To assess the factors affecting inventory control in

Tepi agricultural research center

A research proposal Submitted to Accounting and finance department in

Partial Fulfillment of the Requirement for B.A Degree in Accounting and
finance.

Prepared by : Getahune kassa

ID No 011/2015

Department of Accounting and finance

College of Business and Economics
ABBYSSINIA SHINE BUSINESS AND TECHNOLOGY COLLEGE

March, 2017

MIZAN AMANA CITY, Ethiopia

Table of content

Abstract

Chapter one

1. Introduction ------------------------------------------------------------------------------------------1

1.1 Background of the study --------------------------------------------------------------------------------1

1.2 Statement of the problem -------------------------------------------------------------------------------2

1.3 Research questions --------------------------------------------------------------------------------------3

1.4 Objective of the study -----------------------------------------------------------------------------------3

1.4.1 General objective of the study -----------------------------------------------------------------------3

1.4.2 Specific objective of the study -----------------------------------------------------------------------3

1.5 Significance of the study --------------------------------------------------------------------------------4

1.6 Delimitation of the study --------------------------------------------------------------------------------4

Chapter two

2. Literature review ------------------------------------------------------------------------------------------- 5

2.1 Definition of Inventory -----------------------------------------------------------------------------------5

2.2 Inventory Management ----------------------------------------------------------------------------------5

2.3 Inventory Control -----------------------------------------------------------------------------------------6

2.4 Inventory Model: The Economic Order Quantity (EOQ) Model -----------------------------------8

2.5 Purchasing and Inventory Performance ----------------------------------------------------------------8

2.6 Bureaucratic Procurement Procedures ------------------------------------------------------------------8

2.6 Inventory Cost ---------------------------------------------------------------------------------------------9

2.7 Internal Control --------------------------------------------------------------------------------------------9

2.8 Knowledge and Skills Possessed the Staff -------------------------------------------------------------10
2.9 Stock Record Practice ------------------------------------------------------------------------------------11
2.10 Conceptual Framework -----------------------------------------------------------------------------13
CHAPTER THREE
3. RESEARCH METHDOLOGY --------------------------------------------------------------------------14
3.1 Research Design -------------------------------------------------------------------------------------------14
3.2 Population and Sampling Techniques ------------------------------------------------------------------14
3.2.1 Population of the Study --------------------------------------------------------------------------------14
3.2.2 Sample Size and Sampling Techniques --------------------------------------------------------------14
3.3 Sources of Data and Data Collection Tools ------------------------------------------------------------14
3.4 Data Collection Procedures ------------------------------------------------------------------------------15
3.5 Data Processing and Analysis ---------------------------------------------------------------------------15
3.6 Validity and Reliability of Instruments ----------------------------------------------------------------15
3.7 Ethical Considerations -----------------------------------------------------------------------------------16
 ABSTRACT

The purpose of this study will be to assess the factors influencing inventory control in Tepi
agricultural research center. The various factor influencing inventory control are broken
into bureaucratic procurement procedure, carrying cost ,stock audit practice ,stock record
practice and staff skill & experience. The particular objective that will be analyze include;
evaluation of the effects of procurement procedure to the effectiveness of inventory control,
examination of the effect of high inventory carrying cost to the effectiveness of inventory
control, determination of the effects of stock audit practices to the effectiveness of
Inventory control, analysis of the effects of poor stock record practice to effectiveness of
inventory control, and examination of the effects of staff skill & experience to the
effectiveness of inventory control. The research will adopt a descriptive study design. A
simple random sampling technique will be use to the study. The researcher will have
sample size of 60% of the target population to act as the sample size. The researcher will
use questionnaire to collect data for the research. The questionnaire will contain open and
closed ended questions and five point Likert scale questions and cover areas of inventory
control to come up with good raw data for the research. The study finally will provide key
recommendation to solve the whole problems which will identify by the finding process.

