Inventory Management Techniques and Organizational Productivity in Guinness Cameroon S.A

Tuesday, December 6, 2022

Inventory Management Techniques and Organizational Productivity in Guinness Cameroon S.A

Department: Transport and Logistics

No of Pages: 86

Project Code: T&L8

References: Yes

Cost: 5,000XAF Cameroonian

 : $15 for International students

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The main aim of this study was to ascertain the effect of inventory management techniques on the organisational productivity of Guinness Cameroon S.A. specifically to evaluate the influence of Economic Order Quantity, Just-In-Time technique and ABC Technique on the organisational productivity of Guinness Cameroon.


The study also made use of extraneous variables like experience and its square to see if it has a quadratic effect on Guinness Cameroon productivity. It has been noticed that Guinness Cameroon has failed to meet the increasing demand of their products in the market.


The exploratory research design was adopted for the study while the simple random sampling technique was used to select participants of the study. The study made use of primary data which was collected through questionnaires from 99 respondents of the workers of Guinness SA in the production centre and warehouse in Douala and the data collected was analysed using the regression analysis.


The findings revealed that Just-In-Time and ABC Techniques have a significant positive effect on the organisational productivity in Guinness Cameroon S.A. The extraneous variables experience and its square had a U-shape effect indicating an increasing effect on Guinness Cameroon productivity.


It was therefore recommended that Guinness Cameroon should improve on their techniques by reducing lead time on JIT, properly classifying items in their ABC Technique while reducing the effort placed on the EOQ so as to improve its performance.




1.1       Background to the study

Although the origins of inventory management techniques are unclear, it is safe to say that some of the first pioneers of this field were merchants and shop keepers. Inventory management before the Industrial Revolution was very primitive (Balda, 2018).


Shop keepers and merchants had to rely on their hand- written notes and gut feelings to place orders. It was extremely difficult to account for stolen goods because it would take shop keepers hours or even days to hand count all physical inventory to see if anything was missing.


To be fair, the scale of operations back then was extremely small when compared to those of today, so there was no push to improve efficiency (Anafu, 2018). The forerunner to the modern barcode was created in the late 1940s.


In the 1960s, a group of retailers invented the modern barcode to track inventory. (David, 2009) Overtime, inventory tracking by hand was replaced by scanning products and inputting information into computers by hand. In the early 2000s, inventory management software’s were developed such that barcode readers could instantly update their databases.


Recently, International Standards for Inventory Management ISO 9001brings a unified method for stock control in all categories of companies (small, medium or large) and sectors of which the brewery industry is no exception.


As much as the ISO 9001 is a quality management standard, applying the principles could bring many benefits to a business.

Inventory is a vital part of current assets mainly in manufacturing organisations that needs high level of attention.


Inventory consist of raw materials, work-in- progress and finished products. Huge findings are committed to inventories as  to ensure smooth flow of production so as to meet up with customer demands. Inventory management also entails holding or carrying and opportunity costs


enabling it to play a crucial role in balancing the benefits and disadvantages associated with holding inventory. (Okoro, 2016).



Inventory management as explained by Lavely, (1996) is an active control programme that permits firms to govern the running of the various departments in the organisation that is the production, research and development,  purchasing, marketing, human resource, accounting and finance.


Inventory control and management are pivotal to a firm as such, mishandling of inventory endangers a firm’s capacity to do practical and useful activities (Sprague et al, 1996). The financial supremacy and inventory management malfunction may have a direct influence on the firm’s equity capital, output and customer services.


The concept of inventory management suggests that the formation of inventory positioning and well calculated objectives will improve on the organisational performance (Vergin, 1998).


Many brewery companies such as Cantlillon, Mikkeller and Brewdog in Europe have saved millions of dollars in costs due to the improved inventory management techniques and decreased inventories at the same time improving efficiency and customer satisfaction through various inventory management techniques (Chapman et al, 2000).

Several companies in Asia, America, Europe and Africa have adopted diverse inventory management techniques that have tremendously affected organisational productivity.


