SUPPLY CHAIN MANAGEMENT WITH ROLLING STOCK WITH THE LOGISTICS OF THE FURNITURE SHOP

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1 Volume 119 No , ISSN: (printed version); ISSN: (on-line version) url: ijpam.eu SUPPLY CHAIN MANAGEMENT WITH ROLLING STOCK WITH THE LOGISTICS OF THE FURNITURE SHOP ABSTRACT K. Senthil Kumar1, S.Karthickraja2, Assistant Professor1, Student2 Department of Computer Applications Karpagam College of Engineering, Coimbatore, India Inventory constitutes bulk of current assets tiny and medium scale enterprises (SMEs) like bakeries, quick food/eateries, chain stores and piece of furniture creating companies. SMEs need to understand the true costs associated with inventory management and poor inventory productivity so as to be able to review the benefits of alternative approaches. The objective of the study was to look at the impact of inventory management on profit of SMEs in Federal Republic of Nigeria.. The study used a descriptive research design. The population consists of all SMEs operating in Delta State. The study used stratified random sampling. 10 SMEs were randomly selected from each stratum making a total of 30 firms for the study. Data for the study were obtained through the administration of a self-designed form to managers or accountants of the sampled corporations. The questionnaire was structured to elicit information about the trading and financial activities for the last two accounting years. A multiple regression analysis was conducted to test the model established for the study. Findings of the study reveal that inventory turnover has a significant positive relationship with financial performance of SMEs. The study conjointly reveals that there's a negative relationship between inventory conversion amount and profitableness; and no important positive relationship between inventory thinness and profitability. The study concludes that inventory management has a great role to play in corporate financial performance of firms hence firms. Inventory systems must maintain an appropriate inventory levels to enhance profitability and reduce the inventory costs associated with holding excessive stock in the warehouses. In line with the findings of the study, it is recommended that firms should embrace modern production technology that will enhance faster production to shorten inventory conversion period which will in turn improve inventory turnover and profitability. INTRODUCTION Industry of retail is one amongst the largest sectors with the best rates of employment; world economy is relied on it and to manage this machine processes trade applies all new technologies to maximize profit and to achieve effective and economical results. Swedish company IKEA designs and sells ready-to-assemble furniture, home accessories and appliances and is one of the largest traders of furniture in the retail industry. Presented report is about IKEA itself and its supply chain management. Operational processes of the company are shown in detail; also advantages and disadvantages related to the business of IKEA are exposed. Inversed business processes displayed gap between the analysis and implementation of business processes. Operational processes are covered in the section. Analysis of Multidimensional Operational Issues where analysis is foreseen as a tool for future improvements. 519

2 Methodology used during the research of this topic is different. Materials gathered from previously made researches and secondary data are utilized, articles from journals and other literature of the topic of logistics and supply chain were applied. Statement of Problems Most of the businesses face challenges owing to the inconsistent inventories,wrong estimate, poor reaction to customers demand and lack of correct accounting recording systems ensuing to low performance.similarly, Abdulrasheed, Khadijat, Sulu and Olanrewaju observed that companies face problems of inconsistent deliveries, reduced consumer effective demand and high cost of production due to poor inventory management techniques leading to poor performance. Duru, Okpe and Udeji inventory is the live wire of any manufacturing firm. They maintain that because of shortage of materials to meet sudden increase in customers demand, reduction in profit margin, low returns on equity, wastages of materials, pilferage arising due to excess stock and sleep in communication chains that exist in most industries, inventory management has become mandatory on each and every manager responsible for production in an organization. Inventory is one vital resource that any corporate organization needs. Like any other business resource, inventory is limited in supply; hence it requires effective management rather than neglect. The cost of procurement of materials (inventories) is also important on one hand, for the fact that over stocking will imply tying down capital and risk of becoming obsolete while on the other, under stocking could lead to shortages and production bottle neck. The challenge then is to determine how all these affect the financial performance of the firm. Knowledge of the optimum inventory management techniques will enable business managers to strike a balance on what quantity to buy, when and where to buy on a regular basis devoid of scarcity, how to go about the procurement and the amount to invest on inventory towards maximizing profit. This is the concern and focus of this study. Operationalization of Variables The table below shows the measurement of the variables: Table 1. Measurement of Variables Data Presentation and Analysis 520

