DIPLOMA IN BUSINESS ADMINISTRATIONResearch report NAME : CHIKONDI CHALWESTUDENT NUMBER : 28008227N.
R.C : 478994/61/1LEVEL : 3 JUNE 2018NATIONAL INSTITUTE OF PUBLIC ADMINISTRATIONCASE STUDY: YATU FOODS COMPANY,NDOLA COPPERBELT.TABLE OF CONTENTS Page No.Table of Contents…….…………………………………………………………….Declaration.
.……………………………………………………………………….Approval……………………………………………………………………………Dedication…………………………………………………………………………Acknowledgements……………………………………………………………….. List of abbreviation/Acronyms……………………………………………………List of tables and figures………………………………………………………….
.Operational definitions of key terms……………………..
……………………….Abstract……………………………………………………………………………CHAPTER 1:INTRODUCTION………………………………………………………………11.1 Background…….…………………………………………………………11.
2Problem Statement……………………………………………………….21.3Study Objectives..…………………………………………………………31.4Research Questions………………………………………………………41.
5Study Scope………………………………………………………………..4CHAPTER TWOLITERATURE REVIEW2.
0 introduction2.1.1 importance of inventory management……………………10-112.1.2 the reasons for stocking inventory…………………….
.12-142.1.3 the reasons for not stocking inventory…………………..152.
1.3 types of inventory………………………………………………16-172.1.
4 classification of inventory…………………………………….172.1.
5 inventory classifaction models…………………………..18-192.1.6 inventory costs………………………………………………………192.
1.7 inventory policy……………………………………………………..
1 how much to order i.e. the optimal quantity of an item that could be ordered whenever an order is placed.
..20-22 2.2 performance………………………………………………………….24 2.2.
1 measuring a company’s performance…………………..24-252.3 the relationship between inventory management and perfomance of a company.
..CHAPTER 3: RESEARCH METHODOLOGY…………………………………………….
253.1 Research Design………………………………………………………………..………..
25 3.2 Sources of Data………………………………………………………………………..
..25 3.3 Target Population…………………………………………………………………………
25 3.4 Sample Size……………………………………………………………………………….26 3.5 Sampling Methodology……………………………………………………………..
……26 3.6 Research Instruments………………………………………………………………
.26 3.7 Data Analysis………………………………………………………………………………
26 3.8 Possible Limitations of the Study……………………………………………………..
27CHAPTER 4: DATA PRESENTATION AND INTERPRETATION…………………….284.1Respondents Information…………………………………………………………….
…284.2Critical Factors Causing Failure of SMEs in Ndeke………………………………….314.3The Most Affecting Factor Regarding Failure ofSMES in Ndeke………………….34CHAPTER 5: DISCUSSION OF FINDINGS AND ANALYSIS………………………….385.
1 Critical Factors Causing Failure of SMEs in Ndeke…………………………………385.2 The Most Affecting Factor Regarding Failure of SMES in Ndeke…………………395.3 Failures attributed to the Business Risk Factors in Ndeke Township…………….46CHAPTER 6: CONCLUSIONS AND RECOMMENDATIONS6.1 Conclusion………………………………………………………………………….….
…….47BIBLIOGRAPHY…………………………………………………………………………….49ANNEXES…………………………………………………………………………………….53Annex 1: QUESTIONNAIRE……………………………………………………………….53Annex 2:Proposed Time Frame for the Study……………………………………………56STUDENT’S DECLARATIONI , Chikondi Chalwe hereby declare that the work in this report is my own except for quotations which I have been duly acknowledged, it has never been previously presented at this or any other institution for an academic award. The preparation of this is supervised my Mr.
Chanda.……………………………………..………………………………………AUTHOR’S SIGNATURE(Chikondi Chalwe) DATE………………………………………………………………………..SUPERVISOR’S SIGNATURE(Mr Chanda) DATE DEDICATIONThis research is dedicated to The LORD Almighty ,My family and Loved Ones ,and my unborn children ACKNOWLEDGEMENTSFirstly, my gratitude goes to the lord Almighty for according me this chance to complete this dissertation and for his Love, Grace and Tender Mercies and Life He has given me.
Secondly, I would like to thank my amazing parents for spiritual and financial support they have rendered, I would love to thank my sibling for the support and patience exercised during this time.Thirdly, I would love like to thank my spiritual parents Ps. Prisca and Cephas mwenya for the their love and prayers.Lastly I would love to thank my supervisor for giving me the guidance that was needed to finish the report.
LIST OF TABLES AND FIGURESAcronyms and AbbreviationCHAPTER ONE1.1 INTRODUCTION Inventory management is one of the most important systems that need to be practiced by every company including manufacturing companies. Inventory Management is sometimes referred as inventory control.
It is defined as, “the practice of planning, controlling and inventory so that it contributes to the business profitability”, according to Gonzales (1999). From the above statement, it can be noted that inventory management has an effect on company performance. The major problem facing most companies today is the inability to provide services to the customers as a result of poor inventory management Manjrekar et al (2008).BackgroundYatu meaning “ours” in Nyanja, a local Zambian language, is the name of the products produced by this subsidiary of Nash Holdings and it represents the proprietor’s desire to create a product of which their workers and all Zambians can be proud of, this tea leave producing company has being operating in Zambia since 1999, with its factory premises located in Kalulushi and a store in Ndola.Yatu Foods Company came into existence with the help and support of USAID (United States agency for international development).The USAID did the entire marketing research for Yatu Foods Company.
It was with the help of USAID that Yatu Foods Company was able to build a medium-sized structure as its factory. Yatu Foods Company is a medium food processing Company which began operations in 2006. The Company was first specialized in manufacturing a commonly known brand of Yatu Tea which comes in different packages. (ii)It also focuses on finding out the extent to which inventory management affects the performance of a company.
1.3 GENERAL OBJECTIVES For that soothing taste that will relax and calm, Yatu Tea is the customer’s ideal product. It’s the perfect accompaniment for any meal at any time; the customer can enjoy it alone and reap the benefits of this classic, great flavored tea. This tea is grown and developed in Zambia, by the Zambian people.
The factory produces a variety of blends, producing up to 1200 packets per day.Sourced from the water table, Yatu Water (called Utumenshi) is enriched with minerals and is healthy. This water provides thirst-quenching refreshment. Yatu water is ZABS approved, purified and enriched. Ensuring and assuring the quality of this healthy product.
All the above products are created in Zambia by Zambians, as they seek to create a brand that is synonymous with internationally acceptable quality, healthy and affordable. Yatu Foods Company well established in the market and has become a household name, products are found everywhere in the country in major grocery stores.1.
2 PROBLEM STATEMENTAccording to Manjrekar et al (2008), The major problem facing most companies today is the inability to provide products to the customers’ as a result poor inventory management. It has been seen that most companies in Zambia lack adequate knowledge or information about some aspects of inventory management. Aspects of inventory management like expertise, skills, and systems of inventory management in place.
