ASSESSMENT OF FACTOR AFFECTING INVENTORY MANAGEMENT

PRACTICES IN CASE OF DILLA UNIVERSITY

MBA Thesis

By: HIBIST DAWIT

INFOLINK UNVERSITY COLLEGE, HAWASSA CAMPUS

JUNE 2023
HAWASSA, ETHIOPIA
ASSESSMENT OF FACTOR AFFECTING INVENTORY MANAGEMENT
PRACTICES IN CASE OF DILLA UNIVERSITY

A THESIS SUBMITTED TO THE DEPARTMENT OF BUSINESS

MANAGEMENT OF INFO LINK UNIVERSITY COLLAGE FOR THE
PARTIAL FULFILLMENT OF MASTERS OF BUSINESS
ADMINISTRATION

ADVISER: _ Mr. BEHAYILU

JUNE 2023
HAWASSA, ETHIOPIA

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 DECLARATION
I confirm that the research presented in this thesis, titled "Assessment of Factors Affecting
Inventory Management Practices in the Case of Dilla University," is solely my original
work. It has not been previously submitted for any other academic degree at any institution.
Furthermore, I assure that proper recognition has been given to all sources of information and
materials utilized during the preparation of this thesis.

Name: HIBIST DAWIT

Signature:

Date:

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 CERTIFICATION
This is to certify that the thises prepared by Hibist Dawit, entitled “assessment of factor
affecting inventory management practices in case of Dilla University”, submitted to info link
university collage Hawassa campus College of business management in partial fulfillment of the
requirements for the Degree of Master of Business Administration, complies with the regulation
of the university college and meets the accepted standards with respect to originality and quality.

Advisor: Mr. Behayilu

Signiture:
Date:

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 EXAMINERS’ APPROVAL SHEET

We, the undersigned, members of the Board of Examiners of the final open defense by Place for
Your Name have read and evaluated this thesis “assessment of factor affecting inventory
management practices in case of Dilla University” and examined the candidate. This is,
therefore, to certify that the thesis has been accepted in partial fulfillment of the requirements for
the degree of Masters of Business Administration.
_________________ ________________ _________________

Name of the Chairperson Signature Date

_________________ ________________ _________________

Name of Principal Advisor Signature Date

_________________ _______________ _____________

Name of Internal Examiner Signature Date

_________________ ________________ _________________

Name of External examiner Signature Date

______________________ __________________ _________________

SGS Approval Signature Date

Final approval and acceptance of the proposal is contingent upon the submission of the final
copy of the thesis to the School of Graduate Studies (SGS) through the School Graduate
Committee (DGC/SGC) of the candidate’s department.

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 ACKNOWLEDGEMENT
First and for most praise is deserved to GOD that let as stay in life and that gives as a limitless
aid and strength to pass all the challenges in each of the proposal hope full to end up the work on
the allocated time.

Second we would like to say thanks so much to our advisor Mr. Behayilu for his willingness and
unreserved comment, evaluation and advice from the beginning up to the end of the study.

Third we want to forward our thanks to Dilla university procurement and inventory directorates
to give full information for our research proposal. Finally we also highly thanks all our families
for their financial and other kind of support.

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 Table of Contents
DECLARATION............................................................................................................................iii

CERTIFICATION..........................................................................................................................iv

EXAMINERS’ APPROVAL SHEET.............................................................................................v

ACKNOWLEDGEMENT..............................................................................................................vi

List of table......................................................................................................................................x

List of Figure..................................................................................................................................xi

Abstract..........................................................................................................................................xii

CHAPTER ONE..............................................................................................................................1

1. INTRODUCTION....................................................................................................................1

1.1 Background of the study.......................................................................................................1

1.2 Statement of the problem......................................................................................................3

1.3 Research Questions...............................................................................................................5

1.4 Objectives of the Study.........................................................................................................5

1.4.1 General Objective.............................................................................................................5

1.4.2 Specific Objectives...........................................................................................................5

1.5 Hypotheses............................................................................................................................5

1.6 Significance of the Study......................................................................................................6

1.7 Scope of the Study................................................................................................................6

1.8 Limitation of the Study.........................................................................................................7

1.9 Organization of the Paper.....................................................................................................7

1.10 Definition of used terms.......................................................................................................7

CHAPTER TWO.............................................................................................................................8

2 REVIEW OF RELATED LITERATURE...............................................................................8

2.1 Conceptual Literature...........................................................................................................8

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2.2 Definition and Purpose of inventory.....................................................................................8

2.3 Nature of Inventories..........................................................................................................11

2.4 Inventory Procedures..........................................................................................................12

2.5 Types of Inventory..............................................................................................................12

2.6 Objectives of Inventory Management................................................................................13

2.7 Demand management.........................................................................................................14

2.8 Stock Control......................................................................................................................15

2.8.1 Introduction.....................................................................................................................15

2.8.2 Reasons for Holding Stock.............................................................................................15

2.5 Inventory Costs...................................................................................................................17

2.5.1 Inventory Carrying Cost..................................................................................................17

2.5.2 Order/Setup Cost.............................................................................................................17

2.6 Empirical Literature............................................................................................................18

2.7 Summary and Knowledge Gap...........................................................................................23

2.8 Conceptual Framework.......................................................................................................23

CHAPTER 3..................................................................................................................................24

3 RESEARCH METHODOLOGY...........................................................................................24

3.1 Introduction.........................................................................................................................24

3.2 Description of the Study Area............................................................................................24

3.3 Research Design.................................................................................................................25

3.4 Research approach..............................................................................................................25

3.5 Target Population................................................................................................................26

3.6 Sampling Technique and Sample Size...............................................................................27

3.7 Source of Data Collection...................................................................................................28

3.8 Data Collection Techniques................................................................................................28

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3.9 Data Analysis and Interpretation........................................................................................29

3.9.1 The Pearson Correlation Coefficient...............................................................................29

3.9.2 Linear Regression Analysis............................................................................................30

3.9.2.1 Regression Functions......................................................................................................30

3.10 Reliability Test and Validity...............................................................................................31

3.10.1 Reliability Test................................................................................................................31

3.10.2 Validity Test....................................................................................................................32

3.11 Ethical consideration..........................................................................................................32

CHAPTER FOUR.........................................................................................................................33

4 RESULTS AND DISCUSSIONS..........................................................................................33

4.1 Introduction.........................................................................................................................33

4.2 Demographic Characteristics of Respondent......................................................................33

4.2.1 Genders of the Respondents............................................................................................33

4.2.2 Age of the Respondents..................................................................................................34

4.2.3 Professional qualification of the Respondents................................................................34

4.2.4 Working Experience of the Respondents........................................................................35

4.3 Descriptive Analysis of the major variables of the study...................................................36

CHAPTER FIVE...........................................................................................................................52

4 SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION.....................52

4.1 Summary of Findings.........................................................................................................52

REFERENCES..............................................................................................................................57

APPENDICES ONE......................................................................................................................60

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 List of table
Table 3.1 sample of the study........................................................................................................28
Table 3.2 Reliability of the Survey Questionnaire of inventory management practice.................31
Table 4.1 Genders of the Respondents..........................................................................................33
Table 4.2 Staff Proficiency of the Respondents............................................................................36
Table 4.3 Procurement Practice of the Respondents.....................................................................38
Table 4.4 Facility Management of the Respondents.....................................................................40
Table 4.5 Documentation Management of the Respondents.........................................................42
Table 4.6 Inventory Management of the Respondents..................................................................44
Table 4.7 Rule of thumb for about the strength of correlation coefficient....................................46
Table 4.8 Correlation between Independents Variable and inventory management practice.......47
Table 4.9 Model Summary............................................................................................................48
Table 4.10 ANOVA.......................................................................................................................49

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 List of Figure
Figure 2.1 Conceptual Framework................................................................................................23
Figure 3.1 Description of the study area........................................Error! Bookmark not defined.
Figure 4.1 Age of the Respondents................................................................................................34
Figure 4.2 professional qualification of the Respondents............................................................34
Figure 4.3 working Experience of the Respondents......................................................................35

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 Abstract
Researchers studied about inventory management practice and other related concepts, but it’s
rare to find researchers work on the factors affecting inventory management practice in the case
of universities, especially in Ethiopia. The researcher is interested in fulfilling the gap and
aimed to show the advantage of having Staff Proficiency, Procurement Practice,
documentation /Record/, and Facility management. In case of Dilla University. The main
objective of this study was to assess factor affecting the inventory management practices in case
of Dilla University. Researcher intended to examine the most crucial factors according to
literatures that affect inventory management those are Staff Proficiency, Procurement Practice,
documentation /Record/, and Facility management. To meet the objectives a sample of 373
employees were selected from each strata randomly out of 5,596 total population. Explanatory
research design was used, the study was both qualitative and quantitative (mixed approach) data
was collected by mainly questionnaires to analyze data SPSS version 20 of computer software
was used and analyzed through descriptive and inferential statistics. The study finding shows the
university is not given sufficient emphasis for staff proficiency the study was measuring the
relationship between staff proficiency and inventory management there is strong positive
relationship showing a unit improvement in staff proficiency was make inventory management
practice better. The procurement practice is inefficient to handle the inventory management
function. There is also strong positive relationship between the effects of procurement practice
and inventory management practice. Result shows procurement practice has the next most
significant effect. Facility management also has a significant positive influence on inventory
management practice.

Keywords: Inventory Management Practice, Staff Proficiency, Procurement Practice,

documentation /Record/, and Facility management

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xiii
 CHAPTER ONE
1. INTRODUCTION
1.1 Background of the study

Inventory is stock materials which can be stocked as raw materials, work-in-process goods,
finished goods and spare parts. Those are considered to be the portion of a business's assets that
are ready or will be ready for sale or for service. Inventory represents one of the most important
assets that the businesses possess, because the turnover of inventory represents one of the
primary sources of revenue generation and subsequent earnings for any organization. Inventory
is also an asset owned by a business that has the express purpose of being sold to a customer or
to render services (Ackah & Ghansah, 2016).

Inventories help to maximize customer service by protecting against uncertainty, if we could

forecast exactly what customers’ want and when, we could plan to meet demand with no
uncertainty. In broad terms, customer service is the ability of a company to satisfy the needs of
customers. In inventory management, the term is used to describe availability of items when
needed and is a measure of inventory management effectiveness. However, demand and the lead
time to get an item are often uncertain, possibly resulting in stock outs and customer
dissatisfaction (Chapman, 2010).

Every company has their own inventory where each of the company manages the inventory by
various ways of managing system. However, the purpose of the inventory is the same, where the
inventory must always ready to be used and the inventory cost must be low. Inventory
management refers to all the activities involved in developing and managing the inventory levels
either the inventory is raw materials, semi-finished material or finished goods, so the adequate
supplies must be always available and the form must make sure the cost of over or under stocks
are always low (Mohammad et.al., 2016).

According to Kotler (2000), inventory management refers to all the activities involved in
developing and managing the inventory levels of raw materials, semi-finished materials (work-
in-progress) and finished good so that adequate supplies are available and the costs of over or
under stocks are low. Inventories are essential for keeping the production wheels moving, keep

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the market going and the distribution system intact. They serve as facilitator and launching pad
for the production and distribution systems of organizations. Inventories make possible the
smooth and efficient operation of manufacturing organizations by decoupling individual
segments of the total operation.

Inventory management is concerned basically with planning and control of materials. It deals
with where to buy, when to buy, and how much to buy to ensure uninterrupted supply of
inventory at lowest possible cost for ongoing operation of business. The primary goal of
inventory management, therefore, is to have adequate quantities of high-quality items available
to serve customer needs, while also minimized the costs of carrying inventory (Brigham &
Gapenski, 2013).

Inventory management systems are developed with the aim of reducing costs associated with IM.
Inventory management systems are however described as complex systems to develop. This is
attributed to the fact that inventory management spans through most of the departments within an
institution each having its own heterogeneous functions. Moreover, institutions should integrate
their inventory management systems with those of their suppliers (Power, 2005). By so doing,
the efficiency of the supply chain process will be significantly enhanced. According to Power
(2005), developing integrated inventory systems is one of the challenges that organizations face
as they develop inventory systems. In addition, complex systems are costly to develop and thus
discourage organizations from developing them. According to Cagliano et al., (2011) adoption of
inventory management systems has huge initial cost implications for the firm, but the firm stands
to benefit in the long run. The benefits of the inventory management systems include, increased
operational efficiency, lower institutional and operational costs, shorter lead-times, and reduced
inventory.

