The Assessment of Inventory Management Practice: The Case of Awash

Wine Share Company

*Kebede Defar Gobeze
Abstract
The study was intended to investigate the problem of the inventory
management practices and controlling system of Awash Wine Share
Company. The concept and the definition of inventory management and
control system were discussed and the factory that affect inventory
management were also listed out. The data for the study were collected by
distributing questionnaires to Manager and non-manager of AWSC
employees and the rest information was collected through interviewing
some top management of the company. The systematic random sampling
technique was applied. The respondents were selected by their identification
card given from the company until the required sample sizes were obtained.
After we got the sample size the participants were asked to fill the
questionnaires. All of them were filled properly and returned and the data
were analyzed by using SPSS 20 version software for descriptive analysis.
The result presented was in tables, simple bar and pies graphs. They were ,
and interpreted by frequency and percentages. From summary finding,d the
company has no excessive inventory and optimal level of stock, the balance
at which head control notify preparing for purchase at minimum level which
may be out of stock and it doesn’t provide flexible production schedule .They
use manual or computer system for identifying the ware house location, but
the store management system is poor regarding health and safety. Safety
indication sign are not placed at position in the store and material are not
stored the requirement condition like temperature room control and humidity
control were not placed in the store at all. Due to this problem, some
material were deteriorated before the expiry date.

Keywords: AWCS, control system, descriptive statistics, Inventory management.

1. Introduction
Background of the Study
Inventory consists of products either purchased from an outside render or
manufactured on a company’s own premises for the comforting purpose of
_______________
*Email: [email protected] Department of Management, Faculty of Business St. Mary’s University, Addis
Ababa, Ethiopia

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reserving the finished good to customer. The inventory valves on the
financials statement include the cost associated with manufacturing and/or
purchasing the products. The cost includes direct materials and parts as well
as the related overhead associated with the manufacturing process. Inventory
control is defined as “a science-based art of controlling the amount of
inventory business needs to economically meet the demands placed upon that
business. It is also the application of best practices and common sense
procedures used to control the inventory management process”
(Gopalakrishnan, 2008).
Inventory represents three elements depending on the nature of the firm’s
nature. These are raw Material, semi processed and finished goods.
Therefore, one’s firm finished goods can be raw material for the other
inventory management and production\ maintenance\ is interdependent in
achieving production targets because production schedules cannot meet and
be achieved without timely supply of inventory, ([Link].2008).
The function of inventory control is to balance the set-up costs of
procurement with inventory carrying costs in order to see that cost is kept
minimum, while, at the same time, holding of optimum inventory is possible,
(Datta , 2003).
According to the AWSC policy procedure inventory is defined as the sum of
the value of raw materials, fuels and lubricants, spare parts, semi processed
materials and finished goods stocked at given plant on time. The internal
control management system of AWSC exists in Main Store as such
purchasing, Receiving, Storing and Issuing. The Company has one recoding
& inspection unit in the central store . The central store is divided in to 4
Ware houses. Ware house 1 used to store finished goods, ware house 2 is
used for storing raw material ware house 3 is used for storing scrap material
and spar part materials; ware house 4, is used for storing stationary material
and different closes and safety and marketing tools (AWSC, 2017).
Statement of the Problem
Inventory management and Control must address to meet the state of the
market place and support the company's strategic plan. The many changes in
the market demand, new opportunities due to worldwide marketing, global
sourcing of materials, and new manufacturing technologies, that many
companies need to change, important and update their inventory control
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process. Therefore, proper usage of inventories is vital in any organization
due to its great distribution for a better success of the organization. For this
reason, organizations are required to focus and implement internal control
procedures, rules and regulations (Whittington and pony, 1995).
Inventory management system or process provides information to effectively
utilize people and equipment, coordinate internal activates, and
communicates with customer. The Activities of internal control do not make
decisions or manage operations; they provide the information that makes
more accurate and timely decisions to manage their operations. An internal
control System should design and operate to provide reasonable assurance.
That is, an entity's cost of internal Inventory management and Control system
should not exceed the benefits that are expected to be derived (Toomey, J.
W., 2000).
Even though Awash Wine Share Company has inventory management and
control system policy it appears its implementation has not been properly
carried out this leads to always complain miss match balance between
consumption and issued material from store the justification for this problem
personal observation weekly and monthly report and key information from
management complain during monthly and weekly meeting. Through
conducting a preliminary investigation /assessment/ on the inventory
management and control system indicate that there existed lack of adequate
skill and capacity/ability/ of the store manager and supervisor on the
inventory management and control system as well as they is also lack of
adequate knowledge of the inventory management and control system. This
problem has therefore provoked the student to study on the inventory
management practice that and control system in Awash Wine Share
Company. Therefore, the intention of this research is to investigate of IMCS
(inventory management and control system) practices in Awash Wine Share
Company

Research Questions
This study tries to answer the following specific question based on the
problem of the study
1. What are the problems observed in inventory handling of Awash Wine
Share Company?