iv
 CHAPTER ONE

INTRODUCTION

1.1 Back ground of the Study

The American Production and Inventory Control Society (APICS) defined inventory
management as the branch of business management concerned with planning and
controlling inventories (Toomey, 2000). Lyson and Gillignham (2003) argue that
inventory management involves controlling of stock or inventory levels with the physical
distribution function to balance the need for minimizing stock holding and handling costs.
Consistently, inventory management is aimed at ensuring that the company is supplied
with the right inventories (quantities of inventory) at the right time, in the right places and
ensuring optimization of the benefits of holding inventory in the organizations. Inventories
are the stock of products a company holds to further its production and sales (Pandy, 2005)
they appear in the form of raw materials, work in progress, finished products and supplies
maintained by firms to smoothly conduct their business

The problem of inventory has continued to receive much attention in most businesses.
Inventory levels of raw materials, semi-finished and finished goods need to be effectively
managed to control the cost of inventory (Kotler, 2002). It is common to find the balance
sheet of an average company having inventory running to 60% of its current assets as
capital tied down (Pandey, 2005).
According to Buffa and Salin (1987), there are several reasons for keeping inventory. Too
much stock could result in funds being tied down, increase in holding cost, deterioration of
materials, obsolescence and theft. On the other hand, shortage of materials can lead to
interruption of products for sales; poor customer relations and underutilized machines and
equipments.

According to Coyle, Bardi, & Langley (2003), effective inventory flow management in
supply chains is one of the key factors for success. The challenge in managing inventory is
to balance the supply of inventory with demand. A company would ideally want to have
enough inventories to satisfy the demands of its customers- no lost sales due to inventory
stock-outs. On the other hand, the company does not want to have too much inventory
staying on hand because of the cost of carrying inventory. Enough but not too much is the
ultimate objective.

Based on the author’s observation and discussion with Supply Chain and Distribution
senior officials; Tepi agricultural research center reveals Operational Constraints in areas
of inventory control/management, information management, and aspects which include
high inventory related cost, overstock, under stock, poor documentation, uncertainty of
customer demands, Long supplier Leads times, long bureaucratic procurement procedure,
and inaccurate procurement needs estimation. Therefore, the mere fact that ineffective
inventory control affects virtually the organizational objectives necessitates this type of
research work. This paper therefore will examines the factors that influence inventory
control/management practice of Tepi agricultural research center(JARC).
1.2 Statement of the Problem
The problem of inventory management may be attributable to the failure, on the part of the
top management officials, to give a deserved attention to the function of stores as well as
their inability to employ the services of as well qualified stores officer to take charge of
stores supervision and management. Added to this problem is the issue of the dearth of
storage facilities and the habit of stores procedure violation by the top, the middle, and the
junior cadre personnel’s in the organisation (Neef, 2001).
In order for organizations to be competitive and stay updated, there is need to have a
paradigm shift in the way procurement is carried out so as to solve numerous procurement
problems evident in the business world especially in developing economies which include
increased corruption, high costs of doing businesses, a lot of non-value adding paper work
procedures, long time elapse to respond to tenders and non-competitiveness (Chartered
Institute of Purchasing and Supplies, 2011).
The last three years (2012 to 2015) internal audit report of Tepi agricultural research
center indicates as there is some discrepancy between the information provided by stock
card and the actual physical stock balance. Most of the goods received and issued during
the auditing took place had not been posted properly in bin card.

Invariably, the organization must neither keep excess inventories to avoid an unnecessary

inventory carrying cost and unnecessary tying down of funds as well as loss in fund due to

pilferage, spoilage and obsolescence nor maintain too low inventories so as to meet users

demand as at when needed. Therefore, the mere fact that ineffective inventory control

affects virtually the organizational objectives necessitates this type of research work.

1.3 Research Questions

This Study focused on seeking answer to the following research questions to address the
stated problem:

i) What is the effect of long bureaucratic procurement procedure to the effectiveness of

inventory control?
ii) What is the effect of stock audit practice to the effectiveness of inventory control?
iii) What is the effect of high inventory carrying cost to the effectiveness of inventory
control?
iv) What is the effect of poor stock record practice to the effectiveness of inventory
control?
v) What is the effect of staff skill to the effectiveness of inventory control?
1.4 Objectives of the study
1.4.1 General objective of the study
The general objective of this study is to assess the factors influencing the effectiveness of
inventory control at Tepi agricultural research ceneter.
1.4.2. Specific objectives of the study

Specifically, the objectives of the study are:

i) To evaluate the effects of procurement procedure to the effectiveness of inventory
control;
ii) To examine the effect of high inventory carrying cost to the effectiveness of
inventory control;
iii) To determine the effects of stock audit practices to the effectiveness of Inventory
control;
iv) To analyze the effects of poor stock record practices to effectiveness of inventory
control; and
v) To examine the effects of staff skill to the effectiveness of inventory control.

