Keyword

Inventory management, performance, knowledge of owner/manager, retailing sector, small and medium enterprises

Abstract

The adoption of systematic inventory management practices (IMPs) is a critical success factor for businesses in a retailing industry. Nevertheless, there is lack of thorough understanding in the field of inventory management within a micro business setting. Thus, this study empirically explores the extent of IMPs in the micro retailing enterprises and the mediating effect of knowledge of IMPs in the relationship between IMPs and micro enterprises’ performance. A questionnaire was sent to a random sample of 300 Malaysian owners/managers of micro retailing enterprises and 100 completed replies were received. The study finds that the usage level of systematic IMPs is moderate among the micro retailing enterprises with evaluation of suppliers as the most frequently applied IMPs. Meanwhile, inventory management activities related to reorder point, purchasing and controlling are adopted moderately. Interestingly, this study confirms that there is a significant direct effect of IMPs on enterprise performance. The relationship is partially mediated by knowledge of inventory management. This research enhances the body of knowledge in inventory management and the firm’s performance particularly within the context of micro enterprises.


Full Text : PDF

References
  1. Ayad, A 2008, ‘Optimizing inventory and store results in big box retail environment’ International Journal of Retail & Distribution Management, vol. 36, no. 3, pp. 180-191.
  2. Ahmad, K & Zabri, SM 2016, ‘Inventory management practices among Malaysian micro retailing enterprises’, Journal of Business and Retail Management Research, vol. 11, no.1, pp. 103-115.
  3. Bahri, M, St‐Pierre, J & Sakka, O 2011, ‘Economic value added: a useful tool for SME performance management’, International Journal of Productivity and Performance Management, vol. 60, no.6, pp.603-621 
  4. Bala, PK 2012, ‘Improving inventory performance with clustering based demand forecasts’, Journal of Modelling in Management, vol. 7, no.1, pp. 23–37. 
  5. Baron, O, Berman, O, & Perry, D 2011, ‘Shelf Space Management When Demand Depends on the Inventory Level’, Production and Operations Management, vol. 20, no. 5, pp. 714–726.
  6. Basu, N & Wang, X 2011, ‘Evidence on the relation between inventory changes, earnings and firm value’, International Journal of Business and Finance Research, vol. 5, no.3, pp.1–14.
  7. Boute, NR, Lambrecht, MRL, Lambrecht O & Sterckx, P 2006, ‘An analysis of inventory turnover in the Belgian manufacturing industry, wholesale and retail and the financial impact on inventory reduction’, Faculty of Economics and Applied Economics.
  8. Cannon, AR 2008, ‘Inventory Improvement and Financial Performance’, International Journal of Production Economics, vol.115, pp. 581–593 
  9. Chen, H, Frank, MZ & Owen, QW 2005, ‘What actually happened to the inventories of American companies between 1981 and 2005?’, Management Science, vol. 51, no.7, pp. 1015–1031.
  10. Chikan, A & Whybark CD 1990, ‘Cross-national comparison of production and inventory management practices’, Engineering Costs and Production Economics, vol. 19, pp. 149-56.
  11. Deloof, M 2003, ‘Does working capital management affect profitability of Belgian firms?’, Journal of Business Finance Accounting, vol. 30, no. 3-4, pp. 573–587. 
  12. Demeter, K 2003, ‘Manufacturing strategy and competitiveness’ International Journal of Production Economics, vol. 81/82, pp. 205–213.
  13. De Vries, J 2011, ‘The shaping of inventory systems in health services: A stakeholder analysis’, International Journal of Production Economics, vol. 118, no. 1, pp. 136–145
  14. Elsayed, K & Wahba, H 2016, ‘Reexamining the relationship between inventory management and firm performance: An organizational life cycle perspective’, Future Business Journal, vol. 2, pp. 65–80.
  15. Folinas, D & Shen, CY 2014, ‘Exploring Links among Inventory and Financial Performance in the Agricultural Machinery Industry’, International Journal of Food and Agricultural Economics, vol. 2 no. 4, pp. 1-12.