Yatu Foods Company has been identified to be one of such companies, for it lacks some of the aspects of inventory management.(i)This study is focused on how an inventory management system affects a company’s performance and the ways in which it can be improved to enhance company performance considering the Yatu Foods Company.The general objective of the study was to:Find out the effects of Inventory Management on the performance of companies in Zambia.1.4 SPECIFIC OBJECTIVESThe specific objectives are:(i)To find out the techniques of inventory management used at the Yatu Foods Company in Ndola, Copperbelt Zambia.(ii)To examine the relationship between inventory management and performance of a company in this case, the Yatu Foods Company in Ndola, Copperbelt Zambia(iii)To determine the challenges faced by Yatu Foods Company in managing the inventories.(iv) To find out the effects of inventory management on Yatu Foods CompanyRESEARCH QUESTIONS(i)What are the techniques of inventory management used at the Yatu Foods Company in Ndola, Copperbelt Zambia? ii) What is the relationship between inventory management and performance of The Yatu Company in Ndola, Copperbelt Zambia?(iii)What are the challenges faced by Yatu Foods Company in Ndola, Copperbelt Zambia in managing the inventories?(iv)To what extent has inventory management impacted Yatu Foods Company in Ndola, Copperbelt Zambia? 1.5 STUDY SCOPEThe area of study was the Yatu Foods Company in Ndola, Copperbelt Zambia. Ndola a city located on the Copperbelt province of Zambia. The study is interested in trying to understand the techniques of inventory management used at the Yatu Foods Company in Ndola, Copperbelt Zambia, the relationship between inventory management and performance of the company and the challenges faced before.The study will cover a time period from 2016 to 2017CHAPTER TWO2.0 LITERATURE REVIEWMany previous studies have been conducted by different researchers relating to inventory management in relation to company performance. In this section, various literature will be reviewed with the aim of getting a clear and deeper understanding of the research topic. The aim of the section will be to see the various aspect of the business that can be affected in the case where inventory management is left unattended to. The section will address the various measurement of inventory management that can have an influence on company performance as brought out by several studies. According to Halachmi and Bouckart (2005) “the aim of inventory management is to maintain the quantities of inventory held by a business at a level which optimizes some management criteria such as minimizing the costs incurred by the whole business enterprise for improved performance”. . Performance is obtained by the magnitude of a quantity, such as a length or mass, relative to a unit of measurements, such as a meter or a kilogram. Inventory management disputes can interfere with a customer service and company profit, the problems can cost a business more money and can lead to an excess of inventory overstock that is difficult to move. Most of these problems are associated with poor inventory processes and out-of-date systems by Gourdin (2001).2.1.1 IMPORTANCE OF INVENTORY MANAGEMENTI. To ensure sufficient availability of items to meet customer needs. II. To meet any future demand III. To take advantage of any bulk discounts. IV. To absorb seasonal fluctuations and variations in usage and demand V. To provide a buffer between processes VI. To increase sales there by increasing profits, if stock are held, a wider variety of products are offered and customer demand is more immediately satisfied because the product is available which prevent prospective customers from going else where.Sometimes businesses have one sole supplier of the raw materials or goods; as a result, they will ensure that they get as enough raw materials as possible in order to avoid the risk of stockoutsShortages are major indicators of poor inventory management practice by a company The Copperbelt province has annually been experiencing shortages of alcohol (liquor) and other beverages, especially during festive periods and various events as because of their high demand (Times of Zambia, 5th March, 2013). The period between 2006 and 2012 experienced a lot of shortages2.1.3 THE REASONS FOR STOCKING INVENTORYThere are various reasons as to why firms and companies keep inventories and some of these are; I. To ensure sufficient availability of items to meet customer needs. II. To meet any future demand III. To take advantage of any bulk discounts. IV. To absorb seasonal fluctuations and variations in usage and demand V. To provide a buffer between processes VI. To increase sales there by increasing profits, if stock are held, a wider variety of products are offered and customer demand is more immediately satisfied because the product is available which prevent prospective customers from going else where.2.1.4 THE REASONS FOR NOT STOCKING INVENTORYThere are some reasons as to why some firms and companies do not want to keep inventories or rather stock less of certain products. According to Hamel (2015), keeping a large amount of inventory on hand is advantageous in that it reduces the risk of running out of stock, but a large inventory can also have several notable disadvantages. next order arrives/2 (p – d)/p – If the assumptions of Model II prevail: no safety stock, materials are supplied at a uniform rate (p) and used at a uniform rate (d) and Reasons for not maintaining inventories can include:(a)Storage Cost– Keeping a large quantity of inventory means you need a large amount of space to store your inventory like warehouses and storage rooms which cost resources to build, rent and maintain, these facilities require workers to categorize and organize stock and to transport stock. (b)Deterioration and Obsolescence – Some firms sell goods that tend to deteriorate over time, such as food products, keeping a large inventory in terms of perishables risk the possibility of it getting deteriorated and not being sold as customers will not be willing to buy such inventories.(c)Change in demand – Some goods might not be sold because of changes in the market demand for new products come in the market and competitors as well. (d)Consideration – Stocking more inventories can be very disadvantageous and having too few goods or nothing can also be harmful to a company that is if a company runs out of certain stock and miss out on potential profit sales and this might cause customers to divert to competitorsTherefore, there is a need for firms to identify how they should hold the best level of inventories, as holding in most cases proves to be more beneficial than not holding any.According to Slack (2010), there are various reasons for the imbalance between the rates of supply and demand at different points in any operation lead to different types of inventory practiced by different companies or business entities. He further gives and explains the five basic types of inventory which have been given below:2.1.5TYPES OF INVENTORY(a)Anticipation Inventories – This is mostly used when demand fluctuations are large but relatively predictable, it is the Inventory that is accumulated to meet the expected future demand or interruptions in supply. It can also be used when supply variations are important, such as in the canning or freezing of seasonal foods. It was used to compensate for differences in timing of supply and demand rather than trying to make the product available only when it was needed; it was produced throughout the year ahead of demand and put into inventory until it was needed.(b)Buffer Inventories – “it is also known as safety inventory for it compensates for unexpected fluctuations in supply and demand”, for example, a retail operation can never forecast demand perfectly, even when it has a good idea of the most likely demand level and that’s why it orders enough goods from its suppliers to allow a certain amount of most items in stock. This minimum level of inventory is there to cover against the possibility that demand will be greater than expected during the time taken to deliver the goods. This is buffer or safety inventory. It compensates for the uncertainties in the process of the supply of goods into the stores because of the unreliability of certain suppliers plus transport firms.