1.5 Significance of the Study

Inventories represent a sizeable investment and a potential source of waste that needs to be
reviewed regularly and closely reviewed e.g. through perpetual stock taking, periodic reviews also
as well as internal and external auditing. Thus an effective inventory control is paramount to
ensuring that money is utilized appropriately.

The research findings will hopefully add to the body of knowledge in the area of inventory
control for common user items which will help researchers & scholars and be a basis for
reference. It will assist the management in ensuring effective inventory control at all times
as it will aid those entrusted with decision making to formulate strategies of combating the
persistent problem of inventory control in the organization. Lastly for the Researcher, the
study will not only fulfills the partial requirement for the award of the Bachelor Degree in
accounting and finance but also serve as a basis for further research in the field of
inventory control.

1.6 Delimitation
The study will face limitation of time, experience, information and budget but, it can conduct as
much as possible in the best way.
The research will target to study inventory control practice of JARC with the main actors in
inventory management and other treated department will estimate to 33 employees (sample
size), not reaching out into the other actors in the supply chain network. In other words, the
interaction among the actors in the network in terms of inventory control will exclude. And
from the supply chain management perspective, the contribution of the study will reduce
 CHAPTER TWO

REVIEW OF RELATED LITERATURE

This chapter explores the different theories and models that are related to the subject
of this thesis and can be used for the analysis.

2.1 Definition of Inventory

Lysons and Gillingham (2003) defined Inventory as an American accounting term for the
value or quantity of raw materials, components, assemblies, consumables, work-in progress
and finished stock that are kept or stored for use as need arises.
(Coyle et al., 2003) defines Inventory as raw materials, work-in-progress, finished goods
and supplies required for creation of a company’s goods and services. The number of units
and/or value of the stock of goods a company hold.

Rick (1998) defines Inventory as piles of money on the shelf and profit for the company or
organization. Pandey (2005) added that inventories are classified as current assets because
typically they will be sold within the year or during a firm’s normal operating cycle if it
should be longer than a year for retailing firms, inventories are often the largest and most
valuable current assets.

The relevance of these theories to the study is that Inventory is to be seen as the largest investment
in assets and represents one of the primary sources of revenue generation and subsequent earnings
for an organization, therefore it has to be efficiently and effectively managed to reduce cost and
increase profitability in the organization.

2.2 Inventory Management

(Coyle et al., 2003) define Inventory management as the management of materials in motion and at
rest. The following activities all fall within the scope of inventory management (Wikipedia, 2014) the
fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory
forecasting, inventory valuation, future inventory price forecasting, physical inventory, available
physical space for inventory, quality management, replenishment, returns and defective goods, and
demand forecasting.
Balancing these competing requirements leads to optimal inventory levels, which is an on
going process as the business needs shift and react to the wider environment.

Inventory management basically serves two main goals (Reid & Sanders, 2007). First of
all good inventory management is responsible for the availability of goods. It is important
for running operations that the required materials are present in the right quantities, quality
and at the right time in order to deliver a specific level of service. The second goal is to
achieve this service level against optimal costs.

2.3 Inventory Control

Eni (2001) defines inventory control as the problems of verifying the quantity, the value and the
balance of the entire range of materials held in stock, so that it would be easy and possible to give
the exact quantities of materials in the store at any given time. It helps the store-keeper (or the
inventory controller, as the case may be) to tell how much was ordered (requested for), how many
have been used, what is remaining and when to place the next order so that the enterprises would
not lack materials to work with at any point in time. Similarly, Sharma (2004), views inventory
control as the means by which materials of the correct quantity and quality is made available as at
when required with due regard to economy in terms of storage and costs (both ordering and
working capital). He also opines that inventory control is the systematic ways of locating; storing
and recording of goods in such a way that desired degree of service can be made to the operation
shops at minimum ultimate cost.

