Factors Affecting the Efficiency of …

Research Article
Factors Affecting the Efficiency of Inventory Management of
Janapriya Multiple Campus, Pokhara

Hari Bahadur Bhandari

Faculty of Management
Janapriya Multiple Campus, Pokhara, Nepal

Abstract
Each and every organization needs inventories to perform day to day
activities to achieve set objectives. This study entitled ’factors affecting the
efficiency of inventory management of Janapriya Multiple Campus,
Pokhara’ is to assess the factors that affect on inventory management of the
campus. Basically, the study is based on primary data including 21 sample
out of total population 28. Stratified random sampling is used to select a
sample size of 21 respondents. Structured questionnaire and other official
documents are used to collect data from primary sources. Samples were
three groups of office staff. Group wise distribution of sample was top level,
middle level and assistant level. The collected data are tabulated and
presented according to the needs and objectives of the study. Descriptive
statistics of mean and standard deviation were used for data analysis.
Factors related with proper record keeping of inventory, financial
resources, skill possessed by store staff and bureaucratic procurement
procedure positively affect on the effectiveness of inventory management.
Proper inventory record, stock information and competent & qualified
store employees are very important for the effectiveness of inventory
management. Sufficient fund, skillful store clerks, training and development
for store staff, few quality suppliers and easy process of budget release are
inevitable for superior inventory management.
Keywords: Cost, inventory management, office supplies, over/under
stocking, procurement, store record

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Introduction
Inventories are current assets. These are tangible assets held by an
organization. In manufacturing concerns, inventories include stock of
materials, semi-finished goods, (work in progress), finished goods, packing
materials, factory supplies and spares. Cost of unsold goods is inventories
for trading concern. Service organizations like schools, campuses, hospitals
etc also need in the form of office materials/supplies. All form of
inventories hold some economic value. Thus the sum of raw materials,
semi-finished goods, finished goods, spare parts, office supplies and other
consumable stores is known as inventory.
A firm should determine its optimum level of investment in
inventories and to do this, two conflicting requirement must be met.
First, it must ensuresthat inventories are sufficient to meet the
requirement of production and sales and second, it must avoid
holding surplus inventories that are unnecessary because of the
costs involved .The optimal inventory level lies somewhere between
these extremes (Drury,2012,p.632).
Inventory management deals with eternal issue of howmuch to keep on
hand as well as how much and how frequently to order. All organizations
have to operate in dynamic environment. There exist uncertainty in demand
and lead time. As a result organization needs inventory management.
Hongren,Dater and Rajan (2015) defined “Inventory management includes
planning, coordinating and controlling activities related to the flow of
inventory into through and out of an organizations”(p.1042). Inventory
management is a tool of management and it is concerned with planning,
organizing and controlling the movement of stocks from their initial
purchase to destination. Low level of inventory adversely affect on the day
to day operation of an organization. On the other hand, high level of
inventories increases losses, damages, opportunity cost and other holding
cost. Therefore there should be optimum level of inventory. Maintaining
the optimum level of inventory in any organization is inventory
management. It is concerned with minimizing relevant inventory costs I.e.
purchase cost, ordering cost and carrying cost.

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Factors Affecting the Efficiency of …
Enterprise Resource Planning(ERP)implementation enhance accuracy of
inventory management. The ERP provides speed and reduce cost in
managing inventory (Nayakeri & ochiri, 2014).Documentation is crucial in
ensuring efficient inventory management. Stock records provide the
management with the information to ensure accountability through stock
audit exercise (Ondari & Muturi, 2016).Internal inventory security
procedural practices, inventory auditing and computerized inventory
control individually and collectively have significant positive impact on
procurement performance (Onchoke and Wanyoike, 2016). Inadequate
forecasting of requirement, scheduled time for deliveries, inefficient staff,
scheduled time for receiving, issuing and unorganized storage facilities
affect information sharing between the customer and supplier are the causes
of overstocking and under and affecting effective inventory management
(Onkundi & Bichanga, 2016). Staff training, level of technology, stock
evaluation and procurement policies had a significant connection on the
efficiency of inventory management. Poor stock taking, outdated
procurement system and long bureaucratic procedure had unfavorable
impact on the effectiveness of inventory management(Fredrick, Mike &
Zipporah, 2017). Previous studies are related with manufacturing company,
trading stores and hospitals. There is not any study that has been done on
inventory management of community campus like Janapriya Multiple
Campus (JMC). Therefore the study certainly fulfills the gap. This study
aims to examine the factors affecting the efficiency of inventory
management. It will indicate the different factors that effect on the effective
inventory management. Likewise, it will also help to formulate plans and
policies regarding inventory management of JMC. It will also provide a
base for the further studies to researchers on related topic.

