The Impact of Efficient Inventory Management on Organizational Performance:

Abstract

The study investigates the effects of efficient inventory management on the financial performance of industrial companies listed on Tanzania's DSE. Raw material turnover, work-in-progress turnover, trade payables measured as days payable outstanding, trade receivables measured as days sales outstanding, inventory turnover and capital intensity ratio are among the variables investigated. The firm size was used as controls for these variables. The inquiry was guided by the formulation of six null and six alternative hypotheses, and the statistical testing of parameter estimations was carried out using the ordinary least square (OLS) regression model. A quantitative method was applied in the descriptive study design. The secondary data, which was taken from the annual reports of the companies under study, was processed using panel data. According to the study's findings, inventory turnover and company size had a substantial negative impact on a company's profitability while raw material turnover, work in progress turnover, and capital intensity ratio had a significant positive impact on the profitability of the firms listed at DSE. The study's results also show that day’s sales and payables outstanding don't affect a company's profitability in DSE. According to the study's findings, companies should identify the optimal degree of efficient inventory management that best suits their particular business operations rather than tying up too much cash in order to achieve sustainable profits. The study also comes to the conclusion that increasing the firm's profitability is largely influenced by the capital intensity ratio. The study also recommends that businesses at DSE increase inventory turnover in order to boost profitability.