Effect of inventory management on customer satisfaction in small and medium-size enterprise
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Inventory management plays a vital role in enhancing customer satisfaction among small and medium-sized enterprises in Cameroon. The main purpose of this study was to examine the effect of inventory management on customer satisfaction in the small and medium-size enterprise case study: Njeiforbi company Ltd. Buea.
The specific objectives of the study were, to determine the role of inventory levels on customer satisfaction of small and medium enterprise, to investigate the role of inventory lead times on customer satisfaction of small and medium enterprise. to examine the role of inventory costs on customer satisfaction of small and medium enterprise.
From these objectives, three research questions were formulated and hypotheses state in both null and alternative forms were equally formulated. A Deductive approach was adopted, the population of the study was made up of all the small and medium-sized enterprises in Buea municipality from which using a stratified sampling technique, a sample size of 30 respondents were selected from employees of Njeiforbi company LTD Buea.
Data were collected using a structured questionnaire. Using SPSS, a regression analysis was carried out between the dependent variable and all other variables and an ANOVA analysis was undertaken to determine the differences in means between the variables.
The results show that the p-values obtain for inventory management (0.002), inventory level (0.001), inventory lead time (0.009), inventory cost (0.0012) for the regression coefficients are also higher than the alpha level of significance of 5% specified in SPSS for the analysis. The study concluded that Inventory costs can be reduced by the implementation of reordering points. Equally, it recommended that Njeiforbi should strive to reduce the lead time between ordering and receipt.
1.1 Background to the study
Since the beginning of the “customer service revolution” almost 25 years ago, business’s research has focused on customers, especially customer satisfaction. Business consultants, corporations and operational management have all worked together to identify the characteristics of organizations that consistently please their customers, to develop tools that monitor customer satisfaction, and to build continuous quality improvement systems that respond to consumer feedback (Tigu,2018).
Customers satisfaction became very vital in business during the marketing era of the 1950s when companies could produce what they can sell and not just selling what they can produce as it was during the production era. Since the beginning of the consumption era in marketing, the focus on customers/consumers has increased more as the consumption era also shifts to post-consumption; where organizations are obliged to render more services in addition to what they provide as offers to their customers (Agbor, 2011).
Customer satisfaction is a major determinant of business performance is highly relevant to the long-term success of an efficient inventory management system. Customer satisfaction is, therefore, very significant to the marketing concept with strong reasons for strategic linkages between the overall quality and customer satisfaction (Truch, 2006).
Satisfaction is identified by different industries in different ways depending on the customer’s relationships and the nature of the business. Manufacturers may look at the desire for on-time delivery and meeting the requirement of certain specifications. When measuring customer satisfaction, there should be critical variables involved.
The study of customer satisfaction has shown that there could be a disproportional relationship between cause and effect, or between a factor and its consequence on the organization. For instance, a five per cent increase in loyalty can increase profits by 25 to 85 per cent (Cacioappo, 2000).
Loyal customers are six times more likely to repurchase or recommend the purchase of the product or service to someone else. Studies have shown that on average, four per cent of the customers will be dissatisfied or complain about the product and/or service. The various studies have also shown that a dissatisfied customer is likely to tell nine other people, while a satisfied customer will tell five people about good treatment (Cacioappo, 2000).
1.2 Statement of problem
Customer satisfaction has been a subject of great interest to organizations and researchers alike. The main challenge today among the retail sector in Cameroon is the need to enhance efficiency while at the same time achieving effectiveness (customer satisfaction).
However, firms in Cameroon have been accused of poor inventory management techniques and this has greatly affected their ability to satisfy their customers. Customer satisfaction is crucial for retail stores. The retail sector is constantly searching for new ways to improve customer satisfaction, guided by the knowledge that satisfied customer is typically a loyal, long term stream of revenue.
A customer that finds the ordering process difficult, that cannot get stocks they need or frequently receives product behind schedule is likely to be unsatisfied and looking for a new supplier. Inventory control is one of the most neglected management areas in most firms.
Many firms have an excess amount of inventory due to poor inventory management practices, managing inventory is essential for balancing supply and demand and this practice would be very easy in a situation where end customers tell the suppliers exactly the number of products they require and the time to order them, and if suppliers can deliver exactly in time the number of products needed.
If these three conditions were true, the issue of inventory could not be an issue as any product ordered from a supplier will be shipped to customers in time to satisfy their needs. Unfortunately, this does not exist in real life and in the market
Thus, the need for inventory management in order to deal with the above-mentioned challenges. Retails sector has become increasingly competitive and attracting customer satisfaction more difficult to attain, research efforts need to be concentrated on this significant subject.
1.3 Research question
General research question
What is the effect of inventory management on customer satisfaction of small and medium enterprise?
Specific research questions
- What is the role of inventory levels on customer satisfaction of small and medium enterprise?
- What is the role of inventory lead times on customer satisfaction of small and medium enterprise?
- What is the role of inventory costs on customer satisfaction of small and medium enterprise?
1.4 Objective of the study
1.4.1 General objective
The main objective of the study was to assess the effect of inventory management on customer satisfaction of small and medium enterprise.
1.4.2 Specific Objectives.
- To determine the role of inventory levels on customer satisfaction of small and medium enterprise.
- To investigate the role of inventory lead times on customer satisfaction of small and medium enterprise.
- To examine the role of inventory costs on customer satisfaction of small and medium enterprise.