WOLAITA SODO UNIVERSITY

GRADUATE STUDIES DIRECTORATE

EFFECT OF INVENTORY MANAGEMENT ON PROFITABILITY OF

SMALL AND MEDIUM ENTERPRISE: IN CASE OF WOLAITA SODO

A Thesis submitted to the College of Business and Economics, Wolaita Sodo

University.

In Partial Fulfillment of the Requirements for the Degree of Master of

Science(MSc) in Accounting and Finance.

Kassa Mnilk Berrie

Advisor: Andualem U. (PhD)

June, 2024
Wolaita-Sodo, Ethiopia
 WOLAITA SODO UNIVERSITY
GRADUATE STUDIES DIRECTORATE

EFFECT OF INVENTORY MANAGEMENT ON PROFITABILITY OF SMALL

AND MEDIUM ENTERPRISE IN CASE OF WOLAITA SODO

MSc Thesis

BY
KASSA MNILK

June,2024
Wolaita-Sodo, Ethiopia

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 GRADUATE STUDIES DIRECTORATE

WOLAITA SODO UNIVERSITY

THESIS APPROVAL SHEET

As this research advisor, I hereby certify that I have read and evaluated this thesis prepared
under my guidance by KASSA MNILK entitled “Effects of Inventory Management Practice on
the Profitability of Small & Medium Enterprise: the Case of Wolaita Sodo ”. I recommend that
it be submitted as fulfilling the thesis requirement.
_______________________ __________ _________
Advisor Signature Date
As members of the Board of Examiners of the Master’s thesis open defense examination, we
certify that we have read and evaluated the thesis prepared by Kassa Mnilk and examined the
candidate. We recommend that the thesis be accepted as fulfilling the thesis requirements for
the degree of Masters of Science in Accounting and Finance.
______________________ __________ _________
Chairperson Signature Date
____________________ __________ _________
Internal Examiner Signature Date
_____________________ __________ ___________
External Examiner Signature Date

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 DECLARATION

By my signature below, I declare and affirm that this thesis is my work. I have followed all
ethical principles of scholarship in the preparation, data collection, data analysis, and
completion of this thesis. All scholarly matter that is included in the thesis has been given
recognition through citation. I affirm that I have cited and referenced all sources used in this
document. Every serious effort has been made to avoid any plagiarism in the preparation of this
thesis.
This thesis is submitted in partial fulfillment of the requirement for a degree from the Graduate
Studies Directorate of Wolaita Sodo University. The thesis is deposited in the University Library
and made available to borrowers under the library's rules. I solemnly declare that this thesis has
not been submitted to any other institution anywhere for the award of any academic degree,
diploma, or certificate.
Brief quotations from this thesis may be used without special permission provided that accurate
and complete acknowledgement of the source is made. Requests for permission for extended
quotations from, or reproduction of, this thesis in whole or in part may be granted by the Dean
of the School or Head of Department or the Director of the Graduate Studies when in his or her
judgment the proposed use of the material is in the interest of scholarship. In all other instances,
however, permission must be obtained from the author of the thesis.
Name: Kassa Mnilk Berrie
Date: 14/4/2024
Department: Accounting and Finance

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 ACKNOWLEDGEMENT

I would like to begin by expressing my utmost gratitude to the Almighty God for His incredible
wonders and for guiding me to this point in my journey. His blessings and support have been
instrumental in my achievements.
I would also like to extend my sincere appreciation to my advisor, Andualem U. (Ph.D.), for his
unwavering guidance, critical feedback, and insightful discussions throughout the process of
conducting and writing this thesis. His expertise and support have been invaluable in shaping
my research.
Additionally, I am deeply thankful to all those who have supported me and provided the
necessary information during my research. Their contributions and assistance have been greatly
appreciated.

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 ACRONYMS AND ABBREVIATIONS

AST Adaptive Saturation Theory

CSA Central Statistical Agency of Ethiopia
EOQ Economic Order Quantity
EDI Electronic Data Interchange
CGS Cost of Goods Sold
EPOS Electronic Point of Sale
GAAP Generally Accepted Accounting Principle
DEM Demand Forecasting
GDP Gross Domestic Product
ICP Inventory Conversion Period
ICT Information Communication Technology
IM Inventory Management
IT Information Technology
JIT Just-In-Time
NPM Net Profitability Margin
PC Computer Programming
PLC Private Limited Company
RBT Resource-Based Theory
ROA Return on Assets
SPSS Statistical Package for Social Science
SC Supply Chain
US United States

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 TABLE OF CONTENT
PAGE
DECLARATION ...................................................................................................................................... iii
ACKNOWLEDGEMENT ....................................................................................................................... iv
ACRONYMS AND ABBREVIATIONS .................................................................................................. v
TABLE OF CONTENT ........................................................................................................................... vi
LIST OF TABLES ................................................................................................................................... ix
LIST OF FIGURES .................................................................................................................................. x
ABSTRACT ............................................................................................................................................. xi
CHAPTER ONE ...................................................................................................................................... 1
1. INTRODUCTION ........................................................................................................................... 1
1.1. Background of the study .......................................................................................................... 1
1.2. Statement of problem ............................................................................................................... 2
1.3. Objectives of the study ............................................................................................................. 4
1.3.1. General objective ............................................................................................................. 4
1.3.2. Specific Objective ............................................................................................................ 4
1.3.3. Research Hypothesis ........................................................................................................ 4
1.4. Significance of the study .......................................................................................................... 4
1.5. Scope of the study .................................................................................................................... 5
1.6. Limitations of the study ........................................................................................................... 5
1.7. Organization of the paper ......................................................................................................... 6
2. LITERATURE REVIEW ................................................................................................................. 7
2.1. Definition of Inventory ............................................................................................................ 7
2.2. Theoretical Frameworks........................................................................................................... 7
2.2.1. Adaptive Structuration Theory ......................................................................................... 7
2.2.2. Inventory conversion period ............................................................................................ 8
2.2.3. Theory of Lean inventory................................................................................................. 9
2.2.4. Demand Forecasting....................................................................................................... 11
2.2.5. Inventory turnover .......................................................................................................... 12
2.3. Profitability ............................................................................................................................ 12

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 2.4. Empirical Literature Reviews ................................................................................................ 13
2.4.1. Information Technology ................................................................................................. 14
2.4.2. Inventory Conversion Period ......................................................................................... 15
2.4.3. Inventory leanness.......................................................................................................... 16
2.4.4. Inventory Demand forecasting ....................................................................................... 17
2.4.5. Inventory turnover .......................................................................................................... 17
2.5. Research Gap ......................................................................................................................... 18
2.6. Conceptual Framework .......................................................................................................... 19
CHAPTER THREE................................................................................................................................ 21
3. RESEARCH METHODOLOGY ................................................................................................... 21
3.1. Background of the study area ................................................................................................. 21
3.2. Research Approach ................................................................................................................ 21
3.3. Research Design ..................................................................................................................... 22
3.4. Population and Sample ........................................................................................................... 22
3.4.1. Population ...................................................................................................................... 22
3.4.2. Sampling Technique ....................................................................................................... 22
3.4.3. Sample Size .................................................................................................................... 23
3.5. Data type and Source of data ................................................................................................. 23
3.6. Data analysis technique ....................................................................................................... 24
3.7. Description of Variables and Measurements .......................................................................... 24
3.8. Model specifications .............................................................................................................. 26
3.9. Data Reliability and Validity .................................................................................................. 27
CHAPTER FOUR .................................................................................................................................. 28
4. RESULT AND DISCUSSION ....................................................................................................... 28
4.1. INTRODUCTION ................................................................................................................. 28
4.2. Respondent's response rate..................................................................................................... 28
4.3. Descriptive Statistics Analysis for Inventory Management Practice ..................................... 29
4.4. Descriptive statistics result of Information technology.......................................................... 30
4.4.1. Descriptive statistics result of Lean inventory ............................................................... 31
4.4.2. Descriptive statistics result of the Inventory conversion period .................................... 32
4.4.3. Descriptive statistics result from Demand forecasting ................................................... 33

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 4.4.4. Descriptive statistics result of Inventory turnover ......................................................... 34
4.5. Multiple linear regression Assumptions ................................................................................. 34
4.5.1. Tests for multicollinearity .............................................................................................. 34
4.5.2. Autocorrelation (Durbin Watson Test) ........................................................................... 35
4.5.3. Test for Linearity ............................................................................................................ 36
4.5.4. Normality test assumptions ............................................................................................ 37
4.5.5. Homoscedasticity assumption test ................................................................................. 38
4.6. Correlation results .................................................................................................................. 39
4.7. Results of Regression Analysis ............................................................................................. 40
4.8. Analysis of variance tests (ANOVA) ..................................................................................... 41
4.9. Regression coefficient results................................................................................................ 41
4.10. Hypothesis test ................................................................................................................... 44
CHAPTER FIVE.................................................................................................................................... 48
5. SUMMARY, CONCLUSION AND RECOMMENDATION ...................................................... 48
5.1. Summary of Findings ............................................................................................................. 48
5.2. Conclusion ............................................................................................................................. 49
5.3. Recommendations .................................................................................................................. 51
5.4. Suggestions ............................................................................................................................ 52
REFERENCE ......................................................................................................................................... 54
APENDIX -A ......................................................................................................................................... 57
APENDIX-B .......................................................................................................................................... 62

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 LIST OF TABLES
Table 3.1 Sample Size Determination....................................................................................... 23
Table 3.2: Reliability and validity test ...................................................................................... 27
Table 4.1 respondents Response Rate ....................................................................................... 28
Table 4.3: Mean interval of Respondents’ response ................................................................. 29
Table 4.4: Information technology descriptive statistics result ................................................ 30
Table 4.5: Inventory leanness descriptive statistics result ........................................................ 31
Table 4.6: Inventory conversion period descriptive statistics result ......................................... 32
Table 4.7: Demand forecasting descriptive statistics result ...................................................... 33
Table 4.8: Inventory turnover descriptive statistics result ........................................................ 34
Table 4.9: Multicollinearity assumption test............................................................................. 34
Table 4.10: Autocorrelation assumption test............................................................................. 35
Table 4.11 Pearsons’ correlation matrix .................................................................................... 39
Table 4.12: coefficient of determination ................................................................................... 40
Table 4.13: ANOVA test results ................................................................................................ 41
Table 4.14: Coefficients results for Multiple Linear Regression results .................................. 41

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 LIST OF FIGURES

Figure 2-1 Conceptual Farmwork ............................................................................................. 20

Figure 4-1 Test for linearity Assumptions ................................................................................ 36
Figure 4-2 Normality Test assumptions .................................................................................... 37
Figure 4-3 Test for Homoscedasticity Assumptions ................................................................. 38

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 ABSTRACT

Small and medium enterprises lack awareness of inventory management costs and the impact
of poor inventory productivity, limiting their profitability and efficiency. This study aimed to
investigate the effect of inventory management practices on the profitability of small and
medium enterprises in Wolaita Sodo. The paper adopted a quantitative research approach,
cross-sectional -survey, and explanatory research design. The population of the study consisted
of 175 small and medium enterprises in Wolaita Sodo, stratified simple random sampling
techniques were employed to select 123 sample sizes, and primary data was collected using
Likert scale questionnaires. Multiple linear regression model was employed, to analyze data
through SPSS version 26. The result of descriptive statistics, correlation, and regression analysis
of coefficient shows that: information technology, Inventory conversion period, inventory
leanness, demand forecasting, and inventory turnover had a coefficient of 0.316, -0.27, 0.329,
0.165, and 0.257 respectively. The results showed that, except for the inventory conversion
period, the remaining independent variables had a significant and positive relationship with
profitability. The research model indicated that the efficiency of firms' inventory management
practices significantly influenced profitability, as evidenced by the ANOVA result with an R-
squared value of 0.685. Based on these findings, it is recommended that any actions affecting
inventory management practices should be carefully considered to determine their impact on
the profitability of small and medium enterprises. Enhancing the efficiency of inventory
management practices can positively contribute to the profitability of small and medium
enterprises. Local governments provide incentives to support SMEs by providing training, link
market chain, and expansion.

Keywords: Inventory, inventory management, information technology, inventory leanness,

demand forecasting, inventory conversion period, profitability

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 CHAPTER ONE
1. INTRODUCTION
[Link] of the study
Inventory management (hereafter IM) has a long history, with roots dating back more than
50,000 years when people used tally sticks to keep track of their items (Intern, 2018). Ancient
Greek and Egyptian societies further advanced and more precise accounting systems and
detailed record-keeping.

During the second industrial revolution, Herman Hollerith's creation of the tabulating machine
in 1889 revolutionized inventory management by using punch cards to sort and summarize
information, thereby reducing the time spent on summarizing idle hours (Bellis, 2019).

In the present day, firms face numerous challenges, particularly with stock management and
control, which can adversely affect their operational performance. These challenges include
overstocking materials that eventually become outdated or expire, understocking, failure to take
inventory, employee theft of materials, and delays in obtaining materials for the organization,
among others (Kameron, 2024).