Kumar & Suresh (2008) argue that effective control on inventory is a must for smooth and
efficient running of the production cycle with least interruptions. They proceed with their
argument that this is warranted by varying intervals between receiving the purchased parts
and transforming them into final products. They further argue that inventory control would
ensure adequate supply of products to customers and avoid shortages and ensure timely
action for replenishment. Inventory control systems may ensures smooth production &
hence no stock-out.

Inventory control aims at providing the following information to the business organizations for
effective decision making (Sharma, 2004): Information on the accuracy of stock records and
physical quantities, evidence in support of the value of stock shown in the balance sheet & profit
and loss statement, reveal any weakness in the method of inventory keeping, disclose any
loss, fraud, or theft in the process of material handling, and identifying deterioration,
obsolescence, slow movement and redundancy in the stocks on hand.

Martand (2009) have identified the objectives of inventory control to include: to minimize
the costs involved in purchasing, stocking and issuing of the supplies, to reduce the
frequencies of ordering for stock items, to decrease pilferage, waste and over stocking, to
minimize the investment and fluctuations in Inventories while at the same time providing
prompt order filling services for customers, to integrate and deploy within the logistical
system the minimum amount of inventory consistent with desired delivery capability and
total cost expenditure, to ensure adequate supply of products to customer and avoid
shortages as far as possible, to provide a scientific base for both short term & long term
planning of materials, and to provide a reserve stocks for variations in lead of delivery of
materials.

Good inventory control system offers the following benefits (Clodfelter, 2003):

1. The proper relations ship between sales and inventory can better be well
maintained. Without inventory control procedures in place the store department
can became overstocked or under stocked.

2. Inventory control systems provide a business with information needed to take

markdowns by identifying slow -selling merchandise. Discovering such items early in
the season will allow a business to reduce prices or make a change in marketing
strategy before consumer demand completely disappears.

3. Merchandise control systems allow buyers to identify best sellers early enough in
the season so that reorders can be placed to increase total sales for the store
department.

4. Merchandise shortages and shrinkage, can be identified using inventory control systems.
Excessive shrinkage will indicate that more effective merchandising controls need to be
implemented to reduce employee theft or shoplifting.

According to Arora (2000), the factors to be considered in inventory control include; procurement
costs, inventory carrying costs, cost of spoilage and obsolescence, cost of running-out of stock and
set-up cost. A good inventory control system minimize the possibility of delays in production that
are caused by lack of materials, permits a company to exercise economics in purchasing,
essential for an efficient accounting system is deterrent to people who might steal
materials from factory, expedite the production of financial statement, allows for possible
increase in output, creates buffer between input and output, insures against scarcity of
materials in the market and avoid inventory build-up (Carter, 2002).

Poor inventory control has the following symptoms: high rate of order cancellations, excessive
machine downtime due to material shortage, large scale inventories written down because of price
decline, distress sales, widely varying rate of inventory losses, large writing down at the time of
physical inventory taking, continuous growing inventory qualities, liabilities to meet delivery
schedules and even production rate (Menon, 2006).
2.4 Inventory Model: The Economic Order Quantity (EOQ) Model
Piasecki (2001) presents an inventory model for calculating optimal order quantity that used
the Economic Order Quantity (EOQ) method. He points out that many companies are not
using the EOQ method due to poor results received resulted from inaccurate data input. He
clarifies that many errors resulted in the calculation of EOQ in the computer software package
are due to the failure of the users in understanding how the data inputs and system setup that
control the output. He says that EOQ is an accounting formula that determines the point at
which the combination of order costs and inventory cost are the least. He highlights that the
EOQ method would not conflict with the Just in Time (JIT) concept. In fact, he explains that
JIT is actually a quality initiative to eliminate wasted steps, wasted material, wasted labor and
other costs; EOQ method is used to determine which components would fit into the JIT model
and what level is economically advantageous for the operation