In the USA, Inventory management is also a fundamental part of the brewery supply chain. A lot of research in Supply Chain Management over the last two decades can be characterised as so- called “multi-echelon inventory optimisation” (Quayle, 2003) which is practiced by The Coca Cola Company.


This is an inventory technique in which brewery firms determines where, how much and what particular inventory item to hold at each inventory stocking location. This enables Coca Cola to meet the desired service levels while complying with financial inventory limitations.


Proper inventory management has in recent years become an important way to enhance the company’s competitive strength and therefore an important issue for most companies.


Manufacturing companies like Coca Cola ensures that, all the activities  involved in delivering a product from raw material through to the customer including sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, delivery to the consumer are well organised (Li et al, 2006).

Inventory management techniques is a huge determinant for the prosperity or downfall of a business for huge reduction of investment in working capital and exceptional operational performance will affect the organised management and orderly control of inventories either negatively or positively (Mittal, et al., 2014).


Thus, according to Gupta (2012), the overall calculated business objective should be inventory management since it has a remarkable capacity on the performance of the organisation.


This is further supported by Chalotra (2013), who states that well established inventory management levels outcomes by intensifying competitive ability and market share of firms, companies can experience high-ranking competition and high-level of financial performance from correctly controlled inventories.


In present day, supply chain, holding and warehousing inventory plays an important role in a firm. Logistic cost survey in Europe identified the inventory cost to be 13% of the entire logistic cost while 24% was accounted for warehousing (Baker, 2007).


Inventory management techniques provide great potentials for firms to reduce costs and improve customer services performance (Jeffrey et al, 2008). Therefore, by reducing and minimising costs from inventory means saving money which can be used to increase profit in the firm thereby improving performance.


In Asia, Khalid and Lim (2018), observed that large brewery companies in China, PepsiCo in particular, uses three inventory management strategies; Vendor Managed Inventory (VMI), Material Requirement Planning (MRP), and Just-In-Time (JIT).


Inventory strategy is chosen based on real time situation as each inventory is suitable for different brewery products. Smaller company tends to adopt lesser inventory management strategy whereas large organisation will have multiple inventory management strategy to deal with their different type and over loaded raw materials.


By adopting theses inventory management practices, there is improvement in the organisational performance as they are coping up with the current market demand (Akindipe, 2014).



Husonand (1995), as sited by Gitau (2016) opined that those firms that embraced Just-In-Time system as an inventory management techniques enjoyed high and better net income as an outcome of improved inventory turnover.


Afterwards Lieberman and Demeester (1999), noticed a favourable bond between growth in production and reduction in inventory. The Just-In-Time concept was also reinforced by researchers like Claycomb et al., (1999), 

Fullerton and McWatters (2001), in which Claycomb identified three items that quantify a firm’s performance such as profit, investment returns and sales return and on the other hand Fullerton brought forth three indicators of firm’s financial performance such as assets returns, sales returns and a margin in the cash flow.


Reviewing the situation in Africa, Ime (2013), opined that most brewery companies in sub-Saharan Africa,  applies the Just-In-Time inventory management techniques based on inventory postponement.


Here, a firm deliberately delays the purchase and the physical possession of inventory items until demand or usage requirements are known with certainty. This is an effective supply chain strategy adopted by most manufacturing organisations by reducing the inventory, and in turn reducing the cost of obsolete stock.


The implication of inventory management approaches is that through inventory postponement, local retailers are frequently waiting for stock to fulfil their requirements, and in turn puts added pressure on these retailers who faces these inventory management issues directly with the customers (Akbar, 2013).


The Cameroon brewery industry is a very lucrative industry (Orga, et al., 2017). In 2019, a total of 6,539,570 hectolitres (653.9 million litres) of beer was sold in Cameroon. This figure reflects a slight decrease by 0.1% compared  to 2018.

The Brasseries du Cameroun (SABC) which leads the Cameroonian beer market saw a 2.3% drop in sales compared to that of 2018. As a result, the company’s sales targets fell by 1.5% (Guinness full report 2020).