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2. What are the Strengths and weakness observed in the application of
inventory management practice in Awash Wine Share Company?
3. When does inventory take place and how long it takes?

Objective of the Study

General Objective
The general objective of this study is to assess inventory management
practice in Awash Wine Share Company.

Specific Objectives
Based on the main objective of this study and the problem statement, the
study has the following specific objectives:
1. To discuss the aim of inventory management and control and indicate the
challenges of inventory management practices and control In Awash Wine
share company
2. To identify the major strengths and weakness of inventory management
practices and control system of the Awash Wine share company.
3. To indicate major solution on the long duration taken on inventory
activities and inform appropriate time.

Significance of the Study

The study provides the possible suggestions for inventory management
practices and control system Awash Wine Share Company .Moreover, it help
the researcher to acquire knowledge in the area and understanding practical
experience. Furthermore, the study will help as a source of document and
stepping stone for those researchers who want to make further study in the
area.
Scope of the Study
The scope of this case study is limited to inventory management practice and
controlling system in Awash Wine Share Company. Thus, it is intended to
assess the existing of inventory management practice and controlling system.
The population coverage will only be managers and employees Awash Wine
Share Company. In addition the study relied on the responses of the
questionnaires and interviews that are filled out and answered by manager

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and non-manager of employees in procurement, production, finance, and
quality, technical and marketing and sales.

2. Research Design and Methodology

Research Design
The researcher was used descriptive research design. This research design
allowed the researcher to describe the population characteristics using
frequency and percentage .all the methods in descriptive design are used to
describe how the existing inventory management and control system
functions.

Population, Sample Size and Sampling Techniques

The population for this research are managers and non -manager employees
of Awash Wine Share Company. Since there are finite populations which
counted to be 254 workers in AWSC and if it is noted that the pollution is
finite sample size can be determined by the formula:
𝑁
𝑛=
1 + 𝑁𝑒 2
Given that 5% non-response rate has been considered.
Where: 𝑛 = 𝑖𝑠 𝑡ℎ𝑒 𝑠𝑎𝑚𝑝𝑙𝑒 𝑠𝑖𝑧𝑒,
𝑁 = 𝑡𝑜𝑡𝑎𝑙 𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑠𝑖𝑧𝑒 𝑎𝑛𝑑 𝑒 = 𝑡ℎ𝑒 𝑙𝑒𝑣𝑒𝑙 𝑜𝑓 𝑜𝑓 𝑝𝑟𝑒𝑐𝑖𝑠𝑖𝑜𝑛
Since we have no standard deviation and population mean, by taking margin
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of error 10% in order to get the representative sample size 𝑛 = =
1+254(0.1)2
72 and 5% of non-response rate= 4. The total sample size taken for this
study was 76. As far as sampling technique is concerned, a systematic
random sampling applied in order to select the respondents because the
researcher have list of the population (sampling frame) from Awash Wine
Share Company. The respondents were selected by their identification card
given from the company until the required sample sizes were obtained. After
we got the sample size the participants were asked to fill the questionnaires.

Types of Data Used

The study used both primary and secondary data. The primary data collected
from the sample respondents and secondary data gathered through the
company’s document and report and review related document.

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Data Collection Method
The primary data for this study was collected by distributing questionnaires
and interviews. The interview has also been conducted with top level
manager. It is important since it helps check the validity of the data that
collected through questionnaires. In the Questionnaire mainly structured and
closed–ended questions were used.

Methods of Data Analysis

After collecting of both primary and secondary data, the researcher classified,
processed analyzed and interpreted data thoroughly. Before going through
analysis, the student researcher edited, coded, classified after has been
encoded into SPSS 20 version software for descriptive analysis. The result
has been presented through tables, diagrams, and charts.

Organization of the Study

The study is organized in four chapters. Chapter one provide brief
background information to study, overview of the company under case study,
discusses the research problem, objective of the study scope and limitation,
and significance of the study, data collection and analysis method. Chapter
two reviews detail literatures which are related to study. Chapter three
provides data presentation, analysis and interpretation in the last Chapter
summary of findings, conclusions and recommendations are drawn based on
the result of the study.

