AN ASSESSMENT OF INVENTORY MANAGEMENT

SYSTEM
THE CASE OF HABESHA CEMENT SHARE
COMPANY
By: Fetiya Mohammed Seman

ID No: SGS/0482/2012A

Advisor: Dr. Habtamu Abebaw, PhD

A Thesis submitted to School of Graduate Masters of Business Administration

in Partial Fulfillment of the Requirements for the Degree of Master of
Business Administration

Addis Ababa, Ethiopia

June, 2021G.C
 AN ASSESSMENT OF INVENTORY MANAGEMENT
SYSTEM:
THE CASE OF HABESHA CEMENT SHARE COMPANY

BY
FETIYA MOHMMED SEMAN
ID NO. SGS/0482/2012A

A THESIS SUBMITTED TO ST.MARY’S UNIVERSITY,

SCHOOL OF GRADUATE STUDIES IN PARTIAL FULFILLMEN
OF THE REQUIRMENTS FOR THE DEGREE OF MASTERS OF
BUSINESS ADMINISTRATION

June,2021
ADDIS ABABA, ETHIOPIA

ii
 AN ASSESSMENT OF INVENTORY MANAGEMENT
SYSTEM:
THE CASE OF HABESHA CEMENT SHARE COMPANY

BY
FETIYA MOHMMED SEMAN
ID NO. SGS/0482/2012A

HABTAMU ABEBAW (PhD)

ADVISOR Signature & Date

External Examiner Signature & Date

Internal Examiner Signature & Date

iii
Declaration
I, the undersigned, declare that the thesis entitled “An Assessment of Inventory Management
System in the case of Habesha Cement Share Company.” submitted by me for the award of the
Masters of Business Administration (MBA), at. St. Mary’s University, Original work and all
sources of materials used for the study have been duly acknowledged.
I have carried out this project work independently with the guidance and support of my advisors.
This study has not been presented for the award of any other Degree, Diploma, and Fellowship of
any other university or institution.

Fetiya Mohammed Seman

Name: Signature

St. Mary’s University, Addis Ababa June , 2021

iv
ACKNOWLEDGEMENTS

First of all, I thank the Almighty God who made everything a reality during the entire research
Period. Then my Special acknowledgement goes to my academic advisor
Dr.HabtamuAbebaw(PhD) whose guidance and positive criticism made the project a success.
And, also I want to thank Mr. Ahmed Esmael for his toughness in providing me with valuable
comments and constructive suggestions in the course of preparing this thesis. And I am very great
full thanks to my friend Meron Abebe in facilitating data collection sites as well as date collection
Process . I am indebted to the management and employees of Habesha Cement Share Company
from which data was collected. To all the others not specifically mentioned but who contributed
to the writing of this project, thank you very much. Finally, a million thanks to my teachers and
classmates of MBA 2020-2021.
Thank you so much and God bless you all!

v
LIST OF ABRIVATION AND ACRONYMS
ABC Always Better Control
A.C Average Cost
BOM Bill of materials
CEO Chief Executive Officer
EOQ Economic Order Quantity
ERP Enterprise Resource Planning
FIFO First In First Out
GRN Goods received Note
HCSC Habesha Cement Share Company
IT Information Technology
JIT Just-in-time
LIFO Last In First Out
MRO Maintenance, Repair and Operating
MRP Material Resource Planning
POs Purchase Order
PSCD Procurement and supply chain Department
ROA Return on Asset.
S.C Standard Cost
VMI Vendor Managed Inventory
WIP Work in progress

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LIST OF TABLE
Table 1- 1 Demographic characteristics of Employees ................................................................ 30

Table 2- 1 Inventory management practice and Techniques-Production Department response ... 31

Table 3- 1 Inventory management practice and techniques store and quality control response ... 32

Table 4- 1 Timing and quantity of order-Purchasing Department responses (PSCD).................. 34

Table 5- 1 store function response ................................................................................................ 35

Table 6- 1 Inventory control Reports ............................................................................................ 36

Table 7- 1 coordination between departments–stores department responses ............................... 37

Table 8- 1 coordination between departments–production department responses ....................... 38

Table 9- 1 coordination between purchasing departments ........................................................... 39

Table 10- 1 Insufficient Storage Space: Store Department Responses......................................... 41

Table 11- 1 Assessment of Information Technology Practices: IT department response ............ 42

vii
Contents
LIST OF TABLE .................................................................................................................... vii
CHAPTER ONE ....................................................................................................................... 2
1. INTRODUCTION ................................................................................................................. 2

1.1 Background of Study .......................................................................................................... 2

1.2 Statement of Problem .......................................................................................................... 5
1.3 Research Questions ............................................................................................................. 6
1.4 Objective of Study .............................................................................................................. 6
1.4.1 General Objective ............................................................................................................ 7
1.4.2 Specific Objective ............................................................................................................ 7
1.5 Scope of Study .................................................................................................................... 7
1.6 Significance Of Study ......................................................................................................... 7
1.7 Organization of Study ......................................................................................................... 8
CHAPTER TWO ...................................................................................................................... 9
2. LITRATURE REVIEW ......................................................................................................... 9

2.1 Theoretical Review ............................................................................................................. 9

2.1.1. Essence of Inventory and Inventory Management ............................................................ 9
2.1.2. Methods of Evaluating Inventory ................................................................................... 10
2.1.3 Inventory Management Techniques ................................................................................. 11
2.1.4 Usefulness of Effective Inventory Management .............................................................. 13
2.1.5 The Role of Inventory Management System ................................................................... 15
2.2 Empirical Review.............................................................................................................. 19
2.3 Objective of Inventory Management ................................................................................ 21
2.4 Research Gap .................................................................................................................... 22
2.5 Conceptual Framework ..................................................................................................... 22
CHAPTER THREE ................................................................................................................ 24
3. REASERCH METHODOLOGY ........................................................................................ 24
3.1 Description of the Study ................................................................................................... 24
3.2 Research Approach And Design ....................................................................................... 24
3.3 Population and Sampling Technique ................................................................................ 25

viii
3.3.1 Target Population ........................................................................................................... 25
3.4 Type and Source of Data................................................................................................... 25
3.5 Data Collection Technique ............................................................................................... 26
3.6 Procedure of Data Collection ............................................................................................ 26
3.7 Methods of Data Analysis ................................................................................................. 27
3.8 Validity And Reliability Test ............................................................................................ 27
3.8.1 Validity .......................................................................................................................... 27
3.8.2 Reliability....................................................................................................................... 28
3.9 Ethical Consideration ........................................................................................................ 28
CHAPTER FOUR ................................................................................................................... 29
4. DATA ANALYSIS AND PRESENTATION .................................................................... 29
4.1 Introduction ....................................................................................................................... 29
4.2 Response rate .................................................................................................................... 29
4.3 Demographic characteristics of the respondents............................................................... 30
4.3.1 Timing and Quantity of order ........................................................................................ 33
4.4 Problems associated with inventory management of the company .................................. 40
4.4.1 Lack of coordination ........................................................................................................ 40
4.4.2 Insufficient storage space ................................................................................................. 42
4.4.3 Absence of computerized system..................................................................................... 43
4.4.4 Lack of knowledge and skill ............................................................................................ 43
CHAPTER FIVE .................................................................................................................... 46
5. SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION ................. 46
5.1 Summary of Findings ........................................................................................................ 46
5.2 Conclusion ........................................................................................................................ 47
5.3 Recommendations ............................................................................................................. 48
5.4 Areas of Further Research ................................................................................................ 49
Appendix ................................................................................................................................. 52
Appendix1:Questionnaires ...................................................................................................... 53
Appendix 2: Interview Question ............................................................................................. 58

ix
 ABSTRACT

This research sought to examine the assessment of inventory management system of Habesha
Cement Share Company. The study is applied descriptive reserach design and mixed research
approach. The target population was the total number 48 employees of Habesha Cement Share
Company. Primary data were gathered using structured questionnaires and interview. the
questions were closed ended format. The study result revealed that the inventory management
system of Habesha Cement Share Company is somehow effective in managing the inventory level.
However; further improve is required in areas like inventory physical counting inspection,
handling of overstocking and under stocking of inventories, data accuracy and real time report
preparation. Moreover, the Company is mainly used perpetual inventory system to determine the
materials demand of the customers. More importantly, lack of management support, insufficient
qualified staffs and shortage of training are the major problems for assessment of inventory
management practices. Based on the findings, the study recommends that the managements of the
company should work hard to have its own standards and policies of inventory management the
current inventory control practices and procedures need to be reviewed and redesigned. The
management should stay up-to-date on inventory carrying cost. Only qualified and adequately
trained personnel should be involved in stock control

Key Words: Inventory management system of Habesha Cement Share Company

1
 Chapter One

Introduction
1.1 Background of the Study
Inventory is the totality of all the stock, which includes: raw materials, work-in-progress and
finished goods that enable an organizational to produce. It could also say to be the total amount
of goods and or materials contained in a store or factory at any given time Hilton, 1994.

Many organizations in today’s business environment are forced to increase their market share
both locally and globally in order to survive and sustain business growth. The challenge is to
design an effective strategy to minimize the continued operation costs and maximizing returns to
those organizations (Arnold, 2008).

Define inventory as the materials and supplies that a business or institution carries either for sale
or to provide inputs or supplies to the production process. Inventory is a substantial part of total
assets which are any stored resources that are used to satisfy the current or future customer
needs. Inventories in many organizations occupy a large part of costs which possibly affects the
profitability and manufacturing operations of the organization. So that (Sharma, 2009)suggested
that managing inventory efficiently has become an important operational weapon for companies
to coup the competitive pressures and financial costs

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, 2005)Effective inventory management has become a prerequisite to
gaining and retaining a competitive advantage and organizational performance (Moberg, 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. 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, 2004)Inventory management is primarily about specifying the size and

2
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 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 (Hugo, S.,
Baden ,W.,& Van Rooyen, 2004).

