited. Journal of Operations Management, 29(4), 356-369. https://doi.org/10.1016/j.jom.2010.05.002

Florén, H., Frishammar, J., Lee, C., Ericsson, M., & Gustafsson, S. (2013, June). A framework for raw materials management in process industries. In R&D Management Conference, Manchester, UK, June (pp. 26-28).

Florén, H., Frishammar, J., Löf, A. & Ericsson, M. (2019). Raw materials management in iron and steelmaking firms. Mineral Economics, 32(1), 39-47. https://doi.org/10.1007/s13563-018-0158-7

Fornell, C. & Larcker, D.F. (1981). Structural Equation Models with Unobservable Variables and Measurement Error: Algebra and Statistics. Journal of Marketing Research, 18(3), 382-388. https://doi.org/10.2307/3150980

Fullerton, R.R., & McWatters, C.S. (2001). The production performance benefits from JIT implementation. Journal of operations management, 19(1), 81-96. https://doi.org/10.1016/S0272-6963(00)00051-6

Goonatilake, L. (1990). Inventory management in the manufacturing sector in developing countries. Engineering Costs and Production Economics, 19(1-3), 19-24.

Habtoor, N., & Alharbi, A. A. (2020). Importance of human factors to organizational performance. International Journal of Management and Human Science (IJMHS), 4(1), 11-22.

Hair Jr, J.F. & Lukas, B. (2014). Marketing Research. McGraw-Hill Education Australia.

Hitt, M.A., Xu, K., & Carnes, C.M. (2016). Resource based theory in operations management research. Journal of Operations Management, 41, 77-94. https://doi.org/10.1016/j.jom.2015.11.002

Kolias, G.D., Dimelis, S.P., & Filios, V.P. (2011). An empirical analysis of inventory turnover behaviour in Greek retail sector: 2000–2005. International Journal of Production Economics, 133(1), 143-153. https://doi.org/10.1016/j.ijpe.2010.04.026

Koumanakos, D.P. (2008). The Effect of Inventory Management on Firm Performance. International Journal of Productivity and Performance Management, 57(5), 355-369. https://doi.org/10.1108/17410400810881827

Krishanamacharyulu, M., Rajyalakshmi, N. C., Isaac, O., Harish, K. S., Iqbal, M. I., & Srivastava, K. (2021). Study on Effect of Meditation on Individual’s Performance at Workplace. International Journal of Management (IJM), 12(1), 379-389. https://doi.org/10.34218/IJM.12.1.2021.033

Macbeth, D. (1989). Not purchasing but supply chain management. Purchasing & supply management. Journal of the Institute of Purchasing & Supply, 1(9), 11-20. https://doi.org/10.1016/j.ijpe.2010.04.026

Muchaendepi, W., Mbohwa, C., Hamandishe, T. & Kanyepe, J. (2019). Inventory management and performance of SMEs in the manufacturing sector of Harare. Procedia Manufacturing, 33, 454-461. https://doi.org/10.1016/j.promfg.2019.04.056

Nallusamy, S., Christina-Mary, P.P. & Pragna, B.D. (2018). Development of inventory model for health care system in multi-speciality hospitals using ARENA. Indian Journal of Public Health Research and Development, 9(2), pp 276-282. https://doi.org/10.5958/0976-5506.2018.00133.X

Sahari, S., Tinggi, M., & Kadri, N. (2012). Inventory management in Malaysian construction firms: impact on performance. SIU Journal of Management, 2(1), 59-72.

Simon, M. (1990). Fast and effective stock management, purchasing & supply management. Journal of the Institute of Purchasing & Supply Management, 6(9), pp 3-8.

Sirmon, D.G., Hitt, M.A. & Ireland, R.D. (2007). Managing firm resources in dynamic environments to create value: Looking inside the black box. Academy of Management Review, 32(1), 273-292. https://doi.org/10.5465/amr.2007.23466005

Skipper, J. B., Hanna, J. B., & Cegielski, C. G. (2009). Supply chain contingency planning and firm adoption: an initial look at differentiating the innovators. Transportation Journal, 48(2), 40-62. https://doi.org/10.5325/transportationj.48.2.0040

Vastag, G. & Whybark, D. C. (2005). Inventory management: is there a knock-on effect? International Journal of Production Economics, 93, 129-138. https://doi.org/10.1016/j.ijpe.2004.06.011

Ziukov, S. (2015). A literature review on models of inventory management under uncertainty. Business Systems & Economics, 5(1), 26-35. https://doi.org/10.13165/VSE-15-5-1-03

Downloads

Published

2022-04-01

How to Cite

Marvel Ogah, Gregory Asiegbu, & Nike Moradeyo. (2022). Effect of Raw Material Inventory on Operational Performance in An Emerging Economy: Insight from The Nigerian Manufacturing Sector. International Journal on Recent Trends in Business and Tourism (IJRTBT), 6(2), 31-43. Retrieved from https://ejournal.lucp.net/index.php/ijrtbt/article/view/1676