The Impact of Inventory Management Practices on Financial Performance of Sugar Manufacturing Firms in Kenya
Timothy Lwiki, Patrick Boniface Ojera, Nebat Galo Mugenda, Virginia Kirigo Wachira

Manufacturing firms apply various techniques in the management of their inventories. The practices adopted have a significant impact on returns, profitability and volume of sales. Manufacturing firms that efficiently apply these practices have an excellent financial performance. This paper examines the impact of inventory management practices on the financial performance of sugar manufacturing firms in Kenya, by analyzing the extent to which lean inventory system, strategic supplier partnership and technology are being applied in these firms. The research survey was conducted in all the eight operating sugar manufacturing firms from the period 2002- 2007. The primary data was collected using structured and semi- structured questionnaires administered to key informants in the organizations. Secondary data was obtained from annual financial performance statements available in the year Book sugar statistics. Descriptive statistics was used to test the impact of inventory management practices and Correlation analysis was used to determine the nature and magnitude of the relationship among inventory management variables. The results indicate that there exists a positive correlation between inventory management and Return on Sales (r=0.740) and also with Return on Equity (r=0.653) which were found to be statistically significant at 5% level.

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