Every company has its own inventory and each company manages the inventory through various
ways of managing systems (Syed et al., 2016). However, the purpose of the inventory is the
same, where the inventory must always be ready to be used and the inventory cost must be low.
Inventory management refers to all the activities involved in developing and managing the
inventory levels whether the inventory is raw materials, semi-finished material, or finished
goods, so adequate supplies must be always available and the form must make sure the cost of
over or under stocks are always low.

Despite Ethiopia's large population and high demand for manufactured products, existing
manufacturing companies have failed to meet customer satisfaction. Unfortunately, neither
researchers nor policymakers in Ethiopia have shown a significant interest in the inventory-
related features of firms, especially in the manufacturing sector, which makes a vital
contribution to the economy (Birassa et al., 2016).

The IM study in Wolaita town provided valuable insights, enabling stakeholders to make
1
informed decisions and implement effective improvements. Recommendations were generated
to optimize IM systems, contributing to regional growth and competitiveness. Additionally, the
study enriched the literature on inventory management. Ultimately, the improved IM system
benefited businesses and supported the economic development of the region.
Examining inventory management practices within specific regions, such as the study conducted
in Wolaita Sodo, holds the potential to yield valuable insights and recommendations for
enhancing inventory management systems. The study focused on the context of small and
medium-sized enterprises, this research can contribute to growth and foster improved
profitability within the local business landscape.

[Link] of problem

Small and medium-sized enterprises have a crucial role in both the economy and society, as they
contribute to job creation and are particularly important during times of crises and rising
unemployment. In countries with rapidly growing populations, the growth of SMEs can address
various challenges related to economic development, inequality, high unemployment rates,
demographic changes, and the need for structural transformation (Ahmed Mekonnen, 2020).

The Government of Ethiopia's Micro and Small Enterprise Development Strategy (2011)
highlights that SMEs in the country encounter significant difficulties during different stages of
their growth. Inventory, which represents the investments made by a company to generate
profits, is a vital part of its current assets (Anisere-Hameed, 2021). Inadequate inventory levels
can negatively affect business operations, while excess inventory leads to additional costs that
can reduce a firm's profits (Ashok Kumar, 2018).

Efficient and effective inventory management plays a crucial role in the successful operation
and survival of a business firm. When organizations fail to manage their inventory effectively,
they are likely to encounter stockouts, decreased productivity, customer dissatisfaction, and
ultimately a decline in profitability (Solomon, 2021).
Maintaining appropriate inventory levels is imperative for small and medium-sized enterprises
to ensure profitability and avoid potential negative consequences. Excessive inventory can lead

2
to cash flow problems, high holding costs, material deterioration, obsolescence, and theft. It ties
up valuable working capital, strains financial resources, and limits investment
opportunities(Amnim & Fcit, 2017).
The significance of inventory as a component of working capital in SMEs' operations cannot be
underestimated and necessitates efficient management. Ensuring an adequate and suitable level
of working capital is crucial for effectively tackling liquidity challenges within a firm(Srour &
Marwa, 2021).
Small and medium enterprises face difficulties associated with fluctuating inventory levels,
unreliable demand forecasting, insufficient responsiveness to customer needs, and a lack of
effective ICT application systems. These challenges collectively contribute to below-average
performance within SMEs(Kairu, 2015).
The choice of studying the effects of inventory management practice on profitability is
motivated by the significant impact inventory management can have on SMEs’ profitability.
Effective inventory management practices can lead to improved customer service, reduced
costs, and increased profitability. By examining specific variables such as information
technology, Inventory holding period, lean inventory management, demand forecasting, and
inventory management, this study aims to provide valuable insights for businesses seeking to
optimize their inventory management practices for enhanced profitability.
Insufficient availability of raw materials and spare parts poses significant challenges for small
and medium-sized manufacturing industries, leading to disruptions in production schedules,
machinery malfunctions, and underutilization of capacity (Atnafu & Balda, 2018).
Descriptive statistics couldn’t direction and the relationship among IM and profitability, because
it shows only the existing facts or figures as it is. So, study wants to fill methodological gaps of
Shitaye W., (2017).
These challenges ultimately hinder the profitability and growth potential of these businesses.
To address this issue, the current study focuses on investigating how inventory management
practices impact the competitiveness and overall performance of small and medium enterprises
located in Wolaita Sodo.

3
 [Link] of the study

1.3.1. General objective

The general objective of the study is to examine the effect of inventory management on the
profitability of small and medium enterprises in Wolaita Sodo

1.3.2. Specific Objective

• To identify and analyze the utilization of IT in inventory management and its impact
on the profitability of SMEs.
• To examine the effect of the inventory conversion period on the profitability of SMEs.
• To examine the impact of inventory leanness on the profitability of SMEs.
• To investigate the effect of demand forecasting on the profitability of SMEs.
• To evaluate the effect of inventory turnover and profitability of SMEs.

1.3.3. Research Hypothesis

Based on different literature surveys, the following hypotheses were hypothesized/ formulated
in light of the objectives of the study to identify their relationships:
Ha1: Information technology has a positive significant effect on the profitability of SMEs.
Ha2: Inventory conversion period has a significant negative effect on the profitability of SMEs.
Ha3: Inventory leanness has a significant positive impact on the profitability of SMEs.
Ha4: Inventory demand forecasting has a significant positive effect on profitability of SMEs.
Ha5: Inventory turnover has a statistically significant positive impact on profitability of SMEs.

[Link] of the study

Studying the impact of inventory management practices on SME profitability holds significant
importance for various stakeholders, including owners, policymakers, future scholars, and
researchers, especially for an MSc candidate.
The findings of this study provide practical insights for SME owners, helping them make
informed decisions to improve profitability through optimized inventory levels, streamlined
supply chain processes, and reduced holding costs.

4
Policymakers can utilize these findings to shape initiatives supporting SMEs in adopting
effective inventory management practices, fostering economic growth and competitiveness.
The study also serves as a foundational work for future scholars, inspiring further academic
exploration in the field of inventory management in SMEs.
Lastly, for the candidate as a researcher, conducting this study offers an opportunity to contribute
to existing research, validate theories, develop new models, and enhance research skills.
[Link] of the study

The study titled "Effect of Inventory Management Practices on Profitability of SMEs: A Study
in Wolaita Sodo " focuses on examining the relationship between inventory management
practices and profitability in SMEs specifically located in Wolaita Sodo. The study encompasses
several key concepts, including the usage of information technology in inventory management,
Inventory conversion period, inventory leanness, inventory demand forecasting, and inventory
turnover.
To investigate this relationship, a quantitative approach research is adopted, employing a cross-
sectional survey design. The data analysis technique utilized is multiple linear regression which
allows for the examination of the impact of various inventory management practices on
profitability.
The study was conducted during the academic year 2023/24G.C, with a sample size of 123
SMEs selected out of a total population of 175 in Wolaita Sodo.

[Link] of the study

The study on the effect of inventory management practices on the profitability of SMEs
acknowledges certain limitations that should be considered to provide a comprehensive
understanding of its findings and conclusions. These limitations include the following:
Firstly, the study's sample size is limited to SMEs in Wolaita Sodo, which may restrict the
generalizability of the findings to other regions or industries. The specific characteristics and
context of this sample may not fully represent the broader population of SMEs, limiting the
external validity of the study's findings.

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Secondly, the study relies on self-reported data obtained from the respondents. This reliance on
self-reporting introduces potential biases and errors in the data. Respondents may be influenced
by social desirability bias, leading to overestimation or underestimation of certain factors related
to inventory management practices. Additionally, memory recall issues can affect the accuracy
of the data provided, as the respondents may struggle to accurately remember and report past
inventory management practices and their impact on profitability.
Thirdly, the study is constrained by time limitations, as it focuses on a single academic year.
This constraint may have restricted the depth and breadth of the research, preventing a
comprehensive analysis of the long-term effects of inventory management practices on
profitability. It is important to consider the potential influence of seasonal variations, economic
trends, or other time-related factors that could impact the relationship between inventory
management practices and profitability.

[Link] of the paper

The paper consists of five chapters, each serving a distinct purpose in presenting the study.
Chapter one serves as the introduction, providing background information, stating the research
problem, objectives, and hypothesis, discussing the significance and scope of the study,
acknowledging limitations, and outlining the organization of the paper. Chapter two focuses on
reviewing relevant literature, establishing the theoretical foundation, and justifying the need for
further investigation. Chapter three presents the methodology, describing the research design,
data collection methods, sampling technique, and data analysis techniques. Chapter four
analyzes and interprets the gathered information, discussing the findings to the research
objectives. Finally, chapter five concludes the paper by summarizing the findings, drawing
conclusions, and providing recommendations for future research or practical applications.

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 CHAPTER TWO
2. LITERATURE REVIEW

[Link] of Inventory

In the dictionary meaning of inventory is a “detailed list of goods, furniture, etc.” Many
understand the word inventory, as a stock of goods, but the generally accepted meaning of the
word ‘goods’ in the accounting language, is the stock of finished goods only.
The word inventory refers to the goods or resources used by a firm for production and sale. It
also includes the matter, which is used as helpful materials to ease production (Aklilu Taye,
2022).
An inventory is a detailed list of all the goods or items held by a business or individual. It is an
essential tool used in business to keep track of the products or goods in stock, manage the
ordering and restocking of goods, and help with financial planning and forecasting(Fikirte,
2021). All types of inventories constitute a significant portion of capital, and a company's ability
to manage its inventory effectively determines whether it will succeed or fail because it not only
helps to address the liquidity issue but also boosts profitability(Torky, 2020).
[Link] Frameworks

2.2.1. Adaptive Structuration Theory

The study aims to investigate the impact of information technology on effective store
management, drawing upon structuration theory as a theoretical framework. The concept of
structuration theory was introduced by Anthony Giddens in 1984, which aimed to reconcile the
macro and micro perspectives of organizational structure. De Sanctis and Poole (1994) adopted
Giddens' theory to propose the idea of AST, which is concerned with the interplay between
information technology, social structures, and human interaction(Akinlabi, 2021). AST provides
a model that explains how information technology influences human activities by analyzing the
social structures, rules, and resources provided by these technologies. The use of AST is an
appropriate approach to studying the effect of information technology on inventory management
because it allows for a comprehensive examination of the changes from multiple
perspectives(Welelaw Necho, 2017). Therefore, this study employs AST to investigate how the

7
introduction of information technology affects the practices of inventory management in an
organization.
The proliferation of information technology has resulted in the creation of specialized
departments within organizations to manage their technical aspects. These departments handle
a range of areas such as computer programming, system administration, web development,
specialized customer service, and other related jobs. The IT industry has become a critical
component of businesses in the "information age," and it has transformed the way organizations
operate. With the adoption of information technology, businesses have seen an increase in
efficiency and overall performance (Dhodi & Hassan, 2018). Information technology has
become an integral part of our daily lives, and its impact on organizational performance cannot
be overstated.

2.2.2. Inventory conversion period

In today's business environment, organizations must prioritize not only profit generation but
also the timely settlement of short-term debts. Sound corporate management recognizes the
crucial role of Working Capital Management including efficient inventory management, as a
fundamental function. By effectively managing inventory levels, companies can strike a balance
between meeting customer demand and minimizing holding costs. This approach ensures
financial stability, meets short-term obligations, and optimizes operational performance, making
working capital management a driving force behind the success of an economic entity (Mbathi
et al., 2021).
The composition of company inventories varies depending on the type of production or business
involved. Inventories typically consist of main assets: raw materials, work-in-progress
materials, finished goods, extra materials, and consumption materials. Most companies rely on
inventories that are essential to their operations. Manufacturing companies, in particular, often
maintain inventories that encompass all five types of materials. These inventories enable them
to effectively manage their production processes, ensuring a steady supply of raw materials,
efficient work in progress, and availability of finished goods for timely delivery to customers.

8
Additionally, holding inventories allows manufacturing companies to handle unexpected
fluctuations in demand and maintain a smooth production cycle (Wubshet, 2014).
The inventory holding period, also known as the average number of days inventories, measures
the duration that companies hold their inventory before selling it. A lower inventory holding
period is desirable as it helps to reduce the cash conversion cycle, indicating efficient inventory
management. To calculate the average amount of inventory, the beginning and ending balances
of inventory for a year are summed and divided by two(Bireda, 2020). This average inventory
amount is then divided by the cost of goods sold to determine the proportion of the cost of goods
sold that corresponds to inventory. By multiplying this proportion by the average number of
days in a year (typically 365), the cash conversion cycle in days can be derived. This metric
provides valuable insights into how effectively a company manages its inventory and converts
it into cash, ultimately impacting its overall financial performance (Wubshet, 2014).

