Innovations in Inventory Management to Improve the Profitability of Local SMEs

<ns3:p> Background Efficient inventory management is critical for the financial and operational sustainability of micro and small enterprises (MSEs) in Peru, particularly in the wake of the COVID-19 crisis. In Bagua, many of these businesses lack digital systems for real-time tracking, impairing decision-making and reducing profitability. The absence of clear safety-stock policies and strategic replenishment guidelines often leads to emergency purchases at high prices and imbalances between excess and shortage of goods. Method This study employed a quantitative, descriptive-explanatory design. A convenience sample of 83 MSEs in Bagua yielded 200 valid responses from key participants (managers, warehouse staff, accountants, and assistants). A 21-item Likert questionnaire, validated by experts, captured perceptions of inventory control, valuation methods, record-keeping, and measurement. Data were analysed in SPSS v27 using descriptive statistics and multiple linear regression to assess the impact of these inventory practices on profitability indicators (ROA, gross margin, and ROE). Results Descriptive analysis revealed moderate performance across all four inventory dimensions, with mean scores ranging from 2.37 to 2.62. The regression model explained 40.2 % of the variance in profitability (R <ns3:sup>2</ns3:sup> = 0.402; p &lt; 0.001). Inventory measurement emerged as the strongest predictor (β = 0.383; p = 0.001), followed by inventory control (β = 0.257; p = 0.013). Conclusion Neither valuation methods nor record-keeping showed statistically significant effects. Accurate inventory measurement and control are key drivers of profitability for Bagua’s MSEs. Adoption of real-time tracking technologies and revision of valuation and recording practices are recommended to enhance financial performance. Given the study’s cross-sectional design and geographic focus, future research should employ longitudinal approaches and comparative analyses across different regions and sectors. </ns3:p>