DECLARATION

I hereby declare that this submission is my own work towards a Masters in Business
Administration (MBA) and that, to the best of my knowledge, it contains no material previously
published by another person nor material which has been accepted for the award of any other
degree of the University, except where due acknowledgment has been made in the text.

…………………………….… ……………………...… ………………………….

Student Name Signature Date

i
 CERTIFICATE OF APPROVAL

I declare that this dissertation is from the student’s own work and effort. Where he has used
other sources of information, it has been acknowledged. This dissertation is submitted with
my approval.

Signature: ……………………………… Date : ………………………

MR AUBREY CHIBWANA (Supervisor)

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 ACKNOWLEDGEMENTS

Without the support of many people the completion of this project would never have
occurred. I acknowledge the constructive influence of lecturers throughout the MBA
programme for positively influencing my way of thinking and on whose shoulders I lean
today. First and foremost, I salute the guidance and the directions accorded to me by Mr.
Aubrey Chibwana, my supervisor in this research project for relentlessly guiding me with a
lot of enthusiasm and interest and for remarkably never failing to be available when I needed
his assistance. I also wish to express my sincere appreciation and thanks to Dr. Grace Banda,
and Dr. Dafton Khembo who always gave excellent suggestions during proposal presentation.
Their assistance with my research design and methodology were immeasurable.

I should also acknowledge with appreciation and sincerity the support accorded by
colleagues, Blessings Mhango, Glyn Mughogho, and Nelson Nagogoda who willingly
extended their support to discuss, reorganize and review the various drafts of this document.
Their inputs to the study enhanced my thinking and enormously contributed towards the
completion of the dissertation. I am grateful to them for their invaluable support without
which, perhaps this work would have not been in this form.

Above all, to the God Almighty, the author of knowledge and wisdom, for his countless love.

iii
 DEDICATION

This research is dedicated to my late mother, Miss Fanny Nkhwazi.

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 ABSTRACT

Inventory management is deemed to be one of the greatest factors that determines success or
failure of a firm. A robust inventory management is required to be in place to ensure timely
delivery and that quality standards are observed. Many supermarkets in Lilongwe City have
had a persistent problem in establishing the right inventory levels. The study sought to
determine the effect of inventory management practices on the performance of major
supermarkets in Lilongwe City. The specific objectives of the study were to: identify
inventory management practices used in major retail outlets (supermarkets) in Lilongwe City;
assess the effect of a particular inventory management practice has on the customer service
delivery level of the retail outlets (supermarkets) in Lilongwe City; identify challenges with
inventory management at the major retail outlets (supermarkets) in Lilongwe City; and
establish mechanisms to address challenges faced by supermarkets are facing in inventory
management. The study adopted a descriptive research design and 72 staff and customers in
major supermarkets in Lilongwe City were targeted. The study collected primary data using
questionnaires and the analysis of the collected data was done using descriptive and
inferential statistics. The findings were presented using tables and figures. The study
established that no proper IM policy was in place to facilitate the determination of the
quantities to be ordered. However, some characteristics of ABC, JIT, EOQ, VMI and ERP
approaches were in use. The study established that inventory categorization influences
performance of supermarkets in Lilongwe City positively. They study established that the
supermarkets are not following EOQ for purchasing the materials. The study concluded that
the working conditions in the supermarkets are not sufficient to attract new talent, and retain
the most talented, skilled and experienced staffs. The study further concluded that there are a
number of challenges in inventory management, including having unqualified employees in
charge of inventory, using a too narrow measure of performance for their business, having a
flawed or unrealistic business plan for the future, and not anticipating shortages. The study
recommends that supermarkets should use ABC analysis as a main stock control technique.
The study further recommends that the supermarkets should employ people with relevant
educational qualifications and with some level of experience as far as inventory management
is concerned.

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 TABLE OF CONTENTS
DECLARATION........................................................................................................................i
CERTIFICATE OF APPROVAL..............................................................................................ii
ACKNOWLEDGEMENTS......................................................................................................iii
DEDICATION..........................................................................................................................iv
ABSTRACT...............................................................................................................................v
LIST OF FIGURES..................................................................................................................ix
LIST OF TABLES.....................................................................................................................x
LIST OF ACRONYMS............................................................................................................xi
CHAPTER ONE.......................................................................................................................1
INTRODUCTION....................................................................................................................1
1.1 Introduction..........................................................................................................................1
1.2 Background to the Study......................................................................................................2
1.3 Problem Statement...............................................................................................................3
1.4 Research objectives..............................................................................................................4
1.4.1 General research objectives...............................................................................................4
1.4.2 Specific objectives............................................................................................................5
1.5 Research Questions..............................................................................................................5
1.6 Justification of the Study......................................................................................................5
1.7 Limitations of the Study.......................................................................................................6
1.8 Delimitations of the Study...................................................................................................6
1.9 Chapter Summary.................................................................................................................6
CHAPTER TWO.....................................................................................................................7
LITERATURE REVIEW........................................................................................................7
2.1 Introduction..........................................................................................................................7
2.2 Theoretical Framework........................................................................................................7
2.2.1 Strategic Choice Theory....................................................................................................7
2.2.2 Resource Based Theory of BPO.......................................................................................8
2.3 Empirical Literature Review................................................................................................9
2.4 Inventory Control Techniques............................................................................................12
2.4.1 ABC analysis...................................................................................................................13
2.4.2 Just-in-time inventory management................................................................................13
2.4.3 Economic Order Quantity (EOQ)...................................................................................14
2.4.4 Enterprise Resource Planning (ERP).............................................................................15
2.5 Effects of effective inventory management to customer satisfaction................................15
2.5.1 Customer loyalty.............................................................................................................16

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2.5.2 Repeat Purchases.............................................................................................................16
2.5.3 On-time delivery.............................................................................................................16
2.6 The challenges faced by companies in managing the inventories.....................................17
2.7 Conceptual framework.......................................................................................................18
2.7 Chapter Summary...............................................................................................................20
CHAPTER THREE...............................................................................................................21
RESEARCH METHODOLOGY.........................................................................................21
3.1 Introduction........................................................................................................................21
3.2 Research Philosophy..........................................................................................................21
3.3 Research Approach............................................................................................................21
3.4 Research Design.................................................................................................................22
3.5 Research Site/Area.............................................................................................................23
3.6 Sample Size and Sampling techniques...............................................................................23
3.6.1 Population of the Study...................................................................................................23
3.6.2 Sample Size......................................................................................................................23
3.6.3 Sampling Techniques......................................................................................................24
3.7 Research Instruments.........................................................................................................25
3.7.1 Questionnaires................................................................................................................25
3.7.2 Interview Schedules........................................................................................................25
3.7.3 Pilot Study.......................................................................................................................25
3.8 Data Analysis Procedures..................................................................................................26
3.9 Validity Reliability and Generalizability...........................................................................26
3.9.1 Reliability........................................................................................................................26
3.9.2 Validity............................................................................................................................26
3.9.3 Generalizability...............................................................................................................27
3.10. Ethical Consideration......................................................................................................27
3.11. Chapter Summary............................................................................................................27
CHAPTER FOUR..................................................................................................................28
ANALYSIS OF RESULTS AND DISCUSSIONS OF FINDINGS...................................28
4.1 Introduction........................................................................................................................28
4.2 Socio-demographic Characteristics of the Respondents....................................................28
4.2.1 Gender of the Respondents.............................................................................................29
4.2.2 Level of Education..........................................................................................................29
4.2.3 Period spent working at the Organization by the respondents........................................30
4.2.4 Designation of Respondents............................................................................................32
4.2.5 Percentage of budget that goes to supply chain activities...............................................32
4.2.6 The value of the monthly supermarket turnover.............................................................33

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4.2.7 The average Stock (inventory) in the Supermarket.........................................................34
4.2.8 The average annual value of stock redundancy in the supermarket................................34
4.2.9 Frequently Patronized Supermarket................................................................................35
4.2.10 How often customer patronize Supermarkets...............................................................36
4.3 Inventory Management Practices Used in Major Retail Outlets........................................37
4.3.1 Categories of Inventory Management Practice...............................................................37
4.3.2 Standard lead time in supermarkets................................................................................38
4.4 Factors that Affect Inventory Management Practices in Major Retail Outlets..................39
4.4.1 Vendor Managed Inventory............................................................................................39
4.4.2 Economic Order Quantity...............................................................................................41
4.4.3 Just – in –Time (JIT).......................................................................................................42
4.4.4 A-B-C Model..................................................................................................................43
4.4.5 Information Technology..................................................................................................44
4.4.6 Inventory Records Management.....................................................................................45
4.5 Effect Inventory Management Practices Has on the Customer Service Delivery Level. . .46
4.5.1 Effect Inventory Management Practices Has On the Customer Service Delivery..........46
4.5.2 Impact of Location on Customer Satisfaction.................................................................48
4.5.3 Impact of Product quality on Customer Satisfaction......................................................48
4.5.4 Impact of Facilities on Customer Satisfaction................................................................50
4.5.5 Impact of Value for money (VFM) on customer satisfaction.........................................51
4.6 Challenges with Inventory Management at the Major Retail Outlets................................51
4.7 Relationship between Inventory Management Practices and Performance of Retailing...53
4.8 Chapter Summary...............................................................................................................55
CHAPTER FIVE....................................................................................................................56
CONCLUSION AND RECOMMENDATIONS.................................................................56
5.1 Introduction........................................................................................................................56
5.2 Conclusion..........................................................................................................................56
5.3 Recommendations..............................................................................................................57
5.4 Areas for Further Study......................................................................................................57
REFERENCES.........................................................................................................................58
APPENDICES..........................................................................................................................62
APPENDIX ONE: INTRODUCTORY LETTER...................................................................62
APPENDIX TWO: RESEARCH QUESTIONNAIRE FOR STAFF......................................63
APPENDIX THREE: A RESEARCH STUDY QUESTIONNAIRE FOR CUSTOMERS....70

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 LIST OF FIGURES

Figure 2. 1: Conceptual framework.........................................................................................24

Figure 4. 1: Gender of Respondents
Figure 4. 2: Level of Education
Figure 4. 3: Duration with the organization
Figure 4. 4 Designation of respondents
Figure 4. 5 Percentage of budget that goes to supply chain activities
Figure 4. 6 Frequently Patronized Supermarket
Figure 4. 7 How often customer patronize Supermarkets
Figure 4. 8 Inventory management technique
Figure 4. 9 Standard lead time
Figure 4. 10 Impact of Location on Customer Satisfaction
Figure 4. 11 Impact of Product quality on Customer Satisfaction
Figure 4. 12 Impact of Facilities on Customer Satisfaction
Figure 4. 13 Impact of Value for money (VFM) on customer satisfaction

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 LIST OF TABLES
Table 3.1 Sample Size of the Study.........................................................................................29

Table 4.1 Response Rate 33

Table 4.2 Monthly turnover value for the supermarket...........................................................38

Table 4.3 Average Stock in the Supermarket...........................................................................39
Table 4.4 Average annual value of stock redundancy.............................................................40
Table 4.5 Vendor Managed Inventory.....................................................................................45
Table 4.6 Economic Order Quantity........................................................................................46
Table 4.7 Just – in –Time (JIT)................................................................................................47
Table 4.8 A-B-C Model...........................................................................................................48
Table 4.9 Information Technology..........................................................................................49
Table 4.10 Inventory Records Management............................................................................50
Table 4.11 Effect of IM on customer service delivery.............................................................52
Table 4.12 Challenges with Inventory Management at the Major Retail Outlets....................57
Table 4.13 Model Summary.....................................................................................................58
Table 4.14 Regression Coefficients.........................................................................................59

x
 LIST OF ACRONYMS

AOTML Alliance Once Tobacco Malawi Ltd

BPO Business Process Operations
CIPS Chartered Institute of Procurement and Supply
CMS Central Medicals Stores
DRP Distribution Resource Planning
EOQ Economic Order Quantity
ERP Enterprise Resource Planning
FDI Foreign Direct Investment
JIT Just In Time
MRP I Material Requirement Planning
MRP II Manufacturing Resource Planning
ROP Re-request Post
SCM Supply Chain Management
SKU Stock Keeping Unit
TCT Transaction Cost Theory
TOC Theory Of Constraints
VMI Vendor Managed Inventory

xi
 CHAPTER ONE
INTRODUCTION
1.1 Introduction
This study falls in the field of Supply Chain Management (SCM) and the focus is on
inventory management. For the past decade, supermarkets have been quickly expanding in
emerging countries. Since the turn of the 21st century, the number of supermarkets in Malawi
have expanded dramatically, resulting in increased rivalry. In Malawi the majority of
supermarkets are established in Lilongwe and Blantyre, but due to further expansion,
supermarkets have now expanded beyond these two cities as they are being introduced in
medium-sized cities and larger towns. In Malawi, supermarkets have grown beyond the
middle class to the urban working poor's food markets, forming the initial foundation. This
pattern of first infiltrating upper-class urban markets and then expanding into lower-income
and rural-town markets indicates that supermarkets will grow steadily and rapidly
(Weatherspoon and Reardon 2012).

A robust inventory management is required to be in place to ensure timely delivery and

quality standards are observed. The primary aim of inventory management is to ensure that
sufficient quantities of high-quality inventory are available to meet consumer demands while
also lowering inventory carrying costs (Brigham & Ehrhard, 2015). According to Chow,
Dubelaar and Larson (2011), inventory management is critical to retail performance, since
inventory tops the list of valuable physical assets on nearly every merchant's balance sheet.
Thus, purchasing too many units of a slow selling item will increase storage costs and interest
costs on the 'short-term borrowings that financed the purchases, which may also lead to losses
if the merchandise cannot be sold at the normal price (Libby, Libby & Short, 2014).

Various approaches and techniques, such as Economic Order Quantity, FIFO, the just-in-time
(JIT) system and material requirement planning (MRP), can be used to ensure effective
inventory management. JIT ensures leanness and eliminates wastage where production is in
response to demand (Inegbedion, Eze, Asaleye & Lawal, 2019). It aids in the avoidance of
large inventories in a company, resulting in lower tied-up capital, which benefits the firm's
performance. Material requirement planning, on the other hand, aids an organization in
successfully forecasting inventory needs (the materials). It is an important inventory
management method for scheduling and determining proper flow of raw materials in an

1
organization (Volkov, 2017). As a result, proper inventory management will assist businesses
in meeting or exceeding consumer expectations, resulting in improved performance.