(Bowersox, 2002)Discussed that as inventory represents large part of asset, more effective
inventory management can result in increased sales revenue, customer satisfaction, significant
cash flow and profitability improvements. To attain improved performance, inventory managers
must make more accurate and timely decisions regarding when and how much to order.
However, the basic challenge is to determine the inventory level that works the best within the
organization. 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. Generally,
inventory management system is at its primitive nature by any standard in Sub-Saharan African
countries like Ethiopia (Shitaye&Wodaje, 2017).

The goal of inventory management is to balance supply and demand in order to keep customers
satisfaction to drive profits. The activities of effective and efficient inventory management are
critical to any successful business. Inventory management enables to give the right decisions
about what to buy how much to buy and when to buy within the capital limits. These are “value
decisions.” Excessive inventory investments can tie up capital that may be put to better use
within other areas of the business. On the other hand, insufficient inventory investment can lead
to inventory shortages and a failure to satisfy customer demand. A balance must be struck and
maintained. Generally, it can conclude that inventory management plays a role of coordinating
and managing the activities of all business segments (Namusonge,2015)

3
 1.2 Statement of Problem
The study of (Shitaye&Wodaje, 2017).indicated that the common problems that have seen in
Ethiopian basic Cement industries among other such as unbalanced demand and supply of basic
Cement industries, poor IT system, inefficient and faulty practice, absence of material manager,
poor delivery time, poor customer satisfaction, product unavailability, material cost, and material
warehouse problems. This showed that many Ethiopian basic Cement industries are exposed to
the problems of inventory management system.as discussed by (Awolabi,al.,et,
2014)Manufacturing Companies in recent times are faced with the problem of high cost of
production mainly as a result of inability of the management to have an effective control over
inventory. Unless operators understand the true costs of poor inventory management and
productivity, and they will continue have higher cost and lower profitability.Inventory
management is the key to any successful business distribution. Inventory management provides
everything that everyone needs to know about the receipt and movement of goods, the sale,
removal or other disposition of goods, and the precise valuation and status of goodsremaining in
inventory at any time. And also, effective inventory management allows a distributer to meet or
exceed his /her customer’s expectations of materials availability with the amount of each item
that will maximize the distributer’s net profit (Altekar, 2005).In contrary to this fact, due to
inefficient inventory management system in Habesha Cement Share Company, I would like to
mention the following external audit report as an example .On the 2019/2020external audit report
the audit firm mentioned on the management letter that a discrepancy of four types of raw
materials in between the yearly inventory report and the stock ledger data which resulted in an
over statement of more than 20 million birr. Therefore, this problem needs to be properly
addressed by the concerned management of the company by establishing a sound internal
control system and the study will help them to provide a mitigation mechanism together with the
core reason of the discrepancy. Since the inception of the company using reliable documents,
reports and other mechanisms to properly expose the situation.The inadequate Inventory
Management in turn give rise to improper decision regarding resource matters, which has an
adverse impact on quality and budget lose particularly to companies like Habesha Cement Share
Company which is resided in the third world countries like Ethiopia.The Purpose of this study
will to fulfill the following gaps in Habesha cement Share Company. Even if there are the
necessary Documents to receive and issue inventory items the stores capacity to keep the
necessary items safely and procedures followed by user departments to request and utilize these
resources is too poor in comparison with other similar firms with in sector. 5
First, at a time Habesha Cement Share Company has no any inventory Management
System, but manually handles the various available item using semi-skilled and
professional personnel. So, the study will show the right inventory management system
for the company.
Second, Even if there are the necessary documents to receive and issue inventory items
on the company, the stores capacity of the necessary items are keep safely but
procedures followed by user departments to request and utilize these resources is too
poor in comparison with other similar firms with in sector. This study will full fill and
accomplish all the necessary procedures how to handle the stores safely to compete with
the international companies and standards.
Third, the study will try how can avoid the common Ethiopian cement company problems
of unbalance demand and supply cement productions with quality and quantity production,
technological advances and pure inventory management system

6
1.3 Research Questions
Based on the above discussion the researcher tried to address the following basic
questions.
1. What kind of inventory handling tools does Habesha Cement SCo use during the
operation process?
2. What were the factors that are affecting the inventory management practices?
3. What are the major limitations of the existing inventory management system?
4. Does the inventory management method of the company affect the financial performance
of the organization?
5. What are the future plans in improving performance of the organization through
inventory management system?

1.4 Objective of Study

The objectives of this study are classified as general and specific objectives. The general
objectives specify the general purpose of the study and then based on these general objectives;
the specific objectives is be included in order to satisfy the research questions.

8
1.4.1 General Objective
The Main objective of this study is to assess the inventory management system Habesha Cement
Share Company.

1.4.2 Specific Objective

In line with the above General Objective, The study was addressing the following
specific objectives:
1. To asses type of Inventory Management system Habesha Cement Share Company.
2. To asses direct and indirect effect of the Inventory Management System of the Company.
3. To assess the major limitation of the existing Inventory Management of the Company
4. To investigate financial performance of the organization.
5. To check whet her t he company has future plans to improve the performance of
inventory management system and give suggestion.

1.5 Scope of Study

Basically, the study is focused on the assessment of inventory management practices of Habesha
cement Share Company. It is located in Oromia region Holeta town. And its head office is
located at the center of Addis Abeba. the researcher was conducting the study on issues related
with inventory management practices, coordination between production and purchasing
departments ,how the managements used the store efficiently, how the inventory management
practice were automated and how the management handle the stock e.t.c

1.6 Significance Of Study

This study help the management of the organization in order to identify the various possible risk
of failure or mistakes made by employ in relation to inventory management. Also enable the
managers' aware of the importance of inventory management. It is helpful to the auditor in this
organization to know their role in the organization. On the other hand, It allow the researcher to
practice a larger similar study could be performed in organizational sector and to other
stakeholders who need knowledge about inventory management system can use the Research as
a reference.

9
1.7 Organization of Study
The research paper was organized in five chapters. In the first chapter, it is comprised of the
background of the study, background of the organization, statement of the problem, objective of
the study, significance of the study, scope of the study and organization of the study. The second
chapter deals with literature review of the study and the third chapter deals with methodology,
the forth chapter deal with data presentation, analysis and interpretation and the final chapter
provides discussion of study finding, conclusion and recommendation of the study.

10
 Chapter Two
Literature Review

2.1 Theoretical Review

2.1.1. Essence of Inventory and Inventory Management

(Arnold, 2008) defines inventory as the materials and supplies that a business or institution
carries either for sale or to provide inputs or supplies to the production process. Additionally,
(Ngugi & Godana, 2014) Ascertained that inventory is essential to organization for
production activities, maintenance of plant and machinery as well as other operational
requirements. (Subramanian, 2008) defines Inventory as the set of raw materials, partially
finished goods andfinished goods, an organization holds to meet its operational needs. In
other words, it is aphysical stock of goods kept in store to meet the anticipated demand
and they represent the second largest asset of manufacturing companies next to plant and
equipment.
(Lau& Snell, 2006) noted that the inventory management scope is concerned with the
replenishment and lead time, carrying costs of inventory, asset management inventory
forecasting, inventory valuation, inventory visibility, available physical space for inventory,
quality management, returns and defective goods and damage forecasting.
(Stevenson, 2009) inventory management is defined as a framework employed in firms in
controlling its interest in inventory. It includes the recording and observing of stock level,
estimating future request, and settling on when and how to arrange.
Inventory as an asset on the balance sheet of companies has taken on increased importance
because many companies are applying the strategy of reducing their investment in fixed assets

