STOCK MANAGEMENT AND ORGANIZATIONAL PERFORMANCE.

A CASE
STUDY OF RWENZORI BOTTLING COMPANY

BY
NABUKWASI CHRISTINE

A RESEARCH PROPOSAL SUBMITTED TO THE COLLEGE OF ECONOMICS AND

MANAGEMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR
THE AWARD OF BACHELOR’S DEGREE IN SUPPLY AND
PROCUREMENT MANAGEMENT OF KAMPALA
INTERNATIONAL
UNIVERSITY

FEBRUARY, 2023
 CHAPTER ONE
INTRODUCTION

1.0 Introduction
This chapter covers the background of the study, statement of the problem, objectives of the study,
the scope of the study, significance of the study and the operational definition of terms.

1.1 Background to the study

Globally, according to Frazelle, et al, (2019) many organizations in that do not have proper
inventory management systems in their operations face a lot of challenges most of which include
dependency on the efficiency of the supplier, missed sales in case of stock outs, high costs of
obtaining materials and poor customer service. However, organizations have recently found it as
having a great impact on the success of the organizations. Good inventory management by a firm
will lower costs, improve efficiency and ensure production while at the same time meet
fluctuations in customer demand. It will give the firm a competitive advantage as more efficient
production can feed through to lower prices and also customers are always satisfied as products
will be available on demand.
In Africa, Mogere, Oloko and Okibo (2013) conducted a case study on Gianchore tea factory to
assess how inventory control systems affect operational performance in the tea industry. Using a
structured questionnaire to collect data and regression analysis, the study found out that use of
material requirement planning, distribution planning, and vendor managed inventory had a
positive influence on operations efficiency and by extension on organizational performance.
Lwiki, Ojera, Mugenda and Wachira (2013) examined how inventory management practices
used in the sugar manufacturing firms impact on those firms financial performance. The study
used both primary data and secondary data. Correlation analysis results revealed that inventory
management impacted positively with both return on sales and return on equity. Further more,
Mwangi and Nyambura (2015) examined the role inventory management plays in the
performance of companies engaged in food processing. Using the descriptive research design
and multiple regression analysis, the study identified production maintenance, cost control,
record reduced loss, and continuous supply as key elements of inventory management that play
an important role in the performance of the food processing companies.

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In South Africa, stock and/or inventory management as a supply chain driver has for instance has
been found to exert direct influence on performance (Ambe, 2012). Moreover, inventory
management is listed as a supply chain strategy that may impact positively on the performance of
the wine industry in South Africa (Jooste et al., 2015). A number of inventory management
practices that include Economic Order Quantity (EOQ), Just In Time (JIT), Marginal analysis,
vendor managed inventory, and Order batching are reported to significantly predict performance
in the agricultural sector (Mwangi, 2013) and also in retail institutions (Omondi & Namusonge,
2015). In addition, when referred to as material flow, inventory control has also had a direct
effect on the performance of road construction projects (Ang’ana, 2012). On the basis of such
evidence, the researcher conceptualized that inventory management could equally have a direct
effect on performance of textile firms.

In Uganda the scenario of inventory management involves determining the purchasing practice and
techniques and strategy. A supply strategy is seen by Porter (1999) as an integral part of the
general competitive strategy of a firm. Determining the relationship to have with suppliers is
therefore crucial in inventory management (Bain, 1959, Lenders, 1965). Nair (1999) explains that
inventory management involves stock control, purchasing, stock losses, stock cover, stock turnover
and general stores operations and materials handling.