2.2.3. Theory of Lean inventory

The theory presented by Wangari (2015) as cited (Orga & Mbah, 2017)emphasizes the
importance of inventory management as a vital component within supply chains, regardless of
the type of goods or services involved. This theory builds upon the principles of just-in-time
and introduces the concept of lean theory, which focuses on making more flexible ordering
decisions, reducing on-site inventory levels, and eliminating inventory-carrying costs.
Originating from the Toyota Production System in Japan, lean theory serves as an organizational
change methodology aimed at increasing profitability. By implementing lean principles, such as
streamlining processes, minimizing waste, and optimizing resource utilization, businesses can
enhance operational efficiency, reduce costs, and improve overall profitability.
The lean theory aims to improve overall efficiency and eliminate waste in the supply chain by
implementing lean principles to all functions within the supply chain, including suppliers,
distributors, focal organizations, and customers. The transformation process involved in creating
a lean supply chain involves streamlining processes, reducing costs, improving quality, and
maximizing value for the customer(Ugochukwu, 2017).
The implementation of lean principles requires a cultural change within the organization and is

9
a continuous process that involves ongoing evaluation and improvement. Through the
application of lean theory, organizations can achieve a more streamlined and efficient supply
chain, which can lead to increased profitability and customer satisfaction(Christian et al., 2012).
The concept of lean theory, particularly the just-in-time (JIT) philosophy, emphasizes the
importance of maintaining a balanced level of inventory in the supply chain.
The JIT approach recommends against holding extra inventories, as it can result in increased
costs such as holding, ordering, and interest expenses. Instead, organizations are advised to
maintain an optimal level of inventory to meet customer demand efficiently(Lwiki et al., 2013).
Maintaining the optimum level of inventory, also known as leanness, can enhance an
organization's profitability and customer satisfaction by reducing opportunity costs and
minimizing production and time wastages. By reducing inventory holding costs and maximizing
inventory turnover, organizations can improve their cash flow and reduce the risk of stock
obsolescence or damage(Maina Weru, 2015).
The buffer theory involves holding extra stock to compensate for unexpected fluctuations in
supply and demand. The purpose of buffer inventory is to ensure that an organization can meet
customer demand even if it exceeds expectations or if there are delays in the supply chain due
to factors such as unreliable suppliers or transportation issues(Otchere et al., 2016).
The amount of buffer inventory held by an organization is typically minimal and is based on the
specific needs and requirements of the business. It is essential to strike a balance between
holding enough buffer inventory to compensate for unexpected fluctuations and minimizing
excess inventory that can result in increased costs and reduced profitability(Mohammad, 2023).
Buffer inventory theory, which emphasizes holding excess inventory as a safety net, is at odds
with the principles of system theory and lean inventory management.
The number of Kanban cards or containers used in the system is typically determined based on
factors such as lead time, demand variability, and production cycle time. The Kanban system
operates on the principle of "pull" production, where inventory is replenished based on actual
customer demand. Each Kanban card represents a specific quantity of items, and the number of
Kanban cards in circulation determines the amount of inventory in the system. The specific
calculation of the Kanban quantity can vary depending on the organization and its specific

10
requirements. It may involve analyzing historical demand data, considering lead time, and
adjusting for variability. The goal is to set the Kanban quantity at a level that ensures a smooth
flow of materials while avoiding excessive inventory or stockouts. Organizations need to
analyze their specific production processes, demand patterns, and lead times to determine the
appropriate Kanban quantity and optimize their inventory management within the Kanban
system.
2.2.4. Demand Forecasting

According to (Dorfling, 2021) forecasting can be defined as the science that enables one to
predict future events and outcomes. It can be applied in different forms. One form is through
the use of mathematical models that analyze past events or results and project them into expected
future outcomes. These types of forecasts, known as quantitative forecasts, rely on historical
data.
Another form of forecasting is based on intuitive predictions, which are highly subjective. In
this approach, individuals with specific experiences make predictive statements based on
assumptions, emotions, intuitions, and personal experience. For instance, a sales manager might
predict a 10 to 15% increase in sales for a particular product during a specific period, taking into
account market conditions or privileged customer information. These types of forecasts are
referred to as qualitative forecasts (Dorfling, 2021).
Demand forecasting involves predicting, projecting, or estimating the anticipated demand for
products within a defined future timeframe. The demand for products often fluctuates in the
market due to factors such as seasonality, trends, and economic conditions. When the primary
selling season concludes, any excess product inventory loses significant value. Hence, demand
planning serves as the initial stage of supply chain planning, establishing a continuous
connection to effectively manage inventory levels and product demand (Bon et al., 20019).
Supply chains have experienced continuous expansion in many nations since the 18th-century
industrial revolution. Having surplus inventory can result in higher expenses for storage,
insurance, and labor, as well as potential quality deterioration, depending on the product's
characteristics. Conversely, shortages or out-of-stock situations can lead to missed sales

11
opportunities and a decrease in customer satisfaction and loyalty towards the retailer (Cisse Sory
et al., 2021).
Inventory demand forecasting is a critical process for small and medium-sized enterprises that
involves predicting future product demand within a specific timeframe. This estimation relies
on historical data, trends analysis, and consideration of relevant events(Anastasia, 2022).
Accurate demand forecasting is essential for SMEs to maintain optimal inventory levels,
avoiding the costs associated with excess inventory.
Accurate inventory forecasting helps businesses to optimize their inventory levels and avoid
overstocking or stockouts. Overstocking ties up capital and incurs additional holding costs,
while stockouts lead to lost sales and dissatisfied customers. Demand planning enables
businesses to adjust their inventory levels based on anticipated demand, which can improve
their overall operational efficiency and reduce costs associated with excess inventory or
stockouts(Fraga & Anema, 20019).

2.2.5. Inventory turnover

The inventory turnover ratio is a key metric used to measure a company's ability to manage
inventory effectively. A high inventory turnover ratio is generally seen as positive, indicating
that a company is selling inventory quickly and has strong sales and IM practices(Garba et al.,
2020). On the other hand, a low inventory turnover ratio suggests that a company is selling
inventory slowly, which could be a sign of poor sales or inventory management practices or an
indication that the company is carrying too much inventory (Jason & David, 2023).
[Link]

Profitability assesses how efficiently and effectively resources are utilized to generate
satisfactory returns. Return on Assets (ROA) is a key measure used to determine profitability.
ROA indicates the profitability of a company about its total assets. It's important to note that
ROA can vary significantly across public firms and is heavily influenced by the industry in
which a company operates. Therefore, when using ROA as a comparative metric, it is advisable
to compare it against an SME's previous ROA figures or the ROA of a similar firm to gain
meaningful insights.

12
Profitability, as viewed by small and medium-sized enterprises (SMEs), is an essential measure
of their ability to generate profits relative to their costs and expenses within a specific period. It
serves as a key element in evaluating the financial performance of an SME, indicating its success
in earning a profit and creating value for its stakeholders (Fabozzi & Drake, 2008, as cited in
Girmay, 2017). SMEs can gauge profitability using various financial ratios such as return on
investment (ROI), return on equity (ROE), return on assets (ROA), and gross profit margin. A
profitable SME is generally considered financially healthy, and capable of sustaining its
operations and facilitating long-term growth (Fabozzi & Drake, 2008, as cited in Girmay, 2017).
The formula is given as:
𝐸𝐵𝐼𝑇
𝑅𝑂𝐴 = ∗ 100
𝑇𝑂𝑇𝐴𝐿 𝐴𝑆𝑆𝐸𝑇
Where ERIT = Earnings before income tax
ROA indicates how effectively an SME is utilizing its assets to generate earnings. Here's a
breakdown of the components:
EBIT (Earnings Before Interest and Taxes): EBIT represents the operating profit of the SME
before taking into account interest expenses and taxes. It reflects the profitability of the core
operations of the business.
Total Assets refers to the sum of all the tangible and intangible assets owned by the SME. This
includes items such as cash, inventory, equipment, buildings, and intellectual property.
A higher ROA percentage indicates better profitability and efficient utilization of assets. It
signifies that the SME is generating a higher return on its investment in assets. Conversely, a
lower ROA suggests that the SME is not generating significant earnings in proportion to its asset
base, indicating potential inefficiencies or underutilization of resources.

[Link] Literature Reviews

According to a study conducted by (Orga & Mbah, 2017) it was found that inventory
management plays a favorable role in the organizational growth of departmental stores. The
study examined key factors such as organizational growth, profitability, and sales turnover to
assess the impact of inventory management. The research employed a descriptive survey
research design to gather data and analyze the relationship between inventory management and
13
organizational outcomes. The findings of the study indicated a positive effect of effective
inventory management practices on the growth and profitability of departmental stores.
2.4.1. Information Technology

According to (Sonko & Akinlabi, 2020), a cross-sectional survey research design was employed
to examine the relationship between inventory management and profitability in selected food
and beverage manufacturing companies in Lagos State, Nigeria. The target population consisted
of 2027 managers at different levels within these companies. To ensure a representative sample,
a stratified random sampling technique was utilized. The collected data underwent analysis
using descriptive and inferential statistics. The results indicated a significant impact of inventory
management on the profitability of the examined food and beverage manufacturing companies.
These findings highlight the importance of implementing effective inventory management
practices to enhance profitability within the sector.
In the study titled the Role of Inventory Management on the Competitive Advantage of
Manufacturing Firms in Kenya (Naliaka & Namusonge, 2015) the researchers investigated the
influence of independent variables such as information technology, inventory lead time,
inventory control, and inventory control practices on the competitive advantage of
manufacturing firms. The study utilized a descriptive research design and targeted a population
of 289 employees. Stratified and simple random sampling techniques were employed to select
30 respondents. Both primary and secondary data were collected and analyzed. The findings of
the study indicated that information technology, inventory control systems, inventory lead time,
and inventory control practices play crucial roles in enhancing the competitive advantage of
manufacturing firms in Kenya.
The study on the effect of strategic electronic sourcing practices on the performance of
government ministries in Kenya utilized a descriptive research design. The main factors
examined were strategic electronic sourcing practices, inventory optimization, lead time,
customer service level, organizational policy, and information communication technology
integration on the performance of government ministries. The findings indicated that
organizational policy, customer service, ICT integration, and lead time positively and
significantly influenced the performance of government ministries. These results highlight the

14
importance of effective policies, customer service, and ICT integration in enhancing the
performance of government ministries in Kenya(Jepchirchir & Noor, 2019).
A scholar (Dhodi & Hassan, 2018)found that information technology positively affects
inventory management by enabling information sharing with suppliers, improving inventory
accuracy, reducing ordering costs, enhancing order processing speed, improving service to
customers, and increasing stock availability. The study also revealed a positive impact of
information technology on service delivery.
2.4.2. Inventory Conversion Period

The study conducted (Wubshet,2014) investigated the impact of working capital management
on the performance of 11 metal manufacturing companies in Addis Ababa, Ethiopia, from 2008
to 2012. The study focused on working capital variables, including the cash conversion period,
accounts receivable period, inventory conversion period, and accounts payable period. The
analysis employed SPSS software, utilizing correlation analysis and pooled panel data
regression models. The findings revealed that longer accounts receivable and inventory holding
periods were linked to lower profitability. Additionally, a significant negative relationship was
observed between the cash conversion cycle and profitability measures. However, no significant
relationship was found between the working capital variables and return on investment capital.
Remarkably, the study identified a highly significant negative relationship between accounts
receivable period, inventory conversion period, and accounts payable period with return on
assets.
In a study conducted by (Habtamu 2020), the impact of working capital management on the
profitability of sixteen PP woven bags manufacturing companies in Addis Ababa, Ethiopia, was
examined. The study utilized secondary data from audited financial statements spanning from
2008 to 2017. The independent variables included account receivable days, account payable
period, cash conversion cycle, and inventory holding period, while return on assets (ROA)
served as the measure of profitability. The findings revealed a positive relationship between the
account receivable period and firm profitability, indicating that a decrease in the number of days
for receiving payment positively influenced profitability. Additionally, a negative relationship
was observed between the account payable period and profitability, although the relationship

15
with inventory conversion period was insignificant. The relationship between the cash
conversion cycle and profitability was also found to be insignificant. Furthermore, a positive
relationship was identified between current liabilities to total assets ratio and profitability, as
well as between current assets to total assets ratio and profitability.

