Effects of Inventory Management on Operational Performance of Manufacturing Industries: In case of Dire Dawa National Cement Factory

The purpose of this research was to examine the effect of inventory management on operational performance of Dire Dawa National Cement PLC. The study applied descriptive survey design and mixed research approach. The target population included employees of different departments who were related with inventory management issues. A sample of 175 respondents was taken using random sampling design with a stratified sampling technique and simple random sampling methods was used to select sample from those strata. Primary data was gathered using semi structured questionnaires. A statistical package for the social sciences version 20 was applied for the purpose of processing and analyzing the results. The hypotheses were tested using Pearson product moment correlation coefficient and multi linear regression statistical tools. The findings indicate that inventory management significantly affects operational performance of selected manufacturing firm (r = 0.645; F= 23.361; p< 0.05).There was a positive and statistically significant relationship between JIT (r= .261, p<0.05); EOQ (r= .222, p<0.05); MRP (r= .268, p<0.05); VMI (r= .454, p< 0.05); ABC (r= .139, p< 0.05) practices and operational performance of DDNCC. The study concluded that inventory management is essential in the operation of the studied firm. The current situation of DDNCC’s inventory management practice was found to be moderate. The study recommended that the systematic management of inventory in any organization should be seen as a pre-requisite to the success of the organization hence, the management should design and develop inventory systems that could enable adequate sales turnover and management should ensure a constant review of various inventory system in the organization to enable them maintain profitability and consistently remain afloat in the economy.