According Reuters S. (2010), Rwenzori Beverages (U) Ltd is one of the biggest mineral water
Manufacturing Company in Uganda as well as East Africa. It is the first company in Uganda to
manufacture Mineral water and have 80% market share in mineral water industry in Uganda. The
factory is located on plot 588,592 block 111 Kiwanga Mukono District. It is 16kms from Kampala
city centre on the road to Jinja. Rwenzori focuses its future on innovation and excellence in
business. It has a well – equipped PET bottling plant, which can produce over 400,000 bottles per
day. The water bottling lines can produce over 300,000 bottles per day. This reflects Rwenzori’s
desire to keep a pace with technological advances. The company keeps different categories of
stock including raw materials, finished products and maintenance repair and operations supplies
(MROs), some of which include 500 ml, 1000 ml and 1500 ml water bottles, PET bottles for soft
drinks, Plastic containers for cosmetics, chemicals and plastic bottles for medicines. Rwenzori
looks forward to strengthening its market leadership through constant enhancement of excellence

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of its products through innovative manufacturing and marketing, reinvestments and an efficient
countrywide distribution network and focuses on extending its market leadership up to at least 95%
courtesy of company profile. The company has however not achieved the extra desired 15% of the
market share probably because of poor inventory management system in place. It is therefore
feared that inventory management could impact on the success of this organization (Rwenzori
Internal Report, 2018)

1.2 Problem statement

The management of Rwenzori Bottling Company Namanve supermarkets has tried all different
approaches of managing Inventories because inventory since is the common thread that ties all
functions and department of the firm together thus improving on the performance of the firm. Such
approaches include stock control, planning and allocation including vender managed inventory, re-
order point technique, first in First out (FIFO) and last in first out (LIFO). However the firm's
records still show problem related with inventory such as pilferage, theft, and under stocking of
inventories, high cost related to inventory management systems and mismanagement of
information (Birnberg, 1989) and on top of that the performance has not improved as there was a
decline of 20% in the year of 2022 on the annual proceeds of 2021 as this has been attributed to
the poor stock management strategies and policies (Internal report, 2022) therefore, Basing on the
above evidence, it is questionable whether the stock management system is effective hence
requiring an investigation.

1.3 Purpose of the study

To examine the effect of stock management on organizational performance of Rwenzori
Beverages (U) Ltd as case study.

1.4 Research Objectives

i. To determine the effect of stock planning on organizational performance of Rwenzori
Beverages (U) ltd
ii. To assess the effect of stock allocation on organizational performance of Rwenzori
Beverages (U) ltd
iii. To examine the effect of stock control on organizational performance of Rwenzori
Beverages (U) ltd

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1.5 Research Questions
i. What is the effect of stock planning on organizational performance of Rwenzori
Beverages (U) ltd
ii. What is the effect of stock allocation on organizational performance of Rwenzori
Beverages (U) ltd
iii. What is the effect of stock control on organizational performance of Rwenzori
Beverages (U) ltd
1.6 Scope of the study
1.6.1 Content Scope
The study will encompass stock management as an independent variable while organizational
performance as the dependent variable.

1.6.2 Geographical scope

The research will be conducted in Mukono district using Rwenzori Beverages (U) Ltd as a case
study. The company is located on plot 588,592 block 111Kiwanga Mukono District. Rwenzori
Beverages (U) ltd is 16 Kilometers from Kampala city centre on the road to Jinja. The company is
known to be a large company enough in terms of stock management to cater for all the objectives
of the study.
1.6.3 Period Scope
The study will consider information from respondents for a period of two years. (2018-2021)
1.7 Significance of the study
The finds of the study will assist;
i. The organization (Rwenzori Beverages) to be aware of the relationship between inventory
management and organizational success and the recommendations will be used accordingly
to reform stock problems that might be existing in their organization.
ii. Future researchers will be provided with literatures and recommendations for future
research.
iii. The findings will also help other organizations to get an insight on how inventory
management impacts on organizational success.

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Conceptual framework

Independent variable Dependent variable

Stock management Organizational Performance

1. Stock planning 1. Efficiency (time)

2. Stock allocation 2. Effectiveness (quality
3. Stock control 3. Economy (cost)

The Government Policy

Taxes imposed on the

company

Source: Adopted from Cooper & S. (2006) and Modified

The figure above shows the relationship between the independent variable which is stock
management and the dependent variable which is organizational performance of an organization.
The independent variable is being represented by the stock planning, stock allocation and stock
control which have been presumed to have a direct effect of the efficiency, effectiveness and
economy (cost) of the organization as shown by an arrow pointing to the right.