According to the report of Dilla University, and the researcher observation the stated problems of
Dilla University inventory management practice needs solutions in addition to the above stated
gaps the other gap is researcher’s conduct many research on inventory management practice.
however do not give more emphasis to factors affecting inventory management practice in the
case of universities the reason to select Dilla University is for the reason that of specified
problems and the researcher proximity to the university to observe such problems the other
reason is to contribute to the researcher’s university.

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Inventory management is a critical management issue for organization irrespective of their size
and types, as it encompasses cost and the need to balance between demand and supply.
Therefore, efficient inventory management practices are energetic in confirming inventories are
enough to satisfy expected demands and customer needs. This study was examines the inventory
management practices in Dilla university.

1.2 Statement of the problem

Inventory is a material stored for future use of the institution. All institutions require inventories.
Often, they are a substantial part of total assets. There is a cost of carrying inventories, good
inventory management is essential for considering costs and minimizes the cost. Inventory
management problems have attracted researchers for many years. In the past, inventory
management was not seen to be necessary, in fact excess inventories were considered as an
indication of wealth. Management then considered overstocking beneficial. However today firms
have started to embrace effective inventory management.

According to Wisner and Leong et al (2011) define inventory management is the process of
efficiently overseeing the constant flow of units into and out of an existing inventory. This
process usually involves controlling the transfer in of units in order to prevent the inventory from
becoming too high, or dwindling to levels that could put the operation of the company into
jeopardy. Agus and Noor (2010) states that proper inventory management also seeks to control
the costs associated with the inventory, both from the perspective of the total value of goods
included and the tax burden generated by the cumulative value of the inventory.

According to (Munyo and Omulo2015) in Kenya Mombasa: finding the organization inventory
management practices in manufacturing industry is low because the company had not adopted
computerized inventory management practices, they had not used inventory management system
(IMS) radio frequency, bar code, warehouse management system (WMS), material requirement
planning (MRP).

To continue serving the demand of customers most firms have realized the need to maintain
proper inventory management. Proper management of inventory enables firms to mitigate
inventory costs, reduce lead time and on-time delivery of goods and services. According to
Wisner et al (2011) organizations that maintain proper inventory of raw materials are more likely

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to complete their production on time. Shapiro et al 2009 Inventory management control is part of
the inventory management: that helps to maintain continuity of production operations by
maintaining a smooth flow of raw materials without shortages (Njoroge, 2015).

According to (Osei, 2015) Started in his finding ineffective inventory management practice leads
to incidences of over production, under production, excessive stocks, out of spare parts for
machines, production bottlenecks and delays in delivery of raw materials. The study established
that MRP was most effective in contributing to performance of production department despite
the fact that most organizations used action level methods.

According to (Eliyas W, 2018) the study conducted in Ethiopia assess inventory management
practice at Hawassa Textile Factory in Ethiopia and revealed that the company used a manual
inventory management system, holds too much or too little inventory, and also the company had
used ABC inventory management techniques by ignoring other techniques so, the failure to
provide services to the company on time and gave more attention to the most important materials
and less attention to C items (Eliyas W, 2018). In addition, the researcher find out that the
company has a weak inventory management system due to the absence of well-skilled, educated,
and experienced manpower.

Also, similar study examines the inventory management system of Habesha Cement Share
Company in Ethiopia and founds that to some extent company was effective in managing the
inventory level (Fetiya M, 2021). However; further improvement is needed in areas like
inventory physical counting inspection, handling of overstocking and under stocking of
inventories, data accuracy, and real-time report preparation. Moreover, the Company is mainly
used a perpetual inventory system to determine the materials demand of the customers. However,
lack of management support, insufficiently qualified staff, and shortage of training are the major
problems in the assessment of inventory management practices in the studied firm.

Despite of the fact that different scholar conduct a research on the study area, this study was try
to fill the gap of the study area by providing insight on geographical, conceptual, and variable
difference from the former research. Geographically this study was conducted in Dilla
University, conceptually, this study was revolved only on Assessment of inventory management
practice in Dilla University, and in addition to that these studies seek to use additional variables.

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Especially, Staff Proficiency, Documentation, Procurement Practice, Facility management.
Therefore, this proposed study were focused on Assessment of inventory management practice in
Dilla University.

1.3 Research Questions

 Is there a relationship between staff proficiency and inventory management practices?
 Is there a relationship between procurement practice and inventory management
practices?
 Is there a relationship between organizational facility and inventory management
practice?
1.4 Objectives of the Study
1.4.1 General Objective

The general objective of the study was to assess factor affecting the inventory management
practices in case of Dilla University.

1.4.2 Specific Objectives

The specific objectives of the study was:

 To investigate the relationship between staff proficiency and inventory management

practice.
 To examine the relationship between procurement practice and inventory management
practice.
 To understand the relationship between organization facility and inventory management
practices.
 To investigate the effect of the factors (staff proficiency, procurement practice,
Documentation and organization facility) on inventory management practice.
1.5 Hypotheses

A research hypothesis is a predictive statement, capable of being tasted by scientific method that
relates an independent variable to some dependent variable (Kothari, 2004). It is a statement
about the relationship between the dependent and independent variable to be studded. Based on
the above objective the following hypotheses was set for the study under consideration.

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  H0: Staff Proficiency is not significant determinant factor of inventory management
practice in Dilla University.
 H0: Procurement Practice is not significant determinant factor of inventory management
practice in Dilla University.
 H0: Facility management not significant determinant factor of inventory management
practice Dilla University.
 H0: Documentation /Record/ is not significant determinant of inventory management
practice in Dilla University.
1.6 Significance of the Study

Inventories represent a sizeable investment and a potential source of waste that needs to be
reviewed regularly and closely reviewed. e.g., through perpetual stock taking, periodic reviews
also as well as internal and external auditing. Thus, an effective inventory management is vital to
ensuring that budget is utilized appropriately. To understand how different factors affect the
inventory management system, this study was played a vital role and shows Dilla university
management their inventory management practices status in relation to the variables the study
chooses to assess.

The main goal of this study was to assess inventory management practices on Dilla University.
Thus, the result of the study was help management to make strategic decisions related to
effective and efficient inventory management practices, make equilibrium of supply and demand,
help in planning future demands in the company, and help create awareness for both staff and
management of those are involved in inventory management line. For the government, it serves
as a ground to evaluate, plan and may improve the activities of the study. Finally, this thesis
work was served as future reference material for both academic world and policy makers who
need to research the same area and topic.

1.7 Scope of the Study

The study was plan to focus on inventory management practice in Dilla University through
Geographical: The study was limited to Dilla University. Methodological: The study was useed
descriptive and exploratory research type of research by using both the primary and secondary
data collection method by qualitative and quantitative approach. Conceptual: The study were

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focused on inventory management practice in Dilla University and also this study was time
scope, this was conducted on the time 2023.
1.8 Limitation of the Study
Even though large sample size is essential for in-depth understanding on the inventory
management practices in case of Dilla University, this study had limited to a sample size of 373
administrative and academic staff members in Dilla University. Even though different efforts
have been made, the researcher was faced some challenges while doing this study. May be the
respondents had been creates some negligence in filling the questionnaire. Some do not give
values to the questionnaire and some others do not return it totally. Besides this, some others see
the questionnaire politically even though orientations have been made. Therefore, these
conditions might affect the quality of the paper to some extents.

1.9 Organization of the Paper

This research paper were organized in five chapters. Chapter one were deal with the introductory
part which includes background of the study , statement of the problem, research questions,
objectives of the study, hypotheses of the study, significance of the study, scope of the study,
limitation of the study and organization of the paper. Chapter two were presented review of
related literature including theoretical, empirical literature and conceptual framework. Chapter
three were described the research methodology of the study; it consists research design, research
approach, source of data, data collection techniques, target population, sampling techniques and
sample size, data analysis and interpretation, reliability and validity test, ethical consideration
and finally description of the study area. Chapter four were presents the data analysis,
interpretation and presentation. Chapter five were offered major findings, conclusion and
recommendations. Finally, references and appendices was attached.
1.10 Definition of used terms

The following are defined in the study

 INVENTORIES: These are stock of materials or finished goods which a

company keeps in anticipation of demand or consumption. They constitute a
sizeable portion of the total assets of many firms.
 INVENTORY MANAGEMENT: Is the process which integrates the flow
of supplies into, through and out of an organization to achieve a level of service.

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 CHAPTER TWO
2 REVIEW OF RELATED LITERATURE
2.1 Conceptual Literature
2.2 Definition and Purpose of inventory
Inventory management is defined as a science based art of ensuring that just enough inventory
stock is held by an organization to meet demand (Coleman, 2000; Jay & Barry, 2006).).
Inventory is the availability of any stock or resources at right quantity and quality used in an
organization. An inventory management system is the set of policies that controls and monitors
inventory level
and determine what level should be maintained, how large orders should be made and when
stock should be replenished so as to support the operation of the business. (Miller, 2010).
The availability of materials whenever and wherever required activities were essential for the
procurement, storage, sales, disposal or use of material can be referred to as inventory
management. Individual responsible for inventory management have to know the space they
have for storage and provide information when materials reach at their minimum level and utilize
available storage space resourcefully, so that available storage space is not exceeded. They have
to assist the organization to decide what quantity to order, how to order and when to order so that
stock is available on time and at the optimum cost (Benedict and Margeridis,1999).
Inventory management involves planning, organizing and controlling the flow of materials from
their initial purchase unit through internal operations to the service point through distribution
(Smaros, et al., 2003).Inventory constitutes one of the largest and most tangible investments of
any organization which also decides their success in operation.
Inventory plays a decisive role in the growth and survival of an organization in the sense that
failure to an effective and efficient management of inventory was mean that the organization was
fail to meet its objectives. Customer desire has always been a vital issue in accompany not only
to maintain sales but also to survive as a company. (Goldsby, 2003). Kotler (2002), points that
Inventory management refers to all the activities and organizations involved in maintaining
inventory for their operation so that adequate supplies were available and the costs of over or
under stocks were low.

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Inventory management is required at different locations within multiple locations to protect the
regular and planned course of operation against the random disturbance of running out of
materials. The scope of inventory management covers replenishment lead time, carrying costs of
inventory, inventory forecasting, inventory valuation, inventory visibility, future inventory
pricing, physical inventory, available physical space for inventory, quality management,
replenishment, and returns. Balancing these competing requirements leads to good inventory
management system, which is an on-going process as the business needs shift and react to the
wider environment (Ghosh and Kumar, 2003).
All organizations keep a supply of inventory for the following reasons:
 To maintain independence of operations. A supply of materials at a lost work center
allows that flexibility in operation inventory allows management to reduce the number of
setups. The time that it takes to do identical operations will naturally vary from work unit
to work unit. The sum total performance of an organization is the collective performance
of workstation located at different localities or units. Therefore, to meet business goal,
effective and efficient inventory management at all work station is crucial.
 To meet variation in product demand. If the demand for the product or service is known
precisely, it may be possible to provide services exactly to meet the demand. But demand
is not completely known because we can’t have full information about customers, and a
safety or buffer stock must be maintained to absorb variation.
 To allow flexibility in service provision scheduling. A stock of inventory relieves the
pressure on the service provision to get the goods out. This leads to longer lead times,
which permit service planning for smoother flow and lower cost operation through larger
lot size production.
 To provide a safeguard for variation in inventory delivery time. When material in ordered
from a vendor, delays can occur for a variety of reasons: a normal variation in shipping
time, a shortage of material at the vendor’s plant causing backlogs, an unexpected strike
at the vendor’s plant or at one of the shipping companies, a lost order, or a shipment of
incorrect or defective material.
 To take advantage of economic purchase order size. There were costs to purchase
materials. The larger each order is the lower ordering cost of the materials because of the
bulk purchase. Organization has to decide the quantity and time to procure materials