Many retail outlets in Malawi, however, have ignored the potential savings from proper
inventory management, treating inventory as a necessary evil and not as an asset requiring
management. As a result, many inventory systems are based on arbitrary rules. Taking this
scenario into consideration, this paper therefore examined the effect of inventory
management practice on the performance of retailing Outlets in Malawi, using a comparative
analysis of selected major supermarkets in Lilongwe City.

1.2 Background to the Study

Kilasi, Juma & Mathooko (2013) argue that retail outlets are stores that sell smaller quantities
of products to the general public for own consumption with an aim of making profit. These
stores or outlets buys goods directly from manufacturers or wholesale suppliers at a volume
discount and then mark them up in price for sale to end consumers. According to
Wamugunda (2014), retail outlets are very important in ensuring availability of goods to the
public at the right time, form, place and quantities. The retail stores are also important to the
manufactures as a marketing platform since they are increasingly becoming popular venues
used by marketers to build relationships with consumers (Kozinets & Sherry, 2012).

The retailing market in Lilongwe City has continued to experience considerable growth
overtime. This attributed to increased purchasing power of the middle-class population and
this growth has also been attributed by key factors such as improved infrastructure that has
allowed for ease of movement of goods, therefore better products at cheaper rates for
consumers, as well as promoted rapid retail expansion to untapped rural and peri-urban
markets and an enduring property boom allowing retailers to take up prime locations near
residential areas for customer convenience. Increased investment by leading adding national
retails firms in Lilongwe City has further boosted consumer confidence, encouraging
spending and growth of international brand demand.

Shoprite Holding Ltd

Shoprite Holding Ltd constitutes the largest fast-moving consumer goods retail operation in
Africa. Its more than 141 000 employees work to serve customers across all income levels
through various distinctive retail brands. Shoprite Holding Ltd products and services range

2
from basic to upper end food and furniture to pharmaceuticals and financial services as they
aim at satisfying their customers’ needs in an all-encompassing shopping experience.

Since launching its first store in Lilongwe in 2000, Shoprite Holding Ltd has opened 7 stores
across Malawi, employing more than 500 people across the nation. In its commitment to
supporting local enterprise, Shoprite has built relationships with leading Malawian suppliers,
manufacturers, small businesses and farmers, securing a wide assortment of local brands.
This study was undertaken at Lilongwe Shoprite Building along the Cnr Kenyatta Drive and
Kirk Road, opposite the Lilongwe City Mall Shopping Complex.

Chipiku Stores

Chipiku Stores is a chain store or wholesale/supermarket group with over 30 years in the
market and 75 retail outlets that vary in size. It has recently introduced a premium retail
format ‘Chipiku Plus’ in the big town centers focusing mostly on FMCG dry groceries. They
are a low cost and volume retailer. In Malawi Chipiku Plus Stores operate in the following
locations: Lilongwe City Mall Shopping Centre, Chilambula road (Aera 4), Ginery Corner Next
to Mr. Price, Salima (Old PEP premises) and at Kent Mall in Mzuzu. This study however,
focused on Lilongwe City Mall Shopping Complex Chipiku Plus Stores.

SPAR Malawi

SPAR Malawi is a recent entry in the organised retail sector in Malawi (started late 2011) and
currently has two large outlets in the centre of Lilongwe and another NICO Centre. In 2014,
People’s was licensed to operate the South African SPAR brand and the first supermarket
opened in Lilongwe in 2015. Despite a 50% devaluation of the Malawian Kwacha and
increasing import charges, SPAR Malawi had a relatively good first year (total turnover of
Euro 2 million in 2012) with an increasing number of customers. SPAR Malawi is owned and
managed by three local investors. Together they obtained the franchise for Malawi from
SPAR International, which provides support with store design, retail formats, management
tools, training and advice, etc. In Malawi, SPAR has shops at Ginnery Corner and near
Mount Soche Hotel in Blantyre, and City Centre in Lilongwe and at Lilongwe City Mall
Shopping Complex, and the study focused on the Lilongwe City Mall Shopping Complex
shop.

3
1.3 Problem Statement
In a competitive climate, each company must provide a distinct edge to its clients in order to
thrive and prosper. Of crucial importance to the competitiveness of supermarkets is
inventory. The primary goal of inventory management, therefore, is to have adequate
quantities of high quality inventory available to serve customer needs, while also minimizing
the costs of carrying inventory (Brigham & Ehrhard, 2015).

Proper inventory management will therefore help firms to meet or exceed customer
expectations which results into better performance. According to Zare, Chavez, Raymundo,
and Rojas (2018), proper inventory management enables organizations to accurately estimate
their inventory needs and thereby solve demand uncertainties. Van-Mieghem, van-Houtum,
and Song (2019) opine inventory management aids a firm in meeting its production or sales
revenue targets, which is a critical component of performance. Heizer, Render, Munson and
Sachan (2017) postulates that inventory management help firms to cut down on tied up
capital which brings about maximization of the wealth of shareholders which is the
underlying objective of most firms. Additionally, Laux, Mosher and Hurburgh (2015) argue
that inventory management helps firms to minimize on inventory ordering and holding cost
which results into maximization of the revenues generated.

The inventory investment for retail outlets takes up a big percentage of the total budget, yet
inventory control is one of the most neglected management areas. Many retail outlets have an
excessive amount of cash tied up to accumulation of inventory sitting for a long period
because of the slack inventory management or inability to control the inventory efficiently.
On the other hand, insufficient stock affects customer loyalty as dissatisfied consumers can
very easily take their business elsewhere. Consequently, poor inventory management
translates directly into strains on a company’s cash flow. This therefore creates relationship
problems between inventory management and organizational productivity, profitability and
effectiveness. Much as this might be the general situation in most supermarkets in Malawi,
however some supermarkets are faring better than others in terms of productivity,
profitability and effectiveness. The significance of inventory management practices among
retail outlets, as well as lack of thorough research regarding the inventory management
techniques that are embraced by retail outlets in Malawi and the impact of these techniques
on the performances of similar firms in the Malawian context, reinforces the need of carrying
out this research.

4
1.4 Research objectives
1.4.1 General research objectives
The major objective of this study was to benchmark inventory management practices used by
major retail outlets (supermarkets) against international best practices.

1.4.2 Specific objectives

This study was designed to meet the following specific research objectives:

i) To identify inventory management practices used in major retail outlets

(supermarkets) in Lilongwe City;
ii) To assess the effect of a particular inventory management practice has on the
customer service delivery level of the retail outlets (supermarkets) in Lilongwe City;
iii) To identify challenges with inventory management at the major retail outlets
(supermarkets) in Lilongwe City.
iv) To establish mechanisms to address challenges faced by supermarkets are facing in
inventory management.

1.5 Research Questions

The research study was designed to address the following research questions:

i) What are the inventory management practices used in major retail outlets
(supermarkets) in Lilongwe City?
ii) What effects does a particular inventory management practice have on customer
service delivery level of the retail outlets (supermarkets) in Lilongwe City?
iii) What are the challenges with inventory management at the major retail outlets in
Lilongwe City?
iv) What mechanisms can be put in place to address challenges faced by supermarkets in
inventory management?

1.6 Justification of the Study

The findings of this study would benefit the management of Shoprite, SPAR and Chipiku
Plus Supermarkets, retail industry players and governments to implement proper inventory
management practices to improve performance. First, it is going to help the retail sector to
fashion out efficient and effective inventory policies for the retail shops (supermarkets).
Thus, the study will bring out how managers and retail outlets owners will manage its
inventory policies so as to be responsive and at the same time efficient in its downstream

5
activities thereby increasing the value chain of the supply chain (which is also known as
supply chain profitability).

Through the study, the government through its agencies such as the Malawi Bureau of
Standards may advice the various retail outlets on the best way to manage inventory to ensure
self-sustainability in making sound financing and investment decision as well as to safeguard
the health of its citizens from buying expired items and other atrocities within Malawi.

The benefit of sharing information among researchers is another reason for the study. Thus,
the information provided in the study will be useful to researchers who might want to
undertake further research into the area of inventory control in Malawi. This study is
undertaken to enhance the frontiers of knowledge by adding up to literature on inventory
management practices in retail sub-sector and its effect on the service that is delivered to
ultimate customers.

1.7 Limitations of the Study

The study faced a number of limitations. There was limitation in relation to technical
knowledge and skills amongst the staff and access to the respondent due to the red tape
imposed by business owners and managers. With the red tapes respondents were unwilling to
disclose all the information concerning inventory management in the business outlets
understudy due to fear of being victimized. Furthermore, respondents did not return the
questionnaires on time therefore limiting timeliness of data collection.

1.8 Delimitations of the Study

In order to deal with limitations of the study highlighted above, in terms of reluctance of
some respondents to complete the questionnaires promptly and or fill them at all, the
researcher overcame this by explaining the importance of the study and the potential benefit
to them, and from this an appropriate timetable with the top company managers that suited all
the respondents during the process of data collection for reliable and valid information was
made.

1.9 Chapter Summary

This chapter has presented the general overview of this study, the background of the study,
purpose of the study, the problem statement and research questions. The chapter has also
presented research objectives and the significant of the study. Lastly, this chapter has also

6
presented chapter of the study. The following chapter presents the literature related to the
topic under study.

CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
This chapter presented the literature review. The purpose of this chapter was to review
literature and theoretical framework of inventory management, which is the management of
the largest single investment in assets for most retail outlets. Through this chapter, the
researcher further highlighted the empirical studies that will highlighted what other
researchers observed in the relevant study and conceptual framework of the study.

2.2 Theoretical Framework

Different theories have been employed to help bring clarity to the study of the effects of
inventory management practices on organizational competitiveness. This study was guided
by a number of theories including; Strategic Choice Theory, resource-based view theory, and
the Inventory Control Theory to build the critical concerns on effects of inventory
management practices on organizational competitiveness in the retail industry.

2.2.1 Strategic Choice Theory

Developed by Child in 1972, the strategic choice theory points out the link between the
choices of management and the performance of a firm as well as relations of the firm’s
internal and external environment (Elijah & Ngugi, 2021). The theory emphasizes on the
magnitude of the decisions made by management on the performance of firm. Elijah & Ngugi
(2021) opine that Campling and Michelson in 1998 established a strategic choice model that
demonstrates the inter-reliance between the environment and organizations, actions and
general business performance. The model focus on attaining a higher performance level so as
to enhance efficiency especially in the face of limited resources; however, the strategic theory
was unsuccessful in giving a more importance on contextual aspects, including environment,

7
technology as well as the degree of operation into account and merely considered how the
structure of a firm help in the performance of a business (Elijah & Ngugi, 2021).

Inventory management techniques are among the choices that the management considers
while making decisions as regards how to improve the performance of an organization. This
research study aimed at helping us understand the choices of inventory management
techniques that are made by managers in order to improve the organizational performance of
major supermarkets in terms of profitability, quality, efficiency, production targets and on
time delivery (Elijah & Ngugi, 2021).

2.2.2 Resource Based Theory of BPO

The resource-based view (RBV) argues that firms possess resources, a subset of which
enables them to achieve competitive advantage, and a subset of those that lead to superior
long-term performance. Resources that are valuable and rare can lead to the creation of
competitive advantage and hence superior performance. That advantage can be sustained over
long time periods to the extent that the firm is able to protect against resource limitation,
transfer or substitution (Hitt, 2011).

Firm’s resources are those tangible and intangible assets that lie semi permanently to the firm
at a given time. The tangible resources include skilled personnel, efficient procedures,
machinery, and capital and so on. The intangible resources include among others
technological know-hows, trade contacts, and proprietary technologies (Hitt, 2011).

2.2.3 Inventory Control Theory

Elijah & Ngugi (2021) assert that the theory was proposed by Axsater 10 1985 where
managing all kinds of assets in an organization can be viewed as an inventory problem. The
assumptions of inventory control theory is that there is known, continuous and constant
demand; costs are known and constant; shortages are not permitted; the lead time between
placing and receiving orders is zero and replenishment time can be ignored (Zappone, 2014).

All firms and their leadership aim at cutting costs of production and maximizing returns
while meeting or exceeding the demand of customers, since satisfied customers become loyal
to the brand and business. According to Zappone (2014), having too much inventories raises
operational costs such as consumption of physical space, increase chances of damage, loss,
theft and spoilage on top of holding down money in terms of stocks which might lead to cash
flow crises unless management gets it under control. Often an excess inventory compensates

8
for inefficient and slow leadership, bad estimation, haphazard preparation, and insufficient
process and operational attention. It also raises the likelihood of bad customer service. When
a needed service is not accessible right away, good consumers might grow upset and leave
your firm. Companies with high inventory ratios are more likely to have poor financial
performance (Ortega and Lin, 2015).

Firms with abnormally high inventories have abnormally poor stock returns, firms with
abnormally low inventories have ordinary stock returns while firms with slightly lower than
average inventory perform best over time. There is also a strong negative relationship
between profitability index and cash conversion cycle and at the same time reducing
inventories have a significant and positive relationship with financial and operational
performance (Jackson, Tolujevs, & Kegenbekov, 2020).

The theory exposes on the implication of controlling inventories within an organization and
linking it to improved and efficient processing units, which impacts on performance in terms
financial and operational. As such the theory exposed the inventory control measures that are
adopted at selected supermarkets in Lilongwe City.

2.3 Empirical Literature Review

Researchers of previous studies have brought out both positive relations and weak relations
between the inventory management practices and the operational performance of firms. The
studies have also shown the elements that attract firms to adopt inventory management
practices and the benefits that they obtain from adopting inventory management practices.

Salawat (2012) highlighted the significance of firms maintaining their inventory at an

optimum level by assessing the relation between corporate profitability and working capital
management, and emphasized that its mismanagement would result in extreme tying up of
money at the expense of cost-effective operations. A related research by Rehman (2016)
concluded that there is a strong negative relation between the daily inventory turnover and the
profit of companies.

Sushma and Phubesh (2014), with respect to the study of twenty-three Consumer Electronics
Industry firms in India found out that firm’s inventory management practices played a major
role in the income performance.

Lazaridis and Dimitrios (2015) in their study of one-hundred and thirty-one firms, listed on
Athens Stock Exchange, established that mismanagement of inventories leads to tying up

9
high levels of capital at the expense of cost-effective operations; Lazaridis and Dimitrios
(2015) recommended that the management can create value for organizations by ensuring
inventories are maintained at optimal levels.

Also, Rajeev (2018), a study of ninety-one Indian Machine Tool Enterprises to assess the
association between inventory management approaches and inventory expenses ascertained
that effectual inventory management techniques leads to better inventory performance of
firms; furthermore, the effectual inventory management techniques have an ultimate impact
on the performance of the general businesses’ processes.