1.8 Operational definition of terms

Stock management as the use of management techniques designed to determine and implement
the holding of optimum levels of stock, whether raw materials stocks, bought out goods, work in
progress, or finished goods.

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Organizational Performance: An assessment of how performance is on three specific areas of
firm outcomes: financial performance, market performance, and customer value added (Richard,
Devinney, Yip, & Johnson, 2009).

Stock control can be broadly defined as "the activity of checking a shop's stock". It is the
process of ensuring that the right amount of supply is available within a business.

Stock planning is the process of determining the optimal quantity and timing of inventory for
the purpose of aligning it with sales and production capacity. Inventory planning affects a
company's cash flow and profits while contributing to an efficient supply chain.

Stock allocation is about ensuring that the right stock is available at the right time in each of the
retailer's outlets. Stock allocation is the decisions made about how quantities held at a central
point will be distributed amongst several outlets in a retail chain.

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 CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
This chapter consists of related literature on inventory management following the research
objectives set in chapter one. It shows what has been written about inventory management and how
it impacts on the organization. The chapter covers the meaning of stock management, types of
stock held in an organization, reasons why organizations hold stocks, inventory management
methods, costs involved in stock management, determination of stock levels, factors affecting
stock levels, modern techniques, contribution of stock management, conclusion.

2.2 Stock management

Stock management is the process of managing the goods your business plans to sell. This involves
acquiring, storing, organising and tracking those goods. Stock management also involves keeping
records of changes in your inventory over time (Jessop, 2013).
The international dictionary of management (1995) defines inventory management as the use of
management techniques designed to determine and implement the holding of optimum level of
stock, whether stock, bought out goods, work in progress or finished goods. Lewis and Trevin
(200) also define inventory management as the process of regulating and monitoring the amount of
goods available for sale so that there are always sufficient to meet demand. Inventory management
is essentially concerned with ensuring that the acquisition, storage, holding and usage of all types
of stock are fully controlled at all times. That is making sure that firm has the right quantity of
stock at the right place and at the right time.
Inventory management is a vitally important process in the operationalization of any company, this
implies activities related to planning, control and efficient and effective storage of goods, with the
aim of generating adequate levels of customer service
According to Walgembach et al (1982), inventories are the merchandise owned by the company
and held for resale to customers in the ordinary course of business. Pandey (1998) concurred and
added that inventories are classified as current assets because typically they will be sold within the
year or during a firm's normal operating cycle if it should be longer than a year for retailing firms
Inventories are often the largest and most valuables current assets.
Other scholars like Dopuch et al (1989), Lucey (1994), and Van Horne (1995) agree with other
Scholars in their definition of inventories as noted above and noted that inventories are raw work in

7
progress and finished goods in a typical manufacturing setting, stock in transit, in "backrooms" and
on shelves are inevitable.
2.3 Organizational Performance
Organizational Performance is a measure of the results achieved. Performance efficiency is the
ratio between effort extended and results achieved. The difference between current performance
and the theoretical performance limit is the performance improvement zone. Performance assumes
an actor of some kind but the actor could be an individual person or a group of people acting in
concert. The performance platform is the infrastructure or devices used in the performance act
(Malcom, S. 2005). Performance of an organization is measured basing on many variables
regarding customer satisfaction, sales volume, total cost reduction and meeting industry standards.
According to Host (1992), sales volume and growth rate of change in sales are used to evaluate
organizational success. They are determined by evaluating marketing factors that influence sales,
including marketing strategies, competition, promotional programs and distribution decisions.
Sales problems are determined in order to understand seasonal variations, turnover rates for
merchandise and customer profiles.