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 economically. Materials have to purchase by comparing the ordering and storing costs.
The most economical point where materials to be procured is at the lowest cost of storage
and order cost.
Inventory Management plays a decisive role in the enhancement of efficiency and
competitiveness of business enterprises. There is increased need for organizations to in place
effective inventory management practices as a strategy to improve their quality of business
operation.(Rajeev, 2008). Effective inventory management system means holding an appropriate
quantity of inventory with better quality. Too much inventory consumes unnecessarily our
limited space, creates a financial burden, and increases the possibility of materials to be obsolete.
Too little quantity of inventory often disrupts business operations, and increases the likelihood of
poor customer service (Dimitrios, 2008).
Wise inventory management requires the analysis of the costs of maintaining certain levels of
inventory as there were costs involved in holding too much stock. There were also costs involved
in holding too little hence the need to put in place an effective stock management system to
ensure reliable business operation (Atrill, 2006). The Economic Order Quantity (EOQ) model is
very important for determining the optimal inventory level that takes into account the inventory
carrying costs, stock-out costs and total costs which were helpful in the determination of the
appropriate inventory levels to hold. (Ross et al. 2008). Large organization rely on quantitative
and computer program to get more information on their inventory management but small firms
make use of management judgment without quantitative or computerized systems for decision
making on inventory.
Just-in-time inventory management techniques were increasing in popularity, as were automated
time-phased inventory re-order system. Some inventory management practices such as assessing
inventory levels and balancing stock-out costs against expenses related to higher inventory levels
were seldom used in practice (Romano, 2011).
Maintaining optimal inventory levels reduces the cost of possible interruptions or of loss of
business because of scarcity of inventory, reduces supply costs, and protects from customer
dissatisfaction. The inventory conversion period has a negative effect on a business’s
performance. Shortening the inventory conversion period could increase stock out costs of
inventory which results in losing sales opportunities and leads to poor performance (Deloof,
2003). The importance of firms keeping their inventory at an optimum level by analyzing the

10
relationship between working capital management and corporate profitability will lead to
excessive tying up of capital at the expense of profitable operations.
Inventory management has impact on demand and supply of products, buffer stock to cover for
supply uncertainty and lead time. The quantity of inventory ordered at particular intervals does
affect the replenishment intervals. (Sander et al. 2010)
Gruen&Corsten (2007) indicated that, stock-outs have serious implications for businesses and
they affect consumers, retailers, and manufacturers. Consumer purchase behaviors, such as
product replacement, delayed purchase, or not making a purchase sometimes result from such
events. Zinn& Liu (2008) suggest that when organizations faced with a stock-out, a consumer
search for a substitute product if they have alternatives. Once customer lost, the consumer may
be lost forever, resulting in a negative impact on the long-term built good will of the
organization. Even a loyal consumer may visit another firm to find the desired product, a
situation that may result into loyalty switching. Repeated stock outs negatively affect not only
manufacturers but retailers through the loss of customers and employee time.
Scholars like (Basuroy, S., Mantrala, M., and Walters, G. (2001). Suggest that to reduce stock
outs and improve performance, businesses should employ effective inventory management
practices and automatic replenishment programs.
On effective inventory management on the performance of businesses, Sushma & Phubesh
(2007) in their study established that businesses’ inventory management policies had a role to
play in their profitability performance. Mismanagement of inventory will lead to tying up excess
capital at the expense of profitable operations and suggested that managers can create value for
their firms by keeping inventory to an optimum level.
Effective inventory management processes helps increase operational efficiency of firms;
improves customer service; reduces inventory and distribution costs; and enables businesses
track items and their expiration dates consequently balance between availability and demand
(Pandey, 2004).
2.3 Nature of Inventories
Inventories consist of goods held for sale to customers, partially completed goods and material
and supplies to be used in production. Inventory items are acquired and sold continuously by a
merchandising enterprise or acquired, placed in production, converted to finished product, and
sold by a manufacturing enterprise (Horngren, 2011).

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The sale of merchandise or finished product is the primary source of revenue for most non
service business enterprise (Horngren, 2011).
In retail or merchandising operation, inventories consist principally or products purchased for
resale in their existing form. A retail enterprise also may have an inventory of supplies such as
wrapping paper cartons and stationery. A manufacturing enterprise has several types of
inventories: material, parts, and factory supplies, goods in process; and finished goods
(Horngren, 2011).
Material and parts are basic commodities or other products obtained directly from natural
resources or acquired from other, which will be incorporated physically into the finished product,
but their relation to the end product is indirect .Goods in process consists of partially completed
products and includes the cost of direct material , direct labor and factory overhead. Finished
goods are items that are complete and ready for sale and include the same cost elements as those
in goods in process (Horngren. etal, 2011).
2.4 Inventory Procedures
Two methods may be employed to ascertain the inventory quantities on hand. The periodic
system and the perpetual system. Both systems may be employed simultaneously for various
inventories, such as material, finished goods and goods in process. (Mosich, 1989)
 The periodic inventory system: relies on a physical count of the goods on hand as base
for control, management decisions and financial accounting. Although this procedure
may give accurate result on a specific date, there is no continuing record of the inventory
(Mosich, 1989; 179).
 The perpetual inventory system: requires a continuous record of all receipts and
withdrawals of each items of inventory. The perpetual record sometimes is kept in terms
of quantities only. This procedure provides a better basis for control than is obtained
under the periodic system. When the perpetual system is used, a physical count of the
goods owned by the business enterprise must be made periodically to verify the accuracy
of the inventories reported in the accounting records. Any discrepancies discovered must
be corrected so that the perpetual inventory records are in agreement with the physical
count. (Mosich, 1989; 180)
2.5 Types of Inventory
There are two types of inventory

12
 I. Merchandising and
II. Manufacturing
III. Manufacturing is further divided in to three more components: Raw material, work in
process and finished goods.
Merchandise Inventory: if you buy items from other artists and Crafters to sell in your own
gallery of shop, you will have a merchandise inventory; remember though - any items in your
shop on consignment are not part of your inventory.
Manufacturing inventory: if you make your own arts and crafts, you will have a manufacturing
inventory. The term manufacturing might not seem to fit a hand craft type of business, but a
quick review of the classification within the term, will make the relationship clearer.
A manufacturing inventory consists of three different parts: raw materials, work in process and
finished goods. Using leather crafting business as my sample craft company, here are definitions
and example of the three.
 Raw materials: everything the crafter buys to make the product is classified as raw
materials. That includes leather, dyes, snaps and grommets. The raw material inventory
only includes items that have not yet been put into the production process.
 Work in process: this includes all the leather raw materials that are in various stages of
development. For the leather crafting business, it would include leather pieces cut and in
the process of being sewn together and the leather belts and purse etc. that are partially
constructed. The work in process inventory includes the cost of the labor directly doing
the work and manufacturing overhead. Manufacturing overhead is costs that are
indirectly related to making the product.
 Finished goods: items those are ready to sell. The finis the goods inventory also consists
of the cost of raw material, labor and manufacturing overhead, now for the entire product.
(Source: Maire Loughran /Art leraftbusiness guide. arts and crafts. about. com/ed/...
/at/four types inventory. htm)
2.6 Objectives of Inventory Management
The main objective of a good inventory management is to place an order at the right time from
the right source with the right quantity and quality. While developing an appropriate inventory
management system of inventory the following objectives should be kept in mind:

13
  Organizations should try to minimize the possibility inventory obsolescence by giving
due attention during procurement of materials. Besides materials storage, distribution
and usage should be appropriate to avoid shrinkage or obsolescence of the materials.
 A firm should maintain inventory to such a level that smooth and unhampered service
provision is ensured without any obstruction.
 Investment in inventory should be kept at minimum so that undue amount is not locked
up in it as investment in inventories involves costs.
 A firm should maintain sufficient amount of inventory to meet the demand of customers
regularly because if not done customers may shift to the competitors, which will result in
permanent loss to the firm.
So it is essential to have necessary inventories which were sufficient to the operation of the
organization. Excessive inventory is an idle resource on which resource is tied up rather than
investing on other better alternative. The investment in inventories should be just sufficient in the
optimum level. The major dangers of excessive inventories were:
 High customer dissatisfaction and failure of operation
 The unnecessary tie up of the firm’s funds and loss of profit.
 Excessive carrying cost, and
 The risk of liquidity.
The excessive level of inventories consumes the scares funds of business, which cannot be used
for any other purpose and thus involves an opportunity cost. The carrying cost of inventory, such
as the cost of shortage, handling insurance, recording and inspection, were also increased in
proportion to the volume of inventories.
The low level of inventories may result in frequent interruptions in the production or service
provision schedule resulting in under-utilization of capacity and poor operation that leads to
customer dissatisfaction. The aim of inventory management thus should be to avoid excessive
inventory and inadequate inventory and to maintain adequate inventory for smooth running of
the business operations. Efforts should be made to place orders at the right time with the right
source to purchase the right quantity at the right price and quality for the operations of the
organization.
2.7 Demand management

14
Demand for inventory generates forecasts based on sales history, currently scheduled orders,
scheduled marketing activities and customer information (Veinott 1966). Demand of inventory
should be done collaboratively and interactively both internally across the firm’s functional
components and externally with supply chain partners to develop a common and consistent
forecast.
The forecast must also incorporate feedback from customers to integrate the influence of
combined demand generation activities because unless the customers were satisfied the inventory
demand forecast is meaningless.
Practically, inventory demand management and forecasting were closely related, and forecasting
is an extensive topic in itself (Bowersox at al., 2002).
2.8 Stock Control
2.8.1 Introduction
Stock control is defined as the means by which materials of the correct quantity and quality were
made available at the time when they were required, with due regard to economy in storage and
ordering costs, purchase prices and working capitals.
The modern stores management has a wide variety of functions that they have to perform as
efficiently as possible. The way in which stores management carries out these tasks will be
reflected in the overall efficiency of the organization because it is key supporter to the operation.
The Primary concern in the management of stock control must be to provide the right goods in
the right condition at the right price in the right place at the right time.
The control procedure of inventory should:-
 Safeguard stock against loss, obsolescence or misuse
 Maintain stock at appropriate level of quantity.
 Ensure that the inventory of the organization is properly used for business operations
 Ensure that the inventory is duly accounted for purchasing and controlling purpose
depending on individual organization.
2.8.2 Reasons for Holding Stock
Every organization has warehouse for its inventory since in contrary the quantity of inventory
organizations need, they need inventory to run their business. Generally, organization hold
inventory in their stores for one or more of the following reasons :-(Marrison, P. 100-101)

15
  Operational risks or possible charges in program require the holding of stock as a
precaution against serious breakdown or interruption of production or other activities.
 Delivery of inventory may not be exactly matched with usage day by day.
 Discounts or improved prices for bulk purchases more than offset the cost of storage.
 The cost of storage is outweighed by the saving in production of quantities in excess of
immediate requirement.
The common factor in every stock management is that stock serves to bridge operation of an
organization with customer service.
The two possible reasons exist for this bridging operation of inventory:-
I. Stocks were held because time is required to the procurement process or move inventory
from store to store or from store to operation sites.
II. Stocks were required for organizational work units to schedule their working
responsibilities independently. The work units may locate indifferent geographical areas
and their operation should be bridged by the stock.
Inventory control is concerned with the acquisition, storage, handling and use of inventories so
as to ensure the availability of inventory whenever needed, providing adequate provision for
contingencies, deriving maximum economy and minimizing wastage and losses.
Inventory control ensures that the supply of required quantity and quality of inventory at the
required time and at the same time prevent unnecessary investment in inventories.
Inventory control is one of the most vital phases of material management. Reducing inventories
without impairing operating efficiency frees working capital that can be effectively employed
elsewhere. Inventory control can move a company ahead or return back by breaking its
operations.
A sound inventory control system is in a large measure for balancing operations. It is the focal
point of many seemingly conflicting interests and considerations both short range and long range
because too much or too little inventory affects negatively the operation of an organization.
The aim of a sound inventory control system is to secure the best balance between “too much
and too little.” Too much inventory carries financial rises and too little reacts adversely on
improved continuity operation of an entity. The real problem is not the reduction of the size of
the inventory as a whole but to secure a scientifically determined balance between several items
that make up the inventory.

