ETHICAL PRACTICES IN INVENTORY MANAGEMENT IN PUBLIC

This study was basically trying to look deeply on how profitability, efficiencyand value creation are affected by ethical practices when it comes to inventory management inpublic institu

ETHICAL PRACTICES IN INVENTORY MANAGEMENT IN PUBLIC

INSTITUTIONS IN KENYA (A CASE OF KENYATTA NATIONAL HOSPITAL)

MBUGUA CAROLINE WANGUI REG NO.BBM/106/14/15

A RESEARCH PROJECT SUBMITTED TO THE DEPARTMENT OF BUSINESS MANAGEMENT IN PARTIAL FULFILLMENT FOR THE AWARD OF BACHELORS DEGREE OF BUSINESS MANAGEMENT IN ACCOUNTING OF MARIST

INTERNATIONAL UNIVERSITY COLLEGE

JULY 2016

DECLARATION AND APPROVAL

This research is my original work and I declare that it has not been presented for a degree in anyother institution

Frederick Ukonga Mutuku

Head of Department of Business1 Marist International University College

Signed……… Date………

DR OGUTU

Special thanks to the Lord God Almighty for being with me in my endeavour and seeing methrough every step of my schooling I also appreciate and acknowledge the support from mysupervisor.I also want to thank my family, school mates, class mates and friends for their support

in my schooling and may God bless you all Thank you

I dedicate this research project to my family who have been always there for me throughout mylife and my husband, thanks for the support and the love that you show me God bless you all

TABLE OF CONTENTS

DECLARATION AND APPROVAL ii

ACKNOWLEDGEMENTS iii

DEDICATION iv

TABLE OF CONTENTS v

ABBREVIATIONS vii

OPERATIONAL DEFINITIONS OF KEY TERMS ix

LIST OF TABLES

Table 7: Performance effectiveness response distribution 34

Table :8 Document analysis guide 35

Table9: Mean of response distribution on efficiency analysis according to the

FIGURE 7: Performance effectiveness response distribution 34

ABBREVIATIONS

KNH Kenyatta National Hospital

OPERATIONAL DEFINITIONS OF KEY TERMS

Ethics

This is usually the honorable values which direct or guide a given conduct by an individual ororganization It is the basis in which most of the principles such as fairness, integrity, andtransparency are exercised when it comes to different processes in government institutions

Inventory management

This is a process which involves the acquisition and maintenance of goods and materials which afirm or business holds at a given time It’s a process which ensures that goods and materials arestored in the right way within a given organization and that the goods and materials value andquality is maintained despite the period of time that they stay in the warehouses (Nicholas,2010)

Also known as inventory control is used to show how much stock you have at any one time,

and how you keep track of it

Stock turnover

A measure of number of time inventory is sold?

A growing number of public institutions are failing in their different tasks, duties and activitiesand this has been caused by the lack of proper ethical practices, procedures and guidelines incarrying out their operations in the environment Inventory management in these publicinstitutions has been facing numerous challenges due to lack of ethics in how stock or inventoryoperations are managed within these institutions Unethical practices have been rampant in manypublic institutions This has affected profitability, efficiency and value creation in theseinstitutions in different ways

Despite the fact that many public institutions are usually monitored, controlled and managed bydifferent bodies and operate under different regulations and code of ethics, there are manyunethical practices which are continually taking place in these institutions This has beenfacilitated by the fact that many of these institutions are failing in their management, code ofethics as well as in their control systems This study was seeking to address this issue fully andextensively for the success of these institutions specifically when it comes to inventorymanagement

The purpose of this study was to look deeply on the issue of ethics in inventory management inpublic institutions This study was basically trying to look deeply on how profitability, efficiencyand value creation are affected by ethical practices when it comes to inventory management inpublic institutions Data was collected using questionnaires, one on one interview and I also useddocument analysis guide with the respondents of this study and it was then analyzed usingdescriptive statistics After the data analysis the information was then presented using tables,graphs, pie charts and data management software’s such as MS excel tables

The data for this research study was collected from respondents who were selected from theKenyatta National Hospital offices which this study used as its case study to illustrate howunethical practices in inventory management are evident in public institutions From thispopulation the researcher was able to come up with an effective sample that was used as therespondents of this research study These were able to provide the data and information that theresearcher was looking for, to be able to meet the objectives of this study as well as the researchquestions which this study was seeking to answer