3. Data Presentation, Analysis and Interpretation

In this part we present characteristics of the respondents, analysis and
interpretation of data collected from management and non-management
employees of awash wine share company.

General Characteristics of Respondents

Seventy six (76) questionnaires were distributed and have completely filled
and returned back. The questionnaire that incorporates Twenty two closed
type questions for manager and non-management of AWSC employees and
nine interview questions for members of the top management are
administered safely.

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Gender of Respondents
Sex of respondent Frequency Percent
Male 56 73.7
Female 20 26.3
Total 76 100.0

As seen from above table the sex respondent out of 76 sample population
56(73.7%) males and 20(26.3).from above table the majority participated in
the study are male
Age Group of Respondent

Age group [Years] Frequency Percent

Under 25 15 19.7
26-35 37 48.7
36-45 13 17.1
>46 11 14.5
Total 76 100.0
As seen from above table age respondent 15(19.7%) under25 years of age,
37(48.7%) within range of 26-35 years of age, 13(17.1%) within range of 36-
45yeasrs of age and 11(14.5%) are above 46years of age. This indicates those
majority respondents are adult and young worker.

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 Source: Primary data (2018)
From above Figure the majority respondent those participated in the study
were the job tittle are non- management or which specify there job tittle
individual. Least respondent is from head of quality control categories.

Source: Primary data (2018)

Qualification level of respondent

As seen from above Figure 3.2 46(60.5%) are degree and above qualification
are participated in study .the respondent has most probable good knowledge
about the study and response in good appropriate way.

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 Source: Primary data (2018)

Base for Preparing Purchase request

As seen from above figure the base for preparing purchase request as most
respondent indicates by looking material account section report and to some
extent the base for preparing purchasing request is stock level reach
minimum which this indicate the company may out of stock and there is no
safety stock ,this leads to production gap ,it cannot providing adequate
protection against uncertainties of supplies and consumption of materials.
Inventory method used in AWSC
Moving Average FIFO method LIFO method
Median 2.00 2.00 2.00
Mode 2 2 2
Degree used Number Percent
To what extent does To great extent 52 23.4%
AWSC use the To some extent 109 49.1%
following inventory Undecided 57 25.7%
materials? never at all 4 1.8%
Total 222 100.0%
Source: Primary data (2018)
From above table we can justify that the company used highly to some extent
FIFO method when we compare with the three approaches of inventory.

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Have you ever faced Frequency Percent Valid Percent Cumulative
excess inventory? Percent
Yes 21 27.6 27.6 27.6
No 49 64.5 64.5 92.1
Other 6 7.9 7.9 100.0
Total 76 100.0 100.0
Source: Primary data (2018)
From above table it was noted that the company doesn’t face excessive
inventory, this indicate that the company avoid excessive inventories which
increase chance of loss of liquidity and the physical deterioration of
inventory in storage
Level of the balance material does Frequency Percent Valid Cumulative
control head notify to preparing the Percent Percent
purchase request
Minimum level 30 39.5 39.5 39.5
Record level 25 32.9 32.9 72.4
Moderate level 15 19.7 19.7 92.1
If the material become null 5 6.6 6.6 98.7
Balance 1 1.3 1.3 100.0
Total 76 100.0 100.0

From above table most respondent replies the balance material at which
control head notify prepare for purchase request is minimum level, this
indicate the company may out of stock and there is no safety stock ,this
leads to production gap ,it cannot providing adequate protection against
uncertainties of supplies and consumption of materials.

Is there optimal stock level? Frequency Percent Valid Percent Cumulative

Percent
Yes 30 39.5 39.5 39.5
No 44 57.9 57.9 97.4
Do not know 1 1.3 1.3 98.7
Any other 1 1.3 1.3 100.0
Total 76 100.0 100.0
Source: Primary data (2018)
From above table the majority respondent indicates there is no optimal stock
level so this indicates it doesn’t providing flexibility to allow changes in