Juan and Mertinez (2012), with respect to the study of eight-thousand, eight-hundred and
seventy-two small and medium-sized firms in Spain, showed that that the firm’s management
can create value through minimization of the number of days of inventory. Effectual
inventory management techniques enable to enhance to enhance the efficiency of operations
of an organization. It also enables to improve the customer service, and reduce the expenses
associated with inventories and distribution. Finally, it enables businesses track items and
their expiration dates consequently balance between availability and demand (Pandey, 2014).

Nsikan, Etim and Uduak (2015) are among the researchers who also carried out a research in
regards to the impact of inventory management practices on the performance of firms. In
particular, Nsikan, Etim and Uduak (2015) aimed at establishing the inventory management
practices in flour milling manufacturing firms and their effects on operational performance.
In this regard, five flour manufacturing firms were selected from which onehundred and fifty
respondents were further chosen to answer the research questions of the research study. The
results of the study showed that with the exclusion of large assembly firms, a majority of the
medium-sized flour milling firms use different inventory management strategies from the
scientific models. However, most of the inventory management techniques were based on
changing customers’ demand, the current industry practices, forecasted estimates, and
available production capacity. The research also reveals that firms that adopt scientific
inventory management techniques are more effective in enabling the attainment of enhanced
performance, especially via capacity reduction, improved service level and reduced lead time.
While this study provides significant information regarding the impact of inventory
management practices on performance of consumer goods manufacturing firms, this research
study is less reliable as it focused on one type of consumer goods manufacturing firms, that

10
is, flour milling firms. Furthermore, the research results are not applicable in Nairobi, Kenya
as the research study was carried out in Lagos, Nigeria.

Muhayimana (2015) focused on highlighting and determining the contribution of inventory

management techniques on better management of manufacturing firms. Muhayimana (2015)
used Sulfo Rwanda Ltd, which deals with manufacturing of consumer goods and located in
Kigali City and, as a case study. The purposive sampling technique was employed so as to
ensure that only individuals who are able to provide relevant information regarding the
research topic were included in the sample of the study. Through purposive sampling
technique, fourteen respondents were selected. The study found out that inventory
management practices have a significant impact on firm’s performance, especially on cost
reduction. The research also established that inventory management enable firms to meet the
demands of customers more effectively as instances of unevenness in regards to meeting
customers’ demand is reduced. While the research study focused on consumer goods
manufacturing firms, this research study chose a small sample (14 respondents from one
firm); furthermore, the research was not carried out in Nairobi, Kenya. Therefore, besides
failing to answer more reliably the impact of inventory management practices on
performance of consumer goods manufacturing firms due to small sample, the results of the
study are not applicable in Nairobi since the study was carried out in Kigali, Rwanda.

According to Kandulu (2015), who used the case of Alliance One Tobacco Malawi Limited
(AOTML) to investigate the impact of inventory management on customer service, it was
clear that because AOTML is a processing company, many users wanted to ensure that
processing continued uninterrupted with available spares in main stores. Of course, there
were noteworthy advantages to preserving safety inventory, such as improved machine
utilization, reduced downtime, less process disturbance, and improved customer service. The
study also discovered a link between operational feasibility, the usability of inventory control
management in the organization's customer-related difficulties, and cost-effective techniques
used to improve the organization's return on investment. Effective inventory control
management is acknowledged as one of the skills that each organization's management
should develop.

Using Malawi's Central Medical Stores as a case study, Lapukeni (2012) investigated the
impact of third-party logistics providers in enhancing the availability of health supplies.
Lapukeni (2012) analyzed the National Health Management Information System and

11
conducted interviews with management, CMS personnel, District Health Officers, and other
key stakeholders. CMS is unable to manage all acts within the supply chain system,
according to the author. As a result, vital health supplies are in short supply, and -to deliver to
all area healthcare facilities- is unable to meet demand. According to the author, an unreliable
supply chain system was discovered, which largely involved technical usage, insufficient
capacity, and human resource capacity.

Kanyoma (2012) went on to look into the frequency of stock outs at five different Malawian
public facilities. According to the author, frequent drug shortages in Malawi's public
hospitals have serious effects for patients' health (death). It is one of the primary causes of
public healthcare delivery disruption. The author of this study wanted to figure out what was
causing the scarcity of drugs in the supply chain pipeline. The author analyzed the
relationship between a single sourcing strategy and supply risk management after looking
into the impact of having a single source of medications supply at public hospitals. The study
discovered that stock outs occur on a regular basis by using questionnaires to ask workers
such as nurses, clinicians, doctors, senior managers, and procurement staff who are directly
involved in procurement processes about the causes of stock outs of pharmaceuticals.

Chirwa (2012) conducted research in Malawi to improve the efficiency of the health
commodities supply chain. The study aims to provide a clear picture of how outlined supply
chain components such as (product selection, forecasting and quantification, procurement,
warehouse and distribution, and finance) can affect the availability of medicines and medical
supplies, with the main challenge of inefficient medical supply chains. With a 75% response
rate (150 out of 200 targeted respondents) using questionnaires targeted at various key people
(district health officers, pharmacy personnel, procurement staff, and clinical officers) within
the national healthcare supply chain, this study found that the major challenges of the
healthcare system include procurement processes, forecasting a future demand, and
identifying a future demand.

Mlendo (2012) investigated procurement practices that have harmed medical availability in
both public and commercial hospitals. The report begins by stating that CMS is in charge of
medial sourcing. Furthermore, according to Mlendo's (2012) estimate, 80 percent of Malawi's
pharmaceuticals are imported rather than locally created. These two facts indicate that if
CMS runs out of drugs, it will purchase them from private vendors as a last resort. Other
researchers have noted the same issues, such as extended lead times and high costs incurred

12
as a result of this sourcing approach and imported purchasing. Surprisingly, the author
discovered in this study that the lead-time for medical supplies in public hospitals differs
from that of private hospitals. Medicines arrive in private hospitals in 7 to 14 days on
average, whereas they take 60 days on average to arrive in public hospitals.

2.4 Inventory Control Techniques

Inventory control refers to the tracking and management of commodities, which involves the
monitoring of commodities moved into and out of stockroom locations as well as inventory
balance reconciliation. Some of the techniques used in managing or controlling inventories
were discussed below:

2.4.1 ABC analysis

This technique is applied to stock and its management based loosely on the Pareto principle,
better known as the 80/20 rule. The Pareto principle, (80/20 rule) is a theory that 80% of
outcomes result from 20% of inputs (CIPS, 2013). In the world of inventory management, the
Pareto principle states that 80% of stock value is stored in 20% of the products that are
usually retained as stock items (Coyle et al., 2013). The ABC analysis, according to Brown
(in Bloomberg, Lemay, and Hanna 2012), categorizes products depending on their relevance.
Cash flows, lead times, stockouts, stockout expenses, sales volume, and profitability can all
play a role. After deciding on a ranking factor, break points for classes A, B, C, and so on are
determined.

When products are categorized or classed by their sales activity, the 80-20 notion is
especially beneficial in distribution planning. The top 20% might be classified as A things,
the following 30% as B items, and the remaining 40% as C items. Each item category could
be distributed in a different way. For example, A products may be dispersed across a large
geographic area through a number of warehouses with high stock availability, but C things
may be distributed from a single, central stocking point (e.g. a plant) with lower total
inventory levels than A items. B goods would use an intermediate distribution strategy that
relied on a small number of regional warehouses (Ballou 2014).

Another common application of the 80-20 principle and an ABC classification, according to
Ballou (2014), is to organize products at a warehouse or other stocking point into a small
number of categories, which are then controlled with varied levels of stock availability. The
product categorization is made on the spot. The idea is that not all products should be treated
equally in terms of logistics. The 80-20 percent notion, along with the resulting product

13
classification, provides a strategy for determining which products will receive varying levels
of logistics treatment based on sales activity.

2.4.2 Just-in-time inventory management

According to Harber et al. (2011), Shigeo Shing and Taichi Ohno introduced the just-in-time
(JIT) manufacturing system (also known as the Toyota Production System) at the Toyota
Motor Company in the mid-1970s. Zero inventory production system (ZIPS), minimum
inventory production system (MIPS), kanban production, kaizen production, stockless
production, pull-through production, and quick reaction (QR) inventory systems are all terms
used to describe JIT production. Since its introduction, JIT manufacturing has gotten a lot of
attention as both a concept and a disciplined technique of production. Three basic ideas
underpin the JIT production philosophy: waste elimination, constant quality improvement,
and employee participation in planning and execution.

This just-in-time manufacturing strategy, according to Gourdin (2011), necessitates

collaboration between manufacturers, suppliers, and transportation providers to get required
products to the assembly line at the precise time they are needed for production.

JIT, according to Gourdin (2011), is a disciplined strategy to improving manufacturing

quality, flexibility, and efficiency by eliminating waste and involving everyone in the
process. JIT isn't just about lowering inventory; it's also about improving quality. If correctly
developed, there are a slew of potential advantages. Certain criteria must be met in order to
reap these benefits. Respect for people and waste eradication must be among the objectives.
Creating a stable atmosphere, incentive and trust, bottom-up management, robots, quality
circles, and subcontractor networks are all examples of respect for people. JIT is run by
employees, not management. Employees identify issues and work to resolve them.
Employees improve the product's quality. No matter what management does, if employees do
not believe in JIT concepts, the system will collapse (Bloomberg, Lemay and Hanna 2012).

2.4.3 Economic Order Quantity (EOQ)

Plasecki (2011) defines Economic Order Quantity as an accounting method that calculates the
point at which the total cost of order and inventory is the lowest. Economic Order Amount is
defined by Lysons and Gillingham (2013) as the ideal ordering quantity for a stock item that
minimizes cost. When demand and lead time are reasonably consistent, as well as when there
is significant unpredictability and uncertainty, economic order quantity approaches have
proven to be successful inventory management techniques. This idea is relevant because it

14
implies that the proper or optimal level of stock or inventory that a company should keep or
store must serve to lower the cost of conducting business (Lysons and Gillingham, 2013).
According to Bachetti, Plebani, Saccani, and Syntetos (2010), stock management must be
organized in a consistent manner so that the organization knows when to request and how
much to request. This requires determining the nature of the financial Order -EOQ-
(Schonberger (2014). According to Gonzalez and Gonzalez, as organizations try to improve
stock management, the Economic Order Quantity (EOQ) and Re-request Point (ROP) are
important instruments that organizations can utilize to ensure that stock supply does not hit a
stock-out (2010). After a period of time, associations have held their stock in an
indiscriminate manner, necessitating a change in the way they conduct business. James and
Douglas (2000) state that the optimal requesting strategy is EOQ, which may be managed by
using the monetary request amount display to restrict the absolute conveying and requesting
expenses. The EOQ display is particularly useful for businesses and stockroom managers
who need to assess their stock arrangements in order to reduce expenses and increase profit.
EOQ is the most cost-effective stock renewal request estimate, limiting the overall cost of
stock seeking and stock holding (Kenneth & Brian, 2016).
2.4.4 Enterprise Resource Planning (ERP)
Enterprise resource planning (ERP) is defined by Lysons and Gillingham (2013) as a
business management system that integrates all of an organization's divisions and functions
using multi-module application software. Enterprise resource planning (ERP) is the most
recent and possibly the most significant advancement of material requirement planning (MRP
I) and manufacturing resource planning (MRP II), according to Lysons and Gillingham
(2013). While MRP I and MRP II allowed manufacturers to track supplies, work in progress,
and finished goods output in order to meet sales orders, ERP is applicable to all organizations
and allows managers from all functions or departments to have a consolidated view of what is
or is not happening across the organization.
2.5 Effects of effective inventory management to customer satisfaction

Customer satisfaction is defined by Morgan & Rego (2016) and Fornell et al (2016) as a
measure of a company's customer base in terms of size, quality, and loyalty. Customer
satisfaction leads to customer loyalty and product repurchase (Eckert, 2007). Information
management and customer collaboration are two methods that a company can use to provide
service to its customers. According to Eckert (2015), customer satisfaction refers to the
quality of products, services, price-performance ratios, and when a company meets and

15
surpasses the client's expectations. Customer satisfaction in retailing businesses can be
measured in terms of on-time delivery and satisfying customer specifications (Eckert, 2015).
Customer needs (having the products immediately and on hand to meet the customer's needs),
vendor partnerships (sharing information about sales, sales forecasts, and inventory levels),
and data integrity (data on SKU and location that aids in overall inventory management) are
all variables that are frequently used to define customer satisfaction in the retailing sector
(Lee & Kleiner, 2011). In an increasingly competitive climate, businesses must respond to
changing client needs (Zhang, 2015). Customer happiness, according to Zerbini et al (2017),
is one of a company's key indicators of profitability. Today's businesses are primarily
concerned with satisfying their customers, which has an impact on their competitiveness
(Rad, 2018). Customers' expectations, according to (Howgego, 2012), are heavily reliant on
the supply chain partners' adaptability.

2.5.1 Customer loyalty

Customer loyalty is defined as customers purchasing current brands over competing brands
on a regular basis (Wyse, 2012). Customer pleasure leads to client retention, which leads to a
loyal customer base in a firm, according to a study conducted by Mitchell (2014). Customer
loyalty necessitates manufacturing firms meeting all of their consumers' expectations in a
consistent and continuous manner (Campton, 2014). Customers frequently appraise the
quality of the services they receive based on their expectations, which leads to customer
satisfaction and loyalty (Colburn, 2013). According to Cacioappo (2010), a five percent
increase in client loyalty might result in a 25 to 85 percent rise in profitability. According to
Eckert (2015), loyal customers are six times more likely to purchase or promote a company's
products and services to others. According to many studies, disgruntled customers are more
likely to tell nine other people about their bad service and treatment, whereas satisfied
customers are more likely to tell five other people about their good service and treatment
(Cacioappo, 2010). Manufacturers must ensure that customers are satisfied with their
purchases both before and after they make them, as this is likely to contribute to customer
brand loyalty (Agarwal, 2017).

2.5.2 Repeat Purchases

Repeat purchases are a common sign of customer loyalty (Allen & Wilburn, 2012).
According to Tuli & Bharadwaj (2009), satisfied customers are more likely to adopt a
behavior of increasing their purchase as well as continuing to buy from the company.
According to Agarwal (2017), providing consumer happiness before and after a transaction

16
leads to recurrent purchases. Customer happiness would include characteristics such as
providing high-quality products, fair pricing, and flexibility before the customer makes a
purchase (Amini et al, 2015). Post-purchase customer satisfaction, on the other side, would
include things like repair services and efficient reverse logistics operations (Howgego, 2012).