As a conclusion the study was then be able to recommended and suggest ways in which publicinstitutions can improve on their inventory management with regard to ethical practices Theresearcher also recommended other areas where research needs to be done on this topic on ethics

in inventory management in both public and private institutions

CHAPTER ONE

1.0 INTRODUCTION

This is the first chapter in this study and it tackles the background of the study, the statement ofthe problem, the purpose of the study, objectives of the study, research questions, significance ofthe study, justification of the study, scope of the study, assumptions of the study, limitations anddelimitations of the study and it concludes with a highlight of the variables of the study

1.1 Background of the study

Ethics practices are usually the honorable values which direct or guide a given conduct by anindividual or organization It is the basis in which most of the principles such as fairness,integrity, and transparency in society are enhanced and upheld (Donald, 2014) Inventory orstock is usually the amount of goods, commodities or materials that an organization, firm orbusiness stores or holds in its storage systems or warehouses at a given time for the purpose ofselling the same goods and materials at a later date (Nicholas, 2010)

Inventory management is a process which involves the acquisition and maintenance of goods andmaterials which a firm or business holds at a given time It’s a process which ensures that goodsand materials are stored in the right way within a given organization and that the goods andmaterials value and quality is maintained despite the period of time that they stay in thewarehouses (Nicholas, 2010) Ethical practices when it comes to inventory management areusually the ability of a given institution to be able to carry out its stock management process andmethods in the most acceptable ways within a given institution (Wade, 2001)

Inventory management started as a mechanism which was viewed as a way or reducing costswithin different institutions by ensuring that the stock of that institution were well accounted forand stored well in the institution for the ability of the institution to be able to get the best resultsfrom the goods and commodities stored in the stores of a given institution (William, 2011) Itwas meant to improve efficiency and performance and help in maintain quality and value ofgoods and materials as well as monitor and control the acquisition, storage and sale of goods andmaterials in different institutions (Dwyer, 2006)

Ethical practices were introduced in the inventory management of different institutions due to thefact this process was being done in very many questionable ways in different institutions Therewere many challenges which were facing public institutions such as poor storage systems andthis was making different institutions to undergo losses in their operations and ethical practices ininventory management was seen as the solution to most of these problems (Howard, 2003).Many global institutions have been able to benefit fully from ethical practices in their inventorymanagement and many systems have been set up to ensure that ethical practices are maintained(Kieso, 2007).

With proper ethical practices in inventory management companies or firms are able to staycompetitive despite the many seasonal changes which occur in the market as well as thechanging customer needs, preferences and choices in the society (Axsaeter, 2000) Ethicalpractices in inventory management have helped different public institutions to improve theirperformance and enhance their efficiency and value creation globally because it helpsmanagement to come up with ways of ensuring employees gain the relevant skills and trainings

on the best practices of inventory management within the institutions (William, 2011)

Many inventory management processes and methods are usually not fair, transparent and theylack integrity and this has been caused by many factors in the environment Some institutionshave encountered very huge losses and this has been traced back to the lack of ethical practices

in inventory management (Zipkin, 2000) There are different human resources as well as somemanagement teams who have over the years focused on fulfilling their own personal interestsinstead of the success of the institution and this has been the key cause of unethical practices inthese institutions in the world Failure of addressing this has led to the failure and collapse ofdifferent institutions in the world (Donald, 2014)

Different people who work in the procurement department in many organizations have differentfocus and interests and if these interests are manipulated in the procurement department forpersonal benefit, then the procurement functions becomes unethical (Dwyer, 2006) Very manygovernment institutions have had questionable ethical practices and this has made manygovernment institutions to lose the faith and value which people had in them (William, 2011)

1.1.2 Background of study In Africa

Many African countries have failed when it comes to ethical practices in their public institutionsand this has been caused by lack of code of ethics, poor management of these institutions, poorcontrol systems and lack of effective policies for ensuring that ethical practices are carried outeffectively when it comes to inventory management This has been caused by conflict of interestamong different personnel and the organization in the operations of the institution where bysome people has been in the habit of benefiting themselves at the expense of the institution(Kiseo, 2007)

Many public institutions employees have had their jobs terminated and some taken to courts due

to lack of integrity in their operations especially when it comes to inventory management Thishas been also the cause for the failure and collapse of many public institutions in differentAfrican countries This shows that this has been a major issue which needs special attention andaddress in order to prevent it from causing further damage to different institutions in publicinstitution (Donald, 2014)