2.4 Stock management and organizational performance

According to CIMA (1998), the objective of holding stock is to increase sales thereby increasing
profits. If stocks are held, a wider variety of products is offered and customer demand is more
immediately satisfied because the product is available which prevents prospective customers from
going elsewhere. Effective inventory management maintains customer loyalty. It avoids ill-will of
customers that may be caused by stock outs hence hurting or reducing future sales and profit
margins. Building and maintaining customer loyalty means continued earning by the company.

Frazelle, 2002, Jessop, 1986, explains that good inventory management by a firm will lower costs,
improve efficiency and ensure production can meet fluctuations in customer demand. It will give
the firm a competitive advantage as more efficient production can feed through to lower prices and
also customers should always be satisfied as products will be available on demand. Poor inventory
management systems may lead to dependency on the efficiency of the suppliers, missed sales
incase of stock outs, high costs of obtaining materials and poor customer service.

8
2.4.1 Stock control and organizational performance

Inventory control systems enable a business to determine and maintain an optimum level of
investment in inventory in order to achieve required operational performance. Sila (2006)
expressed that the inventory management of inventory control is to meet customer demand.
Further, Fawcett, Ogden, Magnan, and Bixby Cooper (2006) argue that to meet customer
demand, firms have to ensure that stock-outs are avoided without incurring high inventory costs.
Stocking level variability is caused by factors such as deficient information sharing and deficient
forecasts. He found out that variability of inventory majorly results due to firms not applying the
inventory control systems. He enumerated the effects of inventory variability as inaccurate
forecasting leading to periods of not having enough capacity leading to inadequate customer
service and high inventory costs.

According to Miller, (2010), inventory control is the supervision of the storage, supply and
accessibility of items to ensure an adequate supply without excessive oversupply. To him,
inventory control means availability of materials whenever and wherever required by stocking
adequate number and kind of stocks. However, Lau and Snell (2006) argued that inventory
control is primarily about specifying the size and placement of stocked goods. Inventory control
is required at different locations within a facility or within multiple locations of a supply network
to protect the regular and planned course of production against the random disturbance of
running out of materials or goods for improved performance.

2.4.2 Stock allocation and organizational performance

Inventory allocation is a critical component of logistics, as it can help you save on costs while
helping you consistently meet customer demand — even during peak seasons or as you expand
into new markets (Jessop, 2002). According to Perez (2017) Proper inventory allocation can save
you significantly on storage costs by optimizing inventory levels without overstocking or not
stocking enough to meet demand. In ecommerce, inventory levels constantly fluctuate —
especially if you sell through more than one channel — which is why most brands use
technology and automation to track inventory in real time, so they can stay informed while
spending less time manually tracking inventory.

9
In the study of Moe, (2018) it was found that A solid inventory allocation strategy that’s tech-
enabled and offers valuable insights can help you reduce a number of risks and streamline your
distribution network Inventory allocation becomes more complex as you expand into new sales
channels, which is known as multichannel inventory management or the oversight of stock
levels, reorders, and inventory forecasting across different sources (Monroe, 1998).  

2.4.3 Stock planning and organizational performance

Anichebe and Agu (2013) Effects of Inventory planning on Organizational Effectiveness in

selected organizations inEnugu, was carried out, to assess the impact of proper inventory
plaanning on organizational performances in Yemenite, Hardis& Dromedas, and the Nigeria
Bottling Company all in Enugu, Enugu State. Descriptive research method, especially survey,
and case study were employed in carrying out the study. The population of the study is six
hundred and fifty-eight (658). A sample size of two hundred and forty-eight (248), was derived
using the Taro Yamane formula for sample size determination from a finite population. Data
were generated using questionnaire, oral interviews, observations, books, journals and the
internet.