16
The efficiency of inventory control affects the flexibility of the firm in either direction.
Insufficient procedures may result in an unbalanced inventory. Some items out of stock, other
overstocked, necessitating excessive investment which could hamper the operation. These
inefficiencies ultimately will have adverse effects upon profits and by large customer
satisfaction. Turning the situation round, difference in the efficiency of the inventory control for
a given level of flexibility affects the level of investment required in inventory. The less efficient
is the inventory control, the greater is the investment required. Excessive investment in
inventories increase cost and reduces profits. Control of inventory is exercised by introducing
various measures of inventory control by companies, such as ABC analysis, JIT, fixation of
norms of inventory holdings and reorder point and a close watch on the movements of
inventories.
II.5 Inventory Costs
II.5.1 Inventory Carrying Cost
According to Douglas M. Lambert there were four major components of inventory carrying cost:
capital cost, storage space cost, inventory service cost, and inventory risk cost.
 Capital Cost. Also sometimes called the interest or opportunity cost which type focuses
upon what having capital tied up in inventory. The capital cost is frequently the largest
component of inventory carrying cost. A company usually expresses it as a percentage of
the value of the inventory the company holds. All companies seek to reduce inventory
because management recognizes that holding excessive inventory provides no value
added to the firm’s operations.
 Storage Space Cost. This cost category incorporates handling costs associated with
moving products into and out of inventory, and storage costs such as rent, heating, and
lighting. Such costs may vary considerably from one circumstance to the next.
 Inventory Service Cost. This carrying cost component includes insurance and taxes.
Depending upon the product value and type, the risk of loss or damage may require high
insurance premiums. In most cases, there will be few, if any; significant changes from
year to year in the tax and insurance components of the inventory carrying cost such as
marine or inland insurance.
 Inventory Risk Cost. This major component of inventory carrying cost reflects the very
real possibility that inventory value may decline for reasons largely beyond corporate

17
 control. The inventory risk costs most of the time were due to management problem and
includes the costs associated with obsolescence, pilferage, damage, theft, and other risks
to inventoried product.
II.5.2 Order/Setup Cost
The other inventory cost affecting total inventory cost is ordering cost or setup cost. Ordering
cost refers to the expense of placing an order for additional inventory to the company, and does
not include the cost or expense of the product itself. Setup cost refers more specifically to the
expense of changing or modifying a production or assembly process to facilitate product line
changes. Following some the inventory order costs.
 Order cost. The costs associated with ordering or acquiring inventory have both fixed
and variable components (Parlar 2000). Cost of the information system, facilities, and
technology available to facilitate order placement activities can be considered as part of
fixed order costs. The fixed order cost will remains constant in relation to the number of
orders placed. There were also a number variable order costs that vary in relation to the
number of orders that were placed for more inventories. Some of such variable costs
include reviewing inventory stock levels; Preparing and processing order requisitions or
purchase orders; Preparing and processing receiving reports; Checking and inspecting
stock prior to placement in inventory and preparing and processing payment.
 Setup Cost. Production setup costs may be more obvious than ordering or acquisition
costs. Setup costs were expenses incurred each time a firm modifies a production line to
produce a different item for inventory. The set up cost has both fixed and variable cost
components. The fixed portion of setup cost might include use of the capital equipment
needed to change over production facilities, while the variable expense might include the
personnel costs incurred in the process of modifying or changing the production line.
II.6 Empirical Literature
Many organizations in the current business environment are compelled to increase their market
share both locally and globally to stay alive and continuously operate to meet their growth
objectives. The obstacle is how to keep tremendous level of inventory to meet the needs of its
customers and manage it to prevent both overstocking and stock outs. Therefore, in relation to
the study, appropriate budget fund and cash and cash equivalent existence, proper procurement
and supply chain channels, appropriate stock data control and document record and relevant skill

18
set application are the necessity for sustainable growth and business maturity in the firm‘s life
cycle.
Inventory refers to the raw materials, work-in-process goods, and finished goods that are thought
to be a part of a business asset and are prepared readily for sale. Inventory denotes the most
essential assets that most businesses own, because the turnover of inventory implies one of the
primary sources of revenue earning for business firm‘s shareholders.
Annet and Anthony (2020) conducted a study to establish the Determinants of Inventory
Management on Service Delivery in Trans Nzoia County Level Four Hospital, Kenya. The target
population was 200 respondents who comprised of employees from the following departments in
Tran Nzoia Level four hospital: procurement, finance, and pharmacist and administration
department resource respectively. Service delivery significantly influences effort of respondents,
most notably through the JIT shortening of lead time, staff competence, record management
practices and the up-take of information and communication technology in all level four hospital
in Kenya.
Pushpakumara (2018) conducted a study to identify the factors affect to effective inventory
management system in government sector organizations in Sri Lanka, as well as to identify the
type of inventory control system applied by government sector organizations and to give
suggestion to government sector organization to handle proper inventory management system.
The study concluded that inventory record system, storage system, wastage system, procurement
system, security system and investment in inventory are affected to effective inventory
management system and staff characteristics and method of inventory are not affected to
effective inventory management system in government sector organizations in Sri Lanka.
Okwaro et at. (2017) conducted a study to assess factors affecting the effectiveness of inventory
management practices in Kenya Seed Company. The target population was 110 management
staff working at the Company's procurement departments from which a sample size of 87
respondents was drawn. Staff training, level of technology, stock evaluation and procurement
policies had a positive and significant association on the efficiency of inventory management at
Kenya Seed Company. The results showed that most of the staff do not have necessary
competency to run the procurement function, there is poor stock audit practices, outdated
procurement systems and long bureaucratic procedures.

19
Hari (2017) conducted a study to assess the factors affecting the efficiency of inventory
management of Janapriya Multiple Campus, Pokhara. Factors related with proper record keeping
of inventory, financial resources, skill possessed by store staff and bureaucratic procurement
procedure positively influenced to the effectiveness of inventory management.
Shiau et al. (2017) conducted a study to identify the problem of inventory management faced by
the manufacturing small medium enterprise and also to determine the factors that will influence
the effectiveness of inventory management. The factors, documentation/store records, planning,
knowledge of employees/staff skill have shown to significantly influence the effectiveness of
inventory management while the funds have shown slightly significant influence on the
inventory management in manufacturing small medium enterprises.
Vibhuti & Priyanka (2016) conducted a study to identify the determinants of effective inventory
management of Consumer Durable Retailers among 60 retailers from Allahabad, Lucknow, and
New Delhi dealing with consumer durables. Four Factors of Retailer Size, Supplier Relationship,
Service Level and Demand Uncertainty emerged as the determinants of effective inventory
management. Positive relationship was found between Retailer Size, Supplier Relationship,
Demand Uncertainty and Effective Inventory Management through regression analysis.
Bosek, (2016) conducted a study to establish the determinants of effective inventory
management in health project in Kenya. To achieve the objective, they adopted a census survey
of the 75 respondents. Elema and Karanja (2014) conducted a study to determine the factors
influencing effective inventory management at Kenol Kobil Limited. The study was guided by
four objectives (information technology, distribution channels, Staff Competency and material
handling equipment‘s. The target population was procurement managers, stores managers and
other stores personnel in the Kenol Kobil. The study found out that information technology
reduces lead times on effective inventory management. The study also found that most
employees have basic Staff competency (competencies) on inventory management at Kenol
Kobil.
Kariuki (2013) conducted a study to make an assessment of the factors influencing effectiveness
of inventory control; Ministry of State for Provincial Administration and Internal Security;
Nairobi. The study revealed that: delays in procurement of goods, frequent stock-outs and
uncertain change of prices were some of the effects of long bureaucratic procurement procedure.
The study also revealed that unavailability of stationeries/stores records, lack of specific time or

20
date for both posting stores records, lack of adequate qualified and well-trained staff hinders
effective performance.
In the context of Ethiopia, most organizations have implemented some kind of inventory
management system. Hence following to this implementation, some researchers have been
conducted in order to realize different aspects of inventory management system. For instance,
Amare (2003) examined the existing rubber inventory management practice of Addis Tyre Share
Company and findings shade light that the proportion of the total capital invested in rubber
inventory, the type of inventory control system employed, and the contribution of the system to
operation efficiency. Berhane (2015) has investigated the inventory management practices of the
Ethiopian Electric Utility Addis Ababa city branch and found that there was a problem of
inventory management at all levels and resulted directly on customer dissatisfaction and poor-
quality electric service provision. Also, enhancement in the level of effectiveness in inventory
management practices would result in increased business performance of Ethiopian Electric
Utility (EEU). Gashu (2016) analyzed the inventory management practices in SUR Construction
Company and found out that the overall inventory practice was not effective; and the major
inventory management challenge was the availability of item on time in complete set. Also, the
main contributing factor for this problem was staff capacity having skill gap and awareness in
implementing inventory management technique.
Baye (2017) has examined the effects of inventory management practices on organizations
operational performances: the case of Ethiopian Airlines and found out that effective inventory
management model, inventory record accuracy, stock out management and information
technology usage were statistically significant and information technology usage has more
impact on operational performance of Ethiopian Airlines relative to other inventory management
practices studied. In addition, the research concluded that inventory management practices
impact significantly the operational performances of Ethiopian airlines. Necho (2017)
investigated factors affecting inventory management practice at the Pharmaceutical Fund and
Supply Agency in Ethiopia. The findings of the study revealed that the PFSA managements have
failed to facilitate successful deployment of inventory management, staffs‘knowledge and skills
affects the performance of the inventory management system. Furthermore, the study revealed
that management support and staff competency have strong association with inventory
management practice and inadequate staff competency, low level of management support and

21
poor inventory management practice at PFSA. The study also showed that the importance of
information technology for the improvement of inventory management performance. Melese
(2017) assessed the impact of EEU inventory management practices on service delivery and
presented that the utility was not effective in practicing modern inventory management
techniques instead there is poor inventory management system that results under stocking,
overstocking, high cost, high customer complaints and poor service delivery. In addition, poor
procurement planning, purchase of unnecessary materials and bulk purchase practices result the
availability of excess amount of obsolete and non-moving items. Also revealed that lack of
adequate qualified and well-trained staffs (i.e., skill gaps and awareness) impede in
implementing effective inventory management techniques.
Azeb (2017) assessed the health commodities inventory management practice of the Zewditu
Memorial Hospital. The result showed that ZMH health commodities to be long-term agreements
between the hospital and its suppliers, maintain proper store management the majority of the
store managers had adequate knowledge how to store and practiced health commodities and they
had also a positive attitude towards the importance of appropriate storage of commodities,
obsolete, expired, or damaged inventories properly identified and segregated, inventory records
reconciled to advantage reports on a regular basis and management have review the
reconciliation of physical inventory counts to the inventory records applied at ZMH but ,uses
automatic stock tracking and adequate detailed written inventory instructions and procedures
exist, uses Enterprise Resource Planning system, maintains a data base for all suppliers, uses Just
In Time stock control system and an integrated information sharing system were not applicable
at ZMH. Finally, from the study it can be concluded that the main challenges of the hospital in
managing inventory are lack of modern technologies, insufficient funding, lack of inventory
management training, the length of bureaucratic processes in the procurement system and stock
out of health commodities. Weldeyes (2019) examined the effect of inventory management
practice on logistics performance in the case of Ethiopian Defense Force Logistics Main
Department. The findings of the study revealed that there is a gap on purchasing department in
relation to applying competitive based purchasing practice, lack of information sharing between
purchasing and warehouse departments, lack of computerized inventory management system,
lack of proper inventory handling and disposal system and lack of on job and of job training
programs in relation to inventory management practice. Tilahun (2020) investigated the effect of

22
supply chain integration and inventory management practices on operational performance in
F.D.R.E Air Force. Abdissa (2021) examined the influence of inventory management practices
on customer satisfaction of Ethio-Nippon Technical Company S.C in Ethiopia, the findings of
study shows that there is a poor inventory management practice in the company and lack of good
service and product delivery system in the company to fulfill the customer satisfaction. The
company also has weak inventory management system and because of this it was not good at
delivery product and service on time, and this led to increase customer complaint in the company
time to time.

II.7 Summary and Knowledge Gap

Generally, the study aims to focus on assessing inventory management practices in Dilla
unversity using descriptive and exploratory research to imply areas of gaps to be studied and lay
a foundation for other researchers in the area. Both primary and secondary sources of data will
used for the study. The investigator also used appropriate conceptual and empirical literatures to
strengthen the research area, show and close the gaps to be able to find an independent data
collection and analysis, interpretations and results and provide proper assessments of IM
practices with clear and concise conclusions and recommendations in the area of study for the
fulfillment and award of academic compensation to the investigator and provide sources of
information for in the future for aspiring and new fellow academic researchers in the study area.
In addition to the limited and constrained resources, the unavailability of free and proper
literatures such as appropriate journals, books and thesis and dissertation titles and researcher is
not also directly an academician who also has a full-time job which affected the study somehow.
II.8 Conceptual Framework
Figure 2.1 Conceptual Framework

Staff Proficiency

Documentation
Inventory management

Procurement Practice

23
 Facility management

Source: Developed by the researcher 2023

CHAPTER THREE
3 RESEARCH METHODOLOGY
3.1 Introduction

This chapter were set out various stages and phases that were followed in completing the study.
It involves a blueprint for the collection, measurement and analysis of data. This section is an
overall scheme, plan or structure conceived to aid the researcher in answering the raised research
question. This stage is about how research were executed and how respondents was approached,
as well as how the research was completed. Therefore in this section the research identifies the
procedures and techniques that was used in the collection, processing and analysis of data.
Specifically the following subsections are included; research design, research approach, source
of data, data collection techniques, target population, sampling techniques and sample size, data
analysis and interpretation, reliability and validity test, ethical consideration and finally
description of the study area.