Data and Methods

Janapriya Multiple campus (JMC) is a QAA certified public campus
affiliated to Tribhuvan University ,Nepal. JMC was established in
1991A.D/(2048 B.S.).The campus is nonprofit social organization
generating needed financial resources locally. At present JMC is adopting
the strategy to accept grants provided by Nepal Government through
University Grants Commission(UGC). However the main source of income
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to meet its operating and other cash outlay is fee from the
student.Therefore, the campus needs to minimize cost as far as possible.
Inventory management helps to minimize cost of office supplies used.There
are different factors that contribute to proper functioning of inventory
management. Some of the variables on which the effectiveness of inventory
management dependsinclude bureaucratic procurement procedure,
inventory records, financial resources and skills of employees. The
variables under this study are presented as:

Bureaucratic procurement procedure

Record keeping Effective Inventory
Management
Financial resources/Funding
Skills of employees

In this study, descriptive research design is used to achieve the stated

objective. The population of this study was 28 including all the non-
teaching staff of JMC except office helpers or peon.The target population is
stratified into top level, middle level and assistant level. This study applies
disproportionate stratified random sampling technique to select sample size
of respondents. Sent percent of top level staff,72.72% of middle level staff
and 55.56% of assistant level staff were collected as sample size.The
selection of the sample size is as follows.

Table 1
Target Population and Sample Size
Categories Target population Sample size
Top level 8 8(100%)
Middle level 11 8 ( 72.72%)
Assistant level 9 5 (55.56%)
Total 28 21 (75%)
Source: Annual report, JMC (2073)

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Factors Affecting the Efficiency of …
The study is based on primary data. Primary data were collected by using
self administered questionnaires distributed personally at the respondent’s
place of work by the researcher. Closed ended and scaling questionnaires
were collected. The data gathered from the questionnaire was edited to
ensure completeness, consistency and accuracy. Collected data were
analyzed through the use of statistical packages for social sciences(version
22) software. Mean and standard deviation of descriptive statistics have
been used to explain the finding of the study.

Results and Discussion

This section deals with the analysis of factors affecting on inventory/office
supplies management of JMC. Three forth (75%) of total population were
selected as sample to draw proper conclusion from this study.

Table 2
Effects of Bureaucratic Procurement Procedure Factors on the
Effectiveness of Inventory Management
Standard
Factors 1 2 3 4 5 Mean
deviation
Management should try to avoid 18 3 0 0 0 4.86 0.37
long procurement process
Rigid rules and policies for 1 3 0 1 16 1.67 1.28
procurement should be eliminated
There should be procurement 16 4 0 0 4.67 0.71
committee to acquire inventory 1
Bureaucracy forces on 6 10 0 4 1 3.76 1.19
conformity rather than
performance
Management should try to keep 17 4 0 0 0 4.81 0.39
good relation with fewer quality
suppliers as opposed to many
suppliers
Source: Field survey, 2017

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Table 2 shows responses of respondents towards the factors related with

bureaucratic procurement procedure. Most of the respondents strongly
agreed on the view that management should try to avoid long procurement
process and management should have good relation with few suppliers
rather than many suppliers as shown by mean and standard deviation
4.86(0.35) and 4.81(0.39). Majority of the respondents focused on
provision of procurement committee to acquire inventory indicated by
mean 4.67 and S.D.0.71.The mean and standard deviation for the
elimination of rigid rules and regulation is 1.67 and 1.28 respectively.
Bureaucracy forces on conformity rather than performance has not
significant effect on the effectiveness of office supplies management as
compared to other bureaucratic factors.