Institutions in the African Continent have failed to enter great partnerships with theircounterparts in other countries in the world and this has been caused by the unethical practiceswhich are rampant in these institutions especially when it comes to material storage and usage inthese institutions For example, The South Africa Company De Beers has been found to be sounethical in its inventory management and other services and this has made investors to pullaway from its operations, profitability has declined and efficiency decrease and value of thecompany products and services (Kiseo, 2007)

1.1.3 Background of study in Kenya

Unethical practices in inventory management are very rampant in many public institutions inKenya and this has led to many issues and cases of fraud, losses, misappropriation, and loss ofpurchase documents among others being witnessed in many departments of these institutionsThis has led to establishment of very many commissions of enquiries which have yielded tonothing because also these committees have been filled with so many cases of unethicalpractices Despite the fact that there are many oversight bodies to monitor ethics in the countrymany institutions have failed when it comes to inventory management

Many institutions in Kenya have also been experiencing many cases of losses in their productsand services and this has been caused by the fact poor materials have been in the habit of beingused in the production of goods in these institutions This has been a direct result of this issue ofunethical practices in institutions when it comes to inventory management A study carried out

on inventory management by Anthony Gakinya showed this to be true Okwiri John also in hisstudy on inventory management in Kenya, found out that institutions in Kenya need to enhancetheir policies when it comes to ethics in their inventory management in order to improve their[profitability, efficiency and create more value for their goods and services

When it comes to Kenyatta Hospital, the issue of ethical practices in the inventory managementhas been a major issue because there have been many cases of unethical practices when it comes

to acquisition and storage of different goods in the institution This has been caused by the factthat there is no study that has been carried and heed address this issue in the country extensivelyand therefore this study aimed at critically addressing this issue in depth in the institution

1.2 Statement of the problem

Ethical practices are very important when it comes it inventory management in any institution.When monitoring and control is maintained in ensuring that inventory management is carried out

in the most ethical ways in different institutions, performance is improved, productivity andprofitability Efficiency is also enhanced and value is created for that institution in its operations.Without ethical practices in inventory management no amount of subsidy is justified to preservethe long term operations of different public institutions Many institutions have been able toincrease their profit level growth, client satisfaction, employee satisfaction, efficiency and thegeneral market share increase due to proper inventory management and this is according to astudy carried out( Tam Harbert ,2016 )on ethics and supply chains

However the researcher has noted that many public institutions are still failing when it comes tothe upholding of ethical practices in their operations and this has led to the collapse of manypublic institutions The ideal situation shows that public institutions have been failing when itcomes to ethical practices A study carried out in 2015 and published in 2016 on the impact ofinventory management on stock-outs of essential drugs in sub-Saharan Africa found out thatunethical practices are rampant in many institutions when it comes to inventory management and

this has been a key contributor for the failure of these public institutions This was also proved to

be true by a study which was carried on the effect of inventory management on the firmperformance (Dimitris Koumanakos, 2008)

Although it’s very clear that different public institutions have been able to remain sustainable intheir operations due to ethical practices in inventory management, poor performance and failure

of public institutions when it comes to inventory management is going to continue beingwitnessed unless something is done to change the current situation A deep research study on thissubject of ethical practices in inventory management in public institutions needs to be takenbecause in Kenya less research has been done on this issue Therefore in general, this researchstudy will seek to critically examine the issue of ethical practices in inventory management inKenyatta National hospital

1.3 Purpose of this study

The purpose of this study was to establish the ethical practices in inventory management inpublic relations in Kenya and it paid special emphasis on the Kenyatta National hospital

1.4 Objectives of the study

1.4.1 General Objective

The general objective of study was to investigate the issue of ethics in inventory management inpublic institutions

1.4.2 Specific Objectives

This study was basically steered by the following specific objectives:

a) To assess how profitability has been influenced by ethical practices in inventorymanagement in Kenyatta National hospital in Kenya

b) To investigate efficiency changes due to ethical practices in inventory management inKenyatta National hospital in Kenya

c) To determine how value has been created due to ethical practices in inventorymanagement in Kenyatta National hospital in Kenya

1.5 Research Questions

To address the above objectives this study was guided by the following questions:

a) How profitability changed is due to ethical practices in inventory management inKenyatta National hospital in Kenya?

b) What are the changes in efficiency due to ethical practices in inventory management inKenyatta National Hospital in Kenya?

c) How has value been created due to ethical practices in inventory management inKenyatta National Hospital in Kenya?