11
which even highlights the significance of reducing inventory. Changes in inventory levels affect
important financial parameters called Return on Asset. Reducing inventory usually improves
ROA, and vice versa if inventory goes up without offsetting increases in revenue.
According to (Kotler, 2000) inventory management refers to all the activities involved in
developing and managing the inventory levels of raw materials, semi-finished materials and
finished goods so that adequate supplies are available and the costs of over or under stocks are
low.
Inventory generally refers to the materials in stock. It is also called the idle resource of an
enterprise. Inventories represent those items which are either stocked for sale or they are in the
process of manufacturing or they are in the form of materials, which are yet to be utilized.
(Lysons, K., & Farrington, B, 2012) state that Inventories are stock supplies of raw materials,
suppliers, components, work in process, and finished goods that appear at numerous points
throughout a firm’s production and logistics channel .Inventory refers to the value or quantity of
raw materials, supplies, work in progress (WIP) and finished stock that are kept or stored for use
as need arises.
(Kothari, 2004) Define raw materials are commodities such as steel and lumber that go into the
final product. Supplies include items such as Maintenance, Repair and Operating (MRO)
inventory that do not go into the final product. Work in progress is materials that have been
partly fabricated but are not yet completed. Finished goods are completed items ready for
shipment.
(Sharma, 2009) Define inventory as the quantity of goods, raw materials, or other resources that
are idle at any given point of time. From the definition above, inventories consist of raw
materials, component parts, supplies or finished assemblies etc. which are purchased from an
outside source, and goods manufactured in the enterprise itself. In simple words, inventory refers
to stocks held by affirm.
2.1.2. Methods of Evaluating Inventory
There are four methods accounting uses to cost inventory namely first in first out (FIFO), last in
first out (LIFO), average cost (A.C) and standard cost (S.C). First In First Out (FIFO): This
method assumes that the oldest (first) item in stock is sold first. In rising prices, replacement is at
a higher price than the assumed cost. This method does not reflect current prices and replacement
will be understated. The reverse is true in a falling price market. Last In First Out (LIFO): This
12
method assumes the nearest (last) item in stock is the first sold. In rising prices, replacement is at
the current price. In a falling price market existing inventory is overvalued. However, the
company is left with an inventory that may be grossly under stated in value. Average Cost
(A.C): This method assumes an average of all prices paid for the article. The problem with this
method in changing prices (rising or falling) is that the cost used is not related to the actual cost.
Standard Cost (S.C): This method uses cost determined before production begins. The cost
includes direct material, direct labor and overhead. Any difference between the standard cost and
actual cost is stated as a variance (Arnold, et al. 2008).
2.1.3 Inventory Management Techniques
Here under are the inventory management tools to be employed by different organizations to
attain an affective inventory management, efficiency production and profit maximization.
Economic order quantity: According to (Bowersox, 2002) the inventory management needs to be
organized in a logical way so that the organization can be able to know when to order and how
much to order. This must be attained through calculating the Economic Order Quantity (EOQ).
Monetary request amount engages correlation to arrange their stock reestablishment on an ideal
premise. For instance, the arrangement can be scheduled to happen from month to month,
quarterly, half yearly, or yearly. By so doing, it enables firms to have insignificant limit costs or
zero inside their circulation focuses. Along these lines, as associations attempt to enhance the
stock administration, the EOQ and Re-Order Point (ROP) are necessary instruments that
associations can utilize.
1. Just in time technique
The JIT technique is a Japanese philosophy which comprises having the right things in
the right quality and amount in the correct place at the opportune time. Utilization of JIT
technique brings about the increment in quality, profitability, and effectiveness, enhanced
correspondence, and declines in expenses and wastes. (Hutchins, D., & Gower, 1999)
characterized JIT as a process that is prepared for moment response to the request without
the necessity for any overstocking, either in the desire of the application being
approaching or as a concern of improvident characteristics all the while. (Hutchins, D.,
& Gower, 1999) additionally concentrated on that the prime objective of JIT technique is
the accomplishment of zero stock, not simply inside the bounds of a single association at
the end of the day all through the whole production network.
13
2. ABC analysis
The ABC stock control technique relies on that the decision a little bundle of the things
may usually address the weight of money estimation of the total stock. It is used as a part
of the era method while a tremendous number of things may happen from a little part of
the money estimation of stores. Accordingly, to manage stock control high regard things
are more solidly controlled than low regard things. ABC examination is an essential
action method that follows the Pareto principle concerning an organization’s arrangement
of stock. Most organization attempts and oversights are depleted on managing A thing. C
things get the base thought, and B things are in the centers. The ABC approach ranks
using the following criteria: A things represent 70–80% of the firm’s annual consumption
approximation and just 10–20% of aggregate stocked items. B things represent 15–25%
of annual use esteem and 30% of aggregate the stock, and C things characterize 5% of the
annual application of esteem and half of total stocked items.
3. Security Technology
Technology can be used to protect inventory from internal and external threats security
alarms on doors and windows can alert local policies authorities in the case of a break-in.
Advanced locks on doors protecting storage areas can reduce incidents of internal theft as
well as break in Security cameras can record theft in progress, helping to identify thieves
for local authorities. Cameras can also discourage employees from even attempting to
steal inventory in the first place. Advances in technology continue to provide new
security options. Smart phones provide new opportunities to monitor security alarms and
surveillance systems from anywhere in the world at any time (Hutchins, D., & Gower,
1999).
4. Inventory Audits
Inventory audits systematically count inventory on hand and compare it with internal
inventory records, receive records and Deliver records to spots incidents of theft,
spoilage or other forms of shrinkage. Internal audits can act as a powerful psychological
deterrent to internal theft, if employees know that there is random inventory counting
they may be discouraged from even think about stealing

14
 5. Vendor Managed Inventory
(Frahm, 2003) discusses that Vendor-managed inventory is a practice in which inventory
replacement decision emphasizes on good working relations between customers and suppliers.
The manufacturer enters into a collaborative or partnership agreement with the distributor, under
which the latter agrees to stock a specified range of items and meet specified service levels. In
return, the customer undertakes to buy the specified items solely from the distributor and no
longer keeps the items in stock. It enables manufacturing firms reduce chances to defective items
and the risk of obsolescence.
VMI practices enables manufactures to eliminate the need for customers to reorder, reduce or
exclude inventory and obviate stock outs. It relieves the customer of much of the expense of
ordering, shipping the materials, counting inventory and stocking low-value items. By passing
these costs normally managed by the customer on the supplier, the customer is able to reduce the
overall cost of product and increase on margins. There’s also reduced lead times with enhanced
sales and a reduction of lost sales due to stock outs (Frahm, 2003).
This technique has the following advantage;
i. It ensures a closer and a more strict control over such items, which were having a
sizable investment.
ii. It helps management to in planning its inventory need
iii. It releases working capital, which would otherwise have been locked up for a more
profitable channel of investment.
iv. It reduces inventory-carrying cost.
v. It enables the relaxation of control for the ‘C’ items and thus makes it possible for a
sufficient buffer stock to be created.
vi. It enables the maintenance of high inventory turnover rate.
2.1.4 Usefulness of Effective Inventory Management
for Manufacturing Companies stated that because inventory is usually one of the biggest
numbers on their balance sheet, effective inventory control and management is a vital function to
help insure the continued success of manufacturing companies. Uses of managing inventory
effectively can be discussed in detail as follows:

15
2.1.4.1 Profit Maximization
(Ogbu, 2008) stated that as profit maximization is the goal of every firm, the most important
requirements to maintain that are preventing wastage of time and raw materials, not leaving the
machine capacity idle and underutilization of labor force. In order to maximize profit,
manufacturing concerns always try to reduce both holding costs and ordering costs by using
optimum order quantities called EOQ. Costs attributed to not holding the appropriate level of
inventories are drastically reduced when proper inventory management technique is applied.
2.1.4.2 Customer’s satisfaction
According to (Ogbu, 2008) firms should keep customers satisfied to survive manufacturing
concerns because they cannot afford to miss an order because of absence of an item in stock.
This is achieved by reduction in excessive inventory and encouraging optimum production.
discusses the relationship of inventory control system of the company with demand management,
which is a key to customer satisfaction, as follows;
• Order Receipt-. Identification codes prepared for inventory control are sent to customers
as order forms to help them make their order precisely.
• Order processing-. Inventory control methods are often used for establishing criteria for
classifying orders.
• Estimating delivery times to customers- Promises have to reflect the real stock and
replenishment situation or else customer service will be poor.
• Production of dispatch information Here invoicing systems shouldn’t interfere with
inventory movement.
• Customer feedback to report on progress and to keep the customer feeling involved in the
supply is very important from a customer relations standpoint.
2.1.4.3 Uninterrupted production
(Ogbu, 2008) states that production is changing raw materials into finished goods. When these
raw materials are not available, production is disrupted. Also, when production suffers, the
customers are lost to the competitors and when excessive inventories are stocked, capital is tied
the organization. And so, it is only through the process of effective inventory management
can enable the EOQ to be obtained that allows efficient production to be achieved.

16
2.1.4.4 Liquidity control
(Ogbu, 2008) discusses that sometimes, manufacturing companies over invest in stock in order to
maintain production, avoid stock-outs and satisfy their customers. But when this investment is
done without regards to efficient inventory management, a lot of capital resources of the
concerns are large holding costs. At that point, liquidity which is the ability of an organization to
meet its repayment demand as they fall due will be affected.
2.1.5 The Role of Inventory Management System
(Mohamed, 2016) Inventory is importance for balance sheet that used as an increase the asset
group on the company balance sheet, because many firms play a role to reduce their investment
in fixed asset, plants, warehouses, office buildings, equipment and machinery by increasing their
inventory .Inventory management system is essential to approve the quality of control in stock
handling and the area of customers served by consumer goods. A good inventory system will
lead the company easily to know the time to be order. Inventory management system is also an
essential means of tracing large shipment with in short time.
(Ackah&Ghansha, 2016) An automated inventory system enables to minimize the risk of error
and helps by providing up to date information of the stock items in the warehouse.
The role of inventory management is arranging and organizing over all operation of the
organization maintaining the transactions of sales appropriately keeping the level of stock to
satisfy customer’s needs. The achievement of inventory management is satisfying customer and
driving profit by keeping the required inventory items, balancing the right order as customer
needs. Since all business has a limited working capital, inventory management responsible to
make decisions what type of materials, the quantity bought, how much or within the capital
limits. Hence, an effective inventory management is very necessary for any businesses successes.
Bulky inventory keeping can tie up capital that may be used for other investment to generate
income is locked up without nothing. On other way (Namusonge, 2015) less keeping inventory
items can be a weaker to satisfy customer need and the organization can’t achieve its setting
goal.
Also (Chio, 2012) indicated that effective inventory management is essential in the operation of
any business and keeping stock is used as an important strategy by companies to meet
customers’ needs without taking the risk of frequent shortages while maintaining high service
level. Grossly, effective inventory management gives the chance to make continues competitive

