ABSTRACT

This investigated the effect of inventory control technique on the profitability of manufacturing industries: a study ofNigerian Breweries. Inventory represents an important decision variable at all stages of product manufacturing, distribution and sales, in addition to being a major portion of current assets of many organizations. Too much and too low inventories bring down the level of profitability of an organization. Therefore, whether it is a manufacturing or merchandized organization, the goal should always be the same that is, to ensure tire inventory is ready and at the same time inventory is at an optimum level. The study used return on assets (ROA) as a measure of profitability. The changes in return on assets were explained by economic order quantity model (EOQ), ordering cost (ORC) and (CAC) carrying cost which were used as independent variables. The data collected from statement of financial position of the selected industry was analyzed using Ordinary least squares (OLS). The results ofthe analysis indicated that the inventory control techniques variables jointly influenced about (R2 = 0.304582) 30.45% ofthe total variations in the profitability while F-stat value of 2.1899 at 5% level showed that the model was rightly aggregated. The study recommend that Nigerian breweries ltd should adopt effective inventory control management practices like first-in-first out and minimum inventory requirement strategy. This is because such inventory management practices would improve their profitability and operating cash flows, the management of the industry to develop effective and strategic policies and guidelines on inventory control to guide the staff to ensure they hold optimal inventory levels. Holding optimal inventory would help the firm to minimize costs and maximize their profitability and operating cash flows, the management ofNigerian breweries ltd should focus on growing their working capital since optimum working capital leads to intensive firm activities and grows profitability level.