ABSTRACT

The study was based on the impact of inventory management on the performance of small and medium size enterprises. The main objective of the research was to examine the impact of inventory management on the performance of SMEs; the study was based on three specific objectives, the impact of just in time on the performance of SMEs, the impact of economic order quantity on the performance of SMEs, and the impact of vendor management on the performance of SMEs. The research was carried out using a survey design and questionnaires was used to carry out the research since it was a quantitative research study. Descriptive and inferential statistics were used to analyze the data. The data collected were classified and analyzed using the linear regression analysis with the help of Statistical Package for Social Sciences (SPSS) version 26 to examine the relationship between the independent variable (inventory management) and the dependent variable (performance). A random sample of 40 questionnaires were administered, and the hypothesis were tested which shows that just in time significantly affect the performance of SMEs,  vendor management significantly affect the performance of SMEs, This study therefore rejects the Null hypothesis and concludes that inventory management has a significant impact on the performance of small and medium sized enterprises.

Keywords; Inventory Management, Performance, Just In Time, Economic Order Quantity, Vendor Management

Chapter One: Introduction

1.1 Background of the Study

In historical contexts, inventory management was not prioritized, and excess stock was often seen as a sign of affluence. Over time, perceptions shifted, and modern businesses recognize the importance of efficient inventory management (Syed et al., 2016). Excessive inventory can lead to unnecessary financial strain, while insufficient stock can disrupt sales and negatively affect customer relationships. Inventory management is also a critical component of Supply Chain Management (SCM), influenced by multi-echelon inventory theory over the past two decades. Steven (2019) emphasized the significant impact inventory management practices have on the functions of Small and Medium-Sized Enterprises (SMEs), affecting operations, marketing, accounting, and finance. He identified transaction, precautionary, and speculative motives for holding inventories, all pivotal for the operation of SMEs.

Inventory constitutes a significant portion of current assets in SMEs, often representing the bulk of their turnover (Prempeh, 2016). Definitions of SMEs vary globally, with distinctions made based on employee numbers and turnover. For example, the European Union and World Bank define SMEs using specific thresholds for employees and annual turnover, while the UK Companies Act 2006 provides distinct criteria.

Inadequate information flow within enterprises contributes to high operational costs (Ogbo, 2017). Inventory control and management practices are essential for operational efficiency and include strategies such as just-in-time, economic order quantity, and FIFO/LIFO approaches.

Inventory managers must balance multiple concerns, including costs, the critical nature of items, and their contributions. While reducing or eliminating inventories might be a strategy for cost avoidance, it is seldom practical. Most SMEs aim to maintain an inventory level that ensures customer satisfaction while managing it efficiently. With various inventory management strategies available, firms choose the one that best fits their operational model and market demand.

1.2 Statement of the Problem

SMEs in Cameroon, particularly in the Buea municipality, are grappling with volatile customer demands amid economic instability. Striking a balance between adequate stock levels and minimizing carrying costs is challenging, with implications like rushed purchases, financial losses, and missed sales opportunities (Okoye et al., 2016). Effective inventory management is pivotal for the productivity, sales, and profitability of SMEs, with implications not just for stakeholders but for the national economy.

Various studies have focused on inventory management in SMEs, including its impact on performance and profitability. This study narrows its focus to Buea, Cameroon, seeking to explore the relationship between inventory management and SME performance. It will address the impacts of different inventory management approaches on SME performance.

1.3 Objective of the Study

The primary objective of this study is to determine the effect of inventory management and control on the performance of SMEs in Buea. Specifically, it aims to assess the impact of just-in-time, vendor management, and economic order quantity approaches on SME performance.

1.4 Research Hypothesis

The study tests the following hypotheses:

• H0: Just in time approach of inventory management does not significantly affect the performance of SMEs in Buea.

• H1: Just in time approach of inventory management significantly affects the performance of SMEs in Buea.

• H0: Vendor management approach of inventory management does not significantly affect the performance of SMEs in Buea.

• H1: Vendor management approach of inventory management significantly affects the performance of SMEs in Buea.

• H0: Economic order quantity approach of inventory management does not significantly affect the performance of SMEs in Buea.

• H1: Economic order quantity approach of inventory management significantly affects the performance of SMEs in Buea.

1.5 Significance of the Study

This study will be beneficial to various stakeholders, including SMEs, policymakers, and researchers. It will provide insights into inventory management practices, guiding SMEs in Cameroon to establish sound practices that enhance performance. Policymakers will gain information to formulate appropriate regulatory policies. The study adds to the academic discourse on inventory management, highlighting potential limitations and their effects on SME performance, thus serving as a foundation for further research in this domain.

This chapter sets the stage for an in-depth exploration of inventory management’s role in the performance of SMEs, particularly within the context of the Buea municipality in Cameroon.