17
advantage and improvement of the competitive position of the companies. Moreover, it enhances
the profit margins of the companies since it will reduce the operational and inventory cost
thereby increase in profitability.
On the contrary, poor inventory management affect the organization cash flow, reduce efficiency
and adversely affect the procurement performance out of the capital. The inventory system that
helps the operating policies and organizational work flow for replenishing and controlling
materials in store will be suspended.
According to (Ackah&Ghansha, 2016) Surpluses cause financial hardships because they tie up
capital and shortages lead to poor operational results, but satisfactory and scientific inventory
control eliminates these shortcomings thus proving its importance. Accordingly, management of
inventory system requires an appropriate system of making the decisions to keeping track of
items in inventory and how much and when the order is applied.
Inventory management increases profitability- Forecasting, controlling & managing inventory
increases productivity, while reducing costs, resulting in greater profitability Accuracy
improvements & time savings, in addition to the reduction of fixing costly mistakes, can result in
considerable cost savings across an organization.
(Zipkin, 2000) state that Inventory management improves decision-making rapid, accurate data
collection enables access to real time business intelligence across all areas of your company
Issue, event and project management tracking integrated with an inventory management system
enables all associates to proactively identify & solve business issues. It increases customer
satisfaction Responding to trends, seasonality, promotions & changing marketing conditions
results in having the right products in stock for customers Properly identified products available
to load enables customers to order & receive the correct Commodity Quickly Customer service
tools integrated within an inventory management equips the entire company to deliver consistent,
personalized care for your customers
Inventory management helps businesses be successful. That’s as much of an understatement as
saying the sun’s surface is warm. Inventory management is a crucial part of any business‟
success.
Inventory Balance: Good inventory management helps you figure out exactly how much
inventory you have. This makes it easier to prevent product shortages and keep just enough
inventories on hand without having too much. Accurate Planning: Using smart inventory
18
management, you can stay ahead of the demand curve, keep the right amount of products on
hand and plan ahead for seasonal changes. This goes back to keeping your customers happy all
year long. Employee Efficiency: You can empower your employees to help you manage
inventory. Training employees to use barcode scanners, inventory management software and
other tools helps them make better use of their time, and it helps your business make better use
of its resources, both human and technological. Inventory Tracking: If you have multiple
locations, then inventory management becomes even more important because you need to
coordinate your supplies at each location depending on differences in demand and other factors.
Time Saving: Inventory management is a great time-saving tool. By keeping track of all the
products you have on hand; you can save yourself the hassle of doing inventory recounts to make
sure your records are accurate. This once again requires inventory management software
(PanosKovelis, 2002).
2.1.6 Problems of Inventory Control
(Brent, 2008) argued that, the angle of each department in the enterprise is generally different.
Each department looks at inventories in a different manner. The production department wants to
keep the inventories at a sufficient level at all times. The sales department, on the other hand, is
interested in ensuring a maximum number of customer of for which it always wants a good stock
of all the finished products. The transport department is interested in keeping its fleet intact and
all the time in serviceable condition for which the department needs sufficient stock of spare
parts, and consumable items as its disposal. The finance department may all the time feel that
inventories are consuming capital and looking up the capital. The individual department thinking
poses a problem to the inventory control which has to reconcile the conflicting claims of
different departments within the framework of the policies and programmers of the enterprise. It
is now being realized that inventory control problems have to be solved while keeping in view
the problems of every phase of operation purchase, production, sales and to solve the problems
of inventory control keeping the costs at their lowest. This can be achieved by the integrated
approach.

19
(Ogbu, 2008) Discussed that manufacturing concern to manage its inventories are to establish an
adequate inventory level at a minimum cost, to reduce the cost of managing inventory, to ensure
the production is not interrupted due to lack of inventory and that inventories are not used
through excess stock by fixing re-order and stock levels, to minimize overstocking and under-
stocking. the factors that complicate this problem as:
Conflicting objectives across various segments of each company: some parts of a
business seek to increase inventory and other parts to decrease it. For example, sales
function encourages keeping FGI high to keep customers satisfied due to on time
delivery, purchasing department wants to achieve volume discounts on large batch and
off-season purchases, and also Production wants all parts and raw materials to be
available to keep line efficiency high and run large batch sizes. Conversely, product
developers and finance department, senior management want to decrease inventory,
because sitting on stock ties up cash flow.
The tentative nature of both supply and demand: unpredictability of demand and supply
includes unsteady supplier performance, supply chain disruptions, scarcity of materials,
the perishability, obsolescence, and shrinkage on the supply side and economic
environment, new products and innovations and others on demand side. For
manufacturers, the problems are complicated further when hundreds of thousands of
finished goods for sale or thousands of parts for assembly are warehoused across multiple
locations. Because inventory is the lifeblood of the sales and production processes, it’s
important to stock enough of it to avoid paying the opportunity costs of lost sales and
diminished.

20
2.2 Empirical Review

Different studies have been conducted by various researchers, concerning techniques of

inventory management, assessment of their application in different organization, and
effectiveness of inventory management.

(Ackah&Ghansha, 2016)By their study, on the title of Assessment of Inventory Management,

assessed the Performance of the Production Sector to find out how the management of inventory
within work would be effective and bring a lot of cost savings for the organization to increase
organizational profitability. A study by (Koumanakos, 2008)titled The Management of Inventory
Levels in the Local Manufacturing Industry found out that out of different methods of inventory
management, the most commonly used methods in manufacturers are continuous review model
and MRP method. Different authors have been doing various endeavors to clarify the
relationship between inventory management practices and the efficiency of a firm. Factors of his
study were Inventory Management rehearses as an independent variable, and cost diminishment
as a reliant variable. The discoveries of the survey showed a positive relationship between the
factors. (Koumanakos, 2008) contemplated the impact of Inventory Management on the solid
execution of assembling firms working in Greece. The theory that is inclined to the stock
management stimulates variations in the business’s budgetary implementation. The discoveries
recommend that the higher the level of inventories protected by a firm, the lower the rate of
return. (Eckert, 2007) analyzed Inventory Management and the part it plays in enhancing client
benefit levels. He found a positive relationship between stock administration practices and
consumer loyalty because of decreased number of stock-outs. Effective inventory management
processes help increase operational efficiency of firms; improves customer service; reduces
inventory and distribution costs; and enables businesses track items and their expiration dates
consequently balance between availability and demand (Pandey, 2004).

21
 All organizations keep a supply of inventory for the following reasons:-

1. To maintain independence of operations. A supply of materials at a lost work center allows that
flexibility in operation inventory allows management to reduce the number of setups. The time that
it takes to do identical operations will naturally vary from work unit to work unit. The sum total
performance of an organization is the collective performance of workstation located at different
localities or units. Therefore, to meet business goal, effective and efficient inventory management
at all work station is crucial.
2. To meet variation in product demand. If the demand for the product or service is known precisely,
it may be possible to provide services exactly to meet the demand. But demandis not completely
known because we can’t have full information about customers, and a safety or buffer stock must
be maintained to absorb variation.
3. To allow flexibility in service provision scheduling. A stock of inventory relieves the pressure on
the service provision to get the goods out. This leads to longer lead times, which permit service
planning for smoother flow and lower cost operation through larger lot size production.
4. To provide a safeguard for variation in inventory delivery time. When material in ordered from a
vendor, delays can occur for a variety of reasons: a normal variation in shipping time, a shortage of
material at the vendor’s plant causing backlogs, an unexpected strike at the vendor’s plant or at
one of the shipping companies, a lost order, or a shipment of incorrect or defective material.
5. To take advantage of economic purchase order size. There were costs to purchase materials. The
larger each order is the lower ordering cost of the materials because of the bulk purchase.
Organization has to decide the quantity and time to procure materials economically. Materials have
to purchase by comparing the ordering and storing costs. The most economical point where
materials to be procured is at the lowest cost of storageand order cost.

22
2.3 Objective of Inventory Management
The main objective of a good inventory management is to place an order at the right time from
the right source with the right quantity and quality. While developing an appropriate inventory
management system of inventory the following objectives should be kept in mind:

• Organizations should try to minimize the possibility inventory obsolescence by giving

due attention during procurement of materials. Besides materials storage, distribution and
usage should be appropriate to avoid shrinkage or obsolescence of the materials.
• A firm should maintain inventory to such a level that smooth and unhampered service
provision is ensured without any obstruction.
• Investment in inventory should be kept at minimum so that undue amount is not locked
up in it as investment in inventories involves costs.
• A firm should maintain sufficient amount of inventory to meet the demand of customers
regularly because if not done customers may shift to the competitors, which will result in
permanent loss to the firm. So it is essential to have necessary inventories which were
sufficient to the operation of the organization. Excessive inventory is an idle resource on
which resource is tied up rather than investing on other better alternative. The investment
in inventories should be just sufficient in the optimum level. The major dangers of
excessive inventories were:
• High customer dissatisfaction and failure of operation
• The unnecessary tie up of the firm’s funds and loss of profit.
• Excessive carrying cost, and The risk of liquidity.
The excessive level of inventories consumes the scares funds of business, which cannot be used
for any other purpose and thus involves an opportunity cost. The carrying cost of inventory, such
as the cost of shortage, handling insurance, recording and inspection, were also increased in
proportion to the volume of inventories. The low level of inventories may result in frequent
interruptions in the production or service provision schedule resulting in under-utilization of
capacity and poor operation that leads to customer dissatisfaction. The aim of inventory
management thus should be to avoid excessive inventory and inadequate inventory and to
maintain adequate inventory for smooth running of the business operations. Efforts should be

23
made to place orders at the right time with the right source to purchase the right quantity at the
right price and quality for the operations of the organization.

2.4 Research Gap

The Purpose of this study was to fulfill the gaps in inventory management practice of Habesha
Cement Share Company. At that time the researcher identified the inefficiency the inventory
Management practice in the company. Hence the research conducted to identified the main reason
of inefficiency in Habesha cement share company.