2.4.3. Inventory leanness

In the context of small and medium-sized enterprises, the study conducted by Christian et al.
(2012) contributes to the theory of lean production by providing valuable insights into the
mediated and moderated effects of implementing lean production practices on inventory
leanness and financial performance. The research specifically examines how SMEs can leverage
lean production to optimize their inventory management and enhance their financial outcomes.
A study conducted by (Mulindabigwi & Mulyungi, 2017), the study concluded cost reduction is
necessary for the implementation of inventory management for the performance of SMEs also
holding stocks and ordering costs may increase the performance of an organization. Cost
reduction helps in preparing employees for managing the inventory ideology and equips the
organization with sufficient resources and inventory cost reduction helps in achieving
profitability objectives.
According to (Isaksson and Seifert, 2014) in their study titled "Inventory leanness and the
financial performance of firms," their findings highlight the key novelty and immediate
implication that firms have substantial untapped potential to improve profitability through the
adoption of lean practices. The study also suggests that there is no threshold where increased
leanness negatively affects profitability. The research provides empirical evidence of the
potential gains that firms can achieve by embracing lean principles and demonstrates how this
sensitivity varies across different inventory components and industries.
The research conducted in large-scale manufacturing firms employed a mixed-methods
approach, combining qualitative and quantitative techniques. Multiple regression models were
utilized to analyze the factors influencing firm performance. The findings indicated that lean
manufacturing practices had a significant positive impact on firm performance. The majority of
the firms implemented Continuous Improvement Practices and lean transformation practices to

16
a great extent. Lean transportation practices and environment lean practices were also highly
implemented by the manufacturing firms. Overall, the study concludes that lean manufacturing
practices are prevalent among manufacturing firms in Kenya(Maina Weru, 2015).
According to the study conducted (Daniel, 2017) titled "Effects of inventory management
practices on organizations' operational performances of Ethiopian Airlines," it was concluded
that lean inventory management practices have a significant impact on the operational
performances of Ethiopian Airlines.
2.4.4. Inventory Demand forecasting

A study conducted ( Lawrence and Rombe, 2018) called "Impact of Effective Forecasting on
Business Growth, A Case of Businesses in Juba Market," examined the relationship between
forecasting and business growth. They gathered data from a sample of 61 businesses to assess
the impact of forecasting on these businesses. The statistical analysis of the collected data
revealed a significant correlation between forecasting and business growth within the market.
The study also found that the majority of business forecasts relied on the length of experience
and subjective judgments made by managers.
In their study titled "Demand Forecast, Up-to-Date Models, and Suggestions for Improvement:
An Example of a Business" (Acar and Batuhan, 2014), the authors highlight the significance of
demand forecasting systems for businesses. These systems not only enable companies to adapt
to changing market conditions but also provide operational convenience and support strategic
and managerial decision-making. The study finds that as the accuracy of demand forecasting
decreases, the company's ability to fulfill customer demands on time also decreases. Therefore,
the research emphasizes the strong positive relationship between demand forecasting and
operational performance.
The study titled "The Fundamentals of Demand Forecasting in Inventory Management" (Bon
Talib and Leng, 2019) examined the impact of demand forecasting on retail decision-making.
2.4.5. Inventory turnover

In this research conducted by Abdillah Arif (2020), the objective was to examine the impact of
inventory turnover on the profitability of automotive companies listed on the Indonesia Stock
Exchange between 2015 and 2017. The profitability was measured using the Return on Assets

17
(ROA) metric. The financial statements of the sample companies were obtained from the
Indonesia Capital Market Directory (ICMD). The study utilized a quantitative approach,
including testing classical assumptions and conducting simple linear regression analysis as the
statistical method. Purposive sampling was employed to select the sample, resulting in a total
of 18 companies per year. The findings of the study indicated that inventory turnover did not
have a positive influence on Return on Assets.

[Link] Gap

After reviewing multiple articles, the researcher observed discrepancies in the literature
concerning the relationship between inventory turnover and profitability. Akinabi (2020, 2021)
and Akuntansi, (Sunday and Joseph (2017) identified a significant positive relationship between
inventory turnover and both efficiency and profitability. However, Abdillah Arif (2020),
Nwakaego et al. (2014), and Khan et al. (2016) reported a negative impact of inventory turnover
on profitability. Additionally, Ivana and Jimena (2016) found no significant effect of inventory
turnover on profitability. These conflicting findings underscore the need for further investigation
and clarification. Consequently, the researcher intends to conduct a study aimed at addressing
these gaps in the literature and shedding light on the relationship between inventory turnover
and profitability.
The existing literature presents varying findings regarding the impact of lean inventory on
different outcomes. Annet & Gamariel (2021b), Sobreiro et al. (2017), Maina Weru (2015), and
Mulindabigwi & Mulyungi (2017) suggest that lean inventory practices have a positive effect.
However, Annet & Gamariel (2021a) found a negative relationship and recommended the
inclusion of reserve or buffer stock for anticipations. On the other hand, Sunday & Joseph (2017)
did not find any significant effect of lean inventory. Daniel (2017) also reported that lean
inventory had no significant effect. These divergent findings indicate the need for further
research to clarify the relationship between lean inventory and its effects on various outcomes.
The studies conducted by Alemtsehay (2023), Fetiya Mohammed (2021), Melese (2017),
Shitaye Wodago (2017), and Woldeaberach (2015) primarily focused on large companies
located in Addis Ababa, which is known for its developed infrastructure and easy transportation

18
access. However, there is a geographical or location gap in these studies, as they do not
specifically address the inventory management practices in Wolaita Sodo, which may have
unique characteristics and challenges due to its distinct location and infrastructure. Therefore,
there is a need for research to fill this geographical or location gap and provide insights into
inventory management practices specific to Wolaita Sodo.
From the summary of the literature, the researcher identified certain methodology gaps in the
studies conducted by Alemtsehay (2023), Shitaye Wodago (2017), and Woldeaberach (2015).
Alemtsehay (2023) and Shitaye Wodago (2017) utilized descriptive statistics as their primary
methodology, which involves summarizing and presenting data in a meaningful way but may
lack in-depth analysis. On the other hand, Woldeaberach (2015) employed qualitative analysis,
which provides a rich understanding of the subject matter but may not offer quantitative
measures or statistical significance. These methodology gaps highlight the need for future
research to employ a more comprehensive approach that combines both quantitative and
qualitative methods to provide a more robust analysis of inventory management practices.
Generally, the literature survey has brought to light several gaps in existing studies, including
controversies, variable combinations, location, methodology, and industry gaps. These gaps
encompass contradictory findings on the relationship between inventory turnover and
profitability, varying effects of lean inventory practices, insufficient coverage of specific
locations or industries, and inconsistencies in methodologies employed. To address these gaps,
further research is needed to provide clarity and understanding. It is crucial to consider variable
combinations for consistent and comparable results, conduct studies in diverse locations and
industries to capture different contexts, and employ comprehensive approaches that integrate
both quantitative and qualitative methods to gain a holistic understanding of inventory
management practices.
[Link] Framework

The conceptual framework developed for this research was aimed to assist the researcher in
developing awareness and understanding of the effects of inventory management practices on
the profitability of SMEs in Wolaita Sodo. Figure (1) shows the relationship between five
inventory management practice indicators, which the study hypothesized, based on the review

19
of theoretical and empirical kinds of literature, as explanatory variables to the dependent
variable in the study, i.e., profitability.

The independent variables were information technology, inventory conversion period, inventory
leanness, demand forecasting, and inventory turnover management, whereas the dependent
variable was ROA which was the most common and comprehensive measure of profitability.

Figure 2-1 Conceptual Farmwork

20
 CHAPTER THREE

3. RESEARCH METHODOLOGY

[Link] of the study area

The study was conducted in the Wolaita zone, which is situated in the Southern Ethiopia. The
zone shares borders with the Gamo Gofa zone to the south, the Dawro Zone to the west, the
Sidama region to the east, the Kamabata Tamabro, and the Hadiya Zones to the north, and the
Oromia regional state to the northeast. The Wolaita zone comprised 16 woredas and 6 towns,
and it was located approximately 300 kilometers (190 mi) south of Addis Ababa, the capital city
of Ethiopia.
The vegetation and climate of a large part of the region were influenced by the overall elevation,
which ranged between 1,500 and 1,800 meters (5,900 ft) above sea level. These geographical
and environmental factors might have influenced the inventory management practices and
profitability of the selected SMEs in the region, which were explored in this study (CSA,2007).

[Link] Approach

Research approach refers to the overall strategy or plan adopted by researchers to conduct their
studies. It encompasses the systematic and organized way in which researchers approach their
research questions, gather data, analyze information, and interpret their findings(Basias &
Pollalis, 2018).There are different research approaches: quantitative, qualitative and mixed
approaches. The study employed a quantitative research approach to investigate the influence
of factors such as information technology utilization, inventory leanness, inventory conversion
period, inventory demand forecasting, and inventory turnover on the profitability of small and
medium-sized enterprises. This approach involved gathering numerical data and utilizing
statistical techniques to quantify variables and determine statistical relationships. By adopting a
quantitative approach, the study aimed to test hypotheses and examine the impact of these
factors on SME profitability through empirical analysis, providing rigorous and evidence-based
insights into the topic.

21
 [Link] Design

The research design refers to the overall plan that outlines the steps, procedures, and methods
used in a research study to address the research questions. It encompasses decisions regarding
the type of study, data collection methods, sample selection, data analysis techniques, and
interpretation of results. In this study conducted in Wolaita Sodo, the researcher adopted a cross-
sectional and explanatory research design to investigate the relationship between inventory
management practices and profitability in SMEs. The cross-sectional design allowed for the
collection of snapshot data within a specific time frame, while the explanatory design aimed to
establish relationships between variables. (C.R. Kothari, 1990; Semira, 2022).

[Link] and Sample

3.4.1. Population

The population refers to the entire set or group of units, individuals, objects, or events that the
findings of the research are intended to be applied to or generalized about. It represents the
larger target or scope of the study, encompassing all the elements that are relevant to the research
question or objective. The population serves as the basis for drawing conclusions and making
inferences based on the findings of the research(Shukla, 2020).
The target population of this study includes 175 small and medium manufacturing enterprises
engaged in woodwork, metalwork, and construction within Wolaita Sodo. These SMEs
represent businesses involved in various manufacturing activities within these industries. The
study aims to gain insights and draw conclusions specific to the manufacturing landscape in
Wolaita Sodo, focusing on woodwork, metalwork, and construction sectors.

3.4.2. Sampling Technique

Sampling technique refers to the method used to select items for a sample. In this study, the
chosen sampling technique was stratified random sampling. According to Yamane (1967),
stratified random sampling is a useful approach for data collection when the population is
relatively heterogeneous. As mentioned earlier regarding the population, since the target

22
population in this study consisted of heterogeneous woodwork, metalwork, and construction
SMEs, stratified random sampling was an appropriate method to ensure a representative sample.
This technique also allowed for maintaining proportionality within each stratum. Consequently,
the target population was divided into three strata: woodwork, metalwork, and construction
SMEs. After stratification, an appropriate sample was randomly and proportionally selected
from each stratum using the Yamane formula.
N 175
n= = = 123
1+N(e)2 1+175(0.05)2

where 𝑛-represents the sample size

𝑁-represents the population size.
e-represents the desired margin of error

3.4.3. Sample Size

Sample size refers to the number of items selected from the population to form a representative
sample. It is crucial to determine an optimal sample size that balances efficiency,
representativeness, reliability, and flexibility. Budget constraints also need to be taken into
consideration when determining the sample and sample size (Kothari, 2004).

Table 3.1 Sample Size Determination

Strata Population Proportion Sample size
Wood-work 121 (123/175) *121 86
Construction 30 (123/175) *30 22
Metal-work 24 (123/175) *24 17
175 123

[Link] type and Source of data

The study employed primary data collected from owners and employees of SMEs through a
semi-structured questionnaire using Likert scale questions. The questionnaire aimed to evaluate
inventory management practices and their impact on profitability. Respondents were given two
week to complete the self-administered questionnaires that explains profitability affected with
the inventory management practices( sales, revenue, cost) which were then coded and edited for

23
 data completeness and consistency. The Likert scale consisted of ratings from 1 to 5, where 5
indicated a very great extent and 1 indicated a very small extent. Thes questionnaires technically
computed to arithmetic means to quantify data. The use of a structured questionnaire minimized
subjectivity and enabled quantitative analysis.
[Link] analysis technique

The data analysis technique employed in this study was multiple linear regression using SPSS
v-26. This technique allowed for examining the relationship between several independent
variables, including information technology, inventory conversion period, inventory leanness,
demand forecasting, and inventory turnover, and a dependent variable, profitability of SMEs.
Multiple linear regression enabled the researchers to assess the extent to which changes in these
independent variables were associated with changes in profitability. It helps to identify the
strength and direction of these associations, as well as the statistical significance of the
relationships. The analysis provided valuable insights into which practices had a significant
influence on profitability and how they contributed to the overall financial performance of the
Small and Medium Enterprises.
[Link] of Variables and Measurements

i. Information Technology

The study measures the extent of adoption and usage of specific IT tools or platforms relevant
to inventory management practices by SMEs. A Likert scale is employed to capture varying
degrees of utilization, with ratings ranging from 1 (low utilization) to 5 (high utilization). SMEs
rate their adoption and usage of tools like the Internet, Facebook, YouTube, or email for
inventory-related activities. The Likert scale allows for a nuanced understanding of adoption
and usage variations, aiding in the analysis of different small and medium manufacturing
enterprises. Higher utilization is expected to contribute to improved inventory management
practices and increased profitability.
ii. Lean Inventory

Determining the number of Kanban cards or containers in a Kanban system is influenced by

factors such as lead time, demand variability, and production cycle time. The Kanban system

24
 follows a "pull" production approach, where inventory is replenished based on actual customer
demand. Each Kanban card represents a specific quantity of items, and the total number of cards
in circulation governs the inventory level in the system. The calculation of the Kanban quantity
may involve analyzing historical demand data, considering lead time, and adjusting for
variability. The objective is to establish a Kanban quantity that ensures a smooth material flow
while avoiding excessive inventory or shortages. Organizations should analyze their production
processes, demand patterns, and lead times to determine the appropriate Kanban quantity and
optimize their inventory management within the Kanban system(Dimitrescu et al., 2019).

iii. Inventory conversion period

The inventory holding period is a valuable financial metric for SMEs as it reflects the efficiency
of their inventory management while providing insights into liquidity and cash flow. Carefully
managing this period is crucial for profitability. A longer holding period can tie up capital,
increase costs, and risk obsolescence. Conversely, a shorter holding period enables SMEs to
allocate funds to other business needs, improves cash flow, and enhances profitability.

iv. Demand Forecasting

Inventory demand forecasting is a crucial process for small and medium manufacturing
enterprises to estimate future customer demand and determine the optimal inventory levels. It
involves analyzing historical sales data, market trends, customer behavior, and other relevant
factors to make informed predictions about future demand patterns. The accuracy of the
forecasted demand is evaluated by comparing it with the actual demand using various
forecasting accuracy metrics. These metrics provide quantitative measurements to assess the
performance of the demand forecasting process and gauge the accuracy of the
predictions(Dimitrescu et al., 2019).
v. Inventory Turnover

Inventory turnover is a financial metric that measures the efficiency of SME inventory
management. It calculates how quickly SMEs sell and replace their inventory over a specific

25
period. A higher inventory turnover ratio generally indicates that SMEs are selling their
inventory more frequently, which can be a positive sign.
A high inventory turnover ratio suggests that a company is efficiently managing its inventory
and keeping inventory levels low, which can help reduce holding costs, minimize the risk of
obsolescence, and improve cash flow. However, a very high turnover ratio may also indicate
potential inventory shortages that could lead to lost sales.