(c)Cycle Inventories – “Inventory that occurs when one stage in a process cannot supply all the items it produces simultaneously and so has to build up inventory of one item while it processes the other”. An example can be seen through a baker who makes three types of bread, each of which is equally popular with customers. Due to the nature of the mixing and baking process, only one type of bread can be produced at a particular time. The baker would have to produce each type of bread in batches. The batches must be large enough to satisfy the demand for each kind of bread between the times when each batch is ready to be sold. So even when demand is steady and predictable, there will be always some inventory to compensate for the recurrent supply of each type of bread.(d)De-coupling Inventories – “The inventory that is used to allow work centers operate relatively independently”. When an operation is designed to use a process layout, the transformed resources move intermittently between specialized areas or departments that comprise similar operations. Each of these areas can be scheduled to work relatively independently in order to maximize the local utilization efficiency of the equipment and staff. As a result, each batch of work-in-progress inventory joins a queue, awaiting its turn in the schedule for the next processing stage. This also allows each operation to be set to the optimum processing speed (cycle time), regardless of the speed of the steps before and after. Thus De-coupling inventory creates the opportunity for independent scheduling and processing speeds between process stages.(e)Pipeline Inventory – This inventory exists if materials are not transported instantaneously between the point of supply and the point of demand. If a retail store orders a consignments of items from one of its suppliers, the supplier will allocate the stock to the retail store in its warehouse, pack and load it onto its truck, which will transported to its destination and unloaded in its the retailer’s inventory. From the time that stock is allocated until it becomes available for the retail store. 2.1.6 CLASSIFICATION OF INVENTORYInventories are as follows:(a)Raw Materials – It is an unprocessed natural product used in manufacturing processes. Horngren (2007:37) defined raw materials as direct materials in stock awaiting use in the manufacturing process. Finished goods of one industry Materials might be defines raw the raw materials of another. Pandey (2007)as these basic fine inputs that are converted into finished products through the manufacturing process. This usually consists of the essential items needed to create or make a finished product.(b)Work-In-Progress – This is an incomplete ongoing piece of work, it also refers to items that are partially completed but are not yet finished products. It also refers to the stock of all materials in which processing has commenced but it is not yet completed. Such materials are usually found between raw materials and finished goods. Malomo (1999:307) defined work-in-progress as partly finished goods and material subassemblies between manufacturing stages.(c)Finished Goods – These are the products that are completed and are ready to be bought by consumers. Pandey (2002) defined finished goods as those products that are completed and are ready for sale. Stock of raw materials and work-in-progress facilitates production while stock of finished goods is required for the smooth marketing operations.2.1.7 INVENTORY CLASSIFICATION MODELSAccording to Dr. Ram Naresh (2005), classification models consist of selective control methods based on Pareto 80-20 principle, which states that there are a critical few and trivial many. According to Dr. Ram Naresh (2005), this all the items of an industry are classified into some broad groups on a certain basis and the attention is paid to their control accordingly. It is not practical to monitor inexpensive items with the same intensity of care as very expensive items.(a)The ABC Classification – This is an approach to inventory management that classes inventory by its usage value and varies the approach to managing it accordingly. ABC stands for ‘always better control’. The items on hand are classified into A, B, and C types on the basis of the value in terms of capital or annual dollar usage (i.e., dollar value per unit multiplied by annual usage rate), and then allocates control efforts accordingly. Thus, the items with high value and low volume are kept in A-type, items with low value and high volume are kept in C-type, and the items with moderate value and moderate volumes belong to the B-type. A-type items are given the maximum attention while ordering for purchase and C-type the least. B-type gets the moderate attention. Typically, three classes of items are called: A (very important), B (moderately important), and C (least important).(b)The Critical Value Analysis (CVA) – The Critical Value Analysis (CVA) pays more attention to C items. Although it ranks products similarly to ABC, CVA analyses products based on the stock out rate using three to five categories. CVA evaluates products as follows:(I)Top Priority: Critical item and no stock-outs are permitted.(ii)High Priority: Essential item but limited stock-outs are permitted.(iii)Medium Priority: Necessary item but occasional stock-outs are permitted.(iv)Low Priority: Desirable item but stock-outs are allowed.(v)Lowest Priority: Needed item but stock-outs are permitted on a wide basis.Stock-outs rates are assigned subjectively to each category. Top priority, might have a zero percent (0%) stock out rate. High priority might have three percent (3%) stock outs rate. Medium priority might have six percent (6%) stock out rate. Low priority, might have ten percent (10%) stock out priority and lowest priority, might have fifteen percent (15%) rate of stock out.(vi)Economic Order Quantity – According to SN Mathur (2010), Economic Order Quantity is the order size that will result in the lowest total of order and the carrying costs for the item. In an event where the company makes unnecessary orders it will incur unneeded orders. On the other hand if a firm places too few orders, it will incur excessive carrying costs because the firm will have to maintain large stocks of goods and to help do so it must strike a balance between ordering costs and carrying costs. Economic Order Quantity (EOQ) inventory management model enables the company to determine the number of order units that will result in the lowest total of these two costs.2.1.8 INVENTORY COSTSAccording to Dr Ram Naresh (2005), there a more four basic costs associated with inventory management and these are: holding or carrying cost, ordering or replenishment cost, purchasing cost and shortage cost.(a)Carrying or Holding Costs – these types of costs relate to having the items physically in storage. Costs include the cost due to interest, insurance, taxes, depreciation, obsolescence, deterioration, spoilage, pilferage, breakage, and warehousing costs (heat, light, rent, security). The importance of the various parts of holding cost depends on the type of item involved even if taxes, interest, and insurance are generally based on the value of inventory. Items that are easily concealed e.g., pocket cameras, calculators, or fairly expensive (cars, TVs) are prone to theft, fresh seafood, vegetables, and poultry products are subject rapid deterioration and spoilage. Dairy products, salad dressings, batteries, and film also have limited shelf lives, holding costs are stated in two ways, as a percentage of unit prices and as kwacha amount per unit. (b)Ordering or Replenishment Costs – These are the costs incurred when ordering and receiving inventory. (c)Shortage Costs – this is where supply is lower than demand, such situations result to opportunity cost of not making sales, losing customer goodwill and similar costs. (d) Purchasing cost; this is incurred when purchasing stock.2.1.8 INVENTORY POLICYThe type of decision to be taken about inventory management is similar regardless of the size and complexity of the business. However, all decisions may be made by one man in a simpler or smaller business, while a bigger or separate level of top management will usually be concerned with inventory decision in complex businesses.Inventory policies are used as guides in the process of establishing programs and controls in business organizations so that a suitable rate of return will be earned on the inventory investment. In most cases the decisions or policies will cover:How much to order i.e. the optimal quantity of an item that could be ordered whenever an order is placed. When should an order be placed?How much safety stock should be kept?2.1.8 HOW MUCH TO ORDER I.E. THE OPTIMAL QUANTITY OF AN ITEM THAT COULD BE ORDERED WHENEVER AN ORDER IS PLACED. According to SN Mathur (2010), Economic Order Quantity is the order size that will result in the lowest total of order and the carrying costs for the item. In an event where the company makes unnecessary orders it will incur unneeded orders. On the other hand, if a firm places too few orders, it will incur excessive