3.2 Description of the Study Area

Dilla University (Amharic: ዲላ ዩኒቨርስቲ) is a public university in Dilla town, Southern Nations,
Nationalities, and Peoples' Region, Ethiopia. Located in Gedeo Zone, it has over 45,000 students
belonging to different faculties. Dilla University is often referred to as "University of the
Greenland" because of the vibrant greenery in and around Gedeo area.

Dilla University has its origins in the Dilla College of Teachers’ Education and Health Sciences,
first established in 1996. In 2001, it was included in the expansion of a regional Debub

24
University ("Southern" University). From this point, the Dilla campus grew to house 12
departments, though retained a fairly small student base. In 2006, the Council of Ministers
granted Dilla its own certification as an independent university, and Debub University was
renamed Hawassa University.

Academics at Dilla University are organized into six colleges (Technology and Engineering;
Business and Economics; Health and Medical Science; Social Science and Humanities;
Agriculture and Natural Resources; and Natural and Computational Science), two institutes
(Indigenous Studies; and Education and Behavioural Science), as well as separate Schools of
Law, Continuing and Distance Education; and Graduate Studies.

Dilla University has 62 undergraduate, 45 masters and 4 PhD degree programs. These programs
are offered in different disciplines including Agriculture, Business, Education, Engineering,
Health Sciences, Natural and Social Sciences.

The University also hosts specialized research centres focused on energy and the environment;
education; Food and Nutrition; and Child, Women and Youth.

3.3 Research Design

Research design provides the basic direction for carrying out a research project to obtain answer
to research questions. It is a master plan specifying the method and procedures for collecting and
analyzing the need of information. Research design is needed because it facilitates the smooth
sailing of the various research operations, thereby making research as efficient as possible
yielding maximal information with minimal expenditure of effort, time and money (Kothari,
2004:32). It helps the study to be relevant to the problem and it uses economical procedures. The
same authors discusses three types of research design, namely exploratory (emphasizes discovery
of ideas and insights), descriptive (concerned with determining the frequency with which an
event occurs or relationship between variables) and explanatory (concerned with determining the
cause and effect relationships). It specifies which approach was used for gathering and analyzing
the data. The types of research employed under this study were descriptive research and
exploratory research. The major purpose of descriptive research is description of the state of
affairs as it exists at present. Then this study were describes to assess the inventory management
practices in case of Dilla University.

25
Second, the study employs descriptive research and explanatory research in that the relationship
between independent variables (Staff Proficiency, documentation /Record/, Procurement Practice
and Facility) is correlated with dependent variables (with inventory management practice in Dilla
University).
3.4 Research approach
There are two methods that provide in the research method such as Quantitative and Qualitative,
where one of them is not better than the others, all of this depends on how the researcher want to
do a research of study (Ghauri and Kjell, 2005).This study were used mixed research approach
that is both quantitative and qualitative research approach. When using the mixed approach the
researcher mixes different data collection methods. Which enable the researcher to use the same
phenomenon from different perspective in order to understand the problem more completely.
(Creswell, 2007)
Although quantitative and qualitative approach differ in how they access knowledge and the
research questions they address, they complementary and help provide a more complete analysis
of the research problem. While quantitative approach enables the researcher to look for
relationship between the variables and generalize results to the main population. The qualitative
approach enables the researcher to acquire in depth understanding of respondent experience and
perception. (Mare, 2007)

As indicated in the above discussion both quantitative and qualitative research approaches have
limitations. According to Sale et al. (2002).the advantage of a quantitative research approach
may be limitations for a qualitative approach and vice versa.
Mixed research design, which is supposed to alleviate the limitations of quantitative and
qualitative approaches bases on pragmatic knowledge claims. Pragmatists contend that
knowledge claims arise out of actions, situations, and consequences rather than antecedent
conditions. There is a concern with applications and solutions to problems. Instead of methods
being important the problem is most important and researchers use all (mixed method studies)
approaches to understand the problems. (Creswell, 2003)
The goal for researchers using the mixed methods approach is to draw from the strengths and
minimize the weaknesses of the quantitative and qualitative research approaches (Carrie, 2007).
To sum up, quantitative and qualitative research methods investigate and explore the different
claims to knowledge and both methods are designed to address a specific type of research

26
question. While the quantitative method provides an objective measure of reality, the qualitative
method allows the researcher to explore and better understand the complexity of a phenomenon.
3.5 Target Population

A population is a group of potential participants to whom one is seeking to generalize the results
of a study. It represents the collection of all units of analysis (Abiy et al., 2009).

The target population of the study were select administrative staff and academic staff members
of Dilla University who are concerned about inventory management. According to Dilla
University human resource office data 2022 G.C there are 3,549 administrative staff and 2,047
academic staff members with total 5,596 employees will be a target population of the study (DU
Human Resource Directorate report 2022).

3.6 Sampling Technique and Sample Size

The researcher was select the samples from the target population by using probability sampling
particularly stratified sampling technique. since stratified was used when the cases in a
population Fall into distinctly different categories (strata) of a known proportion Of that
population to achieve proportional randomized sampling, a randomized sample is obtained from
each stratum separately, sized according to the known proportion of each stratum in the whole
population, and then combined as previously to form the complete sample from the population
(Walliman, N. 2006).

The target population for the study were classified into two main strata that is administrative and
academic staff. The samples were selected from each stratum rendering their share to the total
population. Stratified sampling technique were used to have the right proportion of people from
every concerned staff. The samples were selected from all administrative staff by using a simple
random sampling technique in Dilla University.

To determine the sample size out of the whole population the researcher uses Slovin’s 1960
Formula the researcher have selected 373 samples from the total population of 5596.

N
1+ N ( e ) 2

Where

27
N= total population of the study

n = sample size of the study

e= error factor 5 %

5596
n=
1+5596 ( 0.05 ) 2
N
n=
1+5596 ( 0.0025 )
5596
n=
14.99
n=373.31
n=373

Table 3.1 sample of the study

Strata Total Population Sample
Administrative Staff 3,549 237
Academic Staff 2,047 136
Total 5,596 373
Source: - Survey Data 2023
Following this procedure, 373 sample will be select 5,559 eligible employee. In addition to that
by using proportion to sample size 373 sample employee was distributed in to administrative and
academic staff by using the following formula.
Na
na= ∗n
N
na= cluster sample
Na= cluster population
N = total population
n = total sample
3.7 Source of Data Collection

Data collection is integral part of the research design. Generally there are two types of sources of
data namely primary and secondary data sources. Primary data are those information obtained

28
from the original source while secondary data are those obtained as second hand data like from
books and any other sources which is not original (Kothari, 2004). In order to collect reliable
data, both primary and secondary sources of data were the major focus of the researcher. To
achieve the objectives of this study, the primary data was collected through questionnaires and
interviews. Secondary sources of data was gathered from different sources like references books,
internet, different thesis, dissertation and projects, literatures, articles and other academic papers,
unpublished reports and others related sources.
3.8 Data Collection Techniques
To gather the quantitative and qualitative data, this study were employee both the primary and
secondary data collection techniques.
Primary data were collect by using questionnaires. Both open and close ended questionnaire
were design and distribute to respondents through enumerators to get the needed information. Pre
testing of the questionnaire were carried out and depending on the result; some adjustments were
made to the final version of the questionnaire. The researcher were also guide and worked with
the numerators throughout the data collection process.
The study were use both published and unpublished secondary data Collection Techniques like
references books, internet, different thesis, dissertation and projects, literatures, articles and other
academic papers, unpublished reports and others related sources.

3.9 Data Analysis and Interpretation

All research questions were tested with the help of the SPSS of computer software. In order to
analyze the data the two sets of Statistics: Descriptive as well as inferential statistics was used.
Descriptive statistics include percentage and frequency whereas inferential statistics include
correlation and regression analysis. Pearson correlation will be used to measure the relationship
between independent variables (staff Proficiency, procurement practice, facility management and
documentation) has an effect on the dependent variable (inventory management) by using
correlation. And multiple linear regressions were used to measure the effect of independent
variables (staff competency, procurement practice, facility management, and documentation) on
dependent variable inventory management.
3.9.1 The Pearson Correlation Coefficient

29
According to Phyllis and his associates (2007:18-55), inferences have a very important in
management research. This is so because conclusions are normally established on the bases of
results. Such generalizations were therefore, be made for the population from the samples. They
speculate that the Pearson Correlation Coefficient is a widely used statistical method for
obtaining an index of the relationships between two variables when the relationships between the
variables is linear and when the two variables correlation are continuous. To ascertain whether a
statistically significant relationship exists between Staff Proficiency, Procurement Practice,
documentation /Record/, and Facility management with inventory management practice.
According to Duncan C. and Dennis H. (2004:38-41), correlation coefficient can range from -1
to +1. The value of -1 represents a perfect negative correlation while a value of +1 represents a
perfect positive correlation. A value of 0 correlations represents no relationship. In this study
Pearson’s Correlation Coefficient was used to determine the following relationships.
 Staff Proficiency is a significant determinant factor of inventory management practice in
Dilla University.
 Procurement Practice is a significant determinant factor of inventory management
practice in Dilla University.
 Documentation /Record/ is a significant determinant factor of inventory management
practice in Dilla University.
 Facility management are a significant determinant factor of inventory management
practice in Dilla University.
3.9.2 Linear Regression Analysis
Linear regression is a method of estimating or predicting a value on some dependent variable
given the values of one or more independent variables. Like correlations, statistical regression
examines the association or relationship between variables. Unlike correlations, however, the
primary purpose of regression is prediction (Geoffrey M. et al., 2005:224-225). In these study
liner regressions will be employed. Liner regression analysis takes into account the inter-
correlations among all variables involved. This method also takes into account the correlations
among the predictor scores (John Adams, et al., 2007:198). They added liner regression analysis,
which means one predictor is jointly regressed against the criterion variable. This method was
used to determine if the independent variables will explain the variance in dependent variable.
3.9.2.1 Regression Functions

30
The equation of regressions on this study is generally built around two sets of variables, namely
dependent variable (inventory management practice) and independent variables (Staff
Proficiency, Procurement Practice, documentation /Record/, and Facility management). The
basic objective of using regression equation on this study was to make the study more effective
at describing, understanding and predicting the stated variables.
Regress Performance on Selected Variables
Yi = β0+ β1X1 + β2X2 + β3 X3 + β4X4
Where:
Y is the response or dependent variable- inventory management practice of Dilla University
X1= Staff Proficiency
X2= documentation /Record/
X3= Procurement Practice
X4= Facility management are the explanatory variables.
β0 is the intercept term- constant which would be equal to the mean if all slope coefficients are 0.
β1, β2, β3 and β4 are the coefficients associated with each independent variable which measures
the change in the mean value of Y, per unit change in their respective independent variables.
Accordingly, this statistical technique was used to explain the following relationships. Regress
inventory management practice of Dilla University (as dependent variable) on the selected linear
combination of the independent variables using multiple regressions.
3.10 Reliability Test and Validity
3.10.1 Reliability Test
Reliability is the degree to which the measure of a construct is consistent or dependable. There
are many ways of estimating reliability one of which is internal consistency reliability. It is a
measure of consistency between different items of the same construct. If a multiple-item
construct measure is administered to respondents, the extent to which respondents rate those
items in a similar manner is a reflection of internal consistency. This reliability can be estimated
in terms of Cronbache alpha (Bhattacherjee, 2012). Zikmund (2003) stated that the researcher
should conduct the pre-testing to ensure the questionnaire’s reliability and to make sure that
measures are free from error and therefore yield consistent result. The reliability of the questions
for each variables are obtained when Cronbache coefficient alpha is at least 0.6 and the internal

31
consistency and reliability of the questions will be considered higher, if the result is near to 1. In
general, a reliability of a scale or item may fall between 0 and 1.
George and Mallery (2003) also stated that a reliability score of greater than 0.9 is excellent,
greater than 0.8 is good, greater than 0.7 is acceptable, greater than 0.6 questionable, greater than
0.5 is poor and less than 0.5 is unacceptable. In this study Cronbache alpha model was used to
measure the overall reliability of the data obtained from a questionnaire.
Table 3.2 Reliability of the Survey Questionnaire of inventory management practice

Reliability Statistics
Cronbach's Alpha N of Items
.944 34
Source: - survey data 2023

3.10.2 Validity Test

Validity refers to the extent to which a measure adequately represents the underlying construct
that it is supposed to measure (Bhattacherjee, 2012). Content validity will be checked through
getting the questionnaire reviewed by experts. An insight that was obtained from the pilot survey
of the 10 employee was analyzed and used to make adjustments on the questionnaire items.
Reliability of the questionnaire items was determined using the test-retest method in which the
same respondents were requested to provide information for the second time (Kothari, 2005).
The results from the pilot study was used to calculate the reliability coefficient.
3.11 Ethical consideration

After the title of the study was approve by Academic Committee of College of Business and
economics of infolnk University College. Any relevant data for the study was collect by issuing
an official letter to the concerned organizations. All the study participants was inform about the
purpose of the study and finally their consent was obtain before collecting data. The respondent
has the right to refuse or terminate at any point of the data collecting process. Concerning the
right to anonymity and confidentiality, the participants was not required to write their names on
the questionnaire and assured that their responses are not in any way linked to them. The
dissemination of the finding will be not referring to specific respondent. In any case, the
confidentiality of information supplied and the anonymity of respondents will be respect.