24
 Chapter Three
3. Research Methodology

3.1 Description of the Study

Habesha Cement Share Company, as a manufacturing firm involving in producing cement. It has
many types of inventories which are important to fulfill its purpose. From the many inventory
items: - row materials, spare parts, semi processed cements(Clinker), coal, cement, packing bags
are the major inventory items which need a skilled labor force and better management system to
properly utilize and become profitable.
From the inception of the company Habesha Cement Share Company has faced many problems
especially due to the existing political situations of the country, lack of enough capital to properly
function in a regular manner. Hence, managing the available resource towards the successful
accomplishment of its goal becomes a challenge for a period of more than two (2) years.
Currently, (HCSC) Habesha Cement Share Company handles various available items using semi-
skilled and professional personnel. Even if there are the necessary documents to receive and issue
inventory items the stores capacity to keep the necessary items safely and procedures followed by
user departments to request and utilize these resources is too poor in comparison with other
similar firms with in the sector.

3.2 Research Approach And Design

According to (Kothari, 2004)a research design is the conceptual structure within which research
is conducted, it contribute the blue print for the process of collections, measurement and analysis
of data. Thus, this study applied a descriptive research design because it enables the researcher
to collect data from large population and to look a bigger overview about the subject matter,
inventory management system of Habesha Cement Share Company.
Also, the study used mixed approach. Thus, the quantitative approach became suitable in
gathering information on the subject matter from a wider section of the population via
questionnaire. Parallelly, so as to have more detailed information on the subject issue and to
discuss the open ended and interview questions the study applied qualitative approach.

25
Therefore, so as to meet this objective properly, both qualitative and quantitative approaches
were used. During the qualitative study (a case study approach), deep information about
applications of inventory management were gathered from key informants. On top of that,
quantitative data were gathered from employees to supplement the quantitative data through
Focus Group Discussion of service center employees.
3.3 Population and Sampling Technique
3.3.1 Target Population
According to (Mugenda, 2003) a population is a well-defined or set of people, services,
elements, and events or group of things that are being investigated. Accordingly, the population
for this study consisted of management and staff of Habesha Cement Share Company with a
population of 100 permanent skilled staffs from four departments. This research targeted the
departments which have a direct relation to the inventory management system specifically:
Procurement and Supply Department (PSCD), Finance Department, Production Department and
store and quality control department. Therefore, Out of these distinctive subjects the research
identified all portion of samples by using census method because the total number of population
is manageable and it helps to get accurate information. That means based on census sampling the
researcher identified the target population is 48 skilled permanent employees who have a direct
relation to the study subject matter. Each of the target departments treated as a separate stratum
from where the respondents selected according to the proportion of the employees. The sample
size for this research is 48 these population consists of 12 from Production department, 15 from
Procurement and supply department, 15 from Finance department and 6 from store and quality
control department

3.4 Type and Source of Data

The study used both primary and secondary data. Primary data collected through the use of
structured questionnaires and interviews. secondary data reviewed from external sources such as
the internet, Journals, the company’s document and reports, other documentations and external
audit reports depending on the nature and scope of the information needed.
.

26
3.5 Data Collection Technique
Primary data was collected by distributing questionnaires to employees and managers. Interview
was conducted to get in-depth understanding of the organizations working principles, procedures
and methods. And to check the data found by the questionnaire are in line with the employee
responses. Furthermore, data were gathered documents and reports through reviewing them.

3.6 Procedure of Data Collection

Questionnaire is chosen as the main data collection instrument. According to (Kothari, 2004)
questionnaire has a specific concrete and predetermined questions to ensure that all respondents
reply to the same set of questions. Therefore, the study data was gathered with the aid of
questionnaires to assess the respondent’s views on the inventory management system of Habesha
Cement Share Company. The questionnaire was organized in line with the study objectives and it
composed of two sections. The first section of the survey questionnaire portrayed the general
demographic information of the sampled respondents.

The second part contained the main questions which are linked directly with the research specific
objectives. The questions are closed ended format where; if the respondent agree = Yes/ Agree if
not the respondent mark on = No/Disagree and so on. The use of closed ended questions is to
make easier for respondents to answer question in a simple way and the questionnaire was
prepared in English language.

After validation of the research instrument, requisite consents are obtained from the concerned
management of Habesha Cement Share Company. After having permissions, the questionnaires
distributed to the sample respondent’s. To supplement the gap that are captured by the data that
from questionnaire, key informant interview with Finance manager, Supplies and logistics
manager was conducted. Finally, the researcher performed the data coding, entering, editing and
cleaning activity in order to check the consistency of the data which was collected from the
respondents.

27
3.7 Methods of Data Analysis
This part represents the output of data analysis. After collecting all the necessary data, these data
was coded and edited, analyzed and rephrased to eliminate errors and ensure consistency. It
involve categorizing, discussing, classifying and summarizing of the responses to each question in
coding frames, basing on the various responses. This is intended to ease the tabulation work. It
also helps to remove unwanted responses which may be considered insignificant.

The data are presented in the form of tables. The data analysis of this study is done from both a
qualitative and quantitative standpoint to achieve the objective of the study. The presentation was
done according to the objectives of the study. The data analysis was based on returned
questionnaires distributed to respondents.

The background information of respondents was deemed necessary because the ability of the
respondents to give satisfactory information on the study variables greatly depends on their
background. The background information of respondents solicited data on the samples and were
presented by categorizing into; gender, education levels, work unit, age and length of service
years in the organization.

3.8 Validity And Reliability Test

3.8.1 Validity
Validity refers to the degree to which a study accurately reflects or assesses the specific concept
that the researcher is attempting to measure.
The researcher ensured that these are wholly integrated in the research. To enhance validity and
reliability of research findings, the researcher has eliminated or at least reduced bias and
ambiguity by using questionnaires and data collector bias are minimized by the researcher’s being
the only one to administer the questionnaires, and standardizing conditions such as exhibiting
similar personal attributes to all respondents and the research has applied both pre and post coding
techniques to check omission, legibility, and clarity responses before dictation.

28
3.8.2 Reliability
The researcher is also engaged in careful fine-tuning of questions integrated on the questionnaires
to make them clear and easy to comprehend. More so, before the questionnaires are administered
to participants the researcher conducted a pilot-test by using 2 colleagues in the researcher’s
office. This is meant to assess whether the questionnaires are easily understandable and well
suited to probe answers to the research problem under study. The 2 colleagues chosen for the
pilot-test are the foreign purchase division head and local purchase division head at the head
office and thus are presumed to understand the purpose underlying the research and the
repercussions thereof. There critics were mainly on the content of the question.My previous
questions were focused more on general management questions and as per their comment I have
changed the content of the question towards inventory management practice. The constructive
criticisms and responses forwarded by the colleagues are incorporated by making necessary
amendments and revision to the questionnaires.

3.9 Ethical Consideration

Above all, the researcher did not ask the study participants to engage into risks as a result of
participating in this study. Besides, informed verbal consent was obtained from the key
respondents during data collection. The respondents were given the right to refuse or take part in
the study. All the primary and secondary data collection in the organization was under the
permission of the managers and without any offence in ethical rules during the whole research
process.

29
 CHAPTER FOUR
4. DATA ANALYSIS AND PRESENTATION

4.1 Introduction
This chapter deals with presentation, analysis and interpretation of data obtained from
respondents through questionnaire and interview to explore the inventory management practices
of Habesha Cement Share Company. 48 questionnaires were distributed to the selected sample
respondents, out of the distributed questionnaires 37 of them were properly filled and returned.
The interview was conducted with the focused group in the company. Accordingly, all the data
gathered are presented, analysed and interpreted in the forthcoming subsequent pages.

4.2 Response rate

Total of 48 questionnaires were distributed to employees of the company out of which 12 from
Production department, 15 from Procurement and supply chain department (PSCD), 15 from
Finance department and 6 from store and quality control department. Out of the distributed
questionnaires 37 of them were filled in and returned which makes the response rate 77%.
According to Mugenda and Mugenda (2003), a response rate of 50% is adequate for analysis and
reporting; a rate of 60% is good and a response rate of 70% and above is excellent. Based on the
assertion, the response rate was excellent. As to interviews the response rate is 100%.

Response Rate Percentage

Total Sample Size 48 100%

Successfully collected 37 77%

Uncompleted and Unreturned 11 23%

So, the analysis was made based on 37 successfully responded questionnaires and done in line
with the research questions and objectives.

30
Justification for the uncompleted and unreturned questionnaires
From the targeted 48 sample respondent, 11 respondents were not fill and give back the research
questionnaires to the researcher due to the current pandemic of COVID-19 and lack of
willingness to fill out the questionnaire and returned too.

4.3 Demographic characteristics of the respondents

The demographic profile of the sample respondents is presented and analysed below. The
purpose of assessing respondents’ gender is that, to determine whether the researcher considered
heterogeneity of sample units. On the other hand, assessing the work experience and education
level of the respondents‟ is that, when the respondents are more experienced and educated they
have better opportunity to understand the case and give better response than else.
Table 1- 1 Demographic characteristics of Employees

S.N Demography Characteristics Frequency

In number In percentage
1 Gender Female 10 27%
Male 27 73%

Total 37 100%
2 Educational Diploma 2 5%
Background 1stDegree 25 68%

Master’s Degree 10 27%

Total 37 100%

3 Work Experience 1-5 17 46%

6-10 15 40%

11-15 5 14%
16-20 0 0%
21-25 0 0%
Above26 0 0%

Total 37 100%
Source: own survey result (2021)
31
A shown in the table below majority employees in the selected functions of the company are
malescomprising73%(27outof37)of the population while femalescontaintheremaining27%(10
out of 37).Background data shows that 5% (2 out of 37) of the respondent are diploma holders,
68% (25 out of 37)have 1st degree and 27% (10 out of 37) are Masters Holder. This data shows
that 1st degree holders are dominant in the selected functions which are satisfactory for their
positions.