carrying costs because the firm will have to maintain large stocks of goods. The firm needs to strike a balance between ordering costs and carrying costs. EOQ model helps companies in determining the maximum and minimum inventory level order and hold while minimizing inventory total costs (ordering costs and carrying costs).They further noted that the quantity of inventory ordered at once affects inventory ordering and holding costs and will ultimately have a bearing on profitability.S.L Adeyemi and A.O Salami (2010) conducted a study in Nigeria, Oyo state. The study topic was “inventory management: a Tool of Optimizing Resources in a manufacturing industry”: a case study of Coca-Cola bottling company, Ilorin plant. This study was guided by the following specific objectives: To describe the inventory management procedures of Nigeria bottling companyTo determine whether or not the inventory management of Nigeria bottling company can be evaluated and understood by using various existing tools of optimization in inventory management To determine the optimality in the company inventory management policiesThe statistical tools that were used in this study to analyse quantitative data were EOQ model which was used to determine the optimal inventory level, the simple variance method was used in describing presented data while the chi-square tool was used to in drawing inference about the variance of the distribution.However from the analysis of the study, it revealed that the company does not make use of the EOQ whenever placing orders for its raw materials, this caused variation between expected order size and the calculated EOQ. They also observed that Nigeria bottling company, Ilorin plant had excess investment inventory. A correlation was discovered, there is a positive relationship between company sales and inventory usage, this implies that inventory usage depends on company sales meaning, whenever company sales increases, there is an increase in inventory usage. In conclusion, Nigeria bottling company, Ilorin plant has been using EOQ and the company also uses a well-structured inventory policy which has enabled the company to handle idle stock without incurring unnecessary costs.Economic order quantity minimizes the total holding costs and ordering costs. It is one of the oldest classical production scheduling models. EOQ applies when the demand for a product is constant over the year and each New Year order is fully delivered when inventory reaches zero Classic EOQ model: trade-off between ordering cost (blue) and holding cost (red). Total cost (green) admits a global optimum. Source: Production and Operations Management 6th Edition, Slack et alFormula:The optimal value Q* may also be found by recognizing thatDemand is known with certainty and is constant over timeNo shortages are allowedLead time for the orders is constantThe order quantity is received all at onceThere are other formulas of the Economic Order Quantities namely Model II and Model III. This research only employed Model I in order to find the optimal quantities. The following is according to Richard Bronson and Govindasami Naadimuthu (1997) the two professors from the Fairleigh Dickinson University on the EOQ Models:2.1.8. B. Economic Order Quantity Basic model (Model II) – Production LotsThis model has the following assumptions:Carrying costs, ordering cost and annual demand for a material can be estimated.No safety stock is utilized, materials are supplied at a uniform rate (p) and used at a uniform rate (d) and materials are used up when the next order begins to arrive.Stock-outs, customer responsiveness, and other costs are inconsequential.Quantity discounts do not exist. ( Supply rate (p) is greater than the usage rate2.1.8. C. Economic Order Quantity (Model III) – Quality DiscountsThis final model of the EOQ, Model III has the following assumptions:(a)Annual demand, carrying a cost, and cost for a material can be estimated.(b)Average inventory levels can be estimated at either; Q/2 – if the assumptions of the model I prevail: no safety stock, orders are received all at once, materials are used at a uniform rate and materials are entirely used up when the materials are entirely used up when the next order arrives.Stock out, customer responsiveness and other costs are inconsequential.Quantity discounts do exist. As larger quantities are ordered, price breaks apply to all units ordered.The EOQ and TSC formulas from either Model I or Model II are applied to Model III, depending on which assumptions best fit inventory situation.Annual acquisition costs = Annual demand × Acquisition cost = (D) acTotal annual material costs (TMC) = TSC + (D) acThe model I – Order Delivered All at One TimeEOQ = ?2DS/CTMC = (Q/2) C + (D/Q) S + (D) acModel II – Gradual DeliveriesEOQ = ? (2DS/C) p/ (p – d)TMC = (Q/2) (p – d)/p C + (D/Q) S + (D) acLastly, with inventory management in place, certain controls have to be in place. How inventories are controlled and how much control is expended depends on different approaches. Approaches like:(a)Understanding the goals of any inventory control system in place(b)How well established computerized inventory management systems are(c)Putting up batch numbers(d) Having to initially count the inventory physically.The above stated are just some of the ways in which inventories can be controlled, as approaches can vary from firm to firm.2.2.0 PERFORMANCEPerformance is a measure of the results achieved. Performance efficiency is the ratio between effort expended and results achieved, according to Malcolm, S 2005, difficulties in inventories can cost a business more money and can lead to an excess of inventory overstock that is difficult to move. Poor inventory control is become an issue of great concern since performance is regarded as the mainstream for development of organizations. A truly effective inventory management system minimizes the complexities involved in planning, executing and controlling a supply chain network which is critical to business success. The opportunities available by improving a company’s inventory management can significantly improve bottom line business performance.2.2.1 MEASURING A COMPANY’S PERFORMANCEA Business success can depend on implementing and developing sound financial and management systems. One of the most important areas in relation to finances that should be reviewed is profitability. Most growing businesses ultimately target increased profits. Therefore, It can be noted it’s important to know to measure profitability. The following are the key standard measures of profitability:(a)Gross Profit Margin – How much money is made after direct costs of sales have been taken into account or the contribution as it is also known.(b)Operating Margin – This lies between the gross and net measures of profitability. Overheads are taken into account, but interest and tax payments are not.(c)Net Profit Margin – Is a narrow measure of profits, all costs are taken into account, not just direct ones. All overheads, tax payments and interest, are calculated in the profit calculation.(d)Return on Capital Employed – This calculates net profit as a percentage of the total capital employed in a business. It allows a company to see how well the money invested in a business is performing compared with other investments.2.2.3 THE RELATIONSHIP BETWEEN INVENTORY MANAGEMENT AND PERFORMANCE OF YATU COMPANY.According to Lynch (2005), the main objective of inventory management is to minimize the total cost of irrelevant costs to ensure profitable operations. Because of the value attributed to inventory management, two cardinal decisions must be faced, and these are; how much we buy at a time? When should we buy (or manufacture)?According to Pandley (1995), in many cases where inventory management decisions have been effective, inventory planning models have been effective; inventory- planning models have been developed and implemented focusing especially on the twin problems of inventory size and timing. Usually, inventory management models are defined to achieve a balance between the costs of acquiring and holding inventory. These costs are the ones that affect organizations profitability. These models are developed in order to help management maintain inventories of the optimal level that will help the organization to realize profits. To be specific, the objective of inventory management models is to maintain adequate inventory levels of minimum inventory costs. They specify the economic order quantity and re-order point and if well observed, companies earn profits, Morse (1981).Economic order quantity is what that should be ordered at once (inventory). They further noted that the quantity of inventory ordered at once affects inventory ordering and holding