The Effect of Inventory Management Practices on Operational Performance: A case study of mineral water factories in Dire Dawa Administration

Abstract

Inventory management is defined as keeping or maintaining the firm’s stock at a level that firms will incur the least cost consistent with other management for the set objectives and targets. The purpose of this study was to examine the effect of inventory management practices on operational performance in case of mineral water factories in Dire Dawa City Administration. The researchers were used explanatory research design, both primary, and secondary sources of data were used to achieve the objective of the study. In this study, close-ended questionnaire was used to collect the data from selected respondents. The total population of the mineral water factories in Dire Dawa City Administration was 2225 and the researchers took 290 employees as a sample. Both descriptive statistics (mean and standard deviation), and inferential statistics (Pearson correlation and ordinal logistic regression) were used. The findings of the study implies that activity-based cost, just-in-time, and inventory control practices have a positive and significant effect on operational performance, whereas economic order quantity has a positive and insignificant effect on operational performance. Therefore, the researchers would like to recommend that the companies should give priority to inventory control because inventory control practice may affect the companies’ performance more than the rest of the inventory management practices in the company.