Inventory Management Practices and Financial Performance of Brewing Firms in Nigeria: A Study of Champion Breweries Plc, Uyo

Abstract

Despite the widely acknowledged benefits of strategic inventory management in enhancing organizational efficiency and profitability many firms, including those in the Nigerian brewing industry are still plagued with sub-optimal inventory levels and their associated financial implications. The main objective of this study therefore, was to examine the effect of inventory management practices on financial performance of Champion Breweries, Uyo. The independent variable being strategic inventory management practices was proxied by Just-in-Time (JIT) strategy, Economic Order Quantity (EOQ) strategy, Lean inventory strategy, Material requirement planning (MRP) strategy and Vendor Managed Inventory (VMI) strategy, while the dependent variable, financial performance, was proxied by gross profit margin. The research design adopted for this study was survey design and primary data used were derived using the researcher self-constructed 5-point Likert questionnaire. The population of the study was 195 staff of Champion Breweries, Uyo. Purposive sampling technique was adopted to select a sample of 85 staff members. Data were analysed using Ordinary Least Square (OLS) regression analysis and the statistical package employed was SPSS version 21. The findings of the study revealed that Just-in-time strategy {0.502(0.000)} has a significant positive effect on gross profit margin; Economic order quantity {0.444(0.000)} has a significant positive effect on gross profit margin; lean inventory strategy {–0.094(0.318)} has an insignificant negative effect on gross profit margin; material requirement planning {0.315(0.021)} has a significant positive effect on gross profit margin and vendor managed inventory {0.206(0.083)} has an insignificant positive effect on gross profit margin of Champion Breweries Plc, Uyo. Among others, it was concluded that effective inventory management strategies play a critical role in improving the gross profit margin of Champion Breweries. Therefore, it was recommended among others, that the management of Champion Breweries, Plc, Uyo, the company should strengthen and maintain its Just-In-Time (JIT) practices. This can be achieved by enhancing supplier relationships to ensure timely delivery of raw materials while and reducing lead times, and this will minimize inventory holding costs and increase profitability.