32
 CHAPTER FOUR

4 RESULTS AND DISCUSSIONS

4.1 Introduction
The data collected have been analyzed through Descriptive statistics mainly percentage and
frequency as well as inferential statistics correlation and regression analysis Before distributing
the whole questionnaire 30 questionnaires were distributed and the reliability/consistency of
items with in each variables has been tested using Cronbach’s Alpha through the help of SPSS
20 version and all the items under each variable have been proved to be reliable and the data
analysis was proceeded after distributing 373 questionnaires to the whole samples and 373 were
fully returned accounting for 100% of the intended data response rate.

4.2 Demographic Characteristics of Respondent

The first part of the questionnaire consists of the demographic information of the participants.
This part of the questionnaire requested a limited amount of information related to personal and
professional demographic characteristics of respondents. The table below shows the
demographic characteristics of the respondents like age, education, and work experience. The
data collected from the respondents were analyzed as follows.

4.2.1 Genders of the Respondents

Table 4.1 Genders of the Respondents
Sex
Frequency Percent Valid Percent Cumulative
Percent

33
 Valid Male 245 65.7 65.7 65.7
Female 128 34.3 34.3 100.0
Total 373 100.0 100.0

Source: Own Survey, 2023

According to table 4.1 above the sex respondent out of 373 sample population 245(65.7%) males
and 128(34.3%) are female from above table the majority participated in the study are male.

4.2.2 Age of the Respondents

Figure 4.1 Age of the Respondents

Own Survey, 2023

Age of the respondent’s shows that 54.42 % of the Dilla unversity employees are between the
age 31-40 and the other 26.27 % are between 20-30 Years. However, the least 19.3% of the
employees are at the age of 41 years and above. In other words, most of the employees are
belonging in the productive age group whose summation percentage is more than 80%.

4.2.3 Professional qualification of the Respondents

Figure 4.2 professional qualification of the Respondents

34
Own Survey, 2023

Education is one of the most important characteristics that might impact employee‘s ability to
implement new system and understanding any particular phenomena. Based on the above table
the educational level of employees of Dilla unversity, 75.603% of the employees are first degree
holders and the other 8.311% of the employees have specialization at a master‘s degree level and
above, whereas 16.086% are diploma holders. From these results, it can be concluded that the
respondents had enough education to execute the roles assigned to them effectively and
efficiently.

4.2.4 Working Experience of the Respondents

Figure 4.3 working Experience of the Respondents

35
Own Survey, 2023

In regarding to year of service, majority (65.95%) of the Dilla university employees have
relatively longer existence in the company, whereas 18.23% of the respondents have an
experience 0-5 years. Moreover, the other 15.82% of the respondents have an experience of
working with the university for at least 11 years. It can be therefore noted that most respondents
have been working for more than 6 years which is a significant length for an employee to
understand the university business process and culture.

4.3 Descriptive Analysis of the major variables of the study

The inventory management affecting factors which are the staff proficiency, procurement
practice, documentation /Record/, and Facility management along with the major dependent
variable of the inventory management is described based on the frequency and percentage of the
respondents response presented as follows.

4.3.1 Respondent’s reaction on staff proficiency related questions.

Staff proficiency of the inventory management unit in the university have been tried to evaluate
being based on the qualification that these inventory related employees have, the training
programs provided in this area and the number adequacy of the inventory management unit
employees and their commitment and the results have been summarized as follows.

36
 Table 4.2 Staff Proficiency of the Respondents
Statement S. Disagree Neutral Agree S.
Disagree Agree

Sufficient manpower is allocated for 56.3% 8.0% 5.9% 25.7% 4.0%

stores of Dilla University
The storekeepers of the university 51.2% 25.7% 6.2% 13.4% 3.5%
can easily identify the placement or
location of each and every material
stored
Staff Members Of Dilla University 54.4% 25.5% 4.8% 11.5% 3.8%
inventory management Have Good
Commitment
There Are Well-Qualified staffs 48.8% 24.1% 7.2% 10.7% 9.1%
Engaged In The Inventory
Management Activities In Dilla
University
There Are Adequate Training & 44.8% 27.9% 6.7% 12.9% 7.8%
Development Program For
inventory management Staff
Employees in Dilla University
Own Survey, 2023

On the item one of the same table above, it has been indicated that majority, 56.3% of the
respondents indicated that there are no sufficient employees allocated for stores of Dilla
University while 25.7% of the respondents showed that there are sufficient employees allocated
for each store in Dilla University and the rest 5.9% of the respondents remained neutral, here it
can be seen that there is insufficient workforce allocated for stores of Dilla University.
On the item two majority, 51.2% of the respondents demonstrated that the storekeepers of the
university cannot easily identify the placement or location of each material stored while and less
13.4% of the respondent’s answer storekeepers of the university can easily identify the
placement of stored materials 6.2% of the respondents remain neutral. Here it is indicated that

37
most of the storekeepers of the university cannot easily identify the placement or location of each
material stored.
On the item three of the same table above most, 54.4% of the respondents proved that of Dilla
University inventory management engaged employees have no good commitment while less
11.5% of the respondents indicated that employees of Dilla University engaged in inventory
management have good commitment. And 4.8% of the respondents remained neutral, here it has
been indicated that most of the employees of Dilla University inventory management engaged
have no good commitment.
As it can be seen from table 4.5, item one above most, 48.8% of the respondents have indicated
the non-existence of qualified staff engaged in the inventory management activities at Dilla
University, while some 10.7% have shown there is well qualified staff Engaged In The Inventory
Management Activities In Dilla University, and the rest 7.2% of the respondents remains neutral,
Here it can be observed that there are inadequate qualified employees engaged in inventory
management activities in Dilla University; this decreases productivity for the university because
managing inventory needs qualified employees.
As indicated by item five of the same table majority, 44.8% of the respondents have confirmed
that there is no adequate training and development program for inventory management Staff in
Dilla University whereas 12.9% of the respondents showed the existence of adequate training
and development program for staff employees while 6.7% of the respondents remained neutral. It
can be seen from this, there is no adequate training and development program for inventory
management Staff in Dilla University.
3.1.1 Respondent’s reaction on Procurement Practice related questions.

Here the procurement practice has been evaluated from the efficiency of need identification,
supplier selection the lead time taken to deliver the required products and from the quality of the
products procures and the results have been summarized as follows:

Table 4.3 Procurement Practice of the Respondents

Statement S. Disagree Neutral Agree S.

Disagree Agree

38
 There is appropriate need 54.7% 10.2% 3.8% 20.1% 11.3%
identification in Dilla University
There Is Effective Supplier 48.3% 30.8% 5.4% 12.1% 3.5%
Selection In Dilla University
There Is Adequate Budget 53.6% 28.7% 4.0% 10.7% 2.9%
Available For Inventory Purpose In
Dilla University
There Is Short Lead Time Until The 50.1% 19.6% 5.1% 9.9% 15.3%
Product Is Order Till It Reaches To
Office For Usage

Quality Products Are Procured In 44.8% 34.0% 7.5% 5.6% 8.0%

Dilla University
Own Survey, 2023

As Indicated in Table 4.6. Item One below most 54.7% of the respondents verified the non-
existence of appropriate need identification in Dilla University by Procurement management
units while 20.1% of the respondents verified the existence of appropriate need identification in
Dilla University and fewer 3.8% of the respondents remain neutral, Here it is indicated that there
is no appropriate need identification in Dilla University by Procurement management units.

On the item two of the same table majority, 48.3% of the respondents proved that there is no
effective supplier selection in Dilla University while 12.1% of the respondents show there is
effective supplier selection in Dilla University procurement practice while 5.4% of the
respondents remain neutral, Here it indicates there is in effective supplier selection in Dilla
University, but few number of respondents believed there is effective supplier selection in Dilla
University so the university is advisable to select the right suppliers for materials.

Item three of the same table shown majority, 53.6% of the respondents proved there is in
adequate budget available for inventory purpose in Dilla University though 10.7% of the
respondents has proved there is adequate budget available for inventory purpose in Dilla
University and other 4% remain neutral, Here it indicates there is in adequate budget available

39
for inventory purpose in Dilla University it is better if the university is managed with adequate
budget because it needs budget to have good inventory management.

On the item four of the same table above the majority 50.1% of the respondents has indicated
there is no short lead time since the product is ordered until it reaches to office for usage while
9.9% of the respondents proven there is short lead time since the product is ordered until it
reaches to office for usage and other 5.1% of the respondents remain neutral. At this point it
shows there is no short lead time since the product is ordered until it reaches to office for usage
the university is advisable to shorten the lead time to take advantage of time because it interrupts
the teaching learning process.

On item five of the same table above 44.8% of the respondents show quality products are not
procured in Dilla University while 5.6% of the respondents prove quality products are procured
in Dilla University the remaining 7.5% neutral, Here it indicated quality products are not
procured in Dilla University the university is advisable to procure quality products to boost the
employee’s moral and to be productive or to make teaching learning process suitable.

4.3.2 Respondent’s reaction on Facility Management related questions.

Facility management is the other factor evaluated in terms of the availability of adequate store
rooms, lay out of store rooms, the material handling and security aspects of facility for the
inventories of Dilla University and the results have been summarize as follows.

Table 4.4 Facility Management of the Respondents

Statement S. Disagree Neutral Agree S.
Disagree Agree

The Required Materials Are Always 56.8% 10.2% 4.8% 19.0% 9.1%
Available In The Store Of Dilla
University
The Material Which Require Special 45.6% 27.3% 8.0% 7.2% 11.8%
Attention (Like Chemicals) Are
Stored Separately

40
 There Is Proper Layout Of Materials 49.9% 18.0% 6.7% 20.6% 4.8%
In The Store Of Dilla University
There Is Effective Materials Handling 46.6% 18.2% 8.6% 10.7% 15.8%
Practice In Dilla University
Much Emphasis Is Given For 45.0% 18.8% 11.3% 20.4% 4.6%
Material Security In Dilla University
There Is Adequate Store Rooms In 52.0% 38.1% 9.9% 0.0% 0.0%
Dilla University

Own Survey, 2023

As it can be observed from the table 4.7 item one for the most part 56.8% of the respondents
indicate the required materials are not available in Dilla University whereas 19% of the
respondents show the required materials are always available in the store of Dilla University
along with 4.8% of the respondents remain neutral, Here it indicates the required materials are
not always available in the store of Dilla University.

On item two of the same table 45.6% of the respondents showed the required materials are not
stored separately in Dilla University while 7.2% of the respondents proved the required materials
are stored separately in Dilla University 8% of the respondents remain neutral, Here it indicates
the required materials are not stored separately in Dilla University the university must store
different materials separately because different materials need different storage according to their
type.

As it can be observed on item there of the same table majority, 49.9% of the respondents proved
there is no proper layout of materials in the store of Dilla University while 20.6% of the
respondents prove there is proper layout of materials in the store of Dilla University and other
6.7% remain neutral, Here it indicates that there is no proper layout of materials in the store of
Dilla University the university must have proper layout of materials in the store.

On the item four of the same table above most 46.6% of the respondents prove there is no
effective material handling practice in Dilla University even as 10.7% of the respondents prove
there is effective material handling practice in Dilla University and the remaining 8.6% remain
neutral, Here it indicates that there is no effective material handling practice in Dilla University
the university must have effective material handling and improved inventory management.

41
On the item five of the same table above majority, 45% of the respondents respond much
emphasis is not given for material security in Dilla University while 20.4% of the respondents
proven much emphasis is given for material security and the remaining 11.3% remain neutral,
Here it indicates that much emphasis is not given for material security in Dilla University.