[Link] specifications

The study titled "Effects of inventory management practice on profitability of SMEs" utilized a
multiple linear regression model to investigate how five independent variables (Information
technology, Inventory conversion period, Lean inventory management, Inventory demand
forecasting, and Inventory turnover) collectively impact profitability. This approach aimed to
capture the combined influence of these factors on the dependent variable.
To ensure the validity of the linear regression analysis, the study considered several
assumptions. These assumptions included linearity, independence of observations,
homoscedasticity (constant variance of errors), normality of errors, and the absence of
multicollinearity among the independent variables. Complying with these assumptions allowed
the study to provide reliable estimates of the relationships between the independent variables
and profitability, facilitating a comprehensive understanding of how inventory management
practices affect SMEs' overall profitability.
Multiple linear regression models were deemed suitable for examining the complex
relationships between the dependent variable and multiple independent variables, making them
an ideal tool for analyzing the effects of inventory management practices on profitability.
The model specification for this study was as follows:
Y = β0 + β1X1 + β2X2 + β3X3 + β4X4 + β5X5 + ε
where: Y = Profitability of SMEs in Wolaita Sodo
X1 = Information technology
X2 = Inventory holding period
X3 = Lean inventory management

26
 X4 =Demand forecasting
X5 = Inventory turnover
β0 = Intercept or constant term
β1 to β5 = Regression coefficients for X1 to X5, respectively
ε = Error term, representing the variation in Y that is not explained.

[Link] Reliability and Validity

The study employed the Cronbach alpha test to assess the reliability of the survey instruments
used in the research. The Cronbach alpha test is a widely used statistical method that measures
the internal consistency of the measurement items. It helps determine the extent to which the
items within each construct. By providing a numerical coefficient ranging from 0 to 1, the
Cronbach alpha test allows researchers to evaluate the reliability of the measurement items.

Table 2 presents the results of the Cronbach alpha test, allowing researchers to examine the
reliability of the survey instruments employed in the study. A higher Cronbach alpha coefficient
indicates stronger internal consistency among the items, suggesting that the measurement items
are reliably measuring the intended constructs. Conversely, lower coefficients may indicate a
lack of consistency among the measurement items, indicating the need for further refinement or
reconsideration of the items.
Table 3.2: Reliability and validity test

Reliability Statistics
Cronbach's Alpha N of Items
.756 45

Source: Computed surveyed questionnaire,2024

27
 CHAPTER FOUR

4. RESULT AND DISCUSSION

4.1. INTRODUCTION

In this chapter, the results and discussion of the data collected from SMEs in Wolaita Sodo
through structured survey questionnaires were presented. Descriptive statistics, including tables,
frequencies, and percentages, were utilized to analyze and report the findings. These statistics
provided a summary of the data and allowed for a clear understanding of the variables under
investigation.
To examine the relationships between the independent and dependent variables, regression
analysis was conducted. This statistical technique helps determine the extent to which changes
in the independent variables are associated with changes in the dependent variable. By
evaluating the coefficients, t-values, and significance levels obtained from the regression
analysis using SPSS V-26, the hypothesized statements were tested.

[Link]'s response rate

The response rate for the questionnaires distributed to individuals employed in the SMEs was
91% as 112 out of the 123 distributed questionnaires were completed and returned. This rate is
deemed satisfactory since it surpasses the recommended threshold of 50% for conducting
thorough analysis and publishing the results. Moreover, previous studies focusing on similar
subjects have also regarded this response rate as acceptable and comparable, as indicated by
(Semira, 2022) and (Girmay, 2017).
Table 4.1 respondents Response Rate

Response Rate Frequency Percentages

Distributed questionnaires 123 100%
Returned questionnaire 112 91%
Unreturned questionnaires 11 9%
Source, Survey 2024

28
 [Link] Statistics Analysis for Inventory Management Practice

Descriptive statistics are used to describe and discuss the characteristics of data. It has a
significant amount of quantitative data. The descriptive statistics were computed, so that they
give a detailed understanding of the trend of inventory management practices, and profitability
among the sample firms Descriptive statistics such as mean and standard deviations were used
to present the quantitative data with the use of a Statistical Package for Social Sciences version-
26. These were presented as per the study objectives as summarized below.
Table 4.2: Mean interval of Respondents’ response
Response Interval level Interval length Level
Strongly disagree 1-1.79 0.79
Low
Disagree 1.80-2.59 0.79
Neutral 2.6-3.39 0.79 Moderate
Agree 3.4-4.19 0.79
Strongly agree 4.20-5 0.79 High

Source: (Kelebu, 2021)

Descriptive analysis displays the level of agreement of the respondent’s perception towards
different variables of the research. This range was used to measure the perception level of the
respondents towards each variable
If the value of the arithmetic mean is (4.20-5.00), it means that the assessment degree of the
respondents’ perception or response is Strongly Agree and the level for the paragraphs and
dimensions is very high.
If the arithmetic mean of the paragraphs or dimensions is (3.40- 4.19), this indicates that the
assessment degree of the respondents‟ perception and response about the paragraphs is Agree
and the level for the paragraphs and dimensions is high.
If the value of the arithmetic mean of the paragraphs and dimension is (2.60-3.39), it means that
the assessment degree of the respondents‟ perception or response is Neutral and the level for
the paragraphs and dimensions is Moderate.

29
Whereas, if the value of the arithmetic mean of the paragraphs and dimension is (1.80-2.59), it
means that the assessment degree of the respondents‟ perception or response is Disagree and
the level for the paragraphs and dimensions is Low.

4.4. Descriptive statistics result of Information technology

Table 4.3: Information technology descriptive statistics result
Descriptive Statistics N Mean Std.
To what extent does your SME utilize IT tools for inventory management? 113 3.45 1.225

how would you rate the effectiveness of IT tools in improving inventory 113 3.44 1.187
management processes?

To what degree has the use of IT tools in inventory management positively 113 3.52 1.261
impacted the accuracy of inventory records in your SME?
how has the adoption of IT tools improved the efficiency of inventory tracking 113 2.84 1.192
and monitoring in your SME?
How has the implementation of IT tools in inventory management contributed 113 3.27 .907
to better demand forecasting and inventory planning in your SME?

how has the use of IT tools in inventory management enhanced the overall 113 3.35 .933
productivity of your SME?

To what extent has the utilization of IT tools in inventory management helped 113 3.50 1.028
in reducing stockouts and ensuring timely fulfillment of customer orders?

how has the integration of IT tools in inventory management influenced cost 113 3.24 1.128
reduction initiatives in your SME?
How satisfied are you with the overall impact of IT tools on the profitability 113 3.37 1.128
of your SME's inventory management operations?
Total mean and std. 3.3 1.11
Valid N (listwise) 113
Source: SPSS V-26 survey result 2024

According to the results shown in Table (4) the descriptive statistics result indicates
that the Total mean of 3.33 suggests a moderate influence of inventory management
through IT management practice on the profitability of SMEs in Wolaita Sodo.

30
 4.4.1. Descriptive statistics result of Lean inventory

Table 4.4: Inventory leanness descriptive statistics result

Descriptive Statistics N Mean Std.
To what extent do you believe that adopting inventory leanness strategies 113 3.50 .955
positively affects the profitability of your SME?

How much do you think inventory leanness contributes to cost savings and113 3.65 1.155
improved profitability in your SME?

Do you think that adopting inventory leanness strategies leads to better cash113 3.14 .854
flow management and increased profitability in your SME?

To what extent do you believe that inventory leanness enhances your SME's113 3.49 .877
ability to respond quickly to changing market demands?

How much do you believe that inventory leanness improves your SME's113 2.89 1.080
ability to meet customer demand and enhance customer satisfaction?

Do you think that inventory leanness positively impacts your SME's overall113 3.52 1.001
profitability?

To what extent do you believe that inventory leanness positively affects the113 3.12 .792
cash flow of your SME?

How would you rate the overall impact of inventory leanness on the113 3.57 1.093
profitability of your SME?

To what extent do you believe that adopting inventory leanness strategies 113 3.19 .854
positively affects the profitability of your SME?
Total mean and std. 3.34 0.962
Valid N (listwise) 113
Source: SPSS survey result 2024

The Results in Table (5) above indicate a Total mean of 3.34 showing that inventory
leanness management practice influenced the profitability of SMEs in Wolaita which
varied significantly as indicated by a standard deviation of 0.962. The Results in the Table
above indicate a total mean of 3.34 showing that inventory leanness management practice
had highly influenced the profitability of SMEs in Wolaita Sodo.

31
 4.4.2. Descriptive statistics result of the Inventory conversion period

Table 4.5: Inventory conversion period descriptive statistics result

Descriptive Statistics N Mean Std.

How would you rate the effect of a shorter inventory conversion period on113 3.65 1.356
the profitability of your SME?

To what extent do you believe that a longer inventory conversion period113 3.14 1.288
negatively affects the profitability of your SME?

How much do you think a shorter inventory conversion period positively 113 3.86 1.017
contributes to cost savings and improved profitability in your SME?

Do you think that a shorter inventory conversion period leads to better cash113 3.85 1.020
flow management and increased profitability in your SME?

To what extent do you believe that a longer inventory conversion period113 3.81 1.101
hinders your SME's ability to respond quickly to changing market
demands?

How much do you think a shorter inventory conversion period improves113 3.68 1.002
your SME's ability to meet customer demand and enhance customer
satisfaction?

Do you think that a shorter inventory conversion period positively impacts113 3.53 1.363
your SME's overall profitability?

Total mean and std. 3.65 1.16

Valid N (listwise) 113

Source: SPSS survey result (2024)

The Total mean for the inventory conversion period questions is 3.65, with a standard deviation
of 1.16. This suggests that the respondents' opinions regarding the effect of the inventory
conversion period on SME profitability varied to some extent. The average response indicates
that, overall, the respondents perceive the inventory conversion period to affect SME
profitability.

32
 4.4.3. Descriptive statistics result from Demand forecasting

Table 4.6: Demand forecasting descriptive statistics result

Descriptive Statistics N Mean Std.
How would you rate the effect of demand forecasting on the 113 3.37 1.269
profitability of your SME?
To what extent do you believe that accurate DF positively affects the113 3.51 1.045
profitability of your SME?
How much do you think DF contributes to cost savings and113 3.65 .874
improved profitability in your SME?
Do you think that effective DF leads to better inventory management113 3.70 1.068
and increased profitability in your SME?
To what extent do you believe that DF enhances your SME's ability113 3.65 1.068
to meet customer demand accurately?
How much do you believe that DF improves your SME's ability to113 3.89 .699
allocate resources effectively and optimize production?
Do you think that DF positively impacts your SME's overall113 3.25 1.073
profitability?
To what extent do you believe that DF positively affects the financial113 3.55 .845
planning and budgeting of your SME?
Total mean and std 3.57 0.99
Valid N (listwise) 113
Source: SPSS survey result (2024)

The findings presented in Table 7 demonstrate that the Total mean of 3.57 suggests a high
influence of inventory demand forecasting practice on the profitability of SMEs in Wolaita
Sodo. This indicates that the practice of forecasting inventory demand has a significant impact
on the financial performance of these small and medium-sized enterprises.

33
 4.4.4. Descriptive statistics result of Inventory turnover

Table 4.7: Inventory turnover descriptive statistics result

Descriptive Statistics N Mean Std.
How would you rate the effect of ITO on the profitability of your SME? 113 3.64 1.282

To what extent do you believe that high ITO positively affects the 113 4.26 .952
profitability of your SME?