2.5 Purchasing and Inventory Performance

According to Susan & Michael (2000), the primary purchasing objectives are to buy materials at
the lowest responsive and responsible cost and to ensure adherence to purchasing terms and
conditions. Maintaining continuity of supply and consistency of quality are also important
objectives that go hand in hand with searching for new products and vendors and developing
alternative supply sources. Meeting these purchasing objectives, as a means to improve inventory
performance and maintenance productivity, requires teamwork among inventory, purchasing, and
maintenance departments. According to Susan & Michael (2000), improving inventory
performance can be accomplished by the following: reducing purchase cycle time, including lead
time, developing commodity expertise/specialization, increasing the use of different purchase
order types, consolidating purchases, increasing the use of volume discounts, tightening control of
purchase order terms and conditions, qualifying vendors, monitoring vendor performance,
searching for new products and vendors, developing supplier relationships, and working with
vendors to reduce the incidence of past-due deliveries.

Other approaches to improving inventory performance require using different procurement

methods, depending on such factors as the types of material or services purchased and
whether the purchase is small bid, one time, or repetitive.

2.5.1 Bureaucratic Procurement Procedures

Procurement encompasses the whole process of acquiring property and/or services. It begins
when an agency has identified a need and decided on its procurement requirement.
Procurement continues through the processes of risk assessment, seeking and evaluating
alternative solutions, contract award, delivery of and payment for the property and/or services
and, where relevant, the ongoing management of a contract and consideration of options
related to the contract. Procurement also extends to the ultimate disposal of property at the end
of its useful life (Waters, 2004).

As organizations become large and more complex, the authoritarian- paternalistic patter
gave way to increased functional specialization with many layers of middle and lower
management for coordinating organization effort (Kenneth & Kenneth, 2005). The
advantages of bureaucracy are many folds; apart from consistent employee’s behavior, it
eliminates overlapping or conflicting jobs or duties and behavior of the system is
predicable (Osborne and Plastrik, 1997). Despite the above advantages, bureaucratic
organization has some significant negative and side effect. Too much red tapes and paper
work not only lead to unpleasant experiences but also to inefficient operations (Osborne &
Plastrik, 1997). Because employees are treated impersonality and they are expected to rely
on rules and policies, they are unwilling to experience individual judgment and they avoid
risks.
2.6 Inventory Cost

The basic object of inventory management is to maximize customer service through

maintaining appropriate amount of inventory with minimum possible cost. There are costs
associated with holding all inventories, and the costs go beyond the expenditure of the
inventory investment, inventory carrying costs form an interesting concept, representing both
accounting costs and economic costs (Goldsby, & Martichenko, 2005). Accounting costs are
explicit and call for a cash payment. Economic costs are implicit, not necessarily involving an
outlay but rather an opportunity cost.

. It is opportunity cost; to clarify its sense, just think about what else could be done with
the amount of capital if it were not tied up in inventory. Inventory is viewed as an asset on
the balance sheet; hence, many state governments impose property tax rates on inventory.

Insurance premiums are paid to provide coverage against loss or damage to inventory.
Obsolescence reflects the real possibility that inventory value may decline in the course of
being kept. Storage costs in this figure just refer to variable costs of storage. Fixed
warehousing costs, which do not change with the volume of inventory maintained are not
included in inventory carrying costs but are calculated as warehousing costs in a total
logistics cost

2.7 Internal Control

Horngren & Harrison (1992) define internal controls as the organization plan and all related
measures adopted by an entity to safeguard assets ensure accurate and reliable accounting
records promote operational efficiency and encourage adherence to company policies. Internal
controls include administrative controls and accounting controls. Administrative controls
include the plan of organization methods and the procedures that help managers achieve
operational efficiency and adherence to company policies. Accounting controls include the
methods and procedures that safeguard assets, authorize transactions and ensure the accuracy
of the financial records. Internal controls are policies and procedures established in an
organization to authorize transactions in order to ensure the accuracy of the financial records
and to provide assurance that organizational objectives will be achieved.

