Inventory Management Strategies and Performance of Manufacturing Firms in Ghana

Abstract

Inventory accounts for about 70% of Food and Beverage and Pharmaceutical firms most valuable current assets. Thus, adopting inappropriate strategies to managing inventory could have severe repercussions on the firms’ performance levels. The study purposely examined the effect of different inventory management strategies on the operational performance of Food and Beverage and Pharmaceutical firms within the Accra, Tema, Kumasi and Sekondi-Takoradi metropolises in Ghana. More precisely, the study examined how Activity Based Costing, Economic Order Quantity, Just-In-Time, Strategic Supplier Partnership and Vendor Managed Inventory affect the operational performance of the firms’ studied. The study was underpinned by the theory of constraints and network theory. The study adopted the positivism philosophy, quantitative approach and explanatory design. Using the census technique, structured questionnaires were administered to the 104 members of the Association of Ghana Industries and Pharmaceutical Manufacturing Association of Ghana. Out of this, a reliable data set of 85 respondents was processed using the IBM SPSS Statistics version 24 and SmartPLS 3 software. Using the Partial Least Square-Structural Equation Modelling, the study found inventory strategies including Activity Based Costing, Economic Order Quantity, Strategic Supplier Partnership and Vendor Managed Inventory to significantly improve operational performance, while Just-In-Time was found to have no significant relationship with operational performance. The study recommended that the Food and Beverage and Pharmaceutical manufacturing firms should pay more attention to Activity Based Costing strategy during inventory management because it was found to majorly improve the firms’ operational performances.