Table 3
Effects of Record Keeping Factors on the Effectiveness Inventory
Management
Factors 1 2 3 4 5 Mean St.
deviation
Lack of advance technology or use of 13 8 0 0 0 4.62 0.49
manual inventory system increase
storage cost
Accuracy of inventory records is 15 6 0 0 0 4.71 0.45
necessary to provide effective service
Perpetual stock taking is essential to 18 3 0 0 0 4.86 0.35
determine replenishment of individual
stock item
Proper inventory record is necessary to 21 O 0 0 0 5.0 0
overcome overstocking and under
stocking.
Stock information is very important for 20 1 0 0 0 4.95 0.21
effective inventory management
Source: Field survey, 2017

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Factors Affecting the Efficiency of …
It could be seen from Table 3 that JMC non teaching staff strongly agreed
on record keeping of inventory for the effectiveness of inventory
management as the mean responses of all five factors is more than 4.0
which is the midpoint signifying indifferent. It could be seen that the
highest response with zero S.D. is 4th item with mean 5.This is followed by
the 5th and 3rd items which are stock information is very important and
perpetual stock taking is essential to determine replenishment of individual
stock itemswith mean and S.D. 4.95(0.21) and 4.86(0.35) respectively.
Then, these factors are followed by accuracy of inventory records is
necessary to provide effective service and lack of advance technology or
manual inventory system increase storage cost as shown by mean and S.D.
4.71(0.45) and 4.62(0.49) individually.

Table 4
Effect of Funding Factors on the Effectiveness of Inventory
Management
Factors 1 2 3 4 5 Mean St.
deviation
There should not be lengthy process of 18 3 0 0 0 4.86 0.35
budget release for the procurement of
inventory
Sufficient fund for inventory contribute 12 9 0 0 0 4.57 0.49
for efficient service of an organization.
It is necessary to provide some petty 8 10 0 2 1 4.05 1.09
cash to store keeper (not more than Rs
2000)
Sufficient fund is necessary to maintain 14 7 0 0 0 4.67 0.47
sustainable relation with quality
suppliers
It is necessary to allocate sufficient fund 9 10 1 0 1 4.24 0.92
to take insurance policy of office
supplies/stock
Source: Field survey, 2017

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Table 4 shows that all the respondents agree on the effect of funding factors
on the effectiveness of inventory management. The sequence of the
agreement are: Thereshould not be the lengthy process of budget release for
procurement, sufficient fund is necessary to maintain sustainable
relationship with suppliers, sufficient fund for inventory contribute for
efficient service of an organization, allocation of sufficient fund for stock
insurance and petty cash not more than Rs 2000 needed for store keeper
with mean and S.D. 4.86(0.35),4.67(0.47),4.57(0.49), 4.24(0.92) and
4.05(1.09) respectively.

Table 5
Effect of Skill Possessed by Store Staff Factors on the Effectiveness of
Inventory Management
Factors 1 2 3 4 5 Mean St.
deviation
Competent and qualified employees 20 1 0 0 0 4.95 0.21
helps to minimize cost of inventory
management
Qualification should be matched with job 16 5 0 0 0 4.76 0.43
requirement
Training and development program is 19 2 0 0 0 4.90 0.29
necessary for effective inventory
management
Knowledge of stock taking is inevitable 18 2 1 0 0 4.81 0.31
for store staff
Store staff should have organizational, 19 2 0 0 0 4.90 0.29
communication and problem solving
skills
Field survey, 2017

It is clearly shown by Table 5 that most of the respondents agree that

competent and qualified employees help to minimize cost of inventory
management with mean 4.95 and S.D. 0.21.This is followed by 3rd and 5th
factors having same mean and standard deviation of 4.90 and 0.29. As per
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Table 5, majority of JMC staff agree that knowledge of stock taking is
inevitable for store staff and qualification should be matched with the job
requirement along with mean and standard deviation 4.81(0.31) and
4.76(0.43) respectively.

Conclusion
Inventory management is very important since it enables to avoid high
investment upon office supplies and other cost associated with inventory.
According to the above result and discussion of collected data, it can be
concluded that the factors related with proper record keeping of inventory,
financial resources(funding), skill possessed by store staff and bureaucratic
procurement procedure positively affect on the effectiveness of inventory
management. Proper inventory record, sock information and competent &
qualified store employees are very important for the proper functioning of
inventory management aswell.Documentation is crucial to ensure efficient
inventory management. There should be sufficient fund, skillful store
clerks, training and development for store staff, few quality suppliers and
easy process of budget release for the effectiveness of inventory
management.

Acknowledgement
I warmly express my special appreciation to all the non teaching staff of
JMCwho provide their valuable time to response on research questionnaire
to bring out this research paper. It would be unfair if I forget Pro. Dr.
Vikash Kumar K.C. for his kind co-operation and encouragement for the
completion of this paper. Finally, the author is thankful to Basundhara
Basnet, Resamlalpoudel, Ravi Bhandari and other supporters for providing
continued help and support throughout the research period.

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