costs and will ultimately have a bearing on profitability. For instance, if a few large orders are placed, annual ordering costs will be low, but annual holding costs will be high, Hanger (1982).Conversely, if many small orders are placed over all ordering costs will be high but annual holding costs will be low. To be profitable, it is necessary to determine if increasing the order size to obtain large volume discounts and slightly lowering costs will be more offset at a higher holding cost. The scholars agreed that profitability would only be achieved at an optimum level of relevant costs i.e. holding costs and ordering costs as stated by Lynch (2005)According to Pandey (1995), this is the level of which an order for additional inventory should be placed, because inventory cannot be ordered and received instantly. Orders for additional inventories should be placed before current stocks are depleted. The re-order point must consider both the lead time required to replenish stocks after an order is placed and inventory demand during the lead time.Morse (1981) agreed with other scholars and further observed that, because of the variation in lead-time and the daily demand for inventory, inventories are cushions to prevent “Stockout” and the resulting loss of sales or disruption of production. As already noted above, in a merchandising establishment, stockout costs includes the extra costs of processing back orders and the opportunity cost of lost sales is frequently specified as the selling price less the invoice price, opportunity costs are considered greater if dissatisfied customers subsequently patronize other establishments. In this case, the profitability of an organization remains fragile if no proper controls are considered .greater it dissatisfied customers subsequently patronize other establishments. In this case, the profitability of an organization remains fragile if no proper controls are ensured.Excessive inventories are the enemy of retail profitability. For inventory management to be an effective profitability improvement tool, corporate culture must ensure that employees are empowered to make it successful, Laugero (2002). Organizations like black and Decker fully realize the relationship between inventory production and profit. This is an international Corporation, with annual sales in excess of and 1 billion. It is the world’s largest manufacturer of power tools, and because of large required investment in inventory and the total cost associated with such, managers are alert for ways to control inventory, Ivancevich (1990). Lucey (1992) says that inventory management is an important area of financial control, which is often, neglected not knowing that a small percentage saving on inventory costs will represent millions of shillings on the natural scale. All stocks represent on investment so they should keep to an absolute minimum.According to Kenneth Lysons and Michael Gilligham, (2003), the role of inventory management is to ensure faster inventory turnover. It increases inventory turnover by ten (10) and reduces costs by 10% to 40%. The so-called inventory turnover is not yet right to sell products on the shelves based on the principle of First in First out (FIFO).Inventory is classified based on the business undertaking from organization to organization. Common criteria used and are nature of inventory for example manufacturing, sale or retail, the purpose for which inventory is being held in stock or function and the related usage in the supply chain. Typical classifications are raw materials (items in the unprocessed state awaiting conversion e.g. timber, steel, and coffee seeds), components and sub-assemblies. These are for incorporation into the end product e.g. side mirrors, glasses for car assembling company and monitors or keyboards for a computer assembling company), consumable (all supplies in an undertaking which are classified as indirect and which do not form part of a saleable product. Proper classification of inventory and its control improve the financial position of a business (David Jessop and Alex Morrison 1994).Inventory management is concerned with specifying the size and placement of stocked goods. According to Garry, (1997), 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 for improved performance. The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting According to Lau A., and Snell (2006).Inventory management involves the planning, ordering, and scheduling of the materials used in the manufacturing process. It exercises management over three types of inventories that are raw materials, work in progress and finished goods. Purchasing is primarily concerned with management over the raw materials inventory, which includes; raw materials or semi-processed materials, fabricated parts and MRO items (Maintenance, Repair, and Operations) Garry, (1997).However, Lau and Snell (2006) argued that inventory management is just specifying the size and placement of stocked goods. Inventory management is required at different stages within multiple locations of the supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods for improved performance. Inventory management also fines lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, and many other things. Poor management of inventory is an issue of great concern since performance is regarded as the mainstream for development of organizations. An effective inventory management ensures that it minimizes the complexities involved in planning, implementing and controlling a supply chain network which is critical to YATU.According to Jayeff (1998) stated that a financial perspective, inventory management is a big matter. Many times, inventory is the largest asset item on a manufacturer’s balance sheet. Therefore, there must be a lot of serious measures on keeping inventories. The main reason for inventory management is to reduce and minimize loss; it is easily achieved with modern inventory management processes that are working effectively for improved performance. Inventory management is more complex than what it’s perceived, In fact, in the soft drinks industry, the inventory control department is perceived as little more than a clerical function as it is probably not very effective. The result of this to inventory management is lots of material shortages, excessive inventories, high costs and poor customer service Lastly, authors, Kreg ; Cristine (2007), identified that too much inventory and not enough customer service is very common but unnecessary. There are proven techniques that can help accurately industry customer demand and to calculate the inventory needed to meet a defined level of customer service. Using the right techniques for sales forecasting and inventory management help to monitor changes and respond to alerts when action needs to be taken. Good measures to inventory management can produce dramatic benefits in customer service with lower inventory.CHAPTER THREE RESEARCH METHODOLOGIESThis chapter discusses the methodology and design used in the research. This type of research involves what has already taken place and as such no attempt was made to control or manipulate relevant independent and dependent variables. As an analytical research, all manners of tools (Microsoft word and excel) were employed in an appraisal of data with the aim of establishing relationships. It describes the types of data used in the study, the types of data collected for the study and the methods used to collect this data. The types of data used in this research are both primary data and secondary data. The research mainly deals with the analysis of quantitative data because of the nature of the topic under study.3.1.1 Research designThis depicts a plan, structure, and strategy used to generate answers for the research. A research design is very important for providing a direction and guidance for a study.According to Robson (2002), a case study is a research plan or strategy that involves an empirical investigation of a particular phenomenon within its real-life context which is done by the use of multiple sources of evidence gathered it provides a framework within the researcher operates to systemically to find solutions for the identified research problem. This research design of the case study provided the direction and approach taken to solve the outlined problem. The research design selected for this study was a quantitative approach. This is simply because this design has proved to be appropriate for quantitative research and the topic for this research suggests a quantitative approach. The area of study was on the Yatu Foods Company which is located in Ndola which is situated on the Copperbelt province Zambia. 