Table 2- 1 Inventory management practice and Techniques-Production Department

response
Questions Frequency of responses
In Number In percentage
Does your industry have policies and Yes 12 100%
procedures to keep inventory level that No 0 0%
avoid excess inventory? Total 12 100%
Is there optimal level of inventory Yes 10 83%
management in the industry? No 2 17%
Total 12 100%
Which inventory system does the Perpetual procedure 12 100%
industry use? Periodic procedure 0 0%
Total 12 100%
Which types of industry management EOQ 1 8%
techniques does the industry follows? JIT 0 0%
ABC 0 0%
Stock Level 3 25%
Others 8 67%
Total 12 100%
Do you think the company is using Yes 12 100%
appropriate inventory management No 0 0%
technique? Total 12 100%
Source: own survey result (2021)

32
As to inventory system used, 100% store and quality control employees confirmed that perpetual
inventory system is used. Perpetual system of inventory updates inventory balance continuously
and counting is done at the end of year for the purpose of reconciliation. All of them respondents
also stated that the company counts inventory once a year. They all agree that the current
situation is well organized and effectively performed to manage control inventory effectively.

Table 3- 1 Inventory management practice and techniques store and quality control
response

Question Frequency of responses

In number In percentage
How often does the industry count/check its Monthly 0 0%
inventory? Semiannually 0 0%
Annually 6 100%
Others 0 0%
Total 6 100%
Do you agree that in the current situation, Strongly Agree 0 0%
inventory control management practice is well Agree 6 100%
organized and effectively performed to manage, Disagree 0 0%
control inventory items to keep safely and Strongly Disagree 0 0%
handling? Total 6 100%
Is there Lack of manpower? Yes 4 67%
No 2 33%
Total 6 100%
Do you have enough knowledge about the Yes 2 33%
company inventory management policies and No 4 67%
procedures? Total 6 100%
Source: own survey result (2021)

33
As shown in Table 3, 100% of the employees agreed that industry count/check its inventory
annually. And all store and quality control department respondents agreed that the current
inventory control management practice is well organized and effectively performed to manage
and control inventory items. However, the findings discussed in the above paragraphs make the
researcher to question on existence of problem of the current inventory management practice of
the company.67% of the respondent assured there is a problem regarding with knowing the
company inventory management policies and procedures. But 33% of store and quality control
respondents confirmed the they have enough knowledge about the company inventory
management policies and procedures. And 67% of respondents assured there is lack of
manpower to manage the company inventory management system but the rest 33% respondents
confirmed there is no problem regarding with manpower.

4.3.1 Timing and Quantity of order

Raw materials and supplies of the company are purchased from both local and foreign suppliers.
100%respondentsof purchasing department also agreed that they get raw materials from local
market. Information from the purchasing manager of the company shows that local orders are
initiated when requisition, containing quantities to be ordered, is sent by department based on job
orders received. This shows JIT technique of inventory management. This reduces carrying cost
of the company and as (Toomey, 1996) discussed it requires minimum lead time and maximum
machine utilization. The main risk of JIT is interruption of production due to late delivery This is
confirmed to

Occur sometime by 100%respondents of purchasing department employees. After requisitions

are accepted, POs are issued by the corporate service director. Pre numbered POs are used and
they must all be approved by the CEO.

The manager described that to determine the quantity to be ordered from foreign suppliers, the
company forecasts annual production and sales, and based on that Manufacturing Resource Plan
is prepared by comparing available stock with demand. POs are then issued by the managing
director and approved by CEO. The quantity also highly depends on foreign currency allowed
for importing. Segregation of approval and issuance of purchase order shows one strength of the
inventory control system as it reduces fraud and theft.
34
Table 4- 1 Timing and quantity of order-Purchasing Department responses (PSCD)

Questions Frequency of responses

In number In percentage

Can your company Yes 0 0%

easily get the raw Sometimes 15 100%
material and supplies No 0 0%
from local market to Total 15 100%
stock?
Do suppliers They always do 0 0%
respondents per your They sometimes do 15 100%
request on time? They don’t 0 0%
Total 15 100%
Source: own survey result (2021)
4.3.2 Stores Function
Proper receipt and storing of inventory is also important for inventory management process. In the studied company,
the employees responsible to receive inventory are also responsible for warehousing. Two stores each having one
storekeeper in the head office and two storekeepers in the plant site are found in Habesha Cement Share Company.
As to release of materials to production, the manager discussed that it is initiated by production order made by the
production department. Based on production order, material requisition is prepared and as it is approved by the
production manager, Order sheet is prepared to release materials from store. Releasing is done by reconciling material
requisition with order sheet. The materials transported to production are kept in satellite stores found in production
area until they are placed to production. The main stores function doesn’t check whether the materials have been put
into production or not but satellite stores do.
The manager also stated that average level of inventory, minimum and maximum stock levels, holding cost of
inventory are not familiar in their practice. The amount of inventory in the store depends on the number of orders
available.

35
Table 5- 1 store function response
Questions Frequency of responses
In number In percentage

How often do you find defective inventory Many Times 0 0%

material can be seen in receiving process of Sometimes 3 100%
your warehouse? Always 0 0%
Never 0 0%
Total 3 100%
How often do you face problem of receiving Sometimes 2 67%
dissimilarity of purchased items with sample Always 1 33%
received items? Never 0 0%
Other 0 0%
Total 3 100%
Source: own survey result (2021)
All store employees confirmed that sometimes there is a defective inventory material during material receiving
process. And they also assured problems of receiving dissimilarity of purchasing item sharpened sometimes.

36
4.3.3 The role of accounting and finance function
As discussed in (Toomey, 1996) accounting data is directly or indirectly involved in almost all inventory management
decisions by determining cost of carrying safety stock, EOQ, cost of distribution & other costs, and also by preparing
various reports. To assess this function, the researcher conducted interview with finance manager of the company and
the result is discussed below.
According to finance manager of the company, accounting and finance function of the company is done in- house. The
role of accountant in the firm with relation to inventory management includes recording purchases to update inventory
accounts, registration and reconciliation with POs, preparation of inventory related reports and others The type
frequency and purpose of reports is summarized below.
Table 6- 1 Inventory control Reports

Name of reports How often is it prepared Brief Description

Consumption Report Monthly, Quarterly, Yearly It is a document used in production process

to summarize the RM used during a specific
accounting period.

Inventory stock status Report Monthly, Quarterly, Yearly It reports on-stock inventory items in
warehouse and item number sequence,
showing current status, value, and most
recent activity dates.
Stock reconciliation report Monthly, Quarterly, Yearly It reconciles the balance of inventory
accounting record with actual amount of
Inventory in stock
Inventory valuation report Monthly, Quarterly, Yearly It is used to review a summary of warehouse
Activity for a range of dates.
Material Variance Report Monthly, Quarterly, Yearly It shows the difference between the standard
cost of material and actual costs
Incurred.
Source: own survey result (2021)

37
Table 7- 1 coordination between departments–stores department responses

Questions Frequency of responses

In number In percentage

Is there a problem in warehouse in ordering the Yes 0 0%

purchase request to No 6 100%

Maintain (replenish the inventory items? Total 6 100%

How strong do you think is coordination among Very Strong 0 0%

production departments ,store department and Moderately Strong 6 100%

Purchase department of the industry? Weak 0 0%

Total 6 100%

Store and quality control departments compare Yes 2 67%

quantities received against receiving reports? No 4 33%

Total 6 100%

Source: own survey result (2021)

38
Table 8- 1 coordination between departments–production department responses

Questions Frequency of responses

In Number In percentage
There is Lack of management support and leadership Yes 10 67%
No 5 33%
Total 15 100%
How strong do you think is coordination among production Very Strong 0 0%
departments, store department and purchase department of Moderately 15 100%
The industry? Strong
Weak 0 0%
Total 15 100%
Source: own survey result (2021)
As seen in Table 7 & 8, all employees of storing and production department think there is a moderately strong
coordination between the three functions, and all purchasing department employees think that the coordination is
highly strong. However, the findings discussed in the above paragraphs make the researcher to question on existence
of problem of coordination between departments.

39
Table 9- 1 coordination between purchasing departments

Questions Frequency of responses

In Number In percentage
How often purchased inventory items have got a problem of Most of the time 0 0%
defect? Rarely 0 0%

Very Rarely 15 100%

Never 0 0%
Total 15 100%
Do you think purchasing of inventory items is timely done Yes 14 93%
to maintain the level of inventory items? No 1 7%
Total 15 100%

How often does your department face problem of delay to Always 3 20%
authorize the purchase order request by top management? Most of the time 9 60%
Never 3 20%
Total 15 100%
How does a delay on finance department in processes of Highly 13 87%
preparing the payment of suppliers affect your work? Moderately 2 13%
Minimally 0 0

It doesn’t affect 0 0
Total 15 100%

How strong do you think is coordination among productionVery strong 15 100%

department store department and purchase department of theModerately strong 0 0
industry? Weak 0 0
Total 15 100%
How does the delay on processes of central store receiving Highly 15 100%
inventory delivery affect your work? Moderately 0 0
Minimally 0 0
Total 15 100%
Source: own survey result (2021)

40
4.4 Problems associated with inventory management of the company
4.4.1 Lack of coordination
As discussed in (Toomey, 1996) desiredorganizationalstructureisameanstogetjobsdoneforbetterend.In some
cases, material managers at corporate level might have direct or indirect control on purchasing, production
planning and production control functions while in other cases the manager has control over only on receiving
and storing, shipping, and production control function. The latter case is called Decentralized system. The
problems of using this system are conflict of interest, communication problems and others. Lack of
coordination between top management & departments and between departments are also problems of
Decentralized management.

