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PROJECT TOPIC AND MATERIAL ON THE INVENTORY MANAGEMENT PRACTICES AND ORGANIZATIONAL EFFICIENCY. A CASE: IBANDA DISTRICT LOCAL GOVERNMENT
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- Name: THE INVENTORY MANAGEMENT PRACTICES AND ORGANIZATIONAL EFFICIENCY. A CASE: IBANDA DISTRICT LOCAL GOVERNMENT
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The research study focused on the inventory management and organization efficiency in Ibanda District local Government t. The study was guided by the following objectives; to analyze the inventory management practices used by Ibanda District local Government, to find out the methods used in performance measurement and its contributions to organization’s efficiency and to find the importance relationship between inventory management and organization’s efficiency to Ibanda District local Government.
The study used a descriptive survey method. By use of simple random sampling, 100 respondents from the departments of store, purchasing, top management and others were selected from the area of study. From each department respective officers took part in the study. In all a total of 100 respondents took part in this research study. The study used closed ended questionnaires to collect data. The study reveals that Ibanda District local Government holds stock that is used to satisfy current and future needs of the people of Ibanda District local Government. The district carries out monthly stock taking of items in stores and stock is inspected for quality and right specifications.
The methods that are used by Ibanda District local Government to manage inventory are stock valuation where by the system used FIFO to record the value of the stock that is held at a particular period for accountability purposes and writing of final accounts to be submitted to the Ministry of Health . The organization has a strong data centre for its stock such as receipts, invoices which help in keeping record of all the relevant prices so as to carry out a stock valuation. Basing on the findings, Inventory management helps organizations to cut down costs incurred by an organization. It can therefore be concluded that inventory management practices are related to performance of an organization, corporation or business as regards service delivery
From the findings, it was evident that inventory management leads to efficiency and effectiveness by avoiding over stocking and under stocking. To ensure this stock taking is carried out to determine the stock levels and hence determine the organizations worth. It also helps to determine the balance of stock and check for any variances and make reconciliations to make sure that the physical stock corresponds with what is within the records. This helps management to detect for any variations and consider possible solutions to solving these problems.
TABLE OF CONTENTS
Researchers and practitioners continue to face the age-old challenges associated with inventory level setting and replenishment. However, the realities of the environment in which these challenges must be met, is evolving. The popular formula, which the competitive battleground is shifting from organization vs. organization to supply chains vs. supply chain, is now perceived to be a reality (Srinivasan, Srinivasan, & Choi, 2010). Effective inventory management has become a prerequisite to gaining and retaining a competitive advantage and organizational performance (Moberg, Cutler, Gross, & Speh, 2012).
As researchers and practitioners move from the traditional view of enterprises as separate, independent entities towards more collaborative models (Singh, 2005), the management of inventory increases in importance. The planning and control of inventories and related activities are vital to managing a supply chain (Jones & Riley, 1985). This is especially true for service-based supply chains. Services have become increasingly important as the driving force in the decentralized system of local governance (Ellram, Tate, & Billington, 2004).
Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods. The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting (Wilberforce, 2007). The aim of inventory management is to hold inventories at the lowest possible cost, given the objectives to ensure uninterrupted supplies for ongoing operations. When making decision on inventory, management has to find a compromise between the different cost components, such as the costs of supplying inventory, inventory-holding costs and costs resulting from insufficient inventories ( Hugo, Baden horst- Weiss and Van Rooyen 2002:169).
According to Wild (2002:4), inventory control is the activity which organize the availability of items to the customers. It coordinates the purchasing, manufacturing and distribution functions to meet the marketing needs. This role includes the supply of current sales items, new products, consumables; spare parts, obsolescent items and all other supplies. Inventory enables a company to support the customer services delivery, logistic or manufacturing activities in situations where purchasing or manufacturing is too protracted, or because quantities can not be provided without stocks.
With increasing need for effective operations management, organizations now requires that costs and cost centers be well managed and controlled. Consequently stores as a cost centers must be well managed. In practice firms spend an inordinate amount of resources i.e. time and money managing and directing their suppliers to ensure that critical inventory/ stock levels are maintained and the vital flow of product needs for operations continue. Ibanda District local Government stores are set up to provide safe custody of Government properties and goods. Given the use of public funds, Local Governments should ensure that there are proper stock control systems and adequate measures to prevent abuse, unauthorized disposal of serviceable stores for personal gain, misappropriation of the assets and theft (MLG, 2010).