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production lines in production lines due to changes in demands or any other
reason.
What kind of purchase do Frequency Percent Valid Cumulative
you use? Percent Percent
Foreign 5 6.6 6.6 6.6
Local 10 13.2 13.2 19.7
Both 61 80.3 80.3 100.0
Total 76 100.0 100.0
Source: Primary data (2018)
From above table the company used both local and foreign purchase as most
respondent replies, even though the local purchase coverage is higher as
compared to foreign.
Is there proper material Frequency Percent Valid Cumulative
control system in AWSC Percent Percent
Strongly agree 9 11.8 11.8 11.8
Agree 24 31.6 31.6 43.4
Agree to some extent 29 38.2 38.2 81.6
Disagree 7 9.2 9.2 90.8
Strongly disagree 7 9.2 9.2 100.0
Total 76 100.0 100.0
Source: Primary data (2018)
From above table the majority respondent indicate agree to some extent the
material control system of the company, this indicate the there is a problem
in material control system in company due to lack of adequate skill and
capacity/ability/ of the store manager and supervisor on the inventory
management and control system.
Does the organization Frequency Percent Valid Cumulative
have different store for Percent Percent
different material?
Yes 52 68.4 68.4 68.4
No 13 17.1 17.1 85.5
Do not know 7 9.2 9.2 94.7
Any other 4 5.3 5.3 100.0
Total 76 100.0 100.0
Source: Primary data (2018)
As indicated in above table the company has different store for different
material, even though there is a problem of material control system as stated
/discussed in properly material control system.

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Number of available stores in AWSC
Number of available stores Frequency Percent Valid Cumulative
in AWSC Percent Percent
Two stores 6 7.9 7.9 7.9
Three stores 16 21.1 21.1 28.9
Four stores 42 55.3 55.3 84.2
Any other 12 15.8 15.8 100.0
Total 76 100.0 100.0
Source: Primary date (2018)
From above table the company has four stores for storing different material
.even though the company has different store for different material because
of poor inventory management and controlling system always the company
face with problem of inventory raw material and out of stock before the end
of the year.
Are there proper procedures Frequency Percent Valid Cumulative
to ensure that items removed Percent Percent
by authorizations?
Yes 49 64.5 64.5 64.5
No 23 30.3 30.3 94.7
Do not know 4 5.3 5.3 100.0
Total 76 100.0 100.0

Source: Primary data (2018)

As indicated in above table it was perceived that most respondents replies
items or goods removed from store by proper producer to ensure item
removed and some respondent say no because there is weak update of
inventory control system in the company.
Stocks are subjected to physical verification /count on
Stocks are subjected to physical Frequency Percent Valid Cumulative
verification /count on Percent Percent
Continuous basis 24 31.6 31.6 31.6
Periodic count during the month 40 52.6 52.6 84.2
At the end of fiscal year only 8 10.5 10.5 94.7
Any other 3 3.9 3.9 98.7
Quarterly count 1 1.3 1.3 100
Total 76 100 100

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From above table the majority respondent replied the stock of company are
subject to physical verification /inventory count periodical count during the
monthly and the rest replies the stock verification done at end of fiscal year
only which means that if some of the items in the inventory are missing or
stolen, there is no way for the company identify the lost items until the end of
the fiscal year.

Are there competent Frequency Percent Valid Cumulative

personnel in the Percent Percent
inventory management?
Yes 31 40.8 40.8 40.8
No 41 53.9 53.9 94.7
Other 4 5.3 5.3 100.0
Total 76 100.0 100.0
Source: Primary data (2018)
From above table most respondent replies that there is no competent
personnel person in the inventory management so this lead to weak inventory
management and controlling system.
Is there training program for employees about inventory management
and control system?
Is there training program for Frequency Percent Valid Cumulative
employees about inventory Percent Percent
management and control system
Yes 26 34.2 34.2 34.2
No 48 63.2 63.2 97.4
Do not know 2 2.6 2.6 100.0
Total 76 100.0 100.0
Source: Primary data (2018)
The above table indicated the majority respondent replies there is no training
program for employees about inventory management this indicate that there
is gap on practice of inventory management and control system in company
due to lack of experience share and training so the employees has lack of
implementation properly inventory management system which can result to
miss the advantage of properly inventory management system

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Checklist for inventory management practice and control system of
awash wine share company
The information gathered through personal observation and interview with
top management of the company like procurement head, production head
store supervisor finance head and marketing and sale head ,the company has
four store (finished goods store ,raw material store, scrap and spare part
material store and stationary, safety material and marketing tool store)
All material are codified according to their nature and used but the store has
limit space and the codification is not handled properly it is difficult to access
within short period of time to get material, also the company uses hill mark
software system which categories the material by code digits. There is
problem with update of system by store keeper and delay the material
requisition date and issue date is not match this problem seen at end of every
months and all department complain the raw material consumption not meet
what issued by system ,the bin card is used some time for nonstick material
and the store keeper prepare it.
The organization has return raw material by return voucher on the hill mark
software, return Material is not properly handled and returns to store on time
and mislead of return were seen Every 3 month(four times) the company
planned to physical verification inventory and finance department
responsible for record for the receipt of materials in a material ledger. the
organization use effective manual or computer system for identifying the
ware house location and the but the store management system is poor
regarding health and safety, safety indication sign are not placed at position
in the store and material are not stored the requirement condition like
temperature room control and humidity control are not place in the store at
all, due to this problem some material are deteriorated before the expired.