Internal controls include all policies and procedures adopted by management of an entity
to assist in achieving their objectives as far as practicable. The controls are aimed at aiding
management in carrying on business in an orderly and efficient manner and showing
transparency and accountability of any policies in such as stock controls through
professional ethics and following routine practices.
Internal control over inventory is important to any business because inventory is the life
blood of a merchandiser. Horngren & Harrison (1992) argue that successful companies
take great care to protect their inventory.

According to Horngren & Harrison (1992), Elements of good internal control over inventory
include: physically counting inventory at least once each year no matter which system is used,
maintaining efficiency purchasing, receiving and shipping procedures, storing inventory to protect
it against theft damage and decay, limiting access to inventory to personnel who do not have
access to the accounting records, keeping perpetual inventory records for high unit cost
merchandise, purchasing inventory in economic quantities, keeping enough inventories on hand to
prevent shortage situations, and not keeping too large stock pilled, thus to avoid capital tied up.

2.8 Knowledge and Skills Possessed the Staff

According to Susan & Michael (2000), people in warehouse (that is, stores) are responsible for
the distribution of inventory materials to all storage or using locations. They are also
responsible for the physical security and safekeeping of material at all stores locations and for
all storekeeping activities, including material receiving, put-away, and material picking and
shipping. Other responsibilities include: maintaining accurate inventory records, managing the
physical layout of storehouses, including bin location assignments, determining the physical
movement and distribution of material throughout the organization, receiving and storing
material; issuing stock material in response to a material request from customers, conducting
cycle counts, annual physicals, or both, reconciling discrepancies between cycle count and
annual physical inventory, developing and operating truck and route schedules for distribution
of material, and working with purchasing departments to resolve vendor-related problems with
timing, quality, quantity, and delivery.
According to PSI/Et warehouse manual (2010), warehouse officers are the direct custodians of PSI/Et
stores and assist in achievement of economy in expenditure on supplies by the application of proper
stores accounting, prevention and detection of losses, wastage or misuse of stores and disposing of
stores in the most advantageous manner to the organization. The manual therefore recommends that in
order to keep costs to the minimum, PSI/Et should ensure that warehouse staff are properly
trained, supervised and allocated for the work they are required to perform.

Lyson and Gillingham (2003) define training as a planned process to modify attitudes, knowledge
or skill behavior through learning experience to achieve effective performance in an activity or
range of activities. Its purpose in the work situation is to develop the abilities of the individual and
to satisfy the current and future human resource needs of the organization. The author further says
that employees may be trained internally on the job or externally in a college offering supply chain
management courses.
Baily and Farmer (1982) argue that for the supplies function to achieve a superior supply
performance, it is necessary to recruit, train and develop personnel with the capacity and
motivation to do better work. Qualified staff that is competent and skilled will help the
organization to achieve its goals and objectives by being efficient and effective when carrying
out their various functions. For an organization to succeed, qualification is therefore a pre-
requisite and must be matched with job requirement.

2.9 Stock Record Practice

Inventory accuracy defines how well the inventory records, specifically the quantities on hand,
match the actual quantities in the storeroom. Accurate records are a prerequisite to effective
inventory management. Susan & Michael (2000) accuracy of inventory records is necessary to
provide satisfactory customer service, determine replenishment of individual items; ensure that
material availability meets repair or project demand, analyze inventory levels and dispose of
excess inventory. Bailey and Farmer (1982) argue that stock recording are expected to maintain
particulars of receipt, issues and balances remaining in stock for each individual item held in the
storehouse daily.

Baily and Farmer (1982) argue that transactions must be posted promptly and correctly to
the records if they are to provide accurate up-to-date information which the stock
controller needs. If left pending for long, transactions can easily be forgotten and the
objective of maintaining stock records will not be met because stock records will be
indicating balances that are not real and hence the records will not be reliable. Therefore
maintaining accurate and up-to-date information of stock recording is one of the crucial
tasks of warehouse personnel.
According to Carter and Price (1993), receipt of goods must be strictly controlled to ensure
efficient stores management. Contributing to the function of receipt and inspection of goods,
Jessop and Morrison (1994) agree that goods supplied to an organization must be properly
looked after. Normally, a certain process of stores recording is followed, which in its natural
course forms the basis of stores accounting system. PSI/Et Warehouse Manual (2010) argues
appropriate standard records and documents should be used for receipts and inspection of
goods.