The researcher has observed existence of the problems in Habesha Cement Share Company. According to
material manager of the company, production department of the company doesn’t bring order sheet to stores
on time (by considering the time it takes to process the order, to transport and make row materials ready for
the process), this cause late delivery of raw materials to production. As a result, manufacturing process is
interrupted because machines are kept idle and productivity is adversely affected. Uninterrupted production is
also achieved if materials are purchased on time. Although it doesn’t seem dominant, 20% of purchasing
department employees (as shown in table9)responded that purchasing is not done on time. Similarly, problem
of replenishing order is a problem seen storing function because replenishing is mostly initiated by order that
optimum level.
Lack of coordination also exists between top management purchasing departments. 60% of purchasing
department employees confirmed that there is a delay in authorization of POs by top management most of the
time,20% answered it always happens and there mining aid it never happens. As confirmed by store
employees(Table5) and the interview conducted with material manager of the company, defects in items
received occur but all respondents of purchasing department were asked the same question and they answered
it happens rarely. This shows that the purchasing department doesn’t make sure that materials they ordered
have been received or not. The effect of lack of coordination on getting jobs done is also confirmed by
employees’ of purchasing department. 87% of the respondents think delay of finance department in payment
highly affects their work and 13% of the respondents think it affects moderately. Allof the respondents agreed
that a delay in receiving function highly affects their work highly.

41
Table 10- 1 Insufficient Storage Space: Store Department Responses

Questions Frequency of responses

In Number In percentage

Do you have sufficient spaces to handle the Yes 0 0

inventory items properly in your warehouse?
No 3 100%

Total 3 100%

What types of inventory items mostly occupy Fast moving 0 0

space more in your warehouse?
Slow moving 3 100%

Total 3 100%

Is there a problem of not keeping slow and fast Yes 2 67%

moving items separately? No 1 33%
Total 3 100%
There are inventories which are kept outside Agreed 3 100%
stock and vulnerable to theft Strongly 0 0%
agree
Disagree 0 0%

Strongly 0 0
disagree
Total 3 100%

Are there inventories in your stock which are kept Yes 3 100%
idle? No 0 0%
Total 3 100%
Source: own survey result (2021)

42
4.4.2 Insufficient storage space
As shown in Table 10, 100% of the employees agreed that there is a problem of insufficient space to handle
inventory.All of the respondents confirmed existence of slow moving and idle stocks in store. Slow moving
items should be keptseparately from fast moving items for more accurate determination of their carrying cost
and better managerial decision. Yet, 67% of the respondents answered that there is a problem of not keeping
them separately. The interview with Material manager of the company also assured that approximately 5 to
10% of inventories in stock are obsolete. The existence of slow moving, idle and obsolete inventories are the
main causes of insufficient storage space in the company. Because of this there are inventories which are kept
outside stores and vulnerable to theft.
From the above analysis the researcher can observe lack of storage space due to poor inventory
management
.Managerial decisions are the main answer to such issues.
Interview with the IT department staffs
The extent to which the respondent’s agreement on the statements concerning information technology
related toinventory management is presented in the table below using percentage and frequency.
Table 11- 1 Assessment of Information Technology Practices: IT department response

Questions Frequency of responses

In Number In percentage
Is there Availability of proper Yes 0 0%
inventory Management software? No 3 100%
Total 3 100%
Does IT department help otherYes 0 0%
departments in Generating of realNo 3 100%
time inventory reports? Total 0 0%

Does the IT department tries toYes 2 67%

Improve coordination betweenNo 1 33%
departments? Total 3 100%

Source: own survey result (2021)

43
As shown in Table 11, all respondents (100%) agreed that Habesha Cement Share Company have no proper
inventory management software to manage its inventory. And also 100% of respondents agreed the
company inventory controlis not supported by information technology. The interviewee with the IT manager
also assured that the Company have no computerized system to control its inventory management activities.
This implies that respondent’s response and the interview results confirmed Habesha Cement Share Company
did not use information technology to manage its inventory stock. As the interviewee said, 67% of the
respondent agreed with the statement “IT department tries to Improve coordination between departments “and
the remaining33% disagreed.
4.4.3 Absence of computerized system

These days computerized system of inventory management is becoming more common because of its time
saving advantage. Manual systems are highly labor intensive and hard to communicate. They are also more
vulnerable to misstatement because they rely highly on the action of people. However, from the above table
obtained by the researcher and interview with IT manager of the company, manual system is used and most
practiced one in Habesha Share Company. Stock card which contains about value, location and other details
is used.
4.4.4 Lack of knowledge and skill

Successful inventory control requires both knowledge and motivation. The importance of education cannot be
overemphasized. This concerns not only an initial implementation phase. An inventory control system should
be seen as a tool that can be applied more or less professionally. How the tool is used is often more important
than the design of the tool. To gain the advantages of a more advanced tool, the user needs a better education
and training. (Axsäter Seven, 2015)
As observed in the research process, the employees in stores function don’t have enough knowledge about
inventory management techniques and policies. A question was asked to material manager of the company
whether inventory management policy exists in the company and the answer given it that there might be (not
sure). The manager said that the practice is done based on experience from the past and that he has never
participated in any training in relation to inventory management. Only three store keepers exist in the
company which shows that there is man power shortagein the function. This imply that most staff involved
in this operation tied in the routine work to cover manpower shortage at operation instead
ofundertakingprofessionalundertakingtomanageinventoryeffectively.

44
What is being done to improve inventory management of the company?
According to the interview with IT department manager of the company, Habesha Cement Share
Company isin the process of adopting a system called ERP. According to (Toomey, 1996) ERP is the
system that attempts to plan from supply and demand information taken across the entire network.
It will attempt to rebalancesupply and demand at each transaction point in the chain. The system will
compare both actual through put of the supply chain and capacity utilization against customer demand
over an extended period of time. It involves company-to-company interfacing with in the network.
By adopting ERP system the company can overcome most of its problems in inventory management.
As discussed by (CompuData , 2016)ERP will help JIT inventory system by
➢ Automated management of bill of materials- with proper BOM management the company
candetermine when it needs to order more materials and when to halt or slow down orders.
➢ Implementing lean strategies- helps for continuous business process improvement to
eliminate excesscost.
➢ More accurate forecasting- employing ERP system with easy data analysis and reporting
features fordemand forecasting, the company can quickly plan production capacity ahead of
time.

45
Discussions of results
As per the researcher observed the major inventory management problem in Habesha Cement Share
Company is Lack of knowledge & skill of the employees of stores and by the overall staff about
inventory management to handle the inventory management system of the company. As a result,
another researcher,(Girma, 2016)conducted on the major problems of inventory management found
out that the major problems ofinventory management are- lack of attention of store management, lack
of assigned qualified employees to the right position on the right time, no planning mechanism to solve
problems to improve inventory management and controlling system and lack of work performance
evaluation of employees of the warehouse. As far as the researcher result agreed with the afore
mentioned researcher results.
The researcher observed lack of management support, Absence of computerized system in stores and
lack of technology support by the IT team, of the company is another challenge for Habesha Cement
Share Company. As a result, a study by (Azeb ,S., 2017)on challenges and practices of inventory
management also concludes that inventory management skills level of personnel involved was poor
and most of them did not know methods to be used in controlling inventory and those for
quantifying commodities needed. Other challenges faced, weak management system, lack of proper
training of inventory management, insufficient funds for procurement, lack of technology in inventory
management is also another challenge. Among the result that wasproved by (Azeb ,S., 2017) and this
study results agreed on lack of management support and lack of technology in general are the major
problem of inventory management system of Habesha Cement S.C.

46
The researcher also observed that the purchasing department employees confirmed there is delaines in
authorization of POs by top management and it affect the purchasing process of the company. This finding also
supported to (Demisse, 2015) that was conducted factors affecting the effectiveness of inventory control, on
problem area of long purchasing processes system and factors affecting inventory control problem on lack of
knowledge and training of employees.
(Morgan, 2009) conducted a research study in United States of America on inventory management
performance in case of Alien Technology Corporation. The findings revealed that efficiency inventory
management of the Alien Technology Corporation is achieved by applying just in time purchase by assuring
smooth and well maintained relationship with suppliers of materials to ensure constant supply when the
corporation is in need of raw materials to facilitate production. As per the above research finding, this research
contrary conducted, as a result there is not maintained smooth relationship with forward relationship and
backward relationship.
Moreover, this study proved insufficient storage space due to significant number of idle, slow moving &
obsolete inventory and not keeping these items separately and in addition, is the vital problem of inventory
management system. As a result, items are kept outside & vulnerable for theft.

47
 CHAPTER FIVE
5. SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION
In this chapter the researcher tried to make conclusion about the effectiveness of Inventory Management in
Habesha Cement Share Company based on the findings discussed and interpreted in chapter four.
Recommendations were given to the concerned bodies in the studied Habesha Cement Share Company.

5.1 Summary of Findings

The purpose of this study is to assess effectiveness of inventory management in manufacturing companies
particularly in Habesha Cement Share Company by giving emphasis to practice and techniques of inventory
management, problems associated with inventory management & their consequences and improvements in the
inventory management system. Summary of findings of the study is discussed as follows.

The finding on inventory management practices show that the company inventory valuation system is perpetual
inventory system.

Raw materials and supplies are acquired from local & foreign suppliers. Local purchases are made based on
requisitions & by using properly authorized and approved POs when they are needed, and foreign purchases are
made based on MRP when foreign currency is available.