How much do you think ITO contributes to cost savings and improved 113 4.26 1.067
profitability in your SME?

Do you think that efficient ITO leads to better cash flow management and 113 3.55 1.452
increased profitability in your SME?

To what extent do you believe that ITO enhances your SME's ability to meet 113 3.23 1.439
customer demand accurately?
Total mean and std. 3.79 1.24
Valid N (listwise) 113
Source: SPSS survey result (2024)

The Results in Table 8 above indicate a Total mean of 3.79 showing that inventory turnover
highly influenced the profitability of SMEs in Wolaita Sodo.
[Link] linear regression Assumptions

4.5.1. Tests for multicollinearity

Table 4.8: Multicollinearity assumption test

Collinearity Statistics
Model Tolerance VIF
1 (Constant)
INFO .743 1.346
ICP .803 1.246
LEAN .648 1.542
DF .726 1.377
ITO .702 1.425
a. Dependent Variable: ROA

34
A lack of high correlation values does not ensure the absence of collinearity, as the combined
effect of two or more independent variables may cause multicollinearity. The conventional
measures for multicollinearity are Tolerance and the Variance Inflation factor (VIF). The
tolerance value is the amount of an independent variable's predictive ability that is not predicted
by the other independent variables in the equation(Kyriazos & Poga, 2023). A Tolerance value
of 1.00 indicates that a variable is unaffected by other independent variables. Theoretically, the
Rule of thumb states a VIF greater than 10 may suggest that the concerned variable is
multicollinear with others in the model and may need to be excluded from the model.
The result of the Tolerance values and VIFs test for multicollinearity displayed in Table (10)
above showed that the multicollinearity problem does not exist.
Therefore, the Results of the multiple regression analyses are statistically significant for all
independent variables. The result of the Tolerance values and VIFs test for multicollinearity
displayed in Table (9) above showed that the multicollinearity problem does not exist.

4.5.2. Autocorrelation (Durbin Watson Test)

Table 4.9: Autocorrelation assumption test

Model Summary
Adjusted R Std. Error of Durbin-
Model R R Square Square the Estimate Watson
1 .828a .685 .670 .25628 1.527
a. Predictors: (Constant), ITO, INFO, ICP, DF, LEAN
b. Dependent Variable: ROA
Source: survey result, (2024)
The Durbin-Watson test was conducted to assess the presence of autocorrelation in the model's
residuals. Autocorrelation refers to the correlation between the residuals of a regression model
at different observations(Mengistu, 2021). The result of the Durbin-Watson statistic was 1.527
which was an acceptable threshold between 1.5 and 2.5.
This implies that the assumption of independence of observations in the model holds, indicating
that the residuals are not systematically related to each other across observations.

35
 4.5.3. Test for Linearity

The linearity of associations between the dependent and independent variables can be tested by
looking at the P-P plot for the model. The nearer the dots lie to the diagonal line, the nearer to
normal the residuals are distributed. As depicted in the below graph, the visual inspections of
the p-p plot revealed that there exists a linear relationship between the dependent and
independent variables.

Figure 4-1 Test for linearity Assumptions

Source: Survey result(2024)

36
 4.5.4. Normality test assumptions

Multiple regressions require the independent variables to be normally distributed. This suggests that
errors are normally distributed and that a plot of the values of the residuals can approximate a normal
curve (Keith, 2006).
According to (Yonas Hailemichael, 2019) frequency distribution comes in many various shapes and
sizes. Therefore, it’s quite necessary to possess some general description for common sorts of
distributions. In a perfect world, our data would be distributed symmetrically around the center of all
scores. As such, if we tend to draw a vertical line through the middle of the distribution then it ought to
look similar on both sides. This is often referred to as normal distribution and is characterized by a bell-
shaped curve. This shape mostly implies that the majority of scores lie around the middle of the
distribution. The normal distribution graph is shown in Fig 4-2 below and shows that the assumption of
normality has been met.

Figure 4-2 Normality Test assumptions

Source: survey result, (2024)

37
 4.5.5. Homoscedasticity assumption test

The assumption of homoscedasticity refers to the equal variance of errors across all levels of
the independent variables (Yang et al., 2019). This implies it requires an even distribution of
residual terms or homogeneity of error terms throughout the data. Homoscedasticity can be
checked by visual examination of a plot of the standardized residuals by the regression
standardized predicted value (Chang, 2020). If the error terms are distributed randomly with no
certain pattern, the problem is not detrimental to analysis. The scatterplot in Fig 4-3 shows that
the standardized residuals in this research are distributed evenly which shows that there is no
violation of homoscedasticity.
Figure 4-3 Test for Homoscedasticity Assumptions

Source: survey result (2024)

38
 4.6. Correlation results

The Pearson product-moment coefficients, obtained from correlation analysis, offer valuable
insights into the strength and direction of the association between independent variables and the
dependent variable. By examining the correlation coefficients in the table, researchers can
determine the closeness of the relationship and whether it is positive or negative. The coefficient
values range from -1 to +1, with values closer to -1 or +1 indicating a stronger relationship,
while values closer to 0 suggest a weaker or no relationship.
Table 4.10 Pearsons’ correlation matrix
ROA INFO ICP LEAN DF ITO
ROA Pearson Correlation 1
Sig. (2-tailed)
N 113
INFO Pearson Correlation .554** 1
Sig. (2-tailed) .000
N 113 113
ICP Pearson Correlation -.300** -.165 1
Sig. (2-tailed) .001 .080
N 113 113 113
LEAN Pearson Correlation .631** .394** -.141 1
Sig. (2-tailed) .000 .000 .137
N 113 113 113 113
DF Pearson Correlation .493** .444** -.142 .421** 1
Sig. (2-tailed) .000 .000 .133 .000
N 113 113 113 113 113
ITO Pearson Correlation .494** .165 .309** .396** .197* 1
Sig. (2-tailed) .000 .082 .001 .000 .037
N 113 113 113 113 113 113
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).

Source: SPSS survey result (2024)

39
The correlation analysis reveals a strong positive relationship between ROA and various
independent variables:

The correlation between ROA and information technology(INFO) is 0.554, indicating a

significant positive relationship between the two variables.

The correlation between ROA and Inventory Conversion period is -0.300 indicating a
significant negative relationship between the two variables.

The correlation between ROA and lean inventory management practice (LEAN) is 0.631
indicating a significant positive relationship between the two variables.

The correlation between ROA and inventory demand forecasting (DF) is 0.493 indicating a
significant positive relationship between the two variables.

The correlation between ROA and inventory turnover (ITO) is 0.494 indicating a significant
positive relationship between the two variables.

[Link] of Regression Analysis

Table 4.11: coefficient of determination

Model Summary
Adjusted R Std. Error of Durbin-
Model R R Square Square the Estimate Watson
1 .828a .685 .670 .25628 1.527
a. Predictors: (Constant), ITO, INFO, ICP, DF, LEAN
b. Dependent Variable: ROA

The model summary presented in Table 4.12 illustrates the effect of the model in predicting
profitability based on the various independent variables included in the analysis.

The R value of .828 indicates a very high correlation between the combined independent
variables (information technology, inventory conversion period, lean inventory, demand
forecasting and inventory turnover) and the dependent variable profitability. The R Square of

40
.685 signifies that approximately 68.5% of the variability in ROA can be explained by these
independent variables collectively.

The Adjusted R Square of .67 reflects the reliability of the model, considering the number of
predictors involved. It indicates that roughly 67% of the variability in ROA is explained by the
independent variables, accounting for the number of predictors in the model.

The Std. Error of the Estimate, measured at .25628, signifies the average distance that the
observed ROA values fall from the regression line. A lower value indicates a better fit of the
regression line to the actual data points.

[Link] of variance tests (ANOVA)

Analysis of variance implies that the independent variables in the model were able to explain
variations in the dependent variable. The result of the analysis is presented below in Table 13.
Table 4.12: ANOVA test results
ANOVA
Model Sum of Squares Df Mean Square F Sig.
1 Regression 15.294 5 3.059 46.57 .00
Residual 7.027 107 .066
Total 22.321 123
a. Dependent Variable: ROA
b. Predictors: (Constant), ITO, INFO, ICP, DF, LEAN

The above Table (13), presented the Summary results of the Analysis of variance and f-statics
(46.57) and the p-value of zero attached to the test statistic revealed that the null hypothesis that
all of the coefficients are jointly zero should be rejected. Thus, it implies that the independent
variables in the model were able to explain variations in the dependent variable.

[Link] coefficient results

Table 4.13: Coefficients results for Multiple Linear Regression results

Coefficients
Standardized
Model Unstandardized Coefficients Coefficients T Sig.

41
 B Std. Error Beta
1 (Constant) .762 .373 2.044 .043
INFO .316 .074 .270 4.287 .000
ICP -.270 .049 -.332 -5.483 .000
LEAN .329 .088 .252 3.736 .000
DF .165 .077 .136 2.143 .034
ITO .257 .039 .425 6.570 .000
a. Dependent Variable: ROA
Source: SPSS V-26 output (2024)

ROA=0.762+(.316*INFO) +(-.27*ICP) + (.329*LEAN) + (.165*DF) + (0.257*ITO)

The B coefficients are important for both prediction and interpretive purposes; however,
analysts usually look first to the t-test at the end of each row to determine which independent
variables are significantly related to the outcome variable. The above Table (14), revealed the
coefficient of Variables along with their t-value and significance level. Looking at the
significance values, we have seen that all of the predictors are statistically significant
(Significance level is 0.05). According to the result depicted in Table (14) above, except
inventory conversion period, other factors identified as independent variables all have positive
coefficients.
First, the effect estimation results of the study showed that there exists a significant and positive
relationship between information technology (INFO) and profitability with a regression beta
value of 0.316. The coefficient for the INFO variable is 0.316. This suggests that a one-unit
increase in the INFO variable is associated with a 0.316-unit increase in the dependent variable
(ROA), holding all other variables constant. The coefficient is statistically significant (p-value
< 0.05), indicating that the INFO variable has a significant impact on ROA.
This finding is consistent with the previous study (Fridah, 2015), and (Dhodi & Hassan, 2018),
who found a significantly positive association between inventory management practices and the
profitability of food and beverage manufacturing companies
Second, the analysis of the coefficients reveals that the Inventory Conversion Period (ICP) has
a significant and negative impact on the profitability of small and medium-sized enterprises

42
(SMEs). The negative unstandardized coefficient (-0.270) indicates that for every unit increase
in ICP, the profitability decreases. This relationship is statistically significant (p < 0.001), as
indicated by the t-value of -5.483. The standardized coefficient (-0.332) further confirms the
moderate negative impact of ICP on the Return on Assets (ROA) of SMEs. Therefore, it is
evident that a longer ICP significantly and adversely affects the profitability of SMEs,
emphasizing the importance of efficiently managing and reducing the time it takes to convert
inventory into sales.
Third, the analysis demonstrates that implementing Inventory Leanness Practices (LEAN) has
a significant and positive impact on the profitability of SMEs. The positive unstandardized
coefficient (0.329) suggests that adopting lean inventory management practices leads to higher
profitability. This relationship is statistically significant (p < 0.001), supported by the t-value of
3.736. The standardized coefficient (0.252) further validates the moderate positive impact of
LEAN on ROA. The significance of LEAN as a predictor of profitability highlights its
importance in optimizing inventory management and positively influencing SMEs' financial
performance. This study's results align with previous research conducted by Maina Weru (2015),
Christian et al. (2012), and Lwiki et al. (2013). These studies have demonstrated that lean
inventory management practices have a statistically significant positive impact on the
profitability of manufacturing SMEs.
Fourthly, the coefficient for the DF variable is 0.310. This suggests that a one-unit increase in
the DF variable is associated with a 0.165-unit increase in ROA, holding all other variables
constant. The coefficient is statistically significant (p-value < 0.05), indicating that the DF
variable has a significant impact on ROA.
This shows that there is a statistically significant positive relationship between inventory
Demand forecasting practice (DF) and profitability (Acar & Batuhan, 2014).
Lastly, the effect estimation results of the study revealed that there exists a significant and
positive relationship between inventory turnover (ITO) and ROA with a beta value of 0.257.
The coefficient for the ITO variable is 0.257. This suggests that a one-unit increase in the ITO
variable is associated with a 0.257-unit increase in ROA, holding all other variables constant.

43
The coefficient is statistically significant (p-value < 0.05), indicating that the ITO variable has
a significant impact on ROA.
The result of this study is consistent with proceedings (Farooq, 2019) and (Sunday & Joseph,
2017) who found a significantly positive association between ITO and profitability. Table (15)
also presents the result of the T-value and probability statistic symbolized by sig.