1.6 Significance of the study

The findings of this study are significant to Kenyatta hospital because they will be able to knowhow ethical practices in inventory management are beneficial for the growth and efficiency ofthe hospital The results which the researcher will come up with after analysing the data andinformation which will be collected from this public institution will be useful in showing therelationship which exists between ethical practices and inventory management and how theinstitution can used it to improve on its profitability, create value and increase its efficiency in itsoperations

This study enables different public institutions to learn more about the benefits brought about byeffective and proper inventory management and ethical practices control and how they help toimprove their profitability as well create value and increase their efficiency It is also shows howinventory management is helpful to these public institutions productivity This research study isgenerally going to open up more opportunities for different public institutions with regard toethical practices in inventory management in their operations

From this research study the government will be able to know the process of inventoryacquisition by different government institutions and if these processes are compliance to thestipulated laws in the country as well as the best ethical practices in the society The governmentwill also to be able to know if the storage of goods and materials by different public institutions

are to the expected standards This will basically help the government to come up with the rightpolicies to control inventory acquisition, storage, transportation and sale within this sector aswell as the best ethical practices monitoring tools and methods.

Researchers and scholars will be able to understand the issue of ethical practices and inventorymanagement in public institutions and thus opening this field of research further for futureresearch to be undertaken on it and on the other related areas which need further research.Researchers and other scholars will also benefit because this research will provide data andinformation on this subject of ethical practices inventory management for an easier research onthe same field of study This study also is significant because it will close the knowledge gap thathas been in existence

1.7 Justification of the study

A lot of studies have been done regarding ethical practices in inventory management in publicinstitutions in different parts of the world in many public institutions in the world but little hasbeen done on this subject on inventory management in Kenya The study sought to try andestablish the influences which have been brought about by different factors which have beeninfluencing inventory management in different public institutions and this study tried to educatevarious stakeholders on its importance and on the benefits it brings about

1.8 Scope of the Study

This study was mainly limited to a contextual analysis on the ethical practices in inventorymanagement in public institutions in Kenya A survey and study was carried out mainly inKenyatta Hospital in Kenya This study mainly carried out on the doctors, nurses and accounts/finance department involved in different key operations of this hospital especially those in theaccounting, finance and inventory management departments in the institution

1.9 Assumptions of the Study

The study made the following assumptions in the process of undertaking this research study Theresearcher had assumed that poor profitability, inefficiency and low value in service delivery hasbeen due to lack of ethical practices in inventory management in different public institutions

1.10 Limitations of the Study

Kenyatta hospital which is the institution which was used in carrying out this study was usuallyoperating under very busy schedules and environments and the researcher found it hard in timingand scheduling meetings with the key operating teams, managers as well as the employees due tothe continuous operations of this institution Some target respondents were also hard to accessand this was a great limitation which the researcher encountered Also funds to go to the fieldwork were a bit of a challenge as well as time for carrying out the research

1.11 Delimitations of the Study

The study was able to conquer these issues of respondent’s availability it by drop and pick ofquestionnaires to the key respondents of this research study The issue of time the researcher wasable to address it by setting time aside for the studies and other commitments in order tofacilitate a smooth flow of the research work Funds for the study were managed by the use ofher resources in carrying out the research work Through this the researcher was able to emergefrom these limitations and all the data required for this research study was timely collected

Ethical Practices

InventoryManagement

Profitability(Returns/Profit levelsand Inventory Cost)Efficiency(Average StockTurnover and Store)Value Creation

(Employees and Client Satisfaction)

2.2 Theoretical Framework

2.2.1 Porter’s model of competitive advantage theory

This model of 1980 identifies the five forces which are used in competition in differentorganizations These are usually new entrants, buyers, substitutes, suppliers as well as industrialcompetitors who are usually the key determinants of how competition advantage level shiftswithin an organization (Porteus, 2002) The goal of every organization is usually to come up withways and strategies which ensure that they gain competitive advantage and a stable position inthe industry in order to increase and create its value and improve on its performance Criticalstrengths and opportunities which are available in public institutions help these firms tocapitalize on them and gain competitive advantage while they enable them to eliminate theweaknesses and threats which face these firms and this can quickly be achieved if ethicalpractices are carried out in the different operations of the organization especially when it comes

to inventory management (Axsaeter, 2000).