3.1.2 Sources of dataData for this research was gathered from both primary and secondary sources for a better comprehension and analysis of the study. Secondary data was collected through other studies on the topic of Inventory Management and some published financial reports of the company under study.A total of two of Two (2) Questionnaires and Two (2) interviews were according to the researcher. The Two (2) respondents who were interviewed and answered the questionnaires had the necessary knowledge and experience to give the correct and precise answers and information for the authenticity of the study. Both respondents having the university as the level of their education, this was simply an indication that the respondents had the knowledge on the topic and were able to answer the questions accordingly and correctly. They also had more than 5 years of experience at the Yatu Foods Company (currently in the Finance ; Administration Department) and both had more than 1 year of working with inventory.This gave insight to the researcher about the topic and the problem statement. It includes most of the theories on the topic of inventory management. Secondary data was also collected from published annual reports and some statements published about Yatu Foods Company in Ndola, Copperbelt Zambia.3.1 .3Target populationPurposive sampling was selected for this study because only a small and defined element used in the study was targeted for primary data. Only a few employees of the company ‘The Plant Manager’ and others from related departments could provide the data needed for this research. Thus, purposive sampling was found to be an appropriate sampling technique for the study. This technique only targets those individuals who can provide data about a certain situation or topic in this case ‘Inventory Management and targets a specific small group of people with desired data to solve the research problem. The target population for purposive sampling included all those who are in the specified departments for the purpose of this research3.1.4Sample size According to Orodho and Kombo (2002), Sampling is a process of selecting or objects from the population such that the selected group contains elements representative of the characteristics found in the whole group. In other words, sampling is the process of choosing a number of samples from a sampling frame. Therefore, the sampling design in the research is simply the plan for selecting samples from a sampling frame. The sampling technique for this study is purposive sampling which follows a non-probabilistic sampling design.3.1.5 Sampling methodologyData for this research was analyzed by use of Microsoft word, excel and the EOQ model, the Microsoft word were programs that were used to develop frequency tables, graphs, pie charts.A Simple Regression through excel was used in order to determine the relationship between inventory management (order quantities) and performance (operating profits). The EOQ model (model I) was employed to determine order quantities. Lastly, the hypothesis was drawn from the regression analysis performed. A positive relationship, Signified an existence of a relationship between inventory management and company performance3.1.6Research instrumentPurposive sampling technique was conducted with the aid of questionnaires and interviews as suitable instruments for data collection. Questionnaires were selected as a suitable tool for obtaining data because of their simplicity and high level of confidentiality. They were also used because of their convenience and specificity as data collection instruments. A Sample of the questionnaire used in collecting data from Yatu Foods Company in Ndola, Copperbelt Zambia is attached in the appendix. Interviews were also used for obtaining data because of their ability to allow interaction between the interviewer and the interviewee. This interaction enables the researcher or interviewer to collect more data than that requested through questionnaires. A researcher obtained factual and detailed data from the interviewee. Therefore, it was for this same reason the interviews were also used as an instrument to collect data from Yatu Foods Company in Ndola, Copperbelt Zambia.3.1.7 Data analysisData for this research was analyzed by the use of Microsoft Word, Excel and the EOQ Model. Microsoft Word and were programs that were used to develop frequency tables, graphs, pie-charts.A Simple Regression through excel was used in order to determine the relationship between inventory management (order quantities) and performance (operating profits). The EOQ model (model I) was employed to determine order quantities. A positive relationship, Signified an existence of a relationship between inventory management and company performance.3.1.8 Possible limitation of the studyIn the course of the study, the researcher encountered a great number of challenges, the major one being most firms did not agree to answer the questionnaire and provide the information needed to carry out the research.Some companies claimed the information being asked was too “confidential” This led to the changing of a number of firms on numerous occasions. The companies included Zambian Breweries, Shoprite, Spar, Pick ‘n pay and Pep. Other limitations included financial constraints. The study was undertaken as part of the diploma program and the time allocated was enough for its completion, but the delay in the giving of information by certain companies took too long or the information was simply not given due to some “confidentiality issues”. CHAPTER FOUR DATA ANALYSIS AND PRESENTATION OF RESEARCH FINDINGS4.0 INTRODUCTIONThe study was fully grounded on one major aim of evaluating the impact of inventory management system on company performance. However, the researcher collected some necessary data about the company performance and on issues relating to inventory management. This chapter presents the empirical research findings of the business practices of the company under study and some major issues that need to be addressed in their inventory management system. Finally, this chapter analyses the research findings. Both Qualitative and Quantitative data about the company was gathered. 4.1 COMPANY PROFILESource: Author’s illustrations from primary data.It can be identified that from the primary data shown in the figure above that the company is well organized and well established. The company has proper management structure to coordinate the daily business Operations in order to enhance company performance.4.2 DATA PRESENTATIONThe research was guided by the following objectives:To find out the techniques of inventory management used at the Yatu Foods Company in Ndola, Copperbelt Zambia.To examine the relationship between inventory management and performance of a company, in this case, the Yatu Foods Company in Ndola, Copperbelt ZambiaTo determine the challenges faced by Yatu Foods Company in Ndola, Copperbelt Zambia in managing the inventories.To identify the impact of inventory management on Yatu Foods Company in Ndola, Copperbelt ZambiaThe research had the research questions:What are the techniques of inventory management used at that Foods Company in Ndola, Copperbelt Zambia?What is the relationship between inventory management and performance of The Yatu Foods Company in Ndola, Copperbelt Zambia?What are the challenges faced by Yatu Foods Company in Ndola, Copperbelt Zambia in managing the inventories?To what extent has inventory management impacted Yatu Foods Company in Ndola, Copperbelt Zambia? According to the research questions, the following were the answers and discussions:4.2.1 WHAT ARE THE TECHNIQUES OF INVENTORY MANAGEMENT USED AT THE YATU FOODS COMPANY IN NDOLA, COPPERBELT ZAMBIA?According to the study, the researcher discovered that the technique of inventory management used at Yatu Foods Company is the FIRST IN, FIRST OUT (FIFO).Source: Production and Operations Management 3rd Edition 2002.According to the respondents, this (FIFO) is a simple system which is manually implemented at Yatu tea. Based on FIFO, this is one of the methods commonly used to calculate the value of inventory on hand at the end of an accounting period and the cost of goods sold during the period. This method assumes that inventory purchased or manufactured first is sold first and newer inventory remains unsold. Thus the cost of older inventory is assigned to cost of goods sold and that of newer inventory is assigned to ending inventory. The actual flow of inventory may not exactly match the first-in, first-out pattern. FIFO method can be applied in both the periodic inventory system and the perpetual inventory system.Therefore, Yatu Tea ensures that its tea products manufactured first, are sold first, and newer Tea products remain unsold or stored, this method