4.10. Hypothesis test

Based on the findings displayed in Table (14) the hypothesis was tested and a discussion for a
pre-supposed statement was made. The acceptance/rejection criteria were that, if the p-value is
greater than 0.05, the H0 is not rejected but if it is less than 0.05, the H0 fails to be accepted
(reject the null hypothesis).
Based on this objective and literature review, the following null hypothesis was formulated for
testing individual independent factors was summarized as follows;

Hypothesis 1(Ho1) stated that the utilization of INFO for inventory management does not have
a significant effect on the profitability of SMEs.
Ho INFO has no significant effect on the profitability of SMEs
Unstandardized std error B cof. t-value sig Decision
b
INFO .316 .074 .270 4.287 .000 Reject Ho

Results in Table (4.14) showed that the p-value was 0.000<0.05. This indicates that there is no
evidence for the null hypothesis if H0 fails to be accepted. Hence, it was concluded that IT-
based inventory Management Practices had a significant effect on the profitability of SMEs
Table (14) The coefficient of this variable is 0.316 or 31.6 percent.
This shows by keeping other factors constant, the utilization of information technology itself
affects profitability by 31.6 percent positively.
The t-value of 4.287 was recognized for information technology Practices with a significance
level of 0.000. This indicates there is a positive and significant relationship between the
utilization of information technology and profitability.

44
This finding supports earlier empirical evidence from (Dhodi & Hassan, 2018), and (Sonko, M.
L.&Akinlabi, 2020) who argue that IT-based inventory management has significant effects on
the profitability of SMEs.
Hypothesis 2(Ho2) stated that inventory conversion period practices have no significant effect
on the profitability of SMEs in Wolaita Sodo.

Ho ICP has no significant effect on the profitability of SMEs

Unstandardized Coeff. std error B cof. t-value sig Decision
ICP -.270 .049 -.332 -5.483 .000 Reject Ho

Based on the results, the unstandardized coefficient for the Inventory Conversion Period (ICP)
is -0.27, with a standard error of 0.049. The significance level (sig) is reported as 0.000, which
means the p-value is less than 0.001.
The t-value associated with the ICP coefficient is -5.483. To determine whether to accept or
reject the null hypothesis, we need to compare the p-value (0.000) to the significance level (let's
assume α = 0.05). If the p-value is less than α, we reject the null hypothesis. Conversely, if the
p-value is greater than or equal to α, we fail to reject the null hypothesis.
In this case, the p-value (0.000) is less than the significance level of 0.05. Therefore, we reject
the null hypothesis that ICP has no significant effect on the profitability of SMEs. The
coefficient being statistically significant suggests that there is evidence to support the claim that
ICP has a significant impact on SME profitability. These findings contrast with previous studies
conducted by (Sunday & Joseph, 2017), (Ashok Kumar, 2018), and (Cherutich Clara &
Anthony, 2020).
Hypothesis 3 (Ho3) states lean inventory Management practice has no significant effect on the
profitability of SMEs.
Ho LEAN has no significant effect on the profitability of SMEs
Unstandardized b std error B cof. t-value sig Decision
LEAN .329 .088 .252 3.736 .000 Reject HO

45
Based on the coefficients and statistical results provided, the coefficient for LEAN is 0.329 with
a standard error of 0.088. The t-value associated with LEAN is 3.736, and the significance level
(p-value) is 0.000.
The null hypothesis assumes no significant effect, meaning that LEAN practices would not have
a meaningful impact on SME profitability. However, since the p-value is less than the
significance level (p < 0.05), we reject the null hypothesis. This implies that there is strong
evidence to suggest that LEAN practices do have a significant effect on the profitability of
SMEs.
Rejecting the null hypothesis means that the data supports the alternative hypothesis, which
states that LEAN practices do have a significant effect on SME profitability. The positive
coefficient value of 0.329 further supports this conclusion, indicating a positive relationship
between LEAN practices and profitability.
These research results confirm the conclusions of (Maina Weru, 2015) and (Sobreiro et al.,
2017), which suggest that implementing lean inventory management practices has a beneficial
and substantial impact on the profitability of small and medium-sized enterprises (SMEs) in
Wolaita town..
Hypothesis 4 (Ho4) states inventory demand forecasting practice has no significant effect on
the profitability of SMEs in Wolaita town.
Ho DF has no significant effect on the profitability of SMEs
Unstandardized b std error B cof. t-value sig Decision
DF .165 .077 .136 2.143 .034 Reject HO

The result revealed in the above Table (15) showed the Coefficient value, t-statistics, and p-
value of inventory demand as (0.165), (2.143), and (0.034) respectively.
This indicates the Existence of a highly positive relationship between inventory demand
management Practices (DF) and profitability.
The interpretation of this result showed; that an increase in inventory demand management by
1 percent leads to an increase in the SMEs’ profitability by 16.5 percent on average. Standing
up on the t-value displayed on the table, there is no evidence for accepting the null hypothesis.

46
The finding supports previous studies by (Sonko, M. L.&Akinlabi, 2020) and (Bon & Talib,
Leng, 2009).
Hypothesis 5(Ho5) states that inventory turnover has no significant effect on the profitability of
SMEs.
Ho ITO has no significant effect on the profitability of SMEs
Unstandardized b std error B cof. t-value sig Decision
ITO .257 .039 .425 6.570 .000 Reject Ho

Results in Table (14) showed that the p-value was 0.000 <0.05. This indicates that the null
hypothesis H0 fails to be accepted. Hence, it was concluded that inventory turnover had a
significant effect on the profitability of SMEs. Furthermore, in Table (14) the coefficient of this
variable was 0.257 or 25.7 percent. This shows by keeping other factors constant, inventory
turnover affects profitability by 25.7 percent positively and with a t-value of 6.570.
The result of this study was consistent with the preceding (Akinlabi, 2021), and (Sonko, M.
L.&Akinlabi, 2020), who found a significantly positive association between inventory demand
forecasting.

Summary of empirical/ hypothesis test result and decision

Description T Sig Decision

Ha1 INFO had significant effect on profitability of SMEs 4.2 00 Reject H0

Ha2 ICP had significant effect on the profitability of SMEs -5 00 Reject H0

Ha3 LEAN had significant effect on profitability of SMEs 3.7 00 Reject H0

Ha4 DF had significant effect on the profitability of SMEs 2.5 034 Reject H0

Ha5 ITO had significant effect on the profitability of SMEs 6.5 00 Reject H0

47
 CHAPTER FIVE

5. SUMMARY, CONCLUSION AND RECOMMENDATION

[Link] of Findings

➢ The results of the multiple regression analysis model indicate that the inventory
management practices, as measured by the five independent variables, have a significant
correlation with the factor's coefficient. The model also demonstrates strong overall
goodness of fit, as evidenced by the R-value of 0.828. The R-squared value of 0.685
suggests that approximately 68.5 percent of the variation in profitability of SMEs can be
explained by the five independent variables included in this study. It is important to note
that the remaining 31.5 percent of the variation is attributable to other factors not
considered in this particular model. This highlights the potential influence of additional
variables that were not accounted for in the analysis.
➢ The significance of (0.43) the constant term with 0.76 suggests that even when all the
independent variables are zero, there is still a non-zero expected value for the dependent
variable (ROA). This implies that there are additional factors or variables not accounted
for in the model that contribute to SME profitability. Factors such as market conditions,
economic factors, managerial decisions, or industry-specific variables may play a role
in determining the profitability of SMEs beyond the influence of the inventory
management practices considered in the analysis. Paraphrase
➢ The statistical analysis conducted on the relationship between inventory management
practices and profitability of small and medium enterprises reveals that there is a
significant effect of information technology (INFO) on profitability. The unstandardized
coefficient (b) of 0.316 indicates a positive relationship between the utilization of
information technology and profitability. The t-value of 4.287 and a p-value of 0.000
confirm that this relationship is statistically significant.

48
 ➢ The statistical analysis conducted on the relationship between inventory conversion
period (ICP) and profitability of small and medium enterprises indicates that there is a
significant effect of ICP on profitability. The negative unstandardized coefficient (b) of
-0.270 suggests an inverse relationship between the inventory conversion period and
profitability. The t-value of -5.483 and a p-value of 0.000 confirm that this relationship
is statistically significant.
➢ The statistical analysis conducted on the relationship between lean inventory
management practices and the profitability of small and medium enterprises revealed
that there is a significant effect of lean practices on profitability. The positive
unstandardized coefficient (b) of 0.329 indicates a positive relationship between lean
inventory management practices and profitability. The t-value of 3.736 and a
significance level of 0.000 indicate that this relationship is statistically significant,
leading to the rejection of the null hypothesis.
➢ The statistical analysis conducted on the relationship between demand forecasting (DF)
and the profitability of small and medium enterprises revealed that there is a significant
effect of demand forecasting on profitability. The positive unstandardized coefficient (b)
of 0.165 indicates a positive relationship between demand forecasting and profitability.
The t-value of 2.143 and a significance level of 0.034 indicate that this relationship is
statistically significant, leading to the rejection of the null hypothesis.
➢ The statistical analysis conducted on the relationship between inventory turnover (ITO)
and the profitability of small and medium enterprises revealed that there is a significant
effect of inventory turnover on profitability. The positive unstandardized coefficient (b)
of 0.257 indicates a positive relationship between inventory turnover and profitability.
The t-value of 6.570 and a significance level of 0.000 indicate that this relationship is
statistically significant, leading to the rejection of the null hypothesis.

[Link]

The study aimed to identify the main factors of inventory management practices that
significantly contribute to improving and increasing the profitability of SMEs. The finding of

49
this study leads to the conclusion that the efficiency of inventory management practices can
bring about higher profitability. The researcher found that the very best firms have the best
inventory management practices in their daily operation. Therefore, SMEs can improve their
profitability by raising the efficiency of inventory management practices.

Based on the findings, it can be concluded that the implementation of information technology
has a significant positive impact on the profitability of SMEs in the context of inventory
management. Leveraging information technology, specifically in the realm of inventory
management, can lead to increased efficiency, reduced costs, improved decision-making, and
enhanced customer satisfaction. Adopting information technology solutions allows SMEs to
better manage their inventory, optimize operations, and ultimately improve their financial
performance.

Based on the findings, it can be concluded that the inventory conversion period has a significant
effect on the profitability of SMEs. A shorter inventory conversion period is associated with
higher profitability. This implies that SMEs should focus on improving their inventory
management practices to reduce the time it takes to convert inventory into sales. By minimizing
the time inventory spends in the conversion process, SMEs can enhance their cash flow, reduce
costs, and improve overall financial performance.

Based on the findings, it can be concluded that implementing lean inventory management
practices has a significant positive impact on the profitability of SMEs. By adopting lean
principles and optimizing their inventory management processes, SMEs can improve
operational efficiency, reduce waste, and enhance financial performance. Lean practices enable
SMEs to streamline their inventory processes, minimize costs, and deliver value to customers
more effectively, resulting in increased profitability.

Based on the findings, it can be concluded that demand forecasting has a significant positive
impact on the profitability of SMEs. By effectively forecasting demand, SMEs can optimize
their inventory levels, reduce stockouts, and improve customer satisfaction. Accurate demand
forecasting enables SMEs to align their production and procurement activities to meet customer
demand, ultimately leading to increased profitability.

50
Based on the findings, it can be concluded that inventory turnover has a significant positive
impact on the profitability of SMEs. Efficiently managing inventory turnover enables SMEs to
optimize their inventory levels, minimize carrying costs, reduce the risk of stockouts, and
improve cash flow. By effectively controlling and monitoring inventory turnover, SMEs can
enhance their financial performance and profitability.

[Link]

Based on the results, findings, and conclusions the following recommendations have been made
for Small Medium Enterprises:

Based on the findings that information technology (IT) has a significant positive impact on the
profitability of small and medium enterprises in the context of inventory management, it is
recommended that SMEs carefully select and implement technology solutions tailored to their
specific needs. Integration of information technology systems with other business functions,
such as sales and procurement, should be prioritized to enable real-time data sharing and
enhance decision-making. Providing training and skill development opportunities for
employees to effectively utilize information technology tools for inventory management is
crucial. Additionally, SMEs should establish a culture of continuous monitoring and
improvement to optimize the benefits of information technology in inventory management.

Shortening the time, it takes for inventory to be converted into sales can have significant
benefits, such as reducing holding costs, minimizing the risk of obsolescence, and improving
cash flow. SMEs can achieve this by streamlining their supply chain processes, implementing
just-in-time inventory management, and adopting lean principles. Accurate demand forecasting
using reliable techniques and data analysis tools can help anticipate customer demand and plan
inventory effectively. Employing inventory control techniques like ABC analysis, economic
order quantity (EOQ), and safety stock management can optimize inventory levels and minimize
costs.

Based on the findings that lean inventory management practices significantly impact the
profitability of SMEs, the following recommendations are suggested: prioritize the

51
implementation of lean principles, foster a culture of continuous improvement, utilize data
analysis techniques, collaborate with suppliers, and provide training and development
opportunities. These steps can optimize inventory management, reduce waste, and enhance
profitability for SMEs.