3 Table 2. Descriptive Statistics for the Variables The above displays the descriptive statistics for the data. The descriptive statistics considered were minimum, maximum, mean and standard deviation, Jarque-Bera along with their probability values. The GPM has a mean of 20.9 percent. The minimum and maximum values are and 34 percent respectively with a standard deviation of 8.9. The standard deviation measuring the spread of the distribution is low and indicates considerable dispersion from the mean and that the distribution is inclusive of SMEs with significant variations in their profitability level. The Jarque-Bera stood at with a p-value of which indicate that the data satisfies normality. Further, IT and ICP have mean values of 19 and 24 respectively. The implication is that on the average, sampled firms turn over the inventory about 19 times in any year. It also means that it takes about 24 day to convert stock from raw materials to finished goods for sale. The statistics also shows that the IT and ICP have minimum values of 6 and 17 respectively. The maximum values for the variables also recorded 47 and 56. The standard deviation also stood at 11 and 7. The standard deviation for IT is large indicating that there is not much deviation among the SMEs sampled in terms of number of days stock is turned over. However, the standard deviation for ICP is low compared to the mean value which means that there is significant variations in the number of days SMEs in the study hold stock. The Jarque-Bera values of 16 and 13 for IT and ICP respectively along with their probability values of indicates that the data satisfies normality and suitable for further regression analysis. The descriptive statistics of the companies Inventory property as indicated in table shows that the mean proportion of the inventory bodily property was 33.3 percent. Results from the table additionally indicate a most and minimum of 67% and 16 %severally. The standard deviation o 13 percent also shows a significant disparity among the SMEs in volume of inventory as a percentage of total assets of the firm. The Jarque-Bera value of 3.9 with a p-values of 0.13 (p>0.05) indicate that the distribution fails the normality test (p<0.05). The analysis of the descriptive statistics indicates that all the variables except Inventory leanness satisfy the normality criterion as their respective Jarque-Beras were all significant and the p-values less than the 5% significant level. 521

4 Table 3. Correlation of the Variables The table shows the relationship among the variables. GPM is observed to correlate positively with ILN (r=0.0107). This implies that increase in inventory by 1.07%, will bring about a unit growth gross profit margin of small businesses. The correlation also shows that GPM has a negative relationship with IT (r= ) and ICP (r= ). The implication of this is that as inventory turnover rates and inventory conversion period grow by 3.5% and 7 days respectively, the gross profit margin of SMEs shrinks by 1%. Further, the table also indicates that IT is positively correlated with ILN (r= but negatively correlated with ICP (r=-0.259). It implies that increase in inventory turnover increases leanness by about 3% whereas higher inventory turnover reduces inventory conversion period by 2.59%. ICP is also observed to have a negative relationship with ILN (r= ) implying that increase in inventory leanness will reduce period stock is held by about 3 days. As shown in table, none of the variables is strongly correlated with each other (r>0.8). Table 4. Regression Statistics for the Model Inventory Turnover and Profitability The regression estimation reveals that a significant positive relationship exists between IT and GPM (t=0.9429, p=0.0019<0.05). We therefore use this as some evidence to empirically state that inventory turnover has an effect on companies financial performance, and hence we reject the null hypothesis and accept the alternative hypothesis. The implication is that small businesses that have higher inventory turnover tend to have better performance than those with lower inventory turnover. This result meets 522

5 our a priori expectation and is consistent with findings of Product turnover. However, this finding does not conform to Sitienei and Memba. Inventory Conversion Period and Profitability Findings from this study reveal Associate in Nursing insignificant negative relationship between inventory conversion amount and monetary performance of distillery companies in African nation ((t= , p=0.0070<0.05). this means that the longer days it takes SMEs to show raw materials purchased into finished product and oversubscribed to customers the lesser profits the firm can create. The result meets our a priori expectation and in keeping with previous studies like Gamze, Ahmet and Emin, Mogaka and Jagongo,Reyhani and Sitienei and Memba inventory strategies. Inventory Leanness and Profitability The regression estimation reveals no important positive relationship between ILN and GPM (t=0.9236, p=0.586>0.05). this means that level of closing stock within the warehouse as at the top of a company s year doesn't extremely have an effect on the money performance of the firm. This didn't meet our a priori expectation. This result doesn't change to previous studies like Koumanakos Eroglu and Hofer gain. SUPPLY CHAIN MANAGEMENT The entire organisation of the material supply for your fleet in accordance with the agreed-on level of availability of single parts and components. This includes the management and optimisation of your stock of materials and, in addition, ordering and delivery processes as well as stock holding. The required parts and components are delivered to the place where you need them. Until withdrawal, the stock of materials remains stocked in our storage facility. Thereby, you can minimise your storage risks, reduce the need for staff for management and material supply and, as a consequence, remain flexible. Following a comprehensive assessment of the framework conditions, ownership of your existing stock can be transferred to us. Thereby, you can lower your capital commitment costs to a minimum and increase your liquidity. PROCUREMENT: To manage and organise procurement processes on the basis of your fleet and operating data, your material consumption data and according to developments on the market for spare parts and components (providers, prices, storage costs etc.). Based on these data, we determine short and long term maintenance requirements and establish corresponding stock requirements. With our statistical models we are able to determine the best time to order stock at the best price.when writing an order proposal we take the parameter you gave us into account, e.g. with regard to the target level of availability of single parts and components.thereby, we place orders on a daily basis for the required spare parts and components and monitor the delivery process.during the whole process we keep track of recent changes on the market and also take price changes and provider-related news into account. We keep you informed about the discontinuation of replacement parts and components and also offer you solutions (obsolescence management).provided that the experience we have gained over many years on 523