2.5.3 On-time delivery

Customers are more satisfied, according to Wallin (2016), if the time it takes to deliver their
products is less than the time they are ready to wait once they have made an order. Due to the
importance of flexibility in achieving delivery deadlines (Gunasekara, 2011), information
sharing is necessary to enable supply chain partners to achieve customer-specified delivery
dates. Customer satisfaction and service quality are influenced by successful customer
delivery, according to a study conducted by Yin-mei (2013). Customers are believed to be
happier if their suppliers can meet and fulfill their requests within the specified time frame
(Widding, 2013).

2.6 The challenges faced by companies in managing the inventories.

Inventory management issues may wreak havoc on a business's earnings and customer
service. They can increase a company's costs and result in an overabundance of inventory that
is difficult to shift. The majority of these issues are caused by inefficient inventory
management and outdated methods (Gourdin et al, 2011).

According to Lambert et al (2011), there are a number of challenges in inventory

management, including having unqualified employees in charge of inventory, using a too
narrow measure of performance for their business, having a flawed or unrealistic business
plan for the future, and not anticipating shortages. Having employees in charge of inventory
who lack proper training, experience, or who ignore the job will result in inventory issues and
poor organizational performance. The application of a performance measure for company that
is excessively limited. This is a situation in which the performance measures are too narrow
and do not cover all aspects of the business. Many areas are missed, which might result in
inventory shortages or stockpiling.

Failure to anticipate how well a firm will do in the future is caused by poor or unrealistic
business strategy (Lambert et al, 2011). This has an impact on inventory management
because if a company forecasts greater growth than it really sees, it may end up with an
inventory overstock. If forecasters do not expect adequate growth, forecasters will be left

17
with insufficient stocks. Failure to identify shortages a head leads to lack of enough products
in stock to meet customer demands which spoil customer relations. Failure to recognize
shortages early on results in a lack of products in stock to meet client needs, causing
customer relations to suffer. Inventory management employees should check their inventory
on a regular basis to ensure there are enough products in stock.

According to Braglia (2014) and Montanari (2014), there are bottlenecks and weak points in
delivery that slow down deliveries and systems; the "bullwhip effect" - an organization's
over-reaction to market changes that leads to unnecessary overstocking; distressed stock in
inventory; excess inventory in stock and unable to move it quickly enough; inaccurate
computer assessments of a company's financial health, and complicated computer inventory
systems.

Overstocking, understocking, and inventory expenses result from the aforementioned issues,
lowering the amount of working capital necessary. Holding stock is an expensive business;
the cost of holding stock is estimated to be 1/3 of the cost of production or purchase each year
(Johnson, 1998). Interest on stock investments, storage space - rent, lighting, heating,
refrigeration, and air conditioning, insurance and security, degradation and obsolescence, lost
future sales, and labor frustrations due to stoppages are all included in the cost (Granville,
2017).

Excessive stock levels are undesirable, according to Lucay (2014), since they increase the
risks of inventory becoming obsolete, stock loss due to damage or theft, increased storage
costs such as rent and insurance, and unneeded tying up of the firm's finances. He goes on to
say that if a company maintains high volumes of inventory, it is foregoing revenues, implying
that the company's long-term probability position is jeopardized because money are not being
invested in other profitable projects.

2.7 Conceptual framework

According to Kombo and Tromp, a concept is an abstract or general idea deduced or
produced from specific occurrences (2009). A conceptual framework, according to Mugenda
and Mugenda (2003), is a postulated model that identifies the model under research and the
link between the dependent and independent variables. The conceptual framework of the
study was based on key concepts of the study and literature review. The conceptual
framework was then used to analyze the results of the research. It was based on the inventory

18
management practices that which has an influence on the performance of retail outlets. This
is shown in the figure below;

Figure 2.1: Conceptual framework

Independent variables

Dependent variables
 Information system
 Staff skills
 Documentation systems  Improved performance
 Lead time  Service delivery
 Stock replenishment  Market share
 Communication  Profitability (Return on
investment)

Intervening variables

 Government policies
 Socio-economic factors
 Personnel capacity
 Management practices

In this framework, there are certain factors influencing the performance of retail outlets
(supermarkets) in the Lilongwe City. For this study, key factors being considered as
independent variables are: information system leading to proper forecasting and
quantification, proper staff skills, proper documentation, systems long lead-time due to
importing strategy, frequency in stock replenishment, security and assistance during transit,
frequent communication between supermarkets and suppliers. Performance of the retail
outlets is the dependent variable that is affected by the independent variables as shown above.

19
According to Ogbo and Onekanma (2014), having goods in stores offers an added benefit for
the company because customers would be satisfied immediately, resulting in a better
performance rating. When inventory is stored in a warehouse, an organization benefits from
prompt delivery and avoids stock outs. Inventories are kept by businesses for a variety of
reasons. Inventories play an important role in the overall production system, and because "it
is physically impossible and economically impractical for each stock of item to arrive exactly
where and when it is needed," it is necessary to retain some inventory on hand at all times.
Transparency in inventory management systems is critical since it eliminates corruption, a
skewed procurement process, and the purchase of substandard goods for the firm, all of
which prove to be incredibly costly (Githui, 2012). According to Mazanai (2012), stock
shortages are a pain for most businesses, and they lead to consumer unhappiness, which leads
to a company's poor performance. To avoid stock outs, businesses should keep track of their
inventory on a regular basis.

The stochastic character of demand and lead time is not accomplished due to the manual
system of checking and validating. Mazanai (2012) further claims that due to a lack of
automated systems, stock outs occur frequently, and replenishment is done in a hurry,
resulting in costly inventory management and, as a result, low performance standards. Firms
with centralized stock holding have an advantage since they can keep track of their inventory
and avoid stock duplication in their subsidiaries. Because high-value stocks are held, there
are times when an organization's warehouse has too much stock, meaning that a significant
portion of their capital is tied down with stocks (Mazanai, 2012).

2.7 Chapter Summary

This chapter has critically analysed and logically presented the literature related to this study.
The chapter has also discussed what other authors have written on the influence of inventory
management on performance of business outlets. The chapter has also presented the
theoretical framework, legal framework as well as conceptual framework of the study, which
shows the relationship between independent, dependent, intervening and moderating
variables. The next chapter presents the literature related to the topic under study.

20
 CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
This chapter discussed the research methodology that was used to achieve the objectives set
for this study. The instrument used to collect the data, including methods implemented to
maintain validity and reliability of the instrument, were also described. Data was collected
from primary sources and secondary sources through semi-structured interviews,
questionnaires and a review of secondary sources.

3.2 Research Philosophy

According to Saunders and Thornhill (2007), research philosophy is the development of the
background of the study including research knowledge and its nature. Therefore, this study
adopted interpretivism philosophical approach which according to Saunders et al (2007) is
the development of knowledge in a particular field. Fischer (2010) argues that in an
interpretive research, the researcher seeks people’s accounts of how they make sense of the
world, structures and processes within it. Saunders, Lewis & Thornhill (2012) state that
according to interpretivist approach, it is important for the researcher as a social actor to
appreciate differences between people, and that interpretivism studies usually focus on
meaning and may employ multiple methods in order to reflect different aspects of the issue.
Pizam and Mansfeld (2009) opine that general interpretivist approach is based on the
following beliefs: Relativist ontology which is an approach that perceives reality as
intersubjectivety that is based on meanings and understandings on social and experiential
levels, and transactional or subjectivist epistemology which state that people cannot be
separated from their knowledge; therefore, there is a clear link between the research and
research subject.

3.3 Research Approach

The study adopted a deductive study approach from which both quantitative and qualitative
were considered in this context. The deductive approach deals with what is already known as
existing theories or ideas about a subject by identifying the theory and testing through

21
observation to confirm the theory (Ofori-kuragu, 2013). This approach involves a top-down
approach in the formulation of the theory and testing of hypothesis while maintaining the
independence of the researcher. That is to say that, the process starts from the identification
of the relevant theories and the use of scientific study through observations to confirm these
theories. The researcher used deductive approach because it generally implied the use of
quantitative methods for the observations, collection and analysis of data to test the validity
of assumptions (Kwofie, 2015).

According to Saunders et al (2009) there are three research approaches namely qualitative,
quantitative and mixed methods. Qualitative approach includes use of interviews, while
quantitative approaches involve use of descriptive statistics generated in the form of
frequency tables, graphs, charts and the chi square test as well all the necessary statistics.
Qualitative research methods are defined by Strauss and Corbin (1997:17) as “any type of
research that produces findings not arrived at by statistical procedures or other means of
quantification”. They can refer to research about many aspects of life, such as life
experiences, behaviours and organisational functioning. The study was both qualitative and
quantitative in nature. According to Kothari (2004) qualitative and quantitative approach
supplement each other in that, qualitative techniques provide in-depth explanations while
quantitative technique provided the hard data needed to meet the requirements of the
objectives

3.4 Research Design

Research design is an overall structure that provides an outline of how the study will be
carried out. For the purpose of this study both a descriptive and cross-sectional design were
used. Cross-sectional studies are carried out at one-time point or over a short period. They are
used to estimate the prevalence of an outcome of interest for a given population, providing a
snapshot of the outcome and characteristics associated with it, at a specific point in time
(Bernard, 2017). According to Mugenda & Mugenda (2003), the purpose of descriptive
research is to determine and report the way things are and it helps in establishing the current
status of the population under study. Patten and Newhart (2017) argue that a descriptive
design is majorly used in primary studies and it allows one to collect and make a summary of
the findings in a clear way. Coolican (2017) indicates that a descriptive design is majorly
used to answer questions about What, Why and How on a given phenomenon. The
descriptive design is selected because it allows researchers to gather numerical and
descriptive data to assess the relationship between the dependent and the independent

22
variables. This made it possible for the researcher to produce statistical information on the
effect of inventory management practices on the performance of major retail outlets
(supermarkets) in Lilongwe City. The chosen design allowed the researcher to collect both
qualitative and quantitative data.

3.5 Research Site/Area

This study was conducted in Lilongwe City. The supermarkets located in Lilongwe city were
sampled. Lilongwe is the capital city as well as the largest city in Malawi. Lilongwe is
purposely selected because it is a fast growing and highly populated urban town and the
supermarkets have rapidly increased over the last five years. There are numerous
supermarkets that have been established in Lilongwe City which include: SPAR, Shoprite,
Sana, 7Eleven, Wulian Shopping Centre, Shanghai Shopping Centre, Game, Chipiku Plus
etc. The study was conducted in three of the leading supermarkets in Lilongwe City:
Shoprite, SPAR and Chipiku Plus.

3.6 Sample Size and Sampling techniques

3.6.1 Population of the Study
A target population is classified as all the members of a given group to which the
investigation is related, whereas the accessible population is looked at in terms of those
elements in the target population within the reach of the study. Based on the
recommendations of Flick (2015) in defining the unit of analysis for a study, the target
population for this study was 72 staff and customers of SPAR (Lilongwe City Mall
Complex), Chipiku Plus Stores (Lilongwe City Mall Complex), and Lilongwe Shoprite
(Shoprite building opposite Lilongwe City Mall Complex).

3.6.2 Sample Size

According to Kombo and Tromp (2006), to sample is to select representative elements from
the population for inclusion in the study. Sampling describes the sampling unit, sampling
frame, sampling procedures and the sample size for the study. The sampling depicts the list of
all populace units from which the specimen was chosen (Jankowicz, 2010). As indicated by
Gay (2009), sampling includes selecting a given number of subjects from a characterized
population in order to represent the whole population. Sampling is a deliberate choice of a
number of people who are to provide the data from which a study drew conclusions about
some larger group whom these people represent (Onabanjo, 2010). The sample size is a
subset of the population that is taken to be representatives of the entire population. Sampling

23
frame was drawn from the senior, middle, and lower management staff of SPAR (Lilongwe
City Mall Complex), Chipiku Plus Stores (Lilongwe City Mall Complex), and Lilongwe
Shoprite (Shoprite building opposite Lilongwe City Mall Complex). as well as customers of
the supermarkets who were conveniently selected. The sample of 72 respondents was used to
represent the whole population. The composition of the sample is shown in the table 3.1
below.

Table 3.1 Sample Size of the Study

S/n Types of Respondents Name of Retail Sample Method employed

Outlet size

1. Senior Management Chipiku Plus 1 Purposive

Shoprite 1 Purposive

SPAR 1 Purposive

2. Middle Management Chipiku Plus 2 Purposive

Shoprite 2 Purposive

SPAR 2 Purposive

3. Junior Staff Chipiku Plus 6 Simple Random Sampling

Shoprite 6 Simple Random Sampling

SPAR 6 Simple Random Sampling

4. Customers Chipiku Plus 15 Convenient sampling

Shoprite 15 Convenient sampling

SPAR 15 Convenient sampling

Total 72

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3.6.3 Sampling Techniques
Literature and previous studies confirm that sampling can be divided into two broad
categories: probability or representative sampling and non-probability sampling (Saunders et
al., 2003; Kothari, 2003). Non-probability sampling is used in large-scale surveys where the
subjects are not known and thus non-random selection is used (Saunders, et al., 2003).
According to Saunders et al. (2003) four types of non-probability sampling have been
identified: convenient, snowball, quota and purposive or judgmental sampling. Four types of
probability sampling are: systematic, simple random, stratified random and cluster sampling,
(Saunders et al., 2003). The researcher employed purposive sampling techniques for senior
and middle managers. Bryman and Bell (2011) opine that this method is used in order to
identify the right sample element based on their roles or position in organization in relation to
the process of inventory management practices and organizational performance. Fisher
(2010) argues that purposeful sampling requires identifying the people who have the answers
to your questions. Kothari (2004) agreed with the above statement and said that in purposive
sampling items for the sample are deliberately selected by the researcher. The researcher used
simple random probability sampling technique in selecting junior staff members in which the
respondents were deemed to have equal probability of being selected as a representative of
the target population. The researcher further used convenient sampling in selecting customers
of the selected supermarkets.