2.2.2 Lawrence Kohlberg’s Stages of Moral development Theory

This theory basically evaluates moral reasoning It states that moral reasoning is usually the key

to ethical behavior for individuals in the society It claims that moral judgment develops in anindividual or organization thorough different stages (Donald, 2014) This is useful because wherethere are established rules, principles, standards, and values, people are able to adopt and followthem more easily This theory is therefore important in this study because it helps to explain why

some organizations are ethical unlike others especially where code of ethics lacks, poormanagement exists and there are no clear guidelines for different operations in the inventorymanagement tasks and activities within the organization This theory shows how performance,efficiency and value can be improved, created and enhanced respectively if the organizationensures that ethical practices are being exercised in inventory management (Baily, 2008).

2.2.3 Cost of production Theory of value

David Ricardo theory of cost of production of value took business ideas to a new level from theprevious ways of incurring many costs in the production process to a new way which assuredcutting down of costs and maintaining a greater and quality value of the same product compared

to the previous productions of the same product (William, 2011) This theory stated that the price

of an object was to be determined by the cost of resources that were put into place in making itplus the cost of production This brought many product prices very high and this could have beenpossibly eliminated (Charles, 2008)

However, Adam Smith came up with ways that would ensure that the costs would be broughtdown as well as the prices of these products The theory used mainly the constant returns to scaleassumptions and existence of only one factor of production and therefore Adam Smith showedthat the factors of production were many and therefore a company could not have set a price of aproduct depending of one variable but had to consider other variables as well and these would beused to cut on costs (David, 2010) In the concept of inventory management this theory can beapplied when it comes to cutting down on costs, improving performance and creating more valuefor the organization This is because when inventory is well managed, monitored and effectivelycontrolled through the application of the most suitable ethical practices, many unnecessary costsare eliminated, then, these firms is able to concentrate and focus on its other functions andthrough this efficiency is enhanced and performance improved

2.2.4 Moral Universalism Theory

It states that unless people or organizations starts viewing things at an universal level it is noteasy to carry out any operation ethically and in the right manner because that which we view to

be good, to someone else might be seen as bad This means that, some practices are viewed to beethical by some people while others view them to be unethical This is caused by the manydifferences that exist between different people in society (David, 2009) In this study, this theory

is useful because it helps to show how institutions can establish code of ethics at a universal level

in order to maintain ethical values and standards at a global level in all their operations anddepartments Organizations can be able to borrow from other institutions in order to enhancetheir functions and operations especially when it comes to inventory management (Australia,2005)

2.3 General Literature Review

2.3.1 Ethics in Inventory management

This is usually the honorable values which direct or guide a given conduct by an individual ororganization It is the basis in which most of the principles such as fairness, integrity, andtransparency are exercised when it comes to inventory management within a given institution ororganization in the society (Donald, 2014)

2.3.2 Ethical Notions and Ideologies in Inventory Management

These are the best practices which ensure that the inventory management operations andfunctions are ethical in nature and they include: Loyalty and respect for instructions andguidelines which direct how inventory management is carried out in a given institution, honesty,equality and fairness, transparency and concealment as well as due diligence (Lewa, 2007)

2.3.3 Unethical Practices in Inventory Management

These are the main unethical practices in inventory management functions and practices and theyinclude: Conflict of interest, fraud, corruption, collusion and coercion (Donald, 2014)

2.3.4 Factors and areas which influence Ethical practices in inventory management

Inventory value

How valuable an inventory or stock is, usually determines how it is going to be monitored, storedand controlled within any given institution (Malakooti, 2013) Most valuable goods and materialswhich have the ability to offer more quality and able to meet the customer needs more effectivelyare usually managed in a better way that the goods and materials with lower value and this is afactor that influences the inventory management within institutions In most public institutionsgoods and commodities are also usually divided and their arrangements are also unique and themost valuable are usually given a more priority than those which are of lower value (Lee, 2012)

Insights in trends

The way a given group of goods and materials performs in the market also influences howinventory is managed within the public institutions Goods which are more suitable and highlypurchased by customers are usually given higher priority when it comes to their acquisition,storage, maintenance, control and sale This is because they generate more revenue to thesestores and therefore they have to be managed in a more suitable way as compared to the goodswhich bring lower returns to these firms (William, 2011)

Data and information about a given inventory

The available data and information about a given commodity or good in the market alsodetermine how they are managed within the public institutions This is because this informationusually is the same information that customers use in making their decisions of making thepurchase of a given commodity within the market This information usually come from both theinternal and external sources within the public institutions and usually influences inventorymanagement in many varied ways (David, 2010)