As it can be indicated on item six of the same table above most 52% of the respondents verified
there is no adequate store rooms in Dilla University while 0% of the respondents there is
adequate store rooms in Dilla University and 9.9% of the respondents remain neutral, Here it
indicates there are no adequate store rooms in Dilla University the university is advisable to have
adequate store rooms and warehouse.

4.3.3 Respondent’s reaction on Documentation Management related

questions.

Documentation management has been reviewed from the point of document organization,
accuracy of recording and the organization of documents along with reviews made.

Table 4.5 Documentation Management of the Respondents

statement S. Disagree Neutral Agree S.

Disagree Agree

There are Well-Organized Information 57.4% 7.0% 8.0% 20.1% 7.5%

On The Inventories Status
Inventory Information Is Accurately 49.1% 24.1% 9.4% 7.0% 10.5%
Documented In Dilla University
Records Of In Dilla University Are 48.8% 6.2% 6.7% 23.1% 15.3%
Cross Checked For Accuracy
There Are Well-Organized Documents 53.4% 15.5% 5.1% 9.9% 16.1%
For Inventory Management Purpose
Recorders Of Dilla University 52.5% 18.0% 9.1% 15.5% 4.8%

42
 Inventory System Have Adequate
Knowledge About Inventory Recording
Records Of Dilla University Inventory 26.3% 18.2% 11.0% 12.6% 31.9%
System Are Periodically Reviewed
Own Survey, 2023

According to table 4.8 above 5 Item one majority, 57.4% of the respondents has proved there is
no well-organized information on the inventories status while 20.1% of the respondents show
there is a well-organized information on the inventories status and 8% remain neutral, Here it
indicates that there is no well-organized information on the inventories status the university is
advisable to have well-organized information.

As it is indicated on item two of the same table above most 49.1% of the respondents proven
inventory information is not accurately documented while 7% of the respondents prove inventory
information is accurately documented and 9.1% remain neutral, At this point it can be observed
inventory information is not accurately documented this could be due to lacks of advanced
technology.

On item three of the same table above most, 48.8% of the respondents prove records of Dilla
University inventory system are not crosschecked for accuracy although 23.1% of the
respondents prove records of Dilla University inventory system are crosschecked for accuracy
and 6.7% remain neutral, Here it indicates records of Dilla University inventory system are not
crosschecked for accuracy the university inventory management unit is advisable to check the
records because accuracy is usual.

On item four of the same table most 53.4% of the respondents indicate there is no well-organized
documents for inventory management purpose whereas 9.9% of the respondents has proved is a
well-organized documents for inventory management purpose 5.1% remain neutral, Here it can
be observed that there are no well-organized documents for inventory management purpose the
university is advisable to have a well-organized documents for inventory management purpose
by using technology.

On item five of the same table above majority, 52.5% of the respondents show recorders of Dilla
University inventory system have no adequate knowledge about inventory recording while

43
15.5% of the respondents show recorders of Dilla University inventory system have adequate
knowledge about inventory recording and remaining 9.1% of remain neutral, here the result
indicates most of recorders of Dilla University inventory system have inadequate knowledge
about inventory recording.

On item six of the same table above most 26.3% of the respondents proven records of Dilla
University inventory system are not periodically reviewed while 12.6% of the respondents show
records of Dilla University inventory system are periodically reviewed the remaining 11%
neutral, Here it indicates observed records of Dilla University inventory system are not
periodically reviewed so records should be periodically reviewed for accuracy.

3.1.2 Inventory Management

Inventory management practice has been evaluated from its major elements point of view which
is waste minimizing capability, capability to minimize shortage and reduce lead time by holding
adequate inventories at hand and the results are shown below (Table 4.6).

Table 4.6 Inventory Management of the Respondents

Statement S. Disagree Neutral Agree S.
Disagree Agree

The inventory management practice of 59.5% 20.1% 14.2% 1.9% 4.3%

Dilla University minimizes wastage of
operational resource
The inventory management practice of 52.0% 18.0% 16.1% 5.4% 8.6%
Dilla University leads to reduced
delivery lead time
Inventory is managed in a way that can 53.6% 17.4% 16.9% 4.0% 8.0%
prevent material shortage
Inventory management system of the 60.3% 15.5% 4.8% 13.1% 6.2%
university promotes uninterrupted
operation

44
Own Survey, 2023
According to table 4.9 above item one most of, 59.5% of the respondents proved the inventory
management practice of Dilla University not minimizes wastage of operational resource whilst
1.9% of the respondents respond the inventory management practice of Dilla University
minimizes wastage of operational resource and 14.2% of the respondents remain neutral, here it
indicates inventory management practice of Dilla University is not minimizing wastage of
operational resource university is advisable to improve its inventory management then wastage
will be minimized.

As indicated in the above table on the item two majority, 52% of the respondents show the
inventory management practice of Dilla University not leads to reduced delivery lead time even
as 5.4% of the respondents proved the inventory management practice of Dilla University leads
to reduced delivery lead time and others 16.1% remain neutral, this indicates management
practice of Dilla University leads to an increased delivery lead time; there is increased delivery
lead time due to unfortunate inventory management. so the university supposed to improve its
inventory Management practice to decrease delivery lead time.

On item three of the same table above majority, 53.6% of the respondents prove inventory is not
managed in a way that can prevent material shortage while 4% of the respondents respond
inventory is managed in a way that can prevent material shortage and the remaining 16.9%
remain neutral, this indicates at Dilla University inventory is not managed in a way that can
prevent material shortage there is material shortage in the university due to poor inventory
management so the university is advisable to prevent material shortage.

Of Item four of the above table 60.3% of the respondents proves Inventory Management System
of the University is not Promoting Uninterrupted Operation whereas 13.1% of the respondents
show Inventory Management System of the University Promotes Uninterrupted Operation and
the remaining 4.8% respondents remain neutral, This point toward Inventory Management
System of the University is not Promoting Uninterrupted Operation and the university should
improve its inventory management system to promote Uninterrupted Operation.

3.2 Results of Inferential Statistics

45
In this section, the results of inferential statistics are presented. Inferential statistics is finding
something about a population from a sample taken from the population (Lind, Marchal
&Wathen, 2006). For the purpose of assessing the objectives of the study, Pearson’s Product
Moment Correlation Coefficient and regression analyses were performed. With the aid of these
statistical techniques, conclusions are drawn with regard to the sample and decisions are made
with respect to the research hypothesis.

3.2.1 Pearson's Product Moment Correlation Coefficient

In this study the researcher uses Pearson’s Product Moment Correlation Coefficient, because it is
the most widely used method of measuring the degree of relationship between two variables.
This Coefficient assumes that there is liner relationship between two variables. Moreover the two
variable are casually related which means that one of the variable is independent & the other one
is dependent & a large number of independent causes are operating in both variable so as to
produce a normal distribution (Kothari, 2004). Stating only the relationship is not enough as it
may involve both dimension from zero (negative, zero itself & positive). Therefore to know the
straight and type of correlation between variable the following table is set as a rule of thumb for
discussion of the thesis.

Table 4.7 Rule of thumb for about the strength of correlation coefficient
Range of coefficient Description of strength
±.81 to ± 1.00 Very strong
± .61 to ±.80 Strong
± .41 to ± .60 Moderate
± .21 to ±.40 Weak
± .oo to ± .20 None
Source: - (Bhattacherjee, 2012)
In this study Pearson’s Product Moment Correlation Coefficient was used to determine whether
there is significant relationship between Staff Proficiency, Procurement Practice,
documentation /Record/, and Facility management variable with inventory management practice.

The following section presents the results of Pearson’s Product Moment Correlation on the
relationship between independent variables and dependent variable. The table below indicates

46
that the correlation coefficients for the relationships between inventory management practice and
its independent variables are linear and positive ranging from substantial to strong correlation
coefficients.

Correlations
Inventory Management

staff proficiency Pearson Correlation .730**

Sig. (2-tailed) .000
N 373
Procurement System Pearson Correlation .679**
Sig. (2-tailed) .000
N 373
Facility Management Pearson Correlation .710**
Sig. (2-tailed) .000
N 373
Documentation Pearson Correlation .733**
Management Sig. (2-tailed) .000
N 373
Inventory Management Pearson Correlation 1
Sig. (2-tailed)
N 373
**. Correlation is significant at the 0.01 level (2-tailed).
Table 4.8 Correlation between Independents Variable and inventory management practice
(Dependent Variable)

Source: - survey data 2023

As it is clearly indicated in the above table 4.11, a strong positive relationship was found
between staff proficiency and Inventory Management (r =.730, p < .01), Procurement System
and Inventory Management (r = .679, p < .01), Facility Management and Inventory Management

47
(r = .710, p < 0.01), and Documentation Management and Inventory Management (r = .733, p
< .01), which are statistically significant at 99% confidence level. This implies that at a 1% level
of significance it was discovered that Staff Proficiency, Procurement Practice, documentation
/Record/, and Facility management plays a significant role on inventory management practice in
Dilla university.
3.2.2 Regression Analysis
To prove whether the identified factors which are staff proficiency, procurement practice,
documentation /Record/, and Facility management provided have a significant effect on the
inventory management.

Table 4.9 Model Summary

Model Summary
M R R Adjuste Std. Change Statistics Durbin
o Squa dR Error Watson
d re Square of the R F df df2 Sig. F
el Estim Square Change 1 Chan
ate Change ge
1 .828a .686 .682 .577 .686 200.690 4 368 .000 .577
a. Predictors: (Constant), Documentation Management, staff proficiency, Facility Management,
Procurement System
b. Dependent Variable: Inventory Management
Source: - survey data 2023

48
As it can be seen from the table 4.12 above, the predictors Staff Proficiency, Procurement
Practice, documentation /Record/, and Facility management have been shown to have positive
significant relation accounting for 82.8% indicating that a unit some change in these predictors
will result in a positive direction change of the inventory management in this positive value as
indicated by R. In addition to the degree of association stated, the R square value represents that
a unit change in the sum of these variables affects the inventory management practice to be
deviated by 68.6% up or down improvement showing that the better these predators are managed
the better the inventory output are to happen.

Therefore, the predictors, Staff Proficiency, Procurement Practice, documentation /Record/, and
Facility management are the most desirable factors having 68.6% effect on the overall inventory
management practice and the remaining unaddressed variables are recommended for further
researchers.

3.2.3 Analysis of Variance

The regression models fitness to the measure of predicting the effect of the predictors on the
inventory management practice has been shown as follows.

Table 4.10 ANOVA

ANOVAa
Model Sum of df Mean Square F Sig.
Squares
1 Regression 267.569 4 66.892 200.690 .000b
Residual 122.658 368 .333
Total 390.228 372
a. Dependent Variable: Inventory Management
b. Predictors: (Constant), Documentation Management, staff proficiency, Facility Management,

49
 Procurement System

In the above ANOVA tables, the column labeled “sum of squares” describes the variability in the
turnover intention value of the regression. The Regression Sum of Squares is the difference
between Total Sum of Squares and Residual Sum of Squares (total Sum of Squares - Residual
Sum of Squares = 390.228- 122.658= 267.569). Here, each sum of squares (i.e., Regression,
Residual, and Total under the source column) has a corresponding degrees of freedom (DF)
associated with it.
Total degrees of freedom is n-1 (372 - 1 = 371), one less than the number of observations. The
Regression degree of freedom for the above table is 4, which is the number of independent
variables (taff Proficiency, Procurement Practice, documentation /Record/, and Facility
management) in the model of this thesis. The residual sum of squares (residual for leftover) is
sometimes known in the literatures as Error Sum of Squares is that part still cannot be accounted
for after the regression model is fitted. It has 368 degrees of freedom (372 - 4) for this research
paper. The mean squares are the sums of squares divided by the corresponding degrees of
freedom. The regression model has a mean square of 66.892 (267.569 / 4) and the residuals mean
square is .333 (122.658/368).
In general, the above ANOVA table 4.13 shows the relationship between the dependent and
independent variables of the study with F-statistic or F-ratio of 200.690 for the overall analysis,
and is worth mentioning that the F-value is highly significant (as p =.000 < .05).
Therefore from the above analyses one can conclude that the relationship between the dependent
variable (inventory management) and the independent variables (staff Proficiency, Procurement
Practice, documentation /Record/, and Facility management) is very strong.
3.2.4 Hypothesis test
Hypothesis testing is the method of testing whether claims or hypotheses regarding a population
are likely to be true. The goal of hypothesis testing is to determine the likelihood that a
population parameter, such as the mean, is likely to be true. Here there are two hypotheses: null
(H0), and alternative (Ha). The researcher tests whether the value stated in the null hypothesis or
in the alternate hypothesis is likely to be true and accepted. The only reason of testing the null
hypothesis is because the researcher thinks that it is wrong and to know what it is actually the
relationship of variables in the case organizations. The significance (sig.) value expresses a value

50
to accept or reject the null hypotheses of alternate hypothesis. It is also called the p-value.
Therefore, the smaller the p-value, the better will be. The general rule is: reject H0 and accept Ha
if p < .05 otherwise accept H0 and reject Ha if p ≥ .05 (Pallant, 2007 cited in Fantahun 2017).
Hypothesis 1
 H0: Staff Proficiency is not significant determinant factor of inventory management
practice in Dilla University.
 H1: Staff Proficiency is significant determinant factor of inventory management
practice in Dilla University.
The regression analysis of the above modal, Staff Proficiency had positive effect or correlation
on inventory management practice HH (β= .730, P= 0.5). Hence, alternative hypothesis was
supported. It implies that Staff Proficiency had a positive influence on inventory management
practice.

