80 pages: Effective Stock Management and Its Impact on the Performance of Small and Medium Scale Enterprises (SMEs) in Cameroon.

CHAPTER ONE

Background To Study

understanding Stock management

Stock management refers to the process of overseeing and controlling the inventory of goods within a business. It involves activities such as tracking inventory levels, ordering and replenishing stock, managing storage, and forecasting demand. Effective stock management ensures that the right amount of stock is available to meet customer needs without overstocking or understocking. This process helps optimize inventory levels, reduce carrying costs, improve cash flow, and enhance overall operational efficiency and customer satisfaction.

In reality, Small and Medium Enterprises occupy a very important place in developing, as well as developed countries’ economy, considering its contribution to national income, employment, exports, and entrepreneurship development (Storey D. J. 1994). Inventory constitutes a very significant portion of the current assets of Small and Medium Scale Enterprises because most Small and Medium Scale Enterprises’ assets are in inventory form and their turnover represents the primary source of revenue and subsequent earnings to Small and Medium Scale Enterprises (Prempeh 2016). 

Considering the level of investment required for inventory in Small and Medium Scale Enterprises, it is essential to manage inventory efficiently and effectively in order to avoid idle or shortage resources and also ensure production continuity. Inefficient management of inventory can lead to under-utilisation of capacity and loss of profit. The under-utilisation of capacity can intensify the unemployment problem in any economy.

Well and efficient control of inventories can contribute to the effective operation of the firm and hence the firms overall profit (Dubelaar, 2000). In many developing economies, small and medium scales enterprises employ substantial number of the work force Therefore, efficient management of inventory in small and medium scale enterprises is very important for meaningful economic growth and or development of any country.

Inventories make up an important part of a manufacturing firm’s production process, as they facilitate continued production. The manner in which inventories are managed affects the performance of an organization because it contributes to the cost of production, which later affects profitability in the small and medium scale enterprises.

In order to manage inventories efficiently, effectively and obtain maximum performance in small and medium scale enterprises, the small and medium scale enterprises must normally have an inventory management system or practice which monitors or controls the flow of inventories so as to ensure that there is neither oversupply nor undersupply in the in small and medium scale enterprises.

Inventory include; inventory of raw materials, inventory of semifinished products, inventory of work in progress and inventory of finish products. Inventory management practices or system include; economic order quantity, net transaction approach, just in time management system and vendor managed inventory system. While performances in SMEs will include; expansion of small and medium scale enterprises, profitability, growth of SMEs and return on capital employed. Therefore, this study intends to examine the relationship between inventory management and the performance in small and medium scale enterprises.

Statement Of The Problem

Inventories occupies the most tactical position in the structure of working capital of most enterprises. Efficient and effective management of inventory in any small and medium scale enterprises saves cost and hence saving SMEs from poor quality production, disappointment of seasoned customers, loss of profit and good social responsibility. One of the key factors for the success of a firm is effective flow management in supply restraints.

The challenge in managing inventory is to balance the supply of inventory with demand. A firm would preferably want to have enough inventories to satisfy the demands of its customers and avoid lost sales due to inventory stock-outs. Also, the firm does not want to have too much inventory staying on hand because of the cost of carrying inventory. Enough but not too much is the ultimate unbiased (Coyle & Bardi, 2003)

Eshun (2014) point out that, despite the benefits of inventory management, SMEs have always ignored the potential savings from proper inventory management and end up having more funds invested in inventory than necessary. They are therefore not able to meet customer demands because of poor distribution of investment among inventory items hence the basis of this study.

In the majority of small and medium scale enterprises, inventory constitutes the most significant part of current assets. In this view, the study wishes to assess the effect of inventory management practices on the performance of small and medium scale enterprises. 

A number of studies have been carried out in this area of inventory management in small and medium scale enterprises. Globally on studies of improving inventory management in small and medium scale enterprises, Koumanakos (2008) studied the effect of inventory management on firm performance in manufacturing firms in Greece. Asare and Prempeh (2016) studied the impact of efficient inventory management on profitability in selected manufacturing firms in Ghana.

Augustine and Agu (2013) examined the effect of Inventory Management on organizational effectiveness in Nigeria, Ndunge (2013) examined inventory management and productivity of small and medium scale enterprises. Mwangi (2013) examined inventory management and supply chain performance of non-governmental organizations in the agricultural sector.

This study therefore sought to determine the relationship between inventory control or management and the performance of small and medium scale enterprises in the municipality of Buea-Cameroon. The study will provide us with answers to the following research questions.

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