3.7 Research Instruments

3.7.1 Questionnaires
Primary data was collected through questionnaire and interviews. Pretested self-administered
questionnaire was used by the researcher to collect primary data. A questionnaire is to be
chosen as the main data collection instrument. A questionnaire is a printed self-report form
designed to elicit information that can be obtained through the written responses of the
respondents. The information obtained through a questionnaire is similar to that obtained by
an interview, but the questions tend to have less depth (Burns and Grove, 1993). The
questionnaire was administered by the researcher using face to face interviews. The open-
ended questions were used so as to encourage the respondent to give an in-depth and felt
response without feeling held back in illuminating of any information and the closed ended
questions allow respondent to respond from limited options that had been stated. According
to Saunders, Lewis and Thornhill (2012), the open ended or unstructured questions allow
profound response from the respondents while the closed or structured questions are

25
generally easier to evaluate. The questionnaires were used in an effort to conserve time and
money as well as to facilitate an easier analysis as they are in immediate usable form.

3.7.2 Interview Schedules

Face-to-face interviews was also administered senior management level staff in the retail
outlets. Interviews were used since they have a high return rate (Kidder, 1981) and also helps
to clarify ambiguous responses and filling in missing gaps.
3.7.3 Pilot Study
A pilot testing of the questionnaire was done using ten respondents and they were identified
in person by the researcher. The researcher then had the opportunity to learn the various
weaknesses of the questionnaire and corrected them before the questionnaire was
administered to participants to collect data more widely. The respondents were issued with
questionnaire to fill by themselves by the researcher using drop and pick method. The
researcher also assured respondents of confidentiality on the information provided. Therefore,
the study was considered to be highly reliable.
3.8 Data Analysis Procedures
Analysis of data is a process of inspecting, cleaning, transforming, and modelling data with
the goal of highlighting useful information, suggesting conclusions, and supporting decision
making (Sekeran, 2006). The collected data was thoroughly examined and checked for
completeness and comprehensibility. The data was then summarized, coded and tabulated.
Statistical Package for the Social Sciences (SPSS) and Microsoft Excel were used to do the
analysis. Descriptive statistics especially frequencies and cross tabulation was applied to help
establish patterns, trends and relationships, and to make it easier for the researcher to
understand and interpret the implications of the study. Tables and percentages were used to
present the data.

3.9 Validity Reliability and Generalizability

3.9.1 Reliability
According to Collis and Hussey (2003), reliability is concerned with the findings of the
research. Saunders et al (2009) agrees with the above and refers reliability as the extent to
which data collection techniques or analysis procedures will yield consistent findings.
Reliability will be achieved because the instrument will produce the same results. In survey,
the instrument is said to be reliable if when used repeatedly results are consistent (Hair et al.,
2003).

26
3.9.2 Validity
Validity can be defined as the degree to which a test measurement measures what it is
supposed to measure (Carmines & Zeller 1979). Creswell (2009) argued that validity is
whether one can draw meaningful and useful inferences from scores on the instruments.
Zikmund et al (2010) agreed with the above statements and referred to external validity as the
accuracy with which experimental results can be genaralised beyond the experimental
subjects. To improve on validity, a pilot test was carried out on the questionnaire.

3.9.3 Generalizability
Based on the sampling design, a sample should reflect a true representation of the population
without any bias so that it may result in valid and reliable conclusions (Khotari, 2004). From
the foregoing, the researcher therefore deems that results of this project can be generalized
and that readers of the results may apply, or transfer, the results to their own situation.

3.10. Ethical Consideration

The researcher followed the research ethics code of the Exploits University. Among the
ethics to be followed is not to force respondents or participants to take part in the study if
they feel not so. This was explicitly mentioned to the interview participants and questionnaire
respondents before the data collection exercise. Consent to carry out the study at the
institutions under study was also sought, and confidentiality and privacy maintained.

3.11. Chapter Summary

This chapter looked at the design and methodology of the research. Data collection methods
that will be used such as semi structured interviews and interviews have been identified.
Research ethics, consent, confidentiality issues to be used in the study were also discussed.

27
 CHAPTER FOUR
ANALYSIS OF RESULTS AND DISCUSSIONS OF FINDINGS
4.1 Introduction
This chapter provides the findings, presentation, interpretation and discussion of the findings
obtained from the study. The research objective of the study was to benchmark inventory
management practices used by major retail outlets (supermarkets) in Lilongwe City against
international best practices. Collection of these data was done using questionnaires which
was administered to respondents, questionnaire involved closed and open questions. An
overall of 72 questionnaires were distributed to staff and customers of three of the major
supermarkets in Lilongwe City. During the course of gathering data, all but 4 questionnaires
were returned completely filled. This accounted for 94% response rate. Of the 68 respondents
who filled and returned the questionnaires, 27 were the staff of the supermarkets while 41
were the supermarkets’ customers. From the analysis it can be concluded that majority of the
respondents were able to participate in the study. This response rate is considered good to
make conclusions for the study. Mugenda and Mugenda (2003) observed that a 50% response
rate is adequate, 60% good while 70% and above is considered very good. Also, Bailey
(2000) asserts that a response rate of 50% is adequate, while a response rate greater than 70%
is very good. The response is illustrated in the below table:

Table 4.1: Response Rate

RESPONSE Frequency Percentage
Questionnaires filled & returned 68 94.4
Non Responded (Unsuccessful ) 4 5.6
TOTAL 72 100

28
4.2 Socio-demographic Characteristics of the Respondents
This section presents an analysis on demographic factors of the respondents who participated
in the study. The socio-demographic characteristics of the respondents was considered by the
study so as to establish how the different characteristics of respondents could differently
understand the relationship between inventory management and the performance of
supermarkets in Lilongwe City. Regarding the background information, the following data
was revealed by the study.
4.2.1 Gender of the Respondents
The purpose of this question was to find out the gender distribution of the various
respondents working at Chipiku Plus, SPAR and Shoprite supermarkets. The gender
distribution of the 27 staff members of the three supermarkets understudy is illustrated in
figure 4.1 below.

Figure 4.1: Gender of Respondents

Gender of Respondents
7

67%
6

55 55%
5

45% 45%
4

33%
3

0
SPAR Chipiku Plus Shoprite

Female Male

As illustrated in table 1, the study further revealed that Chipiku Plus had 67% female and
33% male employees respectively; SPAR had 55% female and 45% male employees
respectively; and Shoprite had 45% female and 55% male employees respectively. The study
revealed that the gender majority representation varied from supermarket to supermarket and
that Shoprite which had more men than women performed better than those with majority of

29
women employees was found to be doing better than Chipiku Plus and SPAR based on the
element of gender because most of the work done in relation to inventory management
requires more energetic people since it is mostly manual and can best be done by men.

4.2.2 Level of Education

The study sought to ascertain the formal literacy levels of the respondents (both staff and
customers) based on their attained highest qualifications; and the findings are presented in
figure 4.2 below:
Figure 4.2: Level of Education

Figure 4.2 above shows that according to the findings from the results characterizing the
respondents by their level of education, those respondents that have attained MSCE
qualification are highest with a frequency of 56%. These were followed by respondents who
had attained College Certificate qualification who constituted a frequency of 26%, 15% had
College Diplomas while those with undergraduate degree constituted 4%. A breakdown of
employee education level revealed that; Chipiku Plus had 43% MSCE holders, SPAR had
21% MSCE holders while Shoprite had 36% MSCE holders; Chipiku Plus had 29% College
Certificate holders, SPAR had 29% Certificate holders while Shoprite had 52% College
Certificate holders; Chipiku Plus had 50% College Diploma holders, SPAR had 25% College
Diploma while Shoprite had 25% College Diploma; only Shoprite had employees with

30
bachelor degree or higher qualification. The findings thus revealed that Shoprite was
performing better than the other supermarkets because it had qualified supply chain personnel
managing their inventories unlike the other supermarkets.

4.2.3 Period spent working at the Organization by the respondents

The study further deemed it necessary to determine the period spent working at organizations
and the findings are elaborated in figure 4.3 below.

Figure 4.3: Duration with the organization

100%

90%

80%

70%

60%

50%
50% 50%
40% 44% 44% 42%

30% 33% 33%

29% 29%
20% 22% 22%

10%

0%
Less than 2 years 2 - 5 years 6 - 10 years Over 10
0%years

Chipiku Plus SPAR Shoprite

Data gathered from the 27 staff of the supermarkets showed that 10 respondents, representing
33% had spent a period of less than 2 years and 2 – 5 years respectively in their respective
firms, 26% of the respondents had worked 6 – 10 years in their respective organizations while
7% of the respondents had over 10 years working experience in their respective firms. From
the above figure, it is established that 33% of those who said they had spent a period of less
than 2 years in their respective firms, were working at Chipiku Plus, 44% were working at
SPAR while 22% were working at Shoprite. Furthermore, findings show that 44% of those
who said they had spent a period between 2 - 5 years in their respective firms, were working
at Chipiku Plus, 33% were working at SPAR while 22% were working at Shoprite. Findings
also show that 29% of those who said they had spent a period of between 6 – 10 years in their

31
respective firms, were working at Chipiku Plus, 29% were working at SPAR while 42% were
working at Shoprite. Of the 7% of the respondents who had over 10 years working experience
in their respective firms, 50% were working at Chipiku Plus and 50% were working at
Shoprite. None was working with SPAR since SPAR opened in 2015 and has no more 10
years of operation in Malawi. Experienced staffs are likely to perform better at their jobs due
to the job experience gained over time, and this this could further be an indication why
Shoprite and Chipiku Plus were performing better in inventory management than SPAR.

4.2.4 Designation of Respondents

The respondents were asked to state their job position. Job position of the respondents
ensured that the survey results were valid and reliable.

Figure 4.3: Designation of respondents

It is noted in figure 4.3 above that the majority of staff respondents, 18 (67%) were support
staff, 6 (22%) were middle management staff while 3 (11%) were senior management staff.
The majority of respondents were thus from support staff. In the view of Tungo (2014), the
position occupied by respondents was crucial in order to ensure aspects of familiarity and
experience of the respondents in matters of inventory management as well as relevance of
professional inclination of people interviewed.

32
4.2.5 Percentage of budget that goes to supply chain activities
The research asked staff respondents to highlight the percentage of budget that goes to supply
chain activities at their organization. Findings of the study show that the majority of
respondents, 11 representing 41% highlighted that 60% of the supermarkets’ budget is
dedicated for supply chain activities; 10 (37%) respondents indicated that they don’t know
the percentage of budget in their supermarkets that goes into supply chain activities, while 6
(22%) respondents indicated that in their supermarkets 40% – 60% of the supermarkets’
budgets goes into supply chain activities. Of those who highlighted that over 60% goes into
supply chain activities, 27% were from Chipiku Plus, 18% were from SPAR and 54% 27%
were from Shoprite. The supply chain activities are important to the supermarkets as it is
important to their business survival.

Figure 4.5: Percentage of budget that goes to supply chain activities

0.6 54%
50%
0.5
40%
0.4
33%
30%0% 30%0%
27%
0.3
17%
18%
0.2

0.1
0% 0% 0%
0
Less than 40% 40% - 60% Over 60% I Don’t Know

Chipiku Plus SPAR Shoprite

4.2.6 The value of the monthly supermarket turnover

Respondents were further asked to indicate what they deemed to be the value of the monthly
supermarket turnover for their supermarkets. Findings from the study are illustrated in table
4.2 below.

Table 4.2 Monthly turnover value for the supermarket

Frequency Percent Cumulative

Percent

33
 MK 20Million - MK 50
7 25.9 25.9
Million
MK 51M illion - MK
8 29.6 29.6
Valid 100Million
Over MK 100Million 8 29.6 29.6
I dont know 4 14.8 14.8
Total 27 100.0 100.0
Total 27 100.0

The results show that 26% of the supermarkets turnover was between 20 and 50 million
Kwacha; the turnover for 30% of the supermarkets was indicated to be between 51 and 100
million Kwacha, while 30% of the supermarkets turnover was indicated as being over 100
million Kwacha. 15% of respondents indicated that they were not sure of the monthly
turnover of the supermarkets. These mainly were responses from support staff as they
indicated that they were not privy to know the financial statements of their supermarkets.
From the findings, the monthly turnover in the supermarkets can be in relation to size,
location and availability of different range of products in the supermarkets and this therefore
necessitates the establishment of an effective inventory management practices.

4.2.7 The average Stock (inventory) in the Supermarket

The study requested respondents to indicate the average stock that their supermarket kept.

Table 4.3: Average Stock in the Supermarket

Frequency Percent Cumulative

Percent

MK200M – MK400M 10 37 37.0

Valid Over MK400M 17 63 63.0
Total 27 100 100

Total 27 100.0

It is noted in table 4.3 above that on monthly turnover, the results indicated that 37% of the
respondents identified that the average stock in the supermarkets was between 200 and 400
million; while 63% of the respondents said that the supermarkets maintain an average stock
level of over 400 million. From the results, the average value of stock being maintained by

34
the supermarkets varied and this enables the supermarkets to ensure that they have the goods
needed by the customers all the time thus promoting delivery of services to its customers.

4.2.8 The average annual value of stock redundancy in the supermarket

The researcher further asked respondents to indicate the average annual value of stock
redundancy in the supermarket. Findings of the study as shown in table 4.4 below indicate
that 11.1% of the respondents deemed that the average annual value of stock redundancy in
the supermarket was indicated as being less than MK5 Million; 37% of the respondents said
that supermarkets maintains an average of between 5 and 10 million annual value of stock
redundancy, 25.9% of respondents indicated the average annual value of stock redundancy
lies between 10 and 20 million while 25.9% of the respondents maintain that supermarkets
annual redundancy was over 20 million. Of the supermarkets, SPAR had more stock
redundancy rate than either Shoprite and Chipiku Plus. Redundancy is a function of
organizational change and/or weaknesses in organizational management. The main causes of
redundancy in stock in the supermarkets may be poor forecasting of demand, weak customer
relationships leading to cancelled orders, overstocking/poor stock control, and change in
internal policy. Largely, this may be due to the fact that the supermarkets largely employee
under qualified supply chain personnel who may be unable to execute inventory management
practices efficiently and effectively.

Table 4.4: Average annual value of stock redundancy

Frequency Percent Cumulative Percent

Less than MK 5M 3 11.1 11.1
MK 5M – 10M 10 37.0 37.0
Valid MK10M – MK20M 7 25.9 25.9
Over MK20M 7 25.9 25.9
Total 27 100.0 100.0
Missing System 0 0
Total 27 100.0

4.2.9 Frequently Patronized Supermarket

Apart from getting views from staff of the supermarkets, the researcher deemed it necessary
to get customers perspective as well. The researcher asked respondents to indicate the
supermarket that they frequently patronized. Results in figure 4.8 below reveal that 15
respondents, representing 37% indicated Chipiku Plus and Shoprite apiece, while 11 (27%)

35
respondents had identified SPAR as the supermarket they patronized the most. The findings
indicate that respondents had their own supermarkets they liked patronizing the most.