Hypothesis 2
 H0: Procurement Practice is not significant determinant factor of inventory
management practice in Dilla University.
 H2: Procurement Practice is significant determinant factor of inventory management
practice in Dilla University.
The regression analysis of the above modal, Procurement Practice had positive effect or
correlation on inventory management practice HH (β= .679, P= 0.5). Therefore, the study accept
alternative hypothesis. It implies that Procurement Practice had a positive influence on inventory
management practice.

Hypothesis 3
 H0: Facility management not significant determinant factor of inventory management
practice Dilla University.
 H3: Facility management significant determinant factor of inventory management
practice Dilla University.
The regression analysis of the above modal, Facility management had positive effect or
correlation on inventory management practice HH (β= .710, P= 0.5). Therefore, the study accept
alternative hypothesis. It implies that Facility management had a positive influence on inventory
management practice.

51
Hypothesis 4
 H0: Documentation /Record/ is not significant determinant of inventory management
practice in Dilla University.
 H4: Documentation /Record/ is not significant determinant of inventory management
practice in Dilla University.
The regression analysis of the above modal, Documentation management had positive effect or
correlation on inventory management practice HH (β= .733, P= 0.5). Therefore, the study reject
null hypothesis. It implies that Documentation management had a positive influence on
inventory management practice.

CHAPTER FIVE

4 SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION

4.1 Summary of Findings

The title of the study was to assess factor affecting the inventory management practices in case
of Dilla University. The total number of sample respondents for this survey is 373 employee
Dilla University. The collected data was analyzed using both descriptive and inferential statistics.
Based on the analysis, discussion and related issues of the research, the following summaries are
made accordingly:

 Correlation and regression analysis

 a strong positive relationship was found between staff proficiency and
Inventory Management (r =.730, p < .01), Procurement System and
Inventory Management (r = .679, p < .01), Facility Management and
Inventory Management (r = .710, p < 0.01), and Documentation
Management and Inventory Management (r = .733, p < .01),

52
  According to the regression modal summary adjusted R- square = .682
means that the independent variable (staff proficiency, Procurement
System, Facility Management, and Documentation) together explain the
total variance of the dependent variable Inventory Management by .682
 ANOVA (Analysis of Variance)
 The first way is the ANOVA test that produced a p- value of 0.000 which is
below the alpha level, i.e. 0.05. That mean the overall independent variable
have statistically significant relationship with that of the independent
variable. i.e. Inventory Management Inventory Management
 Hypothesis testing
On the top of this, the formulated hypothesis is tasted using regression
analysis. Hence the result of the hypothesis test summarizes as follows
 The regression analysis of the above modal, Staff Proficiency had positive
effect or correlation on inventory management practice HH (β= .730, P= 0.5).
Hence, alternative hypothesis was supported. It implies that Staff Proficiency
had a positive influence on inventory management practice.
 The regression analysis of the above modal, Procurement Practice had
positive effect or correlation on inventory management practice HH (β= .679,
P= 0.5). Therefore, the study accept alternative hypothesis. It implies that
Procurement Practice had a positive influence on inventory management
practice.
 The regression analysis of the above modal, Facility management had
positive effect or correlation on inventory management practice HH (β= .710,
P= 0.5). Therefore, the study accept alternative hypothesis. It implies that
Facility management had a positive influence on inventory management
practice.
 The regression analysis of the above modal, Documentation management had
positive effect or correlation on inventory management practice HH (β= .733,
P= 0.5). Therefore, the study reject null hypothesis. It implies that
Documentation management had a positive influence on inventory
management practice.

53
 4.2 Conclusion

Being based on the data collected and analyzed through important techniques here the researcher
has tried to conclude on the major finding of the study as follows.

 The first intention of the study was measuring the relationship between staff
proficiency and inventory management, in this aspect the correlation result is found to
be strong positive showing that a unit improvement in staff proficiency will improve
inventory management practice strongly and the regression result for the effect of
staff proficiency on inventory management practice has been found to indicate the
most significant and higher effect compared with the remaining factors predictors
showing a unit change in staff proficiency will result in high variation of inventory
management practice
 The second objective in this study was measuring the relationship between
procurement practice and inventory management practices. The correlation result
showed that there is strong positive relationship between these variables and the
effect of procurement practice on inventory management practice result shows
procurement practice have the next most significant effect. This shows that a unit
improvement in procurement practice will improve inventory management
moderately.
 The third research objective in this study was to measure relationship between facility
management and inventory management practice then the result of correlation in this
study showed a strong positive relationship between facility management and
inventory management this indicates when there is adequate facility, inventory
management practice will be better. The effect of facility on inventory management
practice is also significant showing the facility changes by one unit the inventory
management practice also changes in the same direction.
 The fourth research objective in this study was to measure relationship between
Documentation management and inventory management practice then the result of
correlation in this study showed a strong positive relationship between
Documentation management and inventory management this indicates when there is
adequate Documentation management, inventory management practice will be better.

54
 The effect of Documentation management on inventory management practice is also
significant showing the Documentation management changes by one unit the
inventory management practice also changes in the same direction.
 The last research objective in this study was the factor determines the practices of
inventory management as the result of both correlation and regression analysis results
all factors staff proficiency, procurement practice, facility and documentation
determine the practice of inventory management, however the staff proficiency highly
determines as staff proficiency has better relationship with inventory management
compared to the three other factors.

4.3 Recommendations

On the basis of the major findings of the study, the following recommendations are forwarded
with the view to assess factor affecting the inventory management practices to the country in
general and to the study area in particular.
 According to the findings, this study recommended that Staff proficiency is one of the
requirements of the inventory management. So, Dilla University particularly the
inventory management department of the University is suggested to work on related to
Staff proficiency problems. Since having professionally qualified employees who have
skill and experience engaged in inventory management is must, the university is
recommended to hire qualified employees engaged in inventory management in addition
to this the university should prepare training and development program concerning to
inventory management it will increase the employee's knowledge and skill and it will
support them to be updated with computerized system.
 The other suggestion is stores of Dilla University need enough employees to handle the
activities, the University is recommended to allocate sufficient employees for stores of
the university.
 Again by hiring qualified employees plus the University is advisable to improve
commitment of employee’s by giving training, creating learning opportunities, providing
additional benefits, clearly defining responsibilities, if they are committed they can be
more productive by taking some techniques like giving training, controlling their time

55
 and by fulfilling materials needed. To solve the storage problem the University should
build warehouse.
 Documentation is also shown with some difficulties thus the inventory management unit
of the university is recommended to work on improving Documentation practice. The
university should have well-organized information system on inventory status, well-
organized means computerized and accurate to achieve this it is better to use
computerized system for recording and keeping inventory management concerning
information plus to document inventory information precisely and to have well organized
documents for inventory management purpose. In addition to this the university inventory
record should be cross-checked for accuracy.
 The inventory management unit should do on this it is better to have the required material
always available in the store Along with this it is better to store materials separately
which need special attention like chemical. This can be done by building warehouse to
find adequate storage place for each materials and the university inventory management
department is recommended to have a proper layout of materials in the store of Dilla
University in addition to this the university is recommended to have an effective material
handling practice in the University.
 The procurement practice unit is advisable to have appropriate need identification at Dilla
University if there is no appropriate need identification the right materials will not be
procured. The procurement department is advisable to have an effective supplier selection
at Dilla University. It is advisable for the University to have an adequate budget available
for inventory purposes if there is an inadequate budget it is difficult to perform in the
right way. In addition to this the inventory management is advisable to have short lead
time since the product is ordered till it reaches to office for usage because if its delayed it
will interrupt the teaching learning process in the university and the procurement
department is advisable to procure Quality products.
 Inventory management practice has to do with the proper management of inventory
activities as the study result showed that Dilla University has low inventory management
performance. The inventory management unit is advisable to improve the inventory
management performance in the university by working on the following procurement
practice. The university inventory management department is advisable to minimize

56
 wastage of resource since resources are scares by improving the inventory management
it’s better to minimize wastage plus the inventory management department of Dilla
University is advisable to reduce delivery lead time in addition to this inventory
management department of the university is recommended to manage inventory in a way
that can prevent material shortage and stock out costs and inventory management
department of the university is advisable to promotes uninterrupted operation as well as
inventory management department of Dilla University is advisable to reduce cost of
operation and inventory management department of Dilla University is advisable to boost
employee morale by efficient management of inventory in Dilla University.

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APPENDICES ONE

INFO LINK UNIVERSITY COLLAGE HAWASSA CAMPUS

COLLEGE OF BUSINESS MANAGEMENT

MBA IN BUSINESS MANAGEMENT

Dear respondents,

This questionnaire is designed to get the relevant information for the current study. The objective
of the study is to assess the inventory management practices in case of Dilla University. This

60
study is only for academic purpose. Hence, your responses will be kept confidential. The
soundness and the legitimacy of the findings highly depend on your honest responses. Therefore,
I generous request you to fill the questionnaire carefully and back to me.

Thank you in advance

I. Demographics variable
1) Age

A 20 – 30 B. 31 to 40 years

C. 41 to 50 D 51 and above

2) Your professional qualification

A. Diploma B. Degree

C. Masters D. PHD

3) How long have you been working in the company (In years)?

A. 2-5 B. 6– 10 C. 11 and above

II. Issues Related to Inventory Management Practices

How much do you agree or disagree with the following statements about the determinants of
inventory management?

NB: - Please read each statement carefully and show the extent of your agreement on the
statements by Puting the (√) mark in the box for your answer in the following rating scale (Likert
Scale).

Where: 1 = Strongly Disagree 2 = Disagree 3 = Neutral 4 = Agree 5 = Strongly Agree

S/ Statement 1 2 3 4 5
N
Staff Proficiency

61
1 Sufficient manpower is allocated for stores of Dilla University
2 The storekeepers of the university can easily identify the
placement or location of each and every material stored
3 Staff Members Of Dilla University inventory management Have
Good Commitment
4 There Are Well-Qualified staffs Engaged In The Inventory
Management Activities In Dilla University
5 There Are Adequate Training & Development Program For
inventory management Staff Employees in Dilla University
Procurement System
1 There is appropriate need identification in Dilla University
2 There Is Effective Supplier Selection In Dilla University
3 There Is Adequate Budget Available For Inventory Purpose In
Dilla University
4 There Is Short Lead Time Until The Product Is Order Till It
Reaches To Office For Usage
5 Quality Products Are Procured In Dilla University
Facility Management
1 The Required Materials Are Always Available In The Store Of
Dilla University
2 The Material Which Require Special Attention (Like Chemicals)
Are Stored Separately
3 There Is Proper Layout Of Materials In The Store Of Dilla
University
4 There Is Effective Materials Handling Practice In Dilla
University
5 Much Emphasis Is Given For Material Security In Dilla
University
6 There Is Adequate Store Rooms In Dilla University
Documentation Management

62
1 There are Well-Organized Information On The Inventories
Status
2 Inventory Information Is Accurately Documented In Dilla
University
3 Records Of In Dilla University Are Cross Checked For
Accuracy
4 There Are Well-Organized Documents For Inventory
Management Purpose
5 Recorders Of Dilla University Inventory System Have Adequate
Knowledge About Inventory Recording
6 Records Of Dilla University Inventory System Are Periodically
Reviewed
Inventory Management
1 The inventory management practice of Dilla University
minimizes wastage of operational resource
2 The inventory management practice of Dilla University leads
to reduced delivery lead time
3 Inventory is managed in a way that can prevent material shortage
4 Inventory management system of the university promotes
uninterrupted operation
Thank you

63