4. Summary, Conclusions and Recommendations

Summary of the Finding

The majority of respondent participated in the study were male. The major
respondent in study lies the age between 26-35 years. The qualification of
respondent who participated to response the questionnaire are degree and
above qualification and the most respondent are working experience of 1-
5years.

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The company didn’t face excessive inventory and the balance of material at
which head control notify prepare for purchase at minimum level which
indicated that the company may out of stock. There is no optimal stock level
in the company which doesn’t provided flexibility to allow changes in
production. The company uses both local and foreign purchase even though
the local purchase coverage was higher.

Majority respondent agree to some extent the material control system of the
company which refers to there is lack of skill and capacity to implement
proper inventory management and controlling system in the company. The
company has different store for different material even though it doesn’t
properly managed. There was no competent personnel in the inventory
management in the company since there was no training programmer for
employee about inventory management and control system.

Conclusions
The researcher finally came with the following conclusion:
The physical verification/inventory periodical count during the every three
month, which means that if some of the items in the inventory are missing or
stolen, there is easy way for the company to identify the lost items and the
used of hill mark software system encourage the company for batter record of
inventory for further information, is seen as the strength of company also the
use of higher coverage local purchase help company to purchase material
with low cost, the absence of excessive material in inventory, high
responsibility taken by head of procurement and the least accountable is
head of finance for material not available store , this indicate that there is no
overlapping of responsibility or authority , but improper implementation of
inventory management practice and control system and the lack of update of
return raw material by return voucher on the hill mark software on time and
mislead of return, the absence of training about inventory and control system
for employees were seen was the weak of company,
Generally there is some mismatch regarding the material requirement
planning and order point of quantity, this indicated that the company lose the
designer advantage that obtain from properly inventory management system

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Recommendations
Based on the finding in the study the following recommendations have been
forwarded to alleviate the problem and keep up with the strength.
 The balance of material at which head control notify prepare for purchase
at minimum level which indicate the company may out of stock which
doesn’t providing adequate protection against uncertainties of supplies and
consumption of materials. Therefore, The Company should be having reorder
point with safety stock balance.
 The company should avoid weak implementation of inventory
management and control system by providing proper training for the
employees about inventory management and controlling system and also
recruited competent personnel for position.
 The company has different store for different material but the store has
limit space and the codification which is not handled properly. This made
difficulty to access within a short period of time to get material. So the
company should take into account for better handling the store as per
requirement suitable storage facilities and definite description material.
 The aim of inventory management is to avoid excessive and inadequate
levels of inventories and to maintain sufficient inventory for the smooth
production and sales operations. Therefore, the company should be made to
place an order at the right time with the right source to acquire the right
quantity at the right place and quality.

5. References
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and practice, Delhi. 5thEdition, Jaico publishing house, PVT Ltd.
A.K Datta. (2003). Materials Management, 2ndEdition. Delhi.
Awash Wine Share Company, (2017), Procurement Manual
Donald [Link] and David [Link]. (1996) Purchasing & Supplies
Management .Text and cases, 6th Edition, Tata McGraw-Hill
Publishing company Ltd, Newdelihii https:// www. quora.
com/What-is-Yamane-sample-calculation
I.M. Pandy (2000), Financial Management, 8thEdition, Vikas publishing
House PVT, Ltd
Mathew, P.D. (1968) Hand book of Inventory Management, Culcata

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Nair, N.K. (1985). Materials Management, 3rd Edition, Bombay .Asia
publishing house,
[Link]. (2008). Hand Book of Materials Management Delhi. ,
Prentice –Hall of India, PVT Ltd
S.C. Sharma, (2004).Production Management .Delhi: Prentice - Hall, Inc.
Toomey, J. W. (2000). Inventory Management: Principles, Concepts and
Techniques. Norwell: Kluwer Academic Publishers.
Whittington and pony. (1995). Principles of Auditing 2nd edition, London.
William J. Stevenson, (2000) Production Operation Management USA

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