Figure 4.8: Frequently Patronized Supermarket

4.2.10 How often customer patronize Supermarkets

The researcher further wanted to find out from customer respondents as to how often they
patronize the supermarkets. Findings of the study are illustrated in figure 4.9 below;

Figure 4.9: How often customer patronize Supermarkets

36
Findings in figure 4.9 above reveal that 22 (54%) respondents indicated that they used to
patronize the supermarkets once in a month, 12 (29%) respondents said that they patronize
the supermarkets 1 – 2 times per week, 5 (12%) respondents said 3 – 4 times per week while
2 (5%) respondents said almost daily. The findings reveal that respondents that choose once a
month were in majority.

4.3 Inventory Management Practices Used in Major Retail Outlets

This study objective was set to find out the techniques of inventory management used in
Supermarkets within the Lilongwe City in Malawi.

4.3.1 Categories of Inventory Management Practice

This section sought to set up the degree to which various inventory controlling practices were
being adopted by the supermarkets. The respondent were asked to indicate relevant
information that relates to the type of inventory management approach that supermarkets
utilizes. As it is noted in figure 4.6 below, the study found that the ABC systems had high
response of 6 respondents indicating 22%, 2 (7%) respondents indicated Just In Time (JIT), 6
(22%) respondents identified Vendor Managed Inventory (VMI), 4 (15%) respondents
indicated Economic Order Quantity, 4 (15%) respondents identified First In First Out (FIFO)
approach while Enterprise Resource Planning had 5(19%) respondents. Results from the
study indicate that the same supermarket could be using two or more approaches at one time.
It was established in terms of ERP systems that Chipiku Plus uses Integrity Systems whereas
Shoprite and SPAR uses Oracle. The study found that Electronic Data Interchange is used in

37
inventory management and that the supermarkets use Bar Coding in transaction. The findings
are in synch with Mohamed and Kibet (2019) whose study revealed that institution uses ABC
analysis in inventory management as it leads to optimization of inventory, helps reduction in
inventory management costs, reduces procurement costs and increases cash flow by the right
items being available for use. This study tends to agree with this concept since the institutions
which have formally ABC analysis carry their operations more efficiently. Furthermore, the
findings are in conformance with Gonzalez and Gonzalez (2010) who opine that EOQ model
is a very important tool that supermarkets can also use to ensure that inventory supply does
not hit a stock out. The EOQ model helps organizations to reduce inventory management
costs by reducing the cost of ordering and holding stock.

Figure 4.6: Inventory management technique

4.3.2 Standard lead time in supermarkets.

The respondents were asked to give response on the standard lead time for products in their
various supermarkets and below were their responses.

Figure 4.7: Standard lead time

38
It is noted in figure 4.7 above that 1 (4%) respondent indicated that the standard lead time the
supermarkets for receiving inventory from their suppliers is between 1 – 10 days. The second
group represents 11% of the respondents represent with lead times of 11 – 20 days. Then
there is 19% who said the standard lead in the supermarkets is between 21 – 30 days. This
was followed by 30% of respondents who said the standard lead in the supermarkets is
between 31 – 40 days, while 37% of respondents indicated that the standard lead in the
supermarkets is over 40 days. The results indicate that the standard lead-time in the
supermarkets is long in all the three supermarkets. The long lead time is as a result of
importation of their raw materials from other countries like South Africa, Botswana, and
Tanzania thereby increasing their lead time. In addition delays at border posts and customs
houses and bureaucracy may be among contributing factors for longer lead times. This long
lead time affect supermarkets performance and often associated with high risk and cost.

4.4 Factors that Affect Inventory Management Practices in Major Retail Outlets
The study also assessed factors that affect inventory management practices on organizational
performance of the three major retail outlets (Supermarkets) in Lilongwe City. The factors
were deemed important because they play a role in determining and shaping the inventory
practices of the organization. The factors do vary from organization to another depending
upon the size, business, culture and environment in which the organization is operating. To
capture information on the influencing factors the questionnaire presented inventory

39
 management systems, standard operating procedures (SOPs) on inventory management and
asked respondents to rate to a scale of 1 to 5.

4.4.1 Vendor Managed Inventory

Respondents were asked to rate the statements provided on Vendor Managed Inventory
(VMI) techniques in the supermarkets in Lilongwe City. The respondents were asked to rate
the statements as follows: 1 = strongly agree; 2 = somewhat agree; 3 = Neither Agree or
Disagree; 4 = Somewhat Disagree; 5 = Strongly Disagree. Standard deviation was used to
measure the variance. The distributions with a coefficient of variation higher than 1 are
considered being high variance whereas those with a coefficient of variation lower than 1 are
considered to be low-variance. Furthermore, a small mean indicate that respondents agree
with the statements. The results on the actions practiced under the vendor managed inventory
are presented in Table 4.5 below

Table 4.5: Vendor Managed Inventory

Factors Mean Std. Dev. Std. Error

The supermarket provides the vendor all inventory information

necessary for replenishment 2.423 1.138 0.223

The supermarket vendor uses available information system to monitor

inventory or place new orders at continuous manner 2.038 1.216 0.238

Our vendor is given access to the supermarket inventory and demand

information 2.731 1.116 0.219

The vendor has the authority and the obligation to replenish

purchaser’s inventory according to collectively agreed inventory
concepts and targets 2.154 1.19 0.233

Overall Mean = 2.337

Findings from table 4.5 above reveals that to some extent, under the vendor managed
inventory system, the supermarket vendors use available information system to monitor
inventory in the supermarket or place new orders on continuous manner (M = 2.423, SD =

40
 1.138) and in the process the supermarket provides the vendor all inventory information
necessary for replenishment originating from the business unit (M = 2.038, SD = 1.216). In
concurrence with Wanyonyi (2017), the low standard deviation means in the answers implies
that there was a high level of concurrence among the respondents on their perception with
regard to the two practices concerning VMI system. VMI system also guides the supermarket
with crucial information on monitoring and ordering of new product (M = 2.731, SD =
1.116). Furthermore, the majority of respondents agreed to some extent that supermarket
provides the vendor with access to the supermarket inventory and demand information as
well as the authority and the obligation to replenish the purchaser’s inventory according to
collectively agreed inventory control concepts and targets (M = 2.154, SD = 1.19). The
results are in agreement with Dabholkar and Overby (2012) who opine that with effective
VMI system, customers of a retail chain will not have to go to different outlets to get their
products, because more identification of opportunities occur under the vendor managed
system because the resultant improvement of associations with suppliers that pace service
delivery improvement.

4.4.2 Economic Order Quantity

Respondents were asked to rate the statements provided on Economic Order Quantity (EOQ)
techniques in the supermarkets in Lilongwe City. The respondents were asked to rate the
statements as follows: 1 = strongly agree; 2 = somewhat agree; 3 = Neither Agree or
Disagree; 4 = Somewhat Disagree; 5 = Strongly Disagree. The results on the actions
practiced under the Economic Order Quantities are presented in Table 4.6 below

Table 4.6: Economic Order Quantity

Factors Mean Std. Dev. Std. Error

The firm knows with certainty the replenishment period of its items
and therefore assist them in identifying the fast moving and dormant 0.169
product.
1.539 0.859

The supermarket stocks or sales made by a firm remains unchanged

throughout the year. 2.346 0.846 0.166

When stocks reach zero level, an order for replenishment is placed

without further delay 2.654 1.164 0.228

41
 Overall Mean = 2.18

It is noted from table 4.6 above that 17 (63%) respondents agreed to a somewhat extent that
with the application of the application of the EOQ system, the supermarkets knows with
certainty the replenishment period of its items and therefore assist them in identifying the fast
moving and dormant product (M = 1.539, SD = 0.859). The outcomes further reveal that 12
(44.4%) respondents agreed to a somewhat extent that the application of EOQ techniques is
such that when stocks reach zero level, an order for replenishment is placed without further
delay (M = 2.346, SD = 0.846). The low standard deviation mean that there was a high
agreement among the respondents. Nevertheless, the results reveal that to as somewhat
extent, the supermarkets stocks or sales made by a firm remains unchanged throughout the
year (M = 2.654, SD = 1.164). The outcomes concur with that of Tumuhairwe (2012) who
suggest that in firms where inventory control choices have been effectual, the organization
will have developed Inventory Planning Models that focus on the challenges involving
inventory volumes as well as timing.

4.4.3 Just – in –Time (JIT)

Respondents were asked by the researcher to rate the statements provided on Economic Order
Quantity (EOQ) techniques in the supermarkets in Lilongwe City. The respondents were
asked to rate the statements as follows: 1 = strongly agree; 2 = somewhat agree; 3 = Neither
Agree or Disagree; 4 = Somewhat Disagree; 5 = Strongly Disagree. With regard to the
application of the JIT system by the supermarkets in Nairobi, the outcomes are presented in
Table 4.7.

Table 4.7: Just – in –Time (JIT)

Factors Mean Std. Dev. Std. Error

The supermarket employs a zero-stock level of its inventory

3.539 0.761 0.149

The firm has only the required inventory when needed 1.885 0.816 0.16

The firm replenishes inventory just when needed 2.577 1.27 0.249

42
Inventory is delivered at the right time and at the right place by the
suppliers 2.462 1.174 0.23

Overall Mean = 2.616

From the findings in table 4.7 above, it is clear that majority disagreed to a high extent that
supermarket employs a zero-stock level of its inventory with a mean of 3.5 and standard
deviation of 0.8. The findings however, show that the majority of respondents agreed to a
lesser extent that inventory is delivered at the right time and at the right place by the suppliers
(M = 2.462, SD = 1.174). The majority of respondents disagreed that the supermarkets
replenishes inventory just when needed (M = 2.577, SD = 1.27). This implies that the firms
practice just in time technique in their inventory management in order to enhance operational
performance in their firms. The results of this study re aligned with the research findings of
Musara (2012) who found that the majority of organizations in South Africa are not applying
Just In Time (JIT) inventory management principles. Musara (2012) added that there are
challenges impeding the implementation of Just In Time (JIT) principles in the organizations,
which include, lack of reliable supplier networks, lack of capital and lack of knowledge of
immediate financial gain among others. Furthermore, statistically significant positive
correlations between the application of JIT inventory management principles and cost
efficiency, quality and flexibility were found.

4.4.4 A-B-C Model

The purpose of classifying stock in this way is to differentiate on how these parts are
managed. Category A items are the most closely managed and controlled (with daily actions).
Category B items require less attention with weekly or monthly checks. While category C
items are low value items making up 5% of the total value, but 50% of the total part number
count. Respondents were asked to rate the statements provided on ABC Model in the
supermarkets in Lilongwe City. The respondents were asked to rate the statements as follows:
1 = strongly agree; 2 = somewhat agree; 3 = Neither Agree or Disagree; 4 = Somewhat
Disagree; 5 = Strongly Disagree. Standard deviation was used to measure the variance. The
distributions with a coefficient of variation higher than 1 are considered being high variance
whereas those with a coefficient of variation lower than 1 are considered to be low-variance.
The results on the actions practiced under the vendor managed inventory are presented in
Table 4.8 below

43
 Table 4.8: A-B-C Model

Factors Mean Std. Dev. Std. Error

The management has separated items with high value from those
lesser value 0.230
2.5 1.175

There is a dedicated supervisor who manages the high value products 2.074 1.238 0.238

There low value products are less supervised by the supermarket

management 2.667 1.144 0.22

Overall Mean = 2.414

Results in Table 4.8 above reveal that to some extent the majority of respondents agreed with
the statement that management has separated items with high value from those lesser value
(M = 2.5, SD = 1.175). On whether there is a dedicated supervisor who manages the high
value products, the majority of respondents further agreed to some extent with the question
on whether dedicated supervisor who manages the high value products (M = 2.074, SD =
1.238). On the question on whether the low value products are less supervised by the
supermarket management, the respondents agreed to a low extent with this suggestion (M =
2.667, SD = 1.144). The high standard deviation among the respondents implies that there
was a less agreement among the respondents on their perception. The results concur with the
findings of Wanyonyi (2017) who cites Kumar, Anzil, Ashik, Ashwin and Ashok (2017)
findings that high value stock was stored and kept under lock and strict supervision.
Additional, from the inventory control point of view, stock ought to be maintained to care
about the lead-time expenditure as well as also to give security inventory.

4.4.5 Information Technology

Respondents were asked by the researcher to rate the statements provided on the use of
Information Technology in the supermarkets in Lilongwe City. The respondents were asked
to rate the statements as follows: 1 = strongly agree; 2 = somewhat agree; 3 = Neither Agree
or Disagree; 4 = Somewhat Disagree; 5 = Strongly Disagree. With regard to the application
of the IT by the supermarkets in Nairobi, the outcomes are presented in Table 4.9.

Table 4.9: Information Technology

44
 Factors Mean Std. Dev. Std. Error

IT can increases the information processing capabilities of suppliers,

thereby enabling or supporting greater relationship in addition to
reducing uncertainty
2.296 1.068 0.206

Due to swift and speed communication, the firm attains reduction in

lead times, paperwork, staff costs and higher information accuracy. 1.63 0.742 0.143

Use of Electronic Point of Sale (EPOS) allows information to buyers,

risk of obsolescence is reduced as well as theft cases and stock 0.179
deterioration 2.404 0.931

Overall Mean = 2.11

It is noted from table 4.9 above that the majority of respondents agreed to greater extent that
the use of Electronic Point of Sale (EPOS) allows information to buyers in the supermarkets
thereby reducing the risk of obsolescence as well as theft cases and stock deterioration (M =
2.404, SD = 0.931). To a lesser extent, respondents agreed that due to swift and speed
communication, the firm attains reduction in lead times, paperwork, staff costs and higher
information accuracy (M = 1.63, SD = 0.742), and respondents agreed to a lesser extent that
IT can increases the information processing capabilities of suppliers, thereby enabling or
supporting greater relationship in addition to reducing uncertainty (M = 2.296, SD = 1.068).
The findings are synch with Bakos & Brynjyoolfsson, (1993) who opines that IT decreases
transaction costs between buyers and suppliers and creates a more relational/cooperative
governance structure, leading to closer buyer-supplier relationships.

4.4.6 Inventory Records Management

The study sought to establish the extent to which supermarkets in Lilongwe City have
embraced the use of inventory records management. A number of questions were fronted to
the respondents who gave their responses on a scale of 1 – 5 where; 1 = strongly agree; 2 =
somewhat agree; 3 = Neither Agree or Disagree; 4 = Somewhat Disagree; 5 = Strongly
Disagree. With regard to the application of the Inventory Records Management by the
supermarkets in Nairobi, the outcomes are presented in Table 4.10.

