Inventory management efficiency analysis: A case study of an SME company

Abstract

The research aims to examine factors that affect inventory mismanagement in a Small Medium Enterprises (SME), which is a market leader in the Heavy Equipment Spare part Industry. Despite its status as market leader, the company deals with various inventory problems, for examples slow-moving stocks, delivery delays to customers, and so forth. Those problems, at the end, may reduce company’s profit. In order to determine the main factors, this study applies quantitative and qualitative methods. Quantitative methods, specifically Pareto diagram and Inventory Turnover Ratio (ITR), are mainly used to evaluate sales and inventory management. ITR is affected by spare part quantity, warehouse area used, and the material amount. The top five ITR ratings are examined further through observation, interview, and questionnaire techniques. Meanwhile, the qualitative method is applied to evaluate the company’s inventory information systems, procedures and coordinations among departments, and human resources. Our findings suggest that the unintegrated company’s information system and lack of qualified human resources are the main factors affect inefficient inventory management. The research benefits to industry by suggesting the importance of information systems and human resources to inventory management. As for academics, this research enriches inventory management literature.