Due to unpredicted demand in market trends, Ibanda District Local Government holds stock to enable the District meet its daily needs and in so doing, like any other Organization, it meets two conflicting needs: whether to maintain low or high levels of stock. However, both situations are undesirable because excessive stock levels leads to increased holding costs, which leaves the Government funds idle and hence reduced profitability. On the other hand, low levels of stock leads to stock outs and their related costs such as loss of client’ good will and disruption in the operation schedules, which ultimately would lead to poor organization performance. It’s therefore important for the district stores to manage inventory efficiently and effectively so as to improve on the organization’s performance. The objective of this dissertation research effort is to investigate the evolving role of inventory management in today’s local government environment.
Traditional views of inventory management tend to focus on inventory at the item level and to be reactive in nature, often seeking to optimize inventory performance at a single location at the expense of the overall system (Closs, 1989). Despite this growth in value and importance of more rigorous inventory techniques, many organizations continue to rely on simple, Use fixed order point system/two bin system; periodic review system; economic order quantity model; ABC Inventory Control Model, item based approaches (Thonemann, Brown, & Hausman, 2002). Under these traditional approaches to inventory management, inventory levels for an item are determined by simple formulas that balance inventory holding, ordering, and stock out costs (Thonemann et al., 2002).
According to Toomey (2000), the ultimate aim of inventory is to serve the general public. As explained by Viale (1991) inventory is a very expensive asset in an organization; however, this expensive asset can be replaced by inventory information which is less expensive. Some of the problems facing Local government today are the ability to provide quality services to the general public whose root cause lies in poor inventory management (Manjrekar, Bhonsale & Kamath, 2008). The main challenge today among of Local government in Uganda is the need to enhance efficiency while at the same time achieving effectiveness (MLG, 2010). However, Local government in Uganda have been accused of poor inventory management techniques and this has greatly affected their ability to satisfy their customers (Sheila, 2010; Mutua, 2010). The study therefore sought to carryout an investigation on the role of inventory management on organizational efficiency among the Local government in Uganda using a case of Ibanda District Local Government.
The purpose of the study was to investigate the relationship between inventory management practices and organizational efficiency in Ibanda District local Government.
- To analyze the inventory management practices used by Ibanda District local Government.
- To find out the methods used in performance measurement and its contributions to organization’s efficiency.
- To find the importance relationship between inventory management and organization’s efficiency to Ibanda District local Government
- What are the inventory management practices used by Ibanda District local Government?
- What are the methods used in performance measurement and its contributions to organization’s efficiency in the Ibanda District local Government?
- What are the relationships between inventory management and organization efficiency?
The study will focus inventory management practices used by Ibanda District Local Government and their effectiveness, importance of inventory management practices on the performance local governments, challenges faced in applying inventory management practices by local governments. This provided reliable for the study.
The study was conducted from Ibanda District Local Government headquarters, Ibanda district in western Uganda. Ibanda district is located in South western Uganda. The district borders with Mbarara district to the south, Kiruhura to the east, Bushenyi to the west, and Kamwenge to the north. The district covers an estimated area of 967 square kms. Ibanda district is in the southwestern highlands of Uganda, at an altitude of 1,800 meters above sea level. The area was selected for the study because for some time, cases of poor measures of inventory management and services delivery were of interests.
The period under study covered using figures 2010 to 2015. This period was chosen because increasing stock costs were experienced especially for drugs, which expired in stores and thus the District set up efforts to control them.
The study was very significant to the different stakeholders that include; management, the Researcher, Suppliers, Consumers and Government organizations in the following ways;
The study was very significant to the different stakeholders that includes; District management, consumers of the district services and government organizations in that the study will help the district management to develop an organized thinking on the importance of inventory management practices in an organization.
The study in the process seeks to uncover many potentially neglected areas in inventory management literature. For instance, the study can also be seen as an answer to the call for research seeking more investigation into the relationship of inventory management with supply management concepts.
The study is of paramount importance to academicians and practitioners as the proposed framework is expected to uncover many neglected relationships that are of interest to managers in the local government. In addition, specific patterns of inventory management practices would also be revealed which would further encourage district managements to implement this technique and possibly improve their organization’s performances. The study seeks to systematically address this issue.
The Researcher may enable to understand in details inventory management practices and relate the findings to the real situation. Other stakeholders who need knowledge about stock control can use the Research as a reference.
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