Inventory Management Strategy and Performance of Manufacturing Firms in India

Inventory management is a determinant of operational efficiency and overall performance ofmanufacturing firms where it is readily apparent. The article focuses on the correlation betweeninventory management strategy and the performance of manufacturing companies in India andspecifically the differences across the firm size. A structured questionnaire was used in order tocollect primary data in 100 manufacturing firms in both small and large enterprises. The analysisof key dimensions of the inventory management strategy, such as inventory holding cost,inventory turnover, and production efficiency were put in the context of the firm performanceindicators such as profitability. The Mann Whitney U was used to determine the level ofdifferences in the perceptions and performance between small and big firms. The results haveshown that there is a considerable variation in the size of firms in terms of inventory holdingcost, inventory turnover and production efficiency and the size of firms can have a certain impacton the practices in inventory management, as well as the performance of operations. Thedifference between profitability of small and large firms was however not significant. Accordingto the results, operational performance among firms of different sizes depends on the strategiesof inventory management in different ways, but the impact on the profitability might beconditional by other organizational or market factors. The research offers useful findings tomanagers and policymakers in the development of inventory management strategies that are ofsize to fit in order to improve efficiency and competitiveness within the Indian manufacturingindustry..