To have maximized the benefits of demand forecasting and further enhanced profitability for
small and medium enterprises the following recommendations were proposed. Firstly, SMEs
were advised to invest in improving the accuracy of their demand forecasting methods by
leveraging advanced techniques, historical data, and market insights. Collaborating with supply
chain partners and sharing information was suggested to lead to more accurate forecasts. The
implementation of demand planning software was recommended to streamline the process and
enhance accuracy. Regular monitoring and adjustment of forecasts based on actual sales data
were emphasized to optimize inventory levels. Lastly, fostering a culture of continuous
improvement and cross-functional collaboration in demand forecasting practices was
encouraged to ensure ongoing enhancements. By implementing these recommendations, SMEs
were expected to leverage demand forecasting to optimize inventory management, meet
customer demand, and ultimately drive profitability

To maximize the benefits of inventory turnover and enhance profitability for small and medium
enterprises (SMEs), the following recommendation is proposed: SMEs should implement
effective inventory management systems, improve demand forecasting accuracy, streamline
supply chain and supplier relationships, implement continuous improvement practices, and
leverage technology solutions. By adopting robust inventory control techniques, enhancing
demand forecasting accuracy, establishing strong supplier relationships, fostering a culture of
continuous improvement, and utilizing inventory management software, SMEs can optimize
inventory turnover, reduce carrying costs, minimize stockouts, and improve overall profitability.

5.4. Suggestions

To begin with, while focusing on Wolaita town is a commendable choice, it would be beneficial
to expand the geographically targeted area. include SMEs from other regions or towns to

52
enhance the generalizability of findings and gain a more comprehensive understanding of the
impact of inventory management practices on profitability.
In addition to expanding the geographical scope, it would be wise to extend the time frame of
study beyond just one year. By considering a longer duration, the study would be able to capture
any seasonal or temporal variations in inventory management practices and their influence on
profitability.
Although the sample size of 123 presents a strong foundation, increasing the number of SMEs,
the study can further improve the reliability and strengthen the results. A larger sample size
enables more powerful statistical analyses, facilitating a more comprehensive exploration of the
relationship between inventory management practices and profitability.
While primary data is crucial, do not overlook the significance of incorporating secondary data
sources. By supplementing the analysis with financial reports, industry data, and market trends,
that can gain additional insights into the intricate dynamics between inventory management
practices and profitability in the manufacturing sector.
To enrich the study, consider implementing a mixed-methods approach. This entails
incorporating both qualitative and quantitative methodologies. And, conduct interviews or
surveys to collect qualitative data on inventory management practices, while simultaneously
analyzing financial data quantitatively.
Furthermore, it is advisable to consider additional predictors that may impact profitability.
While inventory management practices are the primary focus of the study, other factors such as
production efficiency, supply chain management, and market conditions can also significantly
influence profitability. Investigating the relationships between these predictors and inventory
management practices would provide a more comprehensive understanding of the topic at hand.

53
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56
 APENDIX -A

WOLAITA TOWN UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING AND FINANCE

DEAR SIR/MADAM/RESPONDENTS:

I am researching to assess the "Effect of inventory management on profitability of SMEs" as

part of my MSc degree requirements. The purpose of this study is to gather information that will
be used solely for academic purposes and treated with confidentiality. Your honest and genuine
cooperation in responding to the questionnaire is crucial for the success of this research, which
will take no more than 30 minutes to complete.
Before you begin answering the questions, please take note of the following points:
Firstly, it is essential to read all the questions carefully and answer them genuinely. The accuracy
of your responses will determine the reliability of the data collected and the validity of the
research findings.
Secondly, please be assured that all responses will be used solely for academic purposes and
treated with strict confidentiality. Your privacy is of utmost importance, and no personal data
will be disclosed or used for any other purpose than the intended academic research.
Lastly, your participation in this research is highly appreciated and will contribute significantly
to the success of the study. Your valuable insights and responses will enable us to examine the
effect of inventory management on profitability in the manufacturing sector comprehensively.
Name: Kassa Mnlik, Phone: +251927601542 Email: kassamnlik2@[Link]
Thank you for your time and cooperation!

57
 Section 1: Participants response
For a research purpose, please indicate your demographic information. Your responses will
only be presented in aggregate, and no single individual’s results will be highlighted.
*** Please put a tick sign (√) beside the best representation of your view inside the box.

Objective 1: To identify types of IT used by SMEs and analyze their impact on profitability
Where
1. Rarely 4. Frequently
2. Infrequently 5. Extensively.
3. Occasionally
Statement of information technology 1 2 3 4 5
To what extent do you use IT tools for inventory management in
your company?
To what extent do you believe that the use of IT tools for
inventory management has improved your company's efficiency?
How has the use of IT tools for inventory management impacted
your company's ability to meet customer demand?
How IT tools for IM impacted your company's ability to reduce
costs?
Use of technology has improved the current IM practice at your
firm?
Does company use the existing IT strictly for decision-making?
IT has led to a reduction in inventory costs at your firm.
Us technology has boosted customer satisfaction levels
H use of technology has improved employee productivity
To what extent do you use IT tools for IM in your company?

Objective 2: To determine the relationship b/n inventory leanness and profitability in SMEs
Statement of inventory leanness 1 2 3 4 5
To what extent does your firm prioritize reducing
inventory levels to improve profitability?
How frequently does your firm perform inventory
analysis and forecasting to maintain lean inventory
levels?
Implement just-in-time practices had reduced
profitability

58
 How well does your firm collaborate with suppliers to
ensure timely deliveries and minimize inventory holding
costs?
Lean Inventory management harmed profitability

To what extent does your firm experience stockouts or

shortages due to inefficient inventory management?
To what extent is reserve inventory available in your stock

Objective 3: To examine the impact of inventory leanness on the profitability of SMEs.

Statement of lean inventory mgmts. 1 2 3 4 5

Please rate the extent to which your SMEs prioritize

reducing inventory levels to improve profitability:

How frequently do your SMEs perform inventory analysis

and forecasting to maintain lean inventory levels?

To what degree do your SMEs implement just-in-time (JIT)

production and delivery practices?

How well do your SMEs collaborate with suppliers to

ensure timely deliveries and minimize inventory holding
costs?

To what extent has implementing lean inventory

management had a positive impact on your SMEs
profitability?

How often do your SMEs experience stockouts or

shortages due to inefficient inventory management?

How well do your SMEs assess and monitor the efficiency

of inventory utilization as a measure of inventory leanness?

How successful are your SMEs in minimizing excess and

obsolete inventory to maintain inventory leanness?

59
To what extent do your SMEs maintain reserve inventory
available in stock for unexpected fluctuations in demand?

Objective 4: To investigate the effect of demand forecasting on the profitability of SMEs.

Statement of inventory demand forecasting 1 2 3 4 5

To what extent does your firm rely on demand
forecasting for inventory management?

How accurate do you perceive your demand forecasting

techniques to be?
How well does demand forecasting help in optimizing
your inventory levels?
To what extent does demand forecasting reduce stockouts
and excess inventory in your firm?
How much does demand forecasting contribute to
improving your firm's profitability?
How satisfied are you with the accuracy of your demand
forecasting methods?
To what extent does demand forecasting help in reducing
costs associated with inventory management?
How confident are you in the ability of demand
forecasting to predict future demand accurately?

Objective 5: To evaluate effect of inventory turnover and profitability in SMEs.

Statement of inventory turnover 1 2 3 4 5
To what extent do you believe that a higher inventory
turnover positively affects profitability?
How important do you think inventory turnover is in
determining profitability?

In your opinion, does a lower inventory turnover

negatively impact the profitability of firms?

How would you rate the level of emphasis placed on

inventory turnover within your firm?
To what extent does your firm actively monitor and
analyze inventory turnover to improve profitability?

60
Statement related to inventory management effect on profitability of SMEs.

Statement 1 2 3 4 5

1. The firm's financial performance is strong

and generates positive results consistently.

2. The firm effectively manages its profit

margins compared to competitors.

3. The firm's profitability is considered strong.

4. The firm experiences consistent and

significant revenue growth, outperforming
industry peers.

5. The firm's revenue growth rate is impressive.

6. The firm demonstrates financial stability and

resilience, being well-positioned to weather
economic downturns.

7. The firm's financial sustainability is

considered robust.

8. The firm's financial performance is strong

and generates positive results consistently.

61
 APENDIX-B

Sample- Size selected firms

Name of Enterprize Enterprizes

S/N Small Medium
1 Solomon MalekoWood work √
2 Nigussie Fenta Wood work √
3 Akliku Tadewoth Wood work √
4 Tilahun Tigneh Wood work √
5 Getachew Ayele Wood work √
6 Workineh Aboy Wood work √
7 Mesfin Timothiwos furniture √
8 Tedilachew Aregahegn Wood work √
9 Kidanie Wood work √
10 Biniam Yaregal Metal work √
11 Mame Furniture √
12 Abate Ena Betesebotch Metal work √
13 Wondimagegn Furniture √
14 Tariku Zerihun Furniture √
15 Yileyal Furniture √
16 Mikias Bereket Wood work √
17 Tesfaye Shimu Furniture √
18 Yotem Furniture √
19 Zoreta Furniture √
20 Siket Furniture √
21 Tefa Amlak Furniture √
22 General M Vission √
23 Hibret Ledil √
24 Birtat Furniture √
25 Brothers √
26 Tata √
27 Selame √
28 Balferasm √
29 Be'emnet √
30 Abisra √
31 MDF √
32 DTFእ/ብ/ብረት √
33 ብቁ እ/ብ/ብረት √
34 ያበጽ እ/ብ/ብረት √
35 ፋና እ/ብ/ብ √
62
36 ሀልቿ √
37 ተስፋ አለን √
38 ውበት እ/ብ/ብ √
39 በርሽንያ √
40 ተሀድሶ √
41 ይለያል እ/ብ/ብ/ √
42 አኗ እ/ብ/ብረት √
43 ይሳካል √
44 ተባረክ √
45 ቃና እ/ብ/ብረት √
46 ቱሳ እ/ብ/ብረት √
47 ሻሎም √
48 ይሆናል √
49 ዶቃና እ/ብ/ብረት √
50 ሁሉ በእርሱ ሆነ √
51 ብርሃን √
52 ይገባዋል √
53 ርሆቦት እ/ብ/ብረት √
54 ማለዳ እ/ብ/ብረት √
55 ፋናዬ እ/ብ/ብረት √
56 ትዜና ቤተሰቦቹ እንጨት ሥራ √
57 ታታሪ እ/ብ/ብረት √
58 ዘመቻ ለህዳሴ √
59 ኤልሮኤል እ/ብ/ብረት √
60 ሀሹካ እ/ብ/ብረት √
61 ራስ መሆን እ/ብ/ብረት √
62 ሙሩታ እንጨት ሥራ √
63 ደጐታታ √
64 ማራናታ √
65 አርአያ √
66 ሐበሻ √
67 ጀምበር √
68 ወርቃማው √
69 አማኑኤል √
70 ንፍታለም √
71 MTC ብ/ብና ኢንጅነሪንግ √
72 ንፍታሌም ብ/ብ ሥራ √
73 ፊሶን ብ/ብ ኢንጂነሪንግ √
74 ሲጠና ብ/ብረት √
75 ብርሃን /አለ/ምጣድ √
76 ኤቲ ብ/ብረት √
77 አማኑ/አካ/ጉ/ብ/ብረት √
63
 78 ኤፍራታ የኤል/ክ ምጅዳ √
79 ቅዱ/ገብረኤል √
80 ሠላም ብረታ ብረትና አሌሙኒየም √
81 ሮሆቦት ብረታ ብረት ሥራ √
82 ሰላም ጠጠር አምራች √
83 ፅናት ብሎከት አምራች √
84 አልፋ ብሎከት አምረች √
85 ጉዲና ብሎከት አምራች √
86 ድሉ ብሎከት አምራች √
87 ሌዊ ብሎከት አምራች √
88 ሆላሌ ብሎከት አምራች √
89 ከነዓን ጠጠር ማምረቻ √
90 17 ብሎከት አምራች √
91 ላሾ ል/ስፌት √
92 በህብረት እንደግ ል/ስፌ √
93 በፀሎት ል/ስፌት √
94 ሃኖስ ል/ስፌት √
95 ልዴት ል/ስፌት √
96 አንድነት ል/ስፌት √
97 ክርስቲያን ል/ስፌት √
98 ጮራ ልብስ ስፌት √
99 ሠርተን እንደግ √
100 ደቡብ ጮራ ል/ል/ስ √
101 ስታር ጨ/ጨና ስፌት √
102 ሻሎም ል/ስፌት √
103 ሶዶ ምንጭ ል/ ስፌት √
104 አንድት ል/ስፌት √
105 እልፍ በሉ ል/ስፌት √
106 በእምነት ል/ስፌት √
107 ራዕይ ለዕድገት √
108 ትግል- ፍሬ ጥ/ሥራ √
109 በርቺ ጥልፍ ሥራ √
110 ይቻላል ጥልፍ ሥራ √
111 ሳሬም ጥ/ሥራ √
112 እህትማማቾች ጥልፍ ስራ √
113 ይሻላል ጥ/ሥራ √
47 66
Source: Zone enterprise office, 2023

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