6 requirement peaks and periods of increased maintenance needs can be applied to your class of vehicles, we can improve your material availability for you, thereby contributing to the optimisation of your stock holding. You benefit from cost reductions due to greater order quantities and from our comprehensive network of suppliers. Make use of our established statistical models and our comprehensive knowledge of the market to optimise your procurement processes. STOCK HOLDING AND LOGISTICS: When it comes to storage spaces, it is not always possible to provide a suitable place for each type of material. Large components, spare parts, electronic components we provide the suitable storage space for your spare parts, e.g. in one of our many storage facilities all over Germany.On a daily basis we monitor your deliveries andreceipt of goods and, on demand, we also take stock. We deliver the spare parts you require punctually to the place where they are needed.stock holding and logistics Influencing factors/required data Consumption history (including intended purpose).storage fee List of preferred suppliers Information on stock, pending orders/purchase orders (e.g. via software interface) Result Daily information on withdrawal and stock. Complete parts/logistics management. Stocks holding in DB Fahrzeugin stand haltung storage spaces with our transport management system you are keptinformed about the whereabouts of your stock, about how it is transported and when it will probably arrive at its place of destination. It also integrate own service providers and forwarding companies into the system. It not only keep track of stock but the stock is where you need it to be. MAJOR INVENTORY MANAGEMENT: Influencing factors/required data. Desired average target level of availability (e.g. 95%). Price per item and planned requirements. Purchasing costs. Maximum amount of withdrawal/time. Consumption history (including intended purpose). Replenishment lead time. Storage fee. Number of maintenance measures. Size of the vehicle fleet and mileage. List of components. List of preferred suppliers. 524

7 Information on stock, pending orders/purchase orders (e.g. via software interface). Result: Cost-efficient, customised target level of availability. Seasonal planning of requirements, based on the planned maintenance works. Purchase orders (based on daily updated parameters) for procurement by the customer. Conclusion and Recommendation: The study, using the results of the inventory management statistics and exploratory variables in a regression model showed that inventory turnover has a significant positive relationship with financial performance of SMEs in Nigeria during the period under review. The study also reveals that there is a negative relationship between inventory conversion period and profitability; and no significant positive relationship between inventory leanness and profitability. The study concludes that inventory management includes a nice role to play in company money performance of companies therefore firms inventory systems should maintain associate acceptable inventory levels to boost profit and scale back the inventory prices related to holding excessive stock within the warehouses. In line with the findings of the study, it is recommended that firms should embrace modern. REFERENCES 1. Stadtler, H. (2005). Supply chain management and advanced planning basics, overview and challenges. European journal of operational research, 163(3), Larson, P. D., & Rogers, D. S. (1998). Supply chain management: definition, growth and approaches. Journal of Marketing Theory and Practice, 6(4), Tracey, M., Lim, J. S., & Vonderembse, M. A. (2005). The impact of supply-chain management capabilities on business performance. Supply Chain Management: An International Journal, 10(3), S.Ezhildevi, H.Shabuddeen, Optimization Of Resource Provisioning Cost In Cloud Computing, International Journal of Innovations in Scientific and Engineering Research (IJISER), Vol.1, No.3, pp , La Londe, B. J., & Masters, J. M. (1994). Emerging logistics strategies: blueprints for the next century. International journal of physical distribution & logistics management, 24(7), Lambert, D. M., & Cooper, M. C. (2000). Issues in supply chain management. Industrial marketing management, 29(1), Lambert, D. M., Cooper, M. C., & Pagh, J. D. (1998). Supply chain management: implementation issues and research opportunities. The international journal of logistics management, 9(2), Ellram, L. M. (1991). Supply-chain management: the industrial organisation perspective. International Journal of Physical Distribution & Logistics Management, 21(1),

8 9. Gupta, A., & Maranas, C. D. (2003). Managing demand uncertainty in supply chain planning. Computers & chemical engineering, 27(8-9), Johnson, M., & Whang, S. (2002). E business and supply chain management: an overview and framework. Production and Operations management, 11(4), Harrison, A., & Van Hoek, R. I. (2008). Logistics management and strategy: competing through the supply chain. Pearson Education. 526

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