The overall low consumption is the result of the current economic crisis, the unrest in Grand- Nord and Anglophone regions. The other reason is the flow of products from Nigeria and Equatorial Guinea partly linked to the rise in locally-produced beer price in 2015 upon higher tax, among others. Guinness Cameroon, second on the market (16%) sold 1.4% more beer during the period under review.


 Finally, UCB the third-leading company (11% of market share) improved sales by 13.7% with 712,100 hl (71.2 million litres) sold (Nielsen, 2019).


Inventory  management  in  Guinness  Cameroon  S.A,  represents  an  important decision variable at all stages of product manufacturing, distribution and sales. In addition to being a major portion of total current assets of the company, inventory consumes as much as 15% of total capital of the firm (Moore, et al., 2003).


It may represent 18% of a company’s assets and as much as 70% of working capital (Sawaya & Graque, 2006). Given that inventory constitutes a major segment of total investment of the firm, it is essential that Guinness Cameroon S.A Douala, carries out good inventory management techniques to ensure a high level of productivity.


1.2       Statement of the Problem

Looking at existing literature, there is an inclusive view that proper inventory management techniques will lead to an increase in productivity. At first glance it seems obvious that implementing proper inventory management techniques will instantly improve the productivity of any company (David, 1996).


 However, a careful assessment of firms that have implemented proper inventory management techniques show mixed results since some have been successful while others have failed (Agu, 2016).


Although Guinness Cameroon is certified under the ISO 9001: 2008, from time to time, customers often complain about a slight drop in the quality of Guinness Cameroon’s products (Cameroon  Business Report, 2018).


Could it be that this slight change in quality is caused by wrong classification of stock items? This is because classifying stock items wrongly, can cause a mix-up in the production process leading to low quality products, hence a fall in productivity.

Guinness Cameroon S.A requires prompt delivery of raw materials in order to produce goods on time and achieve their desired level of productivity. However, the suppliers, at times fail to deliver these materials on time and in adequate quantity, leading to a reduction in the level of production and their overall productivity.


Observably that Guinness Cameroon practice the Just-In-Time technique where its products are taken directly to the market immediately after production, In such situation, any sudden increase in the level of demand for these products may cause a shortage in their supply.


Could it be that the Regional depots do not maintain sufficient stocks to meet up with sudden increase in demand? Guinness Cameroon S.A has also been facing problem’s on determining the right level of inventory to keep at the production centre (raw materials and work-in-progress) and the various depots (finished products) that will enable them achieve their desired level of productivity.


The above circumstances may account for the reason Guinness Cameroon S.A have failed to lead the brewery market, since there is frequent shortage of their product in the market to meet up with the increasing demand and hence, low level of customer’s satisfaction.


As such, Guinness Cameroon S.A witnessed a 12% decrease in sale revenue between 2015 and 2019, (Guinness full year report 2020). It is therefore against these backdrops that the researcher decided to investigate on the topic ‘‘Inventory management techniques and organisational productivity in Guinness Cameroon S.A’’


1.3       Research Questions

The main research question of this study is: “To what extend does inventory management techniques affects the productivity of Guinness Cameroon S.A?”

The specific questions are;

  • To what extend does the ABC technique influence the productivity of Guinness Cameroon S.A
  • What is the influence of Economic Order Quantity on organisational productivity of Guinness Cameroon S.A?
  • To what extend does Just-In-Time Inventory system affect the productivity of Guinness Cameroon S.A?


1.4       Objectives of the Study

The objectives of this study will be classified into main and specific objectives. The main objective of this study is to investigate the effect of inventory management techniques on the productivity of Guinness Cameroon S.A

The specific objectives include to;

  • Determine the effect of ABC technique on the productivity of Guinness Cameroon S.A.
  • Evaluate the influence of Economic Order Quantity on the productivity of Guinness Cameroon S.A.
  • Assess the effect of Just-In-Time technique on the productivity of Guinness Cameroon S.A.

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