Data were presented in tables and analyzed using simple percentages. Pearson product moment
correlation coefficient and linear regression were used in the hypotheses testing. From the
analyses, it was discovered that irrespective of the fact that the organizations studied, painted the
picture that they were applying the tenets of good inventory planning, they from time to time run
into the problems of inventory inadequacy. This consequently affected their production, leading
to the scarcity of one brand of their products or the other, thereby affecting their profitability and
consequential effectiveness negatively. The Findings indicate that there is a significant
relationship between good inventory planning and organizational effectiveness. Inventory
planning has a significant effect on organizational productivity. There is a highly positive
correlation between good inventory management and organizational profitability. The study
concluded that Inventory Management is very vital to the success and growth of organizations

10
2.5 Related studies
2.5.1 Stock management and organizational performance
Koin, et al. 2014) conducted a study on the effect of inventory management on an organization's
performance. The study will employ a descriptive research design the study population too is 459
employees and care will be taken to ensure that the accessible population sampled is of a sizeable
to inform the researcher on the formulated research objectives. a sample of 56 employees will be
obtained from the target population the data will be collected from the company’s supply chain
department in liaison with the various integrated functions in the chain using questionnaires
2.5.2 Stock control and organizational performance

Inventory control management's impact on organizational efficiency has been a contentious topic
to both scholars and researchers as they hold different views and findings about its influence on
an organizational performance. Mukopi and Iravo (2015), for example, discovered that inventory
management had a favorable impact on performance. Similarly, Mogere, Oloko and Okibo
(2013) found that there is a substantial link between inventory control management and
organizational performance

2.4.2 Stock allocation and organizational performance

Stock allocation is believed to affect how a firm will invest and even take advantage of the
arising opportunities; hence an organization must aim at effectively allocating its resources at a
cost-efficient and differentiated manner than its competitors for increased performance and
competitive advantage. Campbell and Park (2017) noted that the performance of an organization
is the key component in gaining the competitive advantage. According to the resource based
view, the performance of an organization is the key component in gaining the competitive
advantage. This theory explains why organizations succeed or fail in a given market place and
suggests that the abilities of a firm create room for adding customer value chain, developing new
products and expanding new market places (Lin & Wu, 2014).

2.4.3 Stock planning and organizational performance

Kamauand Assumpta (2008) found that organizations benefits from stock planning by way of
easy storage and retrieval of material, improved sales effectiveness, and reduced operational
cost. The study also found that there is a relationship between operational feasibility, the utility

11
of inventory control management in the customer related issues of the organization and cost
effectiveness technique are implemented to enhance the return on investment in the organization.
Effective inventory control management is recognized as one of the areas management of any
organization should acquire capability. It is recommended that organizations should adopt the
inventory keeping method that best suits their operations.
carried out a study on the influence of inventory management on organizational competitiveness,
with a particular focus on Safaricom Ltd Kenya. The specific objectives of the study were to
determine the effects of inventory shrinkage, inventory investment and inventory turnover on the
competitiveness of Safaricom Ltd.
2.6 Chapter summary
The past researches indicated that the adoption and effective implementation of inventory
management techniques impact positively the performance of manufacturing firms. However,
there is no specific research that has focused on the impact of inventory management practices
on performance of Rwenzori beverages Ltd. Thus leading to unreliability of such results as far as
generalizing them to Rwenzori beverages limited is concerned. This research study aims at
filling these knowledge research gaps.

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 CHAPTER THREE
METHODOLOGY

3.0 Introduction
This chapter presents the research design, study population, study sample, instrument, sources of
data administration, data analysis and limitations of the study.

3.1 Research design

The study is intended to establish the impact of inventory management and organizational success.
Therefore both quantitative and qualitative methods of analyzing data will be used to obtain the
information required.