Jessop and Morrison (1994) argue items in stock represent money and therefore should not be
misappropriated, wasted or improperly used. Storekeepers should have full details of the name,
designation and specimen signatures of all persons empowered to approve issue notes. Further,
issue documents should contain the description and stores code number entered by the user who
prepares the document in the first place. According to Carter and Price (1993) specialized control
documents have been developed to enable the issue of stock to be successfully monitored and
controlled. It is important to ensure that all stock records are updated and that an accurate picture
of the total stock situation can be maintained to ensure sufficient supplies of all materials.

Stock control as described by Jessop and Morrison (1994) is the operation of continuously arranging
flows of materials so that stock balances are adequate to support the current rate of consumption, with
due regard to economy. Stock control documentation therefore is the capture of data relating to stock
balances, dues in, dues out, consumption record, forecast requirement, lead-time and economic order
quantities (EOQ).

Jessop and Morrison (1994) argue stock records are important when estimating future
consumption because past performance acts as a guide. PSI/Et Warehouse Manual (2010)
recommends that the basic method of controlling stock by quantity is by means of fixing,
for each commodity, stock levels which are recorded in the stock record system and
subsequently used as a means of indicating when some action is necessary. Carter and
Price (1993) argue that stock records and control are two sections of stores management
that have to work very closely together because stock records provide statistical
information.

Susan & Michael (2000) argue that stock records provide the management with the
information which is used to ensure accountability through stocktaking and stock audit
exercise. Jessop and Morrison (1994) argue that records can be posted manually but, where
the volume and complexity of the documents handled is of major proportion mechanical
methods are often to be more effective. Manual posting is comparatively slow, there is high
risk of filling the wrong detail, and it can be easily misplaced or lost due to multiple handling
as compared to computer posting system.
2.10. Conceptual Framework
The conceptual framework includes independent variables identified as long bureaucratic
procurement practice, inventory audit practice, high inventory carrying cost, inventory stock
record practice and staff skill & experience on one hand inventory control as dependent variable.
The problem under investigation was inventory control as affected by the identified independent
variables. Inventory control is shown on the right side while the independent variables are shown
on the left hand side in figure 2.2.

INDEPENDENT VARIABLES DEPENDANT VARIABLES

Figure 2.2 Conceptual framework.

Source: (Author, 2014).

 CHAPTER THREE
RESEARCH METHDOLOGY
This chapter will describe the methods and procedures that will be use in carrying out this
research. It will deals with the research design, population and sampling technique, sources of
data and data collection tools, data collection procedures, validity and reliability of
instruments, data processing and analysis and ethical considerations.
3.1 Research Design
The study will adopt a descriptive research design. According to Mugenda & Mugenda
(2003), descriptive research is used to obtain information concerning the current status of
the phenomena to describe what exists, with respect to variables or conditions in a
situation. Descriptive research design will be use in this study since the researcher
intended to look at the problem at hand thoroughly to define it, clarify it, and obtain
pertinent information that could be of use in assessment of factors that influence inventory
control/management. The research will conduct through a case study of Tepi agricultural
research center..

3.2 Population and Sampling Techniques

3.2.1 Population of the Study
Population refers to the group about whom the researcher wants to know more and from whom a
sample can be drawn. This is often defined in terms of educational standard, position and occasion
time, etc. The study will target Procurement and general services department and internal audit
process staff in Tepi agricultural research center. The target population from which the
information will solicit by the researcher will 64 (sixty four) employees involved in controlling
inventory or any other related activities in JARC.

3.2.2 Sample Size and Sampling Techniques

A sample size is a finite part of a statistical population whose properties are studied to gain information
about the whole. The researcher will use a judgment sampling technique
The research will select samples by using judgment sampling technique from the
managerial, professional and clerical employees. Data will collect from the managerial,
professional and clerical employees.