implies that the oldest goods are issued out first that is, materials are issued. Out in the order in which they were received. Most times, materials or goods may not be issued out in this order but it will be a good and effective store keeping practice if this order is maintained because it checks material obsolescence, deterioration, and depreciation and it ensures that these materials are issued out at the actual cost thereby avoiding unrealized profits or losses which may result from random issue of the materials.FIFO method poses a problem in times of prices being changed because the cost of goods sold is likely to be understated or underestimated during inflation as old prices are adapted to value the material used.4.2.2 WHAT IS THE RELATIONSHIP BETWEEN INVENTORY MANAGEMENT AND PERFORMANCE OF THE YATU FOODS COMPANY IN NDOLA, COPPERBELT ZAMBIA?To find out the relationship between inventory management and performance, Inventory Management was looked at from aspect of order quantities and performance from the aspect of the company’s operating profits.From the information gathered the Operating profits for Yatu Foods Company.Table 4.2.2. Profits of Yatu TeaYear Profits2010 K 47, 047.382011 K 21, 532.182012 K 49, 707.132013 K 33, 847.022014 K 51, 322.77Source: Author’s illustration from company’s records.From the data collected from the respondents, the following were calculated.The Company’s re-order quantity and how often it places the orders.The Company’s Ordering Policy is that they make an order every after four months. This simply shows that the company’s reorder time is after four months meaning they place three orders in a year. The order quantity ranges between 30,000kilograms to 50,000 kilograms (30 tonnes – 50 tonnes) in a year. However, depending on the market demand for the product company sometimes they make orders even before the four months elapses. This entails the order time is based on the product demand and to some extent the season. Therefore, the higher the demand, the more order times and vice-versa.Figure 4.2.2 A. Company’s Re-order quantity and how often it places the orders.Source: Author’s illustration from company’s records.30,000 Kilograms (30 tonnes) is the company’s minimum order quantity and 50,000 (50 tonnes) kilograms is the company’s maximum order quantity. As illustrated by the diagram above, it was noted the large quantities of orders are usually made between May and August as that is when tea production goes high due to the cold season ( sales increase). Smallest orders were made between September and December (sales decrease).Therefore, to calculate the order quantities, the first model of the EOQ Model was used. The first model was used for this research, as assumptions of the first model best describe the practices practiced at the company of Yatu tea. Yatu has the following elements in its inventory management practice:Demand is known with certainty and is constant over timeNo shortages are allowedLead time for the orders is constantThe order quantity is received all at onceThe following formula was used to determine the order quantities:Variables= purchase unit price, unit production cost= order quantity= optimal order quantity= annual demand quantity= fixed cost per order, setup cost (not per unit, typically cost of ordering and shipping and handling. This is not the cost of goods)= annual holding cost per unit, also known as carrying cost or storage cost (capital cost, warehouse space, refrigeration, insurance, etc. usually not related to the unit production cost)Based on the information given to the researcher from Yatu Tea the following were calculated.Table 4.2.2.B Quantities OrderedYear Order Quantities (in Kilograms) Percentage of Order quantities Demanded Demand (D)2010 40,000 63% 25,2002011 40,000 68% 27,2002012 41,500 62% 25,7302013 30,000 48% 14,4002014 46,000 54% 24,840Source: Author’s illustration from company’s records.With the company having:K = K42,500h = K55,000The optimal order quantities were calculated for the first EOQ Model, as follows:Table 4.2.2.C. Amounts from the EOQ ModelYear EOQ In Tonnes2010 197.3462011 205.0272012 199.4102013 149.1792014 195.931Source: Author’s illustration of order quantities.From EOQ Model above, it shows the order quantities in tonnes that Yatu Foods Company should order in order to minimize or rather reduce the costs it incurs every year. Those orders can only be placed once in a year rather than ordering quarterly as Yatu tea does. Therefore, to establish a relationship (simple was employed and the Regression Equation Table was as follows:Table 4.2.2.D Regression TableYear Profits (Y) EOQ In Tonnes (X)2010 K 47, 047.38 197.3462011 K 21, 532.18 205.0272012 K 49, 707.13 199.4102013 K 33, 847.02 149.1792014 K 51, 322.77 195.931Source: Author’s illustration from company’s recordsFigure 4.2.2.B Regression AnalysisFrom the graph above, the Regression Line shows a line which is positively sloped, this means that the there is a Positive relationship (weak) between Order Quantities and Operating Profits. Regression Equation: Y=82.377x + 25140.The relationship from the above Figure can be said to be a WEAK POSITIVE Relationship between Order Quantity and Profits. It can be said to weak of the various challenges (identified already) being faced by Yatu Foods Company managing its inventory. TESTING OF HYPOTHESISThe Hypothesis was tested using the regression analysis, and from the results shown above, the slope of regression line shows there is a relationship between Inventory Management and Company Performances. Therefore, A Positive Relationship from the regression analysis signifies that there is a relationship between Inventory Management and Company Performances.In conclusion, the null hypothesis should be rejected and accept the alternative hypothesis, this was because from the study analysis it was held that the company operates on a system of placing orders on a quarterly basis. It was further revealed that the company does not make use of the EOQ whenever placing orders for its raw materials, this caused variation between expected order size and the calculated EOQ.4.2.3 WHAT ARE THE CHALLENGES FACED BY YATU FOODS COMPANY IN NDOLA, COPPERBELT ZAMBIA IN MANAGING THE INVENTORIES?Based on the interviews and the results of the questionnaire, it was observed that despite being a first growing company, it also has various challenges it faces.1.0 A Well-Developed Inventory Management System (poor)Firstly, Yatu Tea does not have a well-developed inventory management system in place. However, the company has a simple manual system in place for the management of company inventories which is in form of the first-in, first out method. 2.0 The Lack of Inventory Management ExpertsSecondly, a number of factors were identified that affects the management of inventories in the company, among which was the lack of inventory management experts or qualified personnel in the art of inventory management. The company currently does not employ people who are experts in the field of inventory management. 3.0 Damages of the Final Products and Raw MaterialsThirdly, it was also noted that the company sometimes experiences damages of the final product as well as raw materials, they lose close to 1500 Kilograms or 1.5tonnes which can be valued close K9000 annually. These damages were noted to have been as a result of the packaging system and inspection process of raw materials. Purchase price 1Kg – K6.Normal inventory losses=Purchase price per kilogram ×Quantity lostNIL = K6 ×1500 KilogramsNIL = K9000Where:NIL is equal to Normal inventory lossesAnnually, the quantity lost is about 1.5 tonnes or 1500kilograms.Annually, the loss in Value amount to about K9,000Since the value or rather the purchase price is valued at K6 per Kg.Therefore, K6 * 1500 will amount to K9000 in inventory lossesTherefore, the implication of this is that the company gets to lose K9000 in inventory losses annually.4.0 Delayed Material DeliveriesAnother issue that was brought to light was delayed material delivery. These delayed material deliveries were said to be caused by the suppliers since the raw materials are not locally supplied. Some of Yatu Tea’s main suppliers are from as far as Malawi, where Yatu Tea as a company is required to pay a fixed amount of $1000 for materials to be moved from Malawi to Chipata where in Zambia. Lastly, an additional cost of K3000 is paid for the materials to move from Chipata to Ndola. This is done quarterly, meaning the amounts mentioned above are paid 3times:Malawi – Chipata = $3000 annually (per year) and Chipata – Ndola= K9000 Annually (per year).4.2.4 TO WHAT EXTENT HAS INVENTORY MANAGEMENT IMPACTED YATU FOODS COMPANY IN NDOLA, COPPERBELT ZAMBIA?1.0 Increase in the Production