Stores function of the company receives goods, checks their quality, returns defective goods from local
suppliers immediately and informs suppliers for foreign defective goods. The store then releases the goods
when they are needed by departments by reconciling approved material requisitions and order sheet presented
but no checking thereafter.

Accounting and finance function of the company plays significant role in inventory management by recording
movement of inventory, registering GRN & comparing with POs and preparing inventory related reports such
as consumption, inventory stock status, stock reconciliation, Inventory valuation & material variance report.

The problems associated with inventory management of the company include:

Lack of coordination between stores and production, purchasing and production, & top management
and purchasing.
Insufficient storage space due to significant number of idle, slow moving & obsolete inventory and not
keeping these items separately. As a result, items are kept outside & vulnerable for theft.
Lack of knowledge & skill of the employees of stores and by the overall staff about inventory
management.
Absence of computerized system in stores.

48
5.2 Conclusion
From the finding about inventory management practices and techniques of the company presented in section 4
of this study, the researcher can conclude that the practice & techniques are strong enough.
Reasons for this conclusion are; Use of perpetual system which helps the company to compare with the
physical inventory level and to figure out causes if inventory level discrepancies occur by updating inventory
level regularly.
(Samuel, 2014) points out that there is failure in the company inventory management system since most of
them are not have capable computerized inventory system and such firms tend to have huge inventories due to
poor planning. It is also difficult to compete the competent to stay in the business sector
Proper authorization process of POs which helped the company to ensure that the proper and necessary
quantities are purchased since excess purchase of inventory leads to higher carrying cost.
Keeping up-to-date inventory records & reporting periodically the current condition of inventory for
managerial decisions by the accounting and finance.
However, improvement is needed because clear standards and policies of inventory management are not
present. This leads decisions to be made based on customary practices, opinion of managers and internationally
set standards and makes decisions to be more time taking and inefficient.
From the findings on the problems associated with inventory management of the company with their associated
effects presented the researcher can conclude that the inventory management system is ineffective. Reasons for
this conclusion are:
i. Lack of coordination between purchasing, production, stores and top management of the
company which is causing communication problems, purchasing and production delays,
and loss of orders.
ii. Lack of knowledge and skill of the employees in stores function, Along with managerial
decision problems, lack of knowledge has led the company’s store to be insufficient for the
inventory items. Significant amount of obsolete, slow moving and idle inventories are
occupying the space in store, and they are not kept separately from other items. As a result,
some inventories are kept outside store and vulnerable to theft.
iii. The researcher can also conclude that the problems seen have negative impact in the
company’s performance. This is because the findings show that the company frequently
loses sales opportunity due to lack of proper inventory control in store and as a result
customers are dissatisfied.
iv. Use of manual system of inventory management which has led the employees to be tied up
in routine manual works than striving for improvement of the system and an computerized
systems.

49
 From the overall data analysed in the study, the researcher can conclude that the Inventory
Management system of Habesha Cement Share Company needs improvement.

5.3 Recommendations
make the inventory management of Habesha Cement Share Company more effective. And the researchers
categorises all the recommendations as:
Inside the organization, the company is recommended to:
1. To have its own standards and policies of inventory management and they should be communicated
properly to the concerned bodies.
2. Should keep certain amount of reserve inventory in store to handle urgent orders by departments
between purchasing, production, stores & other departments.
3. Conduct inventory count more frequently (like semi-annually, quarterly) for better control of inventory.
And also conduct surprise counts.
4. Should keep slow moving, obsolete and idle items separately from others so that their amount can be
determined easily and decisions on them can be made on time. Writing expiry dates on items would also
help to avoid obsolescence.
5. The managers should create awareness to the stores and other related departments’ employees so that
they will have better knowledge about inventory management technique of the company so that they
can apply it.
6. The company is also advised to provide training opportunity for the store employees.
7. Adopting computerized system with the latest inventory management software is a mandatory.
8. The managers should also be updated about latest accounting and inventory management techniques so
that they can consider adopting them.
Inside the government, as a developing country the government is recommended to:
a) Should give support on investor’s government policies by making things easy to join the market and
to create a competition among the companies.
b) Taking the overall control on those companies which create market inflation.
c) Support the companies on free taxation when they accommodate machines.
Inside the stockholders, as stockholders it is recommended to:
1. Create a joint venture to expand their power to produce and balance the demand and supply of cement.
2. Form a friendly relationship with other stock holders by helping each other for better performance.

50
5.4 Areas of Further Research
Despite the successes scored during the study, some factors have not been properly accounted for due to its
scope. It is therefore suggested that further research should be done on some topics related to this one. In this
regard, the researcher recommends further research in the following areas:

i) How to reduce the Poor Inventory Practice of Habesha Cement Share Company.
iii) To determine stock record practice improvement at Habesha Cement Share Company.
iii) To identify the relevance of improved staff skill in inventory control at Habesha Cement Share Company.
These areas must be evaluated further because they seem to be the major promoters of problems of inventory
control at the Inventory Management system of Habesha Cement Share Company.

51
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Appendix

55
 ST.MARY UNIVERSITY –SCHOOL OF BUSINESS ADMINSTRATION

INVENTORY QUESTIONARIE

Appendix1:Questionnaires
This questionnaire is designed primarily for collecting data which will be used in writing up master’s thesis

entitled“ Assessment of inventory management system in case of Habesha Cement Share Company.”So,you

arekindly requested to give the right answer you think, since it contributes a lot for the success available of
this study. And the final result may be available to you up on your request so that it may be valuable
information regarding the issue of being researched since it offers a fresh and independent observation. I
would also like to forward my thanks in advance for your corporation.

Instruction
As for the guarantee of confidentiality you are not required to give your name.
You may decline or leave any questions blank that you do not wish to answer.
Please use cross mark(√)in the relevant boxes to indicate your response.

I. Respondentprofile
Gender Male Female

II Educationalbackground

1. Diploma 2. 1st Degree

3.Masters 4 PhD

III Work position and year of experience

1-5 10-15 20-25

6-10 16-20 25-30

56
Questions for Production Department
1. Does your industry have policies and procedures to keep inventory level that avoid excess inventory?

A) Yes B) No
2. Is there optimal level of inventory management in the industry?

A) Yes B) No
3. Which types of industry management techniques does the industry follow?

A) EOQ C) JIT

B) ABC D) StockLevel

E) Others
4..Do you think the company is using appropriate inventory management technique?

A) Yes B) No
5..Is there Lack of management support And leadership?

A) Yes B) No
6. How strongdo you think is coordination among production departments, store department and purchase
department of the industry?
A) Very Strong B)Moderately Strong
C) Weak

57
Questions for Store and quality control Department

1. How often does the industry count/check its inventory?

A) Monthly B) Semi annually

C)Annually D)Others

2. Do you agree that in the current situation, inventory control management practice is well
organized and effectively performed to manage,control inventory items to keep safely and
handling?

A) Strongly Agree B) Agree

C) Disagree D) Strongly Disagree

3 .Is there Lack of man power to manage the inventory?

A) Yes B) No

4.Do you have enough knowledge about the company inventory management policies and
procedures?

A) Yes B)No

58
Questions for Purchasing Department (PSCD)

1. Can your company easily get the raw material and supplies from local market to stock?

A) Yes B)No C) Sometimes

2. Do suppliers respond as per your request ontime?

A) Always do B) sometimes do C) they don’t

Questions for Purchasing department & other departments

1. How often purchased inventory items have got a problem of defect?

A) Most of the time B) Rarely

C) Very Rarely D) Never

2. Do you think purchasing of inventory items is timely done to maintain the level of
inventory items?
A) Yes B) No

3. How often does your department face problem of delay to authorize the purchase order request
by top management?
A) Always B) Most of the time C) Never

4. How does adelay on finance department in processes of preparing the payment of

suppliers affect your work?

A) Highly B) Moderately

C) Minimally D) It doesn’t affect

5. How strong do you think is coordination among production department store department and
purchase department of the industry?

A) Very strong B) moderately strong C)Weak

59
 Questions for Store Department
1. Do you have sufficient spaces to handle the inventory items properly in your warehouse?

A) Yes B) No
2. What type of inventory items mostly occupy space more in your warehouse?
A) Fast moving B) slow moving
3. Is there a problem of not keeping slow and fast moving items separately?
A) Yes B)No
4. Is there inventories which are kept outside stock and vulnerable to theft?
A) Agreed B) Stronglyagree
C) Disagree D) Stronglydisagree
5.Are there inventories in your stock which are kept idle?
A) Yes B)No
6. How often do you find defective inventory material can be seen in receiving process of your warehouse?
A) ManyTimes B) Sometimes
C) Always D)Never
7. How often do you face problem of receiving dissimilarity of purchased items with sample received items?
A) Sometimes B)Always
C) Never D) Other
8. Is there a problem in warehouse inordering the purchase request to maintain (replenish the inventory items?
A) Yes B) No

9. How strong do you think is coordination a mong production departments,store department and purchase
department of the industry?
A) Very Strong B)Moderately Strong C) Weak
10. Store and quality control departments compare quantities received against receiving reports?
A) Yes B) No

60
 ST.MARRY UNIVERSITY –SCHOOL OF BUSINESS ADMINSTRATION

INVENTORY QUESTIONARIE

Appendix 2: Interview Question

Questionnaires for the focused group and IT department respondent

1. How do you describe the internal inventory management system Habesha Cement Share Company?

2. Does the company use the information system to manage its inventory?

3. Are there any problems on the inventory management system of the company?

4. Did you observe the contribution of IT to control inventory management systems?

5. What type of inventory management techniques does Habesha Cement Share Company used in handling
inventory?

6. What is the reason to choose this techniques does Habesha Cement Share Company used in handling
inventory?

61