Table 4.10: Inventory Records Management

45
 Factors Mean Std. Dev. Std. Error

Stock records provide the management with the information which is

used to ensure accountability through stocktaking and stock audit
0.143
exercise. 1.63 0.742

Accuracy of inventory records is necessary to provide satisfactory

customer service 1.185 0.396 0.076

Accuracy of inventory records determine replenishment of individual 1.482 0.7 0.135

items

Accuracy of inventory records helps to analyze inventory levels and 1.407 0.501 0.1
disposal of excess inventory
Overall Mean = 1.426

It is noted from table 4.10 above that to a large extent, respondents agreed that stock records
provide the management with the information which is used to ensure accountability through
stocktaking and stock audit exercise (M = 1.63, SD = 0.742). The majority of respondents
further agreed to a large extent that accuracy of inventory records is necessary to provide
satisfactory customer service (M = 1.185, SD = 0.396). Respondents also agreed to a large
extent that accuracy of inventory records determine replenishment of individual items (M =
1482, SD = 0.7). Moreover, respondents agreed to a large extent that accuracy of inventory
records helps to analyze inventory levels and disposal of excess inventory (M = 1.407, SD =
0.501). From the study, it can be concluded that inventory records management had an effect
on the inventory management in the supermarkets in Lilongwe City. The above findings are
supported by (Susan, 2000) whose provides that accuracy of inventory records is necessary to
provide satisfactory customer service, determine replenishment of individual items; ensure
that material availability meets repair or project demand, analyze inventory levels and
dispose of excess inventory. Stock records also provide the management with the information
which is used to ensure accountability through stocktaking and stock audit exercise (Susan,
2000). The findings are also in synch with Bouzida, Logrippo and Mankovski (2011) whose
findings stress the importance of keeping the inventory track as a most critical factor in
achieving a better inventory control in theory and practice. This is because inventory record

46
 management can allow the inventory controller to be aware of every movement in the stock,
either theoretical or physical.

4.5 Effect Inventory Management Practices Has on the Customer Service Delivery Level
4.5.1 Effect Inventory Management Practices Has On the Customer Service Delivery
Level of the Retail Outlets

The study further assessed the effect of inventory management practices on customer service
delivery level of the three major retail outlets (Supermarkets) in Lilongwe City. The
respondents were requested to state the extent to which they agree with parameters testing
provided in the questionnaire within a scale of 1 – 5. Standard deviation was used to measure
the variance. The distributions with a coefficient of variation higher than 1 are considered
being high variance whereas those with a coefficient of variation lower than 1 are considered
to be low-variance. In addition, a larger mean indicate that of respondents agree with the
statements to a larger extent. The results in terms of descriptive statistics in relation to the
extent to which diverse inventory management practices on customer service delivery level of
the three major retail outlets are shown in table 4.11.

Table 4.11: Effect of IM on customer service delivery

Effect of IM on customer service delivery Mean Std. Dev. Std. Error

There is a higher product availability in the supermarket 4.741 0.526 0.101

The supermarket provides the supplier with opportunities to improve

production and marketing efficiencies 4.185 1.039 0.2

The supermarket is currently a one-stop-shop where customers can 4.444 0.847 0.163
get all of their products demanded

There is a better balance between the cost of acquiring and holding 3.778 1.013 0.195
inventory that does not match customer demands
The supermarkets has minimized cases of stock outs as a result of 4.741 0.656
adopting inventing management practices

47
 0.126

2.889 1.34 0.258

Timely delivery of products from the suppliers has been achieved
Overall Mean = 4.169

Findings in table 4.11 above reveal that respondents agreed to some extent that there is a
higher product availability in the supermarket (M = 4.741, SD = 0.526). The majority of
respondents agreed that to some extent the supermarkets provides the supplier with
opportunities to improve production and marketing efficiencies (M = 4.185, SD = 1.039).
Respondents further agreed to some extent that supermarket are currently a one-stop-shop
where customers can get all of their products demanded (M = 4.44, SD = 0.847). The study
further reveal that the majority of respondents agreed to a greater extent that the supermarkets
has minimized cases of stock outs as a result of adopting inventing management practices (M
= 4.741, SD = 0.656). However, respondents disagreed to some extent with the statement that
timely delivery of products from the suppliers has been achieved (M = 2.889, SD = 1.34),
also that there is a better balance between the cost of acquiring and holding inventory that
does not match customer demands (M = 3.778, SD = 1.013). The findings are in harmony
with Tungo (2014) whose findings suggest that the higher the level of inventories preserved
(departing from lean operations) by a firm, the lower the rate of return.

4.5.2 Impact of Location on Customer Satisfaction

Customer respondents were further asked by the researcher to indicate how satisfied they
were with location of the supermarkets. The respondents were requested to state the extent to
which they agree with parameters testing provided in the questionnaire within a scale of 1 –
5. A number of questions were fronted to the respondents who gave their responses on a scale
of 1 – 5 where; 1 means Not satisfied at all, 2 Not sure, 3 To some extent satisfied, and 4
means Extremely satisfied.

Figure 4.8: Impact of Location on Customer Satisfaction

48
Findings from the figure above reveal that the majority of respondents, 28 (68%) respondents
said that they were extremely satisfied with the location of the supermarkets. 11 (27%)
respondents indicated being somewhat satisfied while 2 (5%) respondents said that they were
not sure whether the supermarkets are conveniently located to them or not. The findings are
supported by Craig et al (1984) who use the central place theory to explain how people living
far away are attracted to larger stores which are centrally located in larger shopping malls
offering more collection of goods and services than those stores within their own vicinity
offering less goods and services.

4.5.3 Impact of Product quality on Customer Satisfaction

For the purpose of this study, three elements were used to measure the dimension of product
quality: product variety, freshness and durability. The respondents were asked to give their
views on how product quality found on the supermarkets affect customer satisfaction. The
respondents were requested to state the extent to which they agree with parameters testing
provided in the questionnaire within a scale of 1 – 5. A number of questions were fronted to
the respondents who gave their responses on a scale of 1 – 5 where; 1 means Not satisfied at
all, 2 Not sure, 3 To some extent satisfied, and 4 means Extremely satisfied.

Figure 4.9: Impact of Product quality on Customer Satisfaction

49
It is noted from the figure above that 7 respondents, representing 17% of the customer
respondents indicated that they were not satisfied with the product quality of the
supermarkets, 1 (2%) respondents said that was not sure, 23 (56%) respondents indicated that
they were to some extent satisfied while 10 (24%) respondents highlighted that they were
extremely satisfied with the product quality of the supermarkets. The findings thus indicate
that the majority of respondents were somewhat satisfied with the product quality of the
supermarkets. The results are in synch with Dhar et al (2001) who assert that variety helps
retailers to serve different tastes and preferences of its clients. Dellaert et al (1998) concedes
that variety does not only help retailers attract more consumers but it can also motivate them
to purchase more while at the store. If a retailer gives greater variety in product categories, it
can improve the convenience of purchase in this way increasing customer satisfaction.
Variety product selection can also help reduce the perceived costs like effort and travel time.

4.5.4 Impact of Facilities on Customer Satisfaction

Under this dimension, three elements like display, clean and spacious atmosphere were used
to measure the effect of supermarket facilities on customer satisfaction. The respondents were
asked to give their views on how product quality found on the supermarkets affect customer
satisfaction. The respondents were requested to state the extent to which they agree with
parameters testing provided in the questionnaire within a scale of 1 – 5. A number of
questions were fronted to the respondents who gave their responses on a scale of 1 – 5 where;

50
1 means Not satisfied at all, 2 Not sure, 3 To some extent satisfied, and 4 means Extremely
satisfied.

Figure 4.10: Impact of Facilities on Customer Satisfaction

In figure 4.10 above,

results of the study
show that 11 (27%)
out of the 41 respondents said that they were satisfied to some extent with the facilities of the
supermarkets, while 30 (73%) respondents said that they extremely satisfied. The majority of
respondents therefore indicated being extremely satisfied with the facilities of the
supermarkets. The findings on the importance of facilities on customer service delivery
concurs with Dioiri (2007) who asserts that the sales outlets/supermarkets facilities are very
important since they have the ability to influence or change the purchasing behavior of
consumers; therefore, extreme care has to be observed when making a decision on
merchandising because 70 percent of purchase decisions are made during shopping. Sirohi et
al (1998:237) found that good store facility design (overall appearance of the shop,
cleanliness, departments in the right places and wide and well-marked aisle directions) leads
to enhanced perceptions of overall merchandise quality.

4.5.5 Impact of Value for money (VFM) on customer satisfaction

The researcher further asked respondents to give their views on how product quality found on
the supermarkets affect customer satisfaction.

Figure 4.11: Impact of Value for money (VFM) on customer satisfaction

51
It is noted from the figure above that 9 out of the 41 respondents, representing 22% indicated
that they were not satisfied on the element of VFM on the product bought from the
supermarkets, 14 (34%) respondents said they were not sure of the competitiveness of the
pricing strategy, 15 (37%) respondents said they were to some stent satisfied while 3 (7%)
respondents indicated being extremely satisfied. The majority of respondents highlighted
being somewhat satisfied. The findings concurs with quantitative studies by Keaveny (1995)
into switching behavior in services which revealed that more than half of customers defected
because of poor price perception.

4.6 Challenges with Inventory Management at the Major Retail Outlets

The last objective of the study sought of understanding challenges faced by the major retail
outlets (supermarkets) in Lilongwe City in managing their inventories. Respondents were
asked to rate the statement on challenges in the implementation inventory management
techniques. The respondents were asked to rate the statement as follows: 1- No extent, 2-
Small extent, 3- Moderate extent, 4- Large extent, 5- Very large extent). Standard deviation
was used to measure the variance. The distribution with a coefficient of variety higher than 1
are thought are high while those with a coefficient of variety lower than 1 are thought to be
low-variance.

Table 4.12: Challenges with Inventory Management at the Major Retail Outlets

52
 Challenges Mean Std. Dev. Std. Error

Management costs 3.037 1.192 0.23

Loss of inventories 2.741 0.944 0.182

Un predetermined products demand 3.444 1.086 0.209

Opportunity costs 4.556 0.698 0.134

3.482 0.893 0.172

Inability to predict demand with perfect accuracy
3.963 0.808 0.156
Poor supply chain coordination between the various players
3.889 1.22 0.235
Lack of proper employee training on inventory management
1.741 0.984 0.184
Lack of senior management commitment on inventory management
Overall Mean = 3.357

It is noted in table 4.12 above that respondents agreed that the supermarkets had issues
identifying and maintaining the right amount of inventory (M = 3.037, SD = 1.192). The
majority of respondents also agreed to a large extent that stiff competition from similar firms
was a challenge (M = 4.556, SD = 1.086). Furthermore, respondents strongly agreed that lack
of proper employee training on inventory management was a challenge facing the
supermarkets in managing inventories (M = 3.889, SD = 1.22). Poor supply chain
coordination between the various players (M = 3.963, SD = 0.808) was also identified by the
majority of respondents as greatly affecting inventory management in the three supermarkets.
However, respondents disagreed that lack of senior management commitment on inventory
management (M = 1.741, SD = 0.984). furthermore, the customer respondents identified a
number of challenges that they deemed they supermarkets to be having, namely;
unavailability of products (stock outs) they are looking for at times, being sold expired items,
buying substitute products due to inconsistency of products, and inconsistent prices of the
products.

The findings concur with Stadtler (2008) who found that recognizing and keeping up the
appropriate measure of stock is one of the greatest difficulties that inventory network chiefs
confront. Stock sits as an exchange off between consumer loyalty and material accessibility
and in addition expanding stock holding expenses and working capital. Results are further in

53
concordance with those of Lambert et al (2001), who identified that there are a number of
challenges in inventory management, including having unqualified employees in charge of
inventory, using a too narrow measure of performance for their business, having a flawed or
unrealistic business plan for the future, and not anticipating shortages. Having employees in
charge of inventory who lack proper training, experience, or who ignore the job will result in
inventory issues and poor organizational performance.

4.7 Relationship between Inventory Management Practices and Performance of

Retailing Outlets (Supermarkets) In Malawi

The study utilized inferential analysis to find out if there was a correlation between an
intervention and an outcome, as well as the strength of that correlation. The study conducted
inferential analysis to establish the relationship between the independent variables and the
dependent variable of which involved a coefficient of determination and a multiple regression
analysis. The coefficient of determination is a measure of how well a statistical model is
likely to predict future outcomes. The coefficient of determination, r2 is the square of the
sample correlation coefficient between outcomes and predicted values. As such it explains
the extent to which changes in the dependent variable can be explained by the change in the
independent variables or the percentage of variation in the dependent variable (effective
performance of supermarkets) that is explained by independent variables (VMI, EOQ, ABC
approach, JIT, IT and IRM, Staff skills).

Table 4.13: Model Summary

Model R R Square Adjusted R Square Std. Error of the
Estimate
1 .993a .987 .933 .183
a. Predictors: (Constant), Use of Electronic Point of Sale (EPOS) allows information to
buyers, risk of obsolescence is reduced as well as theft cases and stock deterioration,
The supermarket provides the vendor all inventory information necessary for
replenishment, The supermarket employs a zero-stock level of its inventory, When
stocks reach zero level, an order for replenishment is placed without further delay

It is noted from the table above that the regression model adopted by this study can explain
98.7% of the variability in the data. This is indicated by the R Square value of 0.987 which
shows that the data closely lies around the fitted regression line. The Adjusted R Squared
Value of 0.933, which is less than the R-Squared Value, shows how well the model

54
generalizes the relationship between the variables. In this study it can be deduced that only
93.3% of variation in the data is explained by the independent variables that actually affect
the dependent variable.