  16. Fullerton, RK, McWatters, CS, & Fawson, C 2003, ‘An examination of the relationship between JIT and financial performance’, Journal of Operations Management, vol. 21, no. 4, pp. 383–404.
  17. Gaur, V & Kesavan, S 2009, ‘The effects of firm size and sales growth rate on inventory turnover performance in the US retail sector’, Agrawal, N., Smith, (Eds.), Retail supply chain management: Quantitative models and empirical studies, Springer, US, pp. 25–52
  18. García‐Teruel, PJ & Martínez‐Solano, P 2007, ‘Effects of working capital management on SME profitability’, International Journal of Managerial Finance, vol. 3, no.2, pp.164-177,
  19. Gitman, LJ & Zutter, CJ 2012, ‘Principles of managerial finance. Boston: Pearson Prentice Hall
  20. Heizer, J & Render, B 2014, Operations Management, Sustainability and Supply Chain Management. 11th Ed. Pearson.
  21. Jonsson, P & Mattsson, SA 2008, ‘Inventory management practices and their implications on perceived planning performance’, International Journal of Production Research. vol. 46, no.7, pp. 1787-1812.
  22. Keramidou, I, Mimis A & Pappa, E 2011, ‘Estimating technical and scale efficiency of meat products industry: The Greek case’, Journal Applied Science, vol.11, no. 971-979.
  23. Kinney, MR& Wempe, WF 2002, ‘Further evidence on the extent and origins of JIT’s profitability effects’, The Accounting Review, vol. 77, no.1, pp. 203–226.
  24. Kolias, GD, Dimelis SP & Filios, VP 2011, ‘An empirical analysis of inventory turnover behaviour in Greek retail sector: 2000–2005’, International Journal of Production Economics, vol. 133, no. 1, pp. 143–153. 
  25. Kotzab, H & Teller, C 2005, ‘Development and empirical test of grocery retail instore logistics model. British Food Journal, vol. 107, no. 8, pp. 594-605. 
  26. Koumanakos, DP 2008, ‘The effect of inventory management on firm performance. International Journal of Productivity and Performance Management, vol. 57, no. 5, pp.  355-369.
  27. Obermaier, R, & Donhauser, A 2012, ‘Zero inventory and firm performance: A management paradigm revisited’, International Journal of Production Research, vol. 50, no.16, pp. 4543–4555. 
  28. Ogbo, AI, Onekanma IV, & Wilfred IU 2014, ‘The Impact of Effective Inventory Control Management on Organisational Performance: A Study of 7up Bottling Company Nile Mile Enugu, Nigeria’, Mediterranean Journal of Social Sciences, vol. 5, no.10, pp. 109-118.
  29. Panigrahi, AK 2013, ‘Relationship between Inventory Management and Profitability: An Empirical Analysis of Indian Cement Companies’, Asia Pacific Journal of Marketing & Management Review, vol. 2, no. 7, pp. 107 – 120.
  30. Pong, C & Mitchell F 2012, ‘Inventory investment & control: How have UK companies been doing?’, British Accounting Review, vol. 44, no. 3, pp. 173–188.
  31. Rajeev, N 2008, ‘Inventory management in small and medium enterprises: A study of machine tool enterprises in Bangalore 'Management Research News, vol. 31, no.9, pp. 659-669.
  32. Shah, R, & Shin, H 2007, ‘Relationships among information technology, inventory, and profitability: An investigation of level in variance using sector level data’, Journal of Operations Management, vol. 25, no. 4, pp. 768–784.
  33. Strohhecker, J & Grobler, A 2013, ‘Do personal traits influence inventory management performance? The case of intelligence, personality, interest and knowledge’, International Journal Production Economics, vol. 142, pp. 37–50.
  34. Waller MA, Nachtmann, H & Hunter, J 2006, ‘Measuring the impact of inaccurate inventory information on a retail outlet’, The International Journal of Logistics Management, vol. 17, no.3, pp. 355 -376.
  35. Waters, D 2003, Inventory Control and Management, 2nd Edition, 1-408. Wiley.
  36. Watts, CA, Kim, KY & Hahn, CK 1990, ‘The supplier development program: a conceptual model’, Journal of Purchasing and Materials Management, pp. 2-7. 
  37. Vastag, G & Whybark, DC 2005, ‘Inventory management: is there a knock-on effect?’, International Journal of Production Economics, vol. 93/94, no. 1, pp.129–138.
  38. Zainudin, A 2015. SEM Made Simple: A Gentle Approach to Learning Structural Equation Modeling MPWS Publisher. Bangi Selangor. Malaysia