of TeaFirstly, according to the respondents, the aspect of Inventory Management has helped the company in the increase in the production of Tea. The output has been increasing as compared to the past years.2.0 Increase in profitabilitySecondly, inventory management has impacted the company is through their profitability. They as a company have seen an increase in the number of profits they generate annually. It b can be estimated that the company’s profitability has grown from K 47, 047 in 2010 and K 51, 322 in 2015. Having a 9% growth rate in Profitability. This can be seen from the figure below.Table 4.2.4.A Profits of Yatu TeaYear Profits2010 K 47, 047.382011 K 21, 532.182012 K 49, 707.132013 K 33, 847.022014 K 51, 322.77Source: Author’s illustration from company’s records4.2.5 Other Additional Information gathered:Costs the company incurred in the five years in relation to Transportation, Ordering, and Holding costs. Table 4.2.5 A. Costs incurred in the last five years Source: Author’s illustration from company’s recordsTransportation CostsSome of Yatu Tea’s main suppliers are from as far as Malawi, where Yatu Tea as a company is required to pay a fixed amount of $1000 for materials to be moved from Malawi to Chipata where in Zambia. Lastly, an additional cost of K3000 is paid for the materials to move from Chipata to NdolaThis is done quarterly, meaning the amounts mentioned above are paid 3times:Malawi – Chipata = $3000 annually (per year) and Chipata – Ndola= K9000 Annually (per year).Ordering costsThese costs can be expressed in 3 components Purchasing, Clearance and Inspection costs. Annually, these costs combined amount to somewhere between K55,000 – K58,000.Holding costs These costs include three components Security, Electricity and insurance amounting to about K37000- K40000 per year.Coming to the conclusion that total cost in the last 5 years was about K700,000 Having annual expenses of about K140,000 per year.Cost of sales and sales in the past five years.Table 4.2.5 B. Cost of salesYear Cost of Sales2010 K67,4202011 K77,8502012 K 45,0002013 K45,0002014 K45,000Source: Author’s illustration from company’s recordsFigure 4.2.5 A. Cost of salesSource: Author’s illustration from company’s recordsFrom 2012 to 2014 the company has tried to implement a standard rate at which its costs of sales should always be at, of about K40,000 – K45,000 annually as compared to 2010 which hadK67, 420and 2011 which hadK77,850 . Therefore, the costs of sales from 2012 to 2014 were estimated to about K135,000 in three years. Giving a total of K280,270 in the cost of sales last five years SalesTable 4.2.5 C. Sales Year Sales2010 K 1,451,0152011 K 1,592,2722012 K 1,155,0002013 K 1,155,0002014 K 1,155,000Source: Author’s illustration from company’s records Figure 4.2.5 B. SalesSource: Author’s illustration from company’s records.The company made of about K 1,451,015 in 2010 and 1,592,272in 2011. From 2012 to 2014 the company was estimated to have generated K 385,000 quarterly. This later signified an amount of K 1,155,000 annually in sales. Therefore, in the past five years, the total amount of sales was estimated to have been around K 5, 775,000 in five years.CHAPTER FIVECONCLUSION 5.0 INTRODUCTIONThis study was aimed at evaluating the Impact of an Inventory Management System on Company Performance. The study looked at Yatu Foods Company as a Case study and the study period was from 2010-2014. This chapter specifically discusses the Research Findings already discussed in Chapter Four, relation to the research objectives and the research Hypothesis. Not only, but the chapter also brought out some highlights of the research methodology which were discussed earlier in chapter four. Based on the research findings and conclusions, the recommendations will be drawn from thence. Lastly, areas of further study will be recommended.5.1 CONCLUSIONBased on the research findings, it can be concluded that there is POSITIVE (WEAK) relationship between Inventory Days and company Operating Profits. The Regression line shows a moderate relationship between Order quantities and operating profits. However, the Coefficient of Determination (r2) is only 0.0212. This simply indicates that order quantities impact Operating Profit by 2.12%.In conclusion, the null hypothesis should be rejected and accept the alternative hypothesis, this was because from the study analysis it was held that the company operates on a system of placing orders on a quarterly basis. It was further revealed that the company does noThe study was also limited by lack of adequate information from the respondents; nevertheless, the respondents were convinced that the research was met to help them in solving some of the inventory management problems in the company, in conclusion, the null hypothesis should be rejected and accept the alternative hypothesis, this was because from the study analysis it was held that the company operates on a system of placing orders on a quarterly basis. It was further revealed that the company does not make use of the EOQ whenever placing orders for its raw materials, this caused variation between expected order size and the calculated EOQ.CHAPTER 65.2RECOMMENDATIONSThe following are the recommendations:1.0 Put up a well-developed inventory management systemFirstly, despite being a small growing company, Yatu Foods Company needs to establish a well-developed inventory management system so as to monitor the inventory days and other issues relating to inventory management closely.Secondly, Yatu tea as a company needs to employ or rather practice the Economic Order Quantity model. Through this research, as a research, I would recommend yatu tea to use the first model of the EOQ Model I, whenever orders are being placed. This will prove to be more profitable for yatu tea as a small growing company.2.0 Improve the production processYatu Foods Company management needs to ensure that the production processes are improved in order to reduce the unnecessary damages. In order to minimize stocks outs and excessive investment in inventories, it is recommended that the company use the EOQ model I whenever making orders as it will help them in reducing their costs.3.0 Train its existing employeesBased on the findings, the company also need to train Staff on the importance of inventory management; this cannot work out without full involvement by the members of staff. Therefore, the company should try training its already existing employees in order to increase their skills and knowledge of inventory management. 4.0 OutsourcingThe Company should also look to implementing the aspect of outsourcing when the need arises just help in the management of its inventory. 5.0 Putting up a computerized inventory management systemLastly, the company should put up a computerized inventory system which would help to alert both the inventory management team and the suppliers when the company is low on inventory.SELECTED REFERENCESCaplice, C. and Sheffi, V. (1994). A Review and Evaluation of Logistic Metrics. The international Journal of Logistics Management, 5(2): 23-37.Coyle.J.J, Bardi.E.J, and Langley Jr C.J (2003). The management of business logistics. A supply chain perspective, 7th edition. Thornson-Learning Canada.Dr. Ram Naresh Roy Ph.D. (2005). A Modern Approach To Operations Management. 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Butterworth Heinnman U.KYatu foods website – www.yatufoods.co.zm/Zhang, Q. Vonderembse, M.A. and Lom, J.S. (2005). Logistic Flexibility and Its Imapct on Customer Satisfaction” The Internaitonal Journal of Logistics Management, 16(1): 89-96. in relation to business performance. RESEARCH QUESTIONNAIRETOPIC: THE EFFECTS OF INVENTORY MANAGEMENT ON PERFORMANCE OF A COMPANY IN ZAMBIA. A CASE STUDY OF YATU FOODS COMPANY NDOLA, COPPERBELT ZAMBIA.Student Name: Chikondi ChalweStudent ID :28008227Dear respondents, I am a student of the National Institute Of Public Administration doing a Diploma in Business Administration . This questionnaire is designed to collect information aimed at evaluating the effects of inventory management on the performance of a company in Zambia, a case study of Yatu Foods Company in Ndola, Copperbelt Zambia. I will greatly appreciate it if you could take a few minutes to provide me with information. Your response will be kept confidential and it will not be divulged to any person or institution outside this corporation. The information obtained will be strictly for academic purposes and it will be treated with at most confidentiality. I kindly request you to fill this questionnaire.Thank you in advance.SECTION A: BIOGRAPHIC DATA(N.B Answer by Ticking where applicable) 1. Gender(a). Female (b). Male 2. Marital StatusSingle (b) Married (c) Divorced /separate