4.14: Regression Coefficients

Coefficientsa

Model Unstandardized Standardi t Sig. 95.0% Confidence

Coefficients zed Interval for B
Coefficie
nts

B Std. Error Beta Lower Upper

Bound Bound

(Constant) 6.166 .290 21.295 .030 2.487 9.846

The supermarket provides the

vendor all inventory
-1.852 .259 -1.067 -7.151 .088 -5.143 1.439
information necessary for
replenishment

When stocks reach zero level,

an order for replenishment is 1.389 .343 1.012 4.055 .154 -2.964 5.743
placed without further delay
1

The supermarket employs a

-.426 .224 -.453 -1.901 .308 -3.277 2.424
zero-stock level of its inventory

Use of Electronic Point of Sale

(EPOS) allows information to
buyers, risk of obsolescence is -.536 .224 -.415 -2.392 .252 -3.387 2.314
reduced as well as theft cases
and stock deterioration

a. Dependent Variable: Performance of Supermarkets

The value of the intercept (Bo) indicates that the level of supermarket service delivery when
all the explanatory variables are zero is 6.166. This implies that were the supermarkets to
withdraw from their existing inventory management practices, then the current level of
service delivery will increase by 6.166%. The data examined as well shows that obtaining all
other independent variables at zero, a unit increase in vendor managed inventory will lead to
a -1.852 decrease in service delivery level; a unit increase in economic order quantity will

55
lead to a 1.389 increase in service delivery level of the supermarkets, a unit increase in just-
in-time system will lead to a decrease of -0.426, while a unit increase in IT will lead to a -
0.536 decrease in service delivery level of the supermarkets. These results infer that
economic order quantity contributes more to the supermarket service level.

4.8 Chapter Summary

This chapter has presented the major findings of the study. The data has been presented in
form of tables and graphs. The tables and graphs have been followed by explanations. The
chapter has analysed socio-demographic characteristics of the respondents; inventory
management practices used in major retail outlets; factors that affect inventory management
practices in major retail outlets; effect inventory management practices has on the customer
service delivery level of the retail outlets. Finally, the chapter presented the respondents’
views on challenges supermarkets face with inventory management. The next chapter will
discuss the research findings.

56
 CHAPTER FIVE
CONCLUSION AND RECOMMENDATIONS
5.1 Introduction
This chapter presents a summary of the major findings from the results of the study and the
conclusions made from them. It also presents the recommendations made by the researcher.
This was based on the research findings that was presented and discussed in the previous
chapters.
5.2 Conclusion
The general objective of this study was to assess the effect of inventory management
practices on the performance of retailing outlets in Malawi, using the case study of major
Supermarkets in Lilongwe City. The following are the findings of the study in summary.

5.3.1 Among crucial factors affecting inventory management practices in supermarkets were
skills and knowledge among staff. The study established that the majority of staff in
Supermarkets are not professionals/incompetent meaning they lacked training and post-
secondary qualification. Poor staff training and education may indicate failure to interpret and
transform theory into practical inventory control.

5.3.2 Results from the study conclude that the same supermarket could be using two or more
approaches at one time. Notably, the supermarkets were found to widely use ABC approach,
VMI, EOQ, and FIFO. It was established in terms of ERP systems that Chipiku Plus uses
Integrity Systems whereas Shoprite and SPAR uses Oracle. The study found that Electronic
Data Interchange is used in inventory management and that the supermarkets use Bar Coding
in transaction.

5.3.3 The study conclude that all the three supermarkets were able to predict ordering,
holding and storage levels with certainty though especially, SPAR was failing to work with
suppliers to plan for inventory replenishment, and also work with suppliers to share actual
data with suppliers for replenishment of inventories.

5.3.4 It is also established in the study that inventory management practices have managed to
reduce wastages, enhanced utilization of machines and equipment, reduced cases of stock
outs at Chipiku Plus and Shoprite, which as in turn enhanced operational efficiency.

5.3.5 The study further concludes that there are a number of challenges in inventory
management, including having unqualified employees in charge of inventory, using a too
narrow measure of performance for their business, having a flawed or unrealistic business

57
plan for the future, and not anticipating shortages. Having employees in charge of inventory
who lack proper training, experience, or who ignore the job will result in inventory issues and
poor organizational performance.

5.3.6 The study concluded that the working conditions in the supermarkets are not sufficient
to attract new talent, and retain the most talented, skilled and experienced staffs.

5.3 Recommendations
In consideration of the aims of the study and the findings revealed, the research makes the
following recommendations:

5.4.1 The research study recommends that the supermarkets should focus on developing
competitive skills for inventory management among their employees, via special training
programs, so that such employees can manage more successfully inventories within the
supermarkets.

5.4.2 The study established that a number of inventory management methods were being
practiced concurrently in the supermarkets. The study recommends that the supermarkets
should use ABC analysis as a main stock control technique because it will facilitate the firm
in analyzing each stock, according to cost and frequency of usage. This technique is flexible
and offers the highest degree of control on those items that are valued highest, thus it helps
minimize costs and maintains high profit margin.

5.4.3 It was also noted that specialization of labour increases the quality of output and the
quality of services rendered. It is therefore recommended that the retail outlets should employ
people with relevant educational qualifications and with some level of experience as far as
inventory management is concerned.

5.4 Areas for Further Study

The researcher suggest that other scholars should conduct studies to identify the various
inventory management systems and their suitability to various industrial or sector demands.
This implies that there are more knowledge gaps in this area. Research can also be conducted
on the influence of technical skills and/or academic qualifications on efficiency and
effectiveness of inventory management practices.

58
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 APPENDICES
APPENDIX ONE: INTRODUCTORY LETTER
Dear Sir/Madam

My name is Fatsani Auspicious Chisiza, an MBA student at Exploits University. I am

currently working on an academic research project titled “A Comparative Analysis On
Effect Of Inventory Management Practices On The Performance Of Retailing Outlets In
Malawi: A Case Study Of Selected Major Supermarkets In Lilongwe City” as a requirement
for the fulfillment of the award of the Masters in Business Administration (MBA). As a
process of collecting data, I would like to ask your opinion on the subject. As this study is
solely for academic purpose, there is no “right” or “wrong” answer. Be rest assured that the
information/data you will provide will only be used for the dissertation and will not be
disclosed to any third party, except as part of the dissertation findings, or as part of the
supervisory or assessment processes with Exploits University.

Thank you very much for your help.

Fatsani Auspicious Chisiza

CELL: 099 1 409 019/088 4 62 867

E-mail: fatsa2008@gmail.om

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 APPENDIX TWO: RESEARCH QUESTIONNAIRE FOR STAFF

PLEASE NOTE: Your name should not appear anywhere in this document.

INSTRUCTION
Tick (√) the appropriate option where responses are given and provide your answer in the
spaces provided where responses are not given.

SECTION A: DEMOGRAPHIC INFORMATION

1. What is your Gender?

Male

Female

2. What is your highest level of education?

Masters/PhD Degree

Bachelors Degree

Diploma

Certificate

Other (specify)

3. What is your level of work experience at this organisaion?

Less than 2 years

3-5 years

6-10 years

Over 10 years

4. What position/designation do you hold?

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 Senior management

Middle management

Junior staff

5. How many employees are there in your supermarket?

a) Less than 20 [ ] b) 21 - 40 [ ]
c) 41 - 60 [ ] d) Over 60 [ ]
6. What percentage of your budget goes to supply chain activities?

a) Less than 20% [ ] b) 20% - 40% [ ]

b) 40% - 60% [ ] d) Over 60% [ ]

7. What is the value of the monthly supermarket turnover?

a) Less than MK 20 Million [ ] b) MK 20 – MK 50 Million [ ]

c) MK 51 – MK 100 Million [ ] d) Over MK 100 Million [ ]

8. What is the average Stock (inventory) in the supermaket?

a) Less than MK 100M [ ] b) MK 100M – 200M [ ]

c) MK200M – MK400M [ ] d) Over MK400M

9. What is the average annual value of stock redundancy in the supermarket?

a) Less than MK 5M [ ] b) MK 5M – 10M [ ]

c) MK10M – MK20M [ ] d) Over MK20M

SECTION B: INVENTORY MANAGEMENT PRACTICES USED IN MAJOR

RETAIL OUTLETS

10. What are the categories of Inventory Management Practice that your firm use? You may
tick in more than one box

ABC Approach

Just In Time (JIT) Approach

Economic Order Quantity

Vendor Managed Inventory (VMI)

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 Material Requirement Planning (MRP)

Manufacturing Resource Planning

Enterprise Resource Planning

Distribution Resource Planning

If your response is other, please explain ……………………………………………………….

9. What is the current status of Inventory that you know at your organisation
stores/warehouse? Please tick in one box only

Excess Inventory

Minimum/Insufficient Inventory

No inventory

If your response is other, please explain……………………………………………………..

10. Which of the following can be considered a standard lead time in your organization?

1 – 10 days

11 – 20 days

21 – 30 days

31 – 40 days

More than 40 days

SECTION C: FACTORS THAT AFFECT INVENTORY MANAGEMENT

PRACTICES IN MAJOR RETAIL OUTLETS
11. Please respond to the following statements by indicating the extent to which each of the
following Factors affects inventory management practices in your organization Use the scale
where: Strongly agree – 1; Somewhat agree – 2; Neither Agree or Disagree – 3; Somewhat
Disagree – 4; Strongly Disagree - 5. Tick your choice
Vendor Managed Inventory 5 4 3 2 1

The supermarket provides the vendor all inventory information

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necessary for replenishment

The supermarket vendor uses this information to monitor inventory

or place new orders at continuous manner

Our vendor is given access to the supermarket inventory and

demand information

The vendor has the authority and the obligation to replenish

purchaser’s inventory according to collectively agreed inventory co

concepts and targets

Economic Order Quantity

The firm knows with certainty the replenishment period of its

items and therefore

The supermarket stocks or sales made by a firm remains unchanged

throughout the period

When stocks reach zero level, an order for replenishment

is placed without further delay

Just – in –Time (JIT)

The supermarket employs a zero-stock level of its inventory

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 The ownership of the inventory does not belong to the supermarket

There is a shared product design with suppliers and clients

There exist preventive protection in the supermarket

A-B-C Model

The management has separated items with high value from those lesser
value

There is a dedicated supervisor who manages the high value products

There low value products are less supervised by the supermarket

management

12. In your opinion what is the impact of inventory management strategies on cycle time. Use
the scale where: Strongly agree – 1; Somewhat agree – 2; Neither Agree or Disagree – 3;
Somewhat Disagree – 4; Strongly Disagree - 5. Tick your choice
Order cycle time performance indicators 1 2 3 4 5
Order entry time

Order procesing time

Purchase order cycle time

In transit time

SECTION D: EFFECT INVENTORY MANAGEMENT PRACTICES HAS ON THE

CUSTOMER SERVICE DELIVERY LEVEL OF THE RETAIL OUTLETS
12. Indicate the extent to which the organization has performed for each of the following
organizational operational performance parameters. Please tick where appropriate (Use the
scale of: 1- No extent, 2- Small extent, 3- Moderate extent, 4- Large extent, 5- Very large
extent).

Statement 1 2 3 4 5

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The is a higher product availability in the supermarket

The supermarket provides the supplier with opportunities to

improve production and marketing efficiencies

VMI results in supplier increasing replenishment frequencies

Smallerquantities

The supermarket is currently a one-stop-shop where customers can get

all of their products demanded

The adoption of the inventory management practices has improved

the relationship between the supermarket and its suppliers

There is a better balance between the cost of acquiring and holding inve
that does not match customer demands

The supermarkets has minimized cased of stock outs as a result of

adopting inventing management practices

Timely delivery of products from the suppliers has been achieved

SECTION E: CHALLENGES WITH INVENTORY MANAGEMENT AT THE

MAJOR RETAIL OUTLETS

69
13. Please to what extent do you agree with the following as the challenges of inventory
management on healthcare service delivery at your institution? Please tick where appropriate
(Use the scale of: 1- No extent, 2- Small extent, 3- Moderate extent, 4- Large extent, 5- Very
large extent).
Challenge 1 2 3 4 5
Identifying and maintaining the right amount of inventory

Rapidly changing markets

Rapidly changing competitors
Stiff competition from similar firms

Dynamic business environment

Unfavorable government policies e.g. quotas, bans,

Inability to predict demand with perfect accuracy

Using forecasts to determine how much inventory to purchase

Poor supply chain coordination between the various players

Finding the right balance between having too little inventory and too much
inventory
Lack of proper employee training on inventory management

Lack of senior management commitment on inventory management

14. Could you provide any suggestions for effective inventory management at your
institution?
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………

Thank you for taking time to complete the questionnaire. Your feedback is highly

appreciated.

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 APPENDIX THREE: A RESEARCH STUDY QUESTIONNAIRE FOR CUSTOMERS

PLEASE NOTE: Your name should not appear anywhere in this document.

INSTRUCTION
Tick (√) the appropriate option where responses are given and provide your answer in the
spaces provided where responses are not given.

SECTION A: DEMOGRAPHIC INFORMATION

1. Please specify which Supermarket you often times shop from?

SPAR

Chipiku Plus

Shoprite

Others, Specify

2. How often do you shop at the supermarket that you have identified to often patronise?
Almost daily

1 – 2 times/week

3 – 4 times/week

Monthly

3. To what extent, on a scale of 1 to 5 (1 means Not satisfied at all, 2 Not sure, 3 To

some extent satisfied, and 4 means Extremely satisfied) are the following factors
determine how satisfied you are with the Supermarket you selected above?
FACTOR 1 2 3 4

Location: Location of the supermarket

Additional services (which includes the below elements)

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Parking lot

Baby areas

Delivery goods

Product quality (which includes the below elements)

Freshness of products ( meat, vegetables, fruits …)

Durability

Product variety

Facilities (which includes the below elements)

Clean& spacious atmosphere

Display/ decoration

Reliability (which includes the below elements)

Accuracy of bill / Bill clarity

Correct information of price signs & discount

Process (which includes the below elements)

Number of check-out counters/ express check-outs

Opening hour

Queues -waiting time at counters

Value for money (which includes the below elements)

Competitive price

Frequency of promotions/ discounts- REA

Staff (which includes the below elements)

Friendliness, helpful

Knowledgeable, quick performance

Personnel service (availability of staffs to offer help, individual attention to

loyal customers)

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4. In your opinion, do you find any issues with stock at this Supermarket (i.e. challenges
you think the Supermarket has with particular type of stock)
Yes

No

5. If yes to above questioon, what challenge(s) do you find this Supermakert to have?
(i) ………………………………………………………………………………
(ii) ………………………………………………………………………………
(iii) ……………………………………………………………………………….
(iv) ………………………………………………………………………………
6. What do you do when you note those issues with stock in the Supermarket?
(i) ………………………………………………………………………………
(ii) ………………………………………………………………………………
(iii) ……………………………………………………………………………….
(iv) ………………………………………………………………………………
7. Can you recommend any measures that the Supermarket can use to address the issues
you have mentioned above.
(v) ………………………………………………………………………………
(vi) ………………………………………………………………………………
(vii) ……………………………………………………………………………….
(viii) ………………………………………………………………………………

Thank you for taking time to complete the questionnaire. Your feedback is highly
appreciated.

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