3.3 Sources of Data and Data Collection Tools

Both primary and secondary sources of data will be use in this research. The researcher will collect
primary data by administering a questionnaire. The study will use closed & open ended questions
and five point Likert scale questions. The questionnaire will use structured questions, divided into
five sections “A”, “B”, “C” “D”, “E” and “F”. Section A consisted of the demographical
background of respondents. Section B and C referred to the bureaucratic procurement procedures
and inventory carrying cost respectively. Section D and E consisted stock record practices and
stock audit practices respectively. Section F consisted of staff skill and experience. The
questionnaires are distributed to selected respondent among employees, managers and
auditors.

Secondary data will also use from JARC which will have readily exist. It will intend to
include both internal and external sources like warehouse manual, internal and external
audit reports depending on the nature and scope of the information needed.

3.4 Data Collection Procedures

The research will use this step/process while collecting data using the collection
instruments. Structured questionnaire will administrate to the main respondents. The
questionnaire will deliver to hand of respondents at their duty stations during working
hours personally. It will issue and collect after a seven days to give respondents enough
time to answer the questions.

3.5 Data Processing and Analysis

Mugenda and Mugenda (2003) confirm that the main purpose of content analysis is to study
existing information in order to determine factors that explain specific phenomenon. To this
extent, the responses to the questions will interpret and put into different specific and relevant
categories. Being a descriptive research the data from questionnaire will summarize, edit, code,
tabulate and analyze using descriptive methods which will illustrate the diverse findings of the
study. Using the descriptive methods involves; frequencies, percentages and presentations of
tables and graphs. Data will analyze using SPSS analysis software. The study will adopt
qualitative data analysis. Information about the scores in a sample will present in frequency tables,
bar graphs and pie charts. All tables, bar graphs and pie charts are clearly will label and present so
that the reader could rapidly make sense of the information contain in them. The results of the data
will the researcher a basis to make conclusions about the study.

3.6 Validity and Reliability of Instruments

The structured questionnaire validity will provide through adequate coverage of the topic under
investigation as per the expert advice. According to Mugenda & Mugenda (2003), expert opinion is
used to check the content and format of an instrument to judge validity of the content. The construct
validity will ascertain by defining clearly the variables will be measure. According to Mugenda &
Mugenda (2003), the test-retest method of assessing reliability of data involves administering the
same instrument twice to the same group of subjects. Reliability of the instruments will provide
through a test-retest conduct in the Tepi agricultural research center by using respondents who will
not part of the study sample but work in the organization and in positions relevant to the research
study.
The questionnaire will subject to a validity test. Pre testing will apply to see the
applicability of the tools and seeing how the questionnaire will acceptable to the
respondents. Pre testing will apply in research process of Tepi agricultural research center.
After the pre test, alterations will make to the tool.

3.7 Ethical Considerations

The study will primarily focus to gather primary qualitative data to analyze the factors
influencing inventory control of JARC. The study will neither involves any experiment on
human subjects nor conduct without the consent of the study participants. Above all, the
researcher will not ask the study participants to engage into risks as a result of
participating in this study. Besides, informed verbal consent will obtain from the key
respondents during data collection. The respondents will have the right to refuse or take
part in the study.
All the primary and secondary data collection in the organization will under the
permission of the director and without any offence in ethical rules during the whole
research process.

Timetable

DATE ACTION
June 15 to June 30 Review documents for primary data
July 1 to 3 Prepare questionnaires
July 4 to 10 Test questionnaires
July 13 to 15 Distribute questionnaires
July 20 to 24 Collect questionnaires
July 25 to 27 Send out reminder letter for non - responses. continue
to categorize returned questionnaires
August 1 to 5 Data input ,Data analysis
August 6 to 20 Write report prepare , Prepare oral presentation

Budget and resource

Ser Item quantity Unite cost Total

no, (birr) amount(birr)
1 A pack of A4 paper 1 125 125
2 Pen 10 5 50
3 Copy 100 1 100
4 Print 75 1 75
5 Binder 1 20 20
6 Ruler 1 15 15
7 Pencil 2 2 4
8 Transport cost 6 times 15 90
9 For Hotel and cafeteria 6 50 300
Total expenditure 779

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