3.2 Study population

Study population is a subset of the target population from which the sample is actually selected. It
is broader than the concept sample frame. It may be appropriate to say that sample frame is an
operationalized form of study population.
The study population will comprise of both junior and senior staff of the organization that is
purchasing department, Production Accounting and stores. This will be done to avoid biasness in
dealing with only one category of respondents. The researcher will therefore interview a 30
respondents of Rwenzori Beverages (U) Ltd basing on the Slovenes formula of determining the
sample size considering that 13 from stores department, 12 from Procurement department and 8
from Production and 7 Accounting Department.
3.3 Sample size

The research will target 30 respondents; that is, 13 from stores department, 12 from Procurement
department and 8 from Production and 7 Accounting Department also a sample of 28
respondents whereby 11will come from stores, 10 from procurement, 4 from production and 3
from Accounting Department.

The Sloven’s Formula will be used here to determine the sample size;

N
n=
1+ N (e)2

30
n= 2
1+30 (0.05)

13
 30
n=
1+30 (0.0025)❑

30
n= ❑¿
1+0.075 ¿

30
n= ¿
1.075 ¿❑

Therefore n = 28 Respondents
3.4 Source of data
The researcher will use both primary and secondary sources. Primary data will be collected
physically from the respondents through interviews; questionnaires will be distributed to the staff
of Rwenzori Beverages (U) Ltd. Secondary data will be collected through reading various
literature of the organization and the research work of other researchers.
3.5 Sampling procedure
The study used purposive and simple random sampling, where the names of respondents will be
written on small pieces of papers for each respondent and mixed up in a box and then be picked
one by one at random. All samples will have the same and equal probability of being picked.
Table 1 : Showing the sample size of respondents
Department Target population Sample size
Stores department 13 11
Procurement 12 10
Production 8 4
Accounting department 7 3
Total 30 28
Source: Primary Data, 2022

3.6. Data collection

3.6.1. Questionnaires
The study will use a self administered questionnaires; the questionnaires will be issued to
respondents to answer in order to get findings. Self administered questionnaires will be used
because they will give time to the respondents to fill the questionnaire without supervision. They
are also free from bias because the data will be given directly by the respondents without any
interference.

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3.7 Study variables
The independent variable is stock management; defined as the use of management techniques
designed to determine and implement the holding of optimum levels of stock, whether raw or
attainment of desired goals or results. Success of an organization is measured basing on many
variables regarding customer satisfaction, sales volume, total cost reduction growth rate of change
in sales and meeting industry standards.

3.8 Data processing and analysis

3.8.1 Coding
The data collected will be arranged in groups of similar questions from different questionnaires as
answers will be given unique looks to make the job easier.

3.8.2 Analysis
Percentages and tables will be used for quantified items into frequencies and judgmental facts.
Other methods will be used to enhance simplicity and good understanding.

3.8.3 Editing
The data collected will be edited for accuracy and completeness and to find out how well
respondents answered the questions. This was done in line with due considerations paid to
questionnaires sent to the respondents so as to detect the gaps which may have been left to ensure
data quality of this study.

3.9 Ethical consideration

Informed consent will be sought from the respondent before any step was taken. The data will be
collected by use of reliable and valid tools, coded and data collection tools which will be burnt to
avoid any form of information misuse. The researcher will maintain the confidentiality of the
respondents and protect their privacy at all times. The researcher will try to be professional when
presenting himself to the respondents as this may affect the attitude and expectations of the
respondents. The researcher will use the language that is as neutral as possible regarding the
terminology involving people and will avoid discriminative language. Lastly, the researcher will
try to be considerate during the interactions with respondents.

3.9 Data presentation and conclusion

Data will be collected, sorted and organized by description. Data will then be presented in tables

15
showing frequencies and percentages. Pie charts will also be used relative to respondents’ answers.

3.10 Limitations of the study

Research might be a very lengthy exercise which may involve procedures to be undertaken. The
researcher met several problems indicated below.

Difficulties in meeting the intended respondents. Some respondents may be unwilling to give
information needed by the researcher

Financial costs, the financial requirements of this research may be so high due to the distance
between the researcher and the study area. Other costs to be incurred prior to the completion of the
state, printing, photocopying, phone calls for making appointments with the respondents.

There might be little time to carry out the research because of conflict between work, studies and
research itself.

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