Costs associated with a given inventory

Costs that are associated with the acquisition of any good or commodity by the publicinstitutions stores also usually influence its level of management The most expensive goods interms of purchase or acquisition, transportation as well as storage usually get the highest prioritywhen it comes to their management within the institution because they eventually bring morereturns or profits to the firm They basically make these firms incur more costs and therefore toreduce these costs they are properly managed (Malakooti, 2013)

Warehouse organization

Warehouse sizes usually influence inventory management This is because how goods andmaterials are organized in these warehouses or stores depends on the available space within thesestores Bigger warehouses enable public institutions to acquire more goods and they areeffectively stored and their value or quality maintained as compared to smaller stores wheregoods are forced in to fit and their value and quality may be lost and they are also prone todestruction due to the forcing (Lee, 2012)

Inventory visibility

This is a process in which public institutions management are able to monitor and manage eventsacross their operations within the industry This means that proper management of inventory isalso dictated by the management ability to monitor effectively the operations of their firms and

be able to make effective decisions on inventory management This usually gives a clear view ofinventory and supply activities which the management can adopt to ensure proper management

of inventory (Charles 2008 & David, 2010)

2.3.5 Effective performance

2.3.5.1 Introduction

Performance is usually measured according to the measurable value that an organizationachieves as compared to the key objectives which it has set for its establishment and operations.Performance usually a direct result of the evaluation of the company efforts on reaching itstargets within a given industry, this is because it is compared to the real results that it realizes at agiven time (Malakooti, 2013) Public institutions usually aim at being effective in theirperformance and constantly improving and maximizing on their profit levels Proper inventorymanagement is usually one of the things that make this a reality within these institutions(Nicholas, 2010)

Effective performance management should be enhanced within public institutions and this can beachieved if inventory is well managed, controlled, monitored and correctly stored within thesepublic institutions stores following the best ethical practices in the society and in the organizationoperations (David, 2010) When goods and products are well managed within the firm, theirvalue and quality is maintained and this attracts more customers to these public institutions andthis improves the performance of these institutions and this increases the profit/return levels andreduces the inventory costs in these institutions (William, 2011)

2.3.5.2 Return/Profit Levels

Return form any investment is usually the benefit which an investor is able to make from a giveninvestment Investors usually strive hard to maximize on their profitability and remainsustainable in their operations Proper inventory management can benefit the investors in

ensuring that they are able to attain their targeted profit levels and this way the institutions areable to remain competitive in the business environment Profit margins, earnings growth andreturns levels are usually good indicators of the performance of the institution and this way aninstitution can be able to gauge on its performance in the market (David, 2010).

2.3.5.3 Inventory Cost

These are usually the various costs which are incurred by the institution as long as there are somegoods which are still in their stores or in holding within the institution These kinds of costs areusually an inclusive of various costs such as the costs related to warehousing, tax on the goods,insurances costs of the goods, capital of storing the goods, depreciation costs as well as theshrinkage costs associated with the goods at the storage or in holding at the institution Inventorymanagement can be able to eradicate these costs and reduce the general costs of the institutionand improve on the performance of the institution

Over the years, many public institutions have registered poor performance, poor average stockturnover and low store ratios and this has been a direct result of unethical practices in inventorymismanagement Where performance has been effective within public institutions, ethicalpractices have been enhanced, there has been efficiency in how these outlets store their materialsand other products and this has been a key factor to the success of these public institutions.Efficiency and ethical practices in the accounts finance and procurement departments of publicinstitutions have led to many improvements in these institutions locally and globally (Philip,

2008 & Lee, 2012)

2.3.6.2 Average Stock Turnover

This is usually the ratio which basically shows the number of times in which an institution stock

or inventory has been sold and over period been replaced in the business environment.Institutions can be able to use this to be able to calculate the number of days which the stock orgoods in their stores will take to be sold to their target customers Proper management ofinventory within the institution can help in making sure that the days calculated are realized andthe institution generally becomes efficient in its services in the business environment Averageinventory turnover is basically the cost of goods sold divided by the average inventory (Pride,2008)

2.3.6.3 Stock Ration

This is usually a ratio which basically shows the number of times in which the goods in the storeare being used within the organization This basically is used to measure the goods which come

in and out of the store and it focuses more on the goods which come out of the store It is usually

an efficiency ratio and it tries to show how effectively inventory is managed within a giveninstitution by comparing costs involved in this process within the institution Proper inventorymanagement usually ensures that the costs are maintained on the lower side and the store ratioincreases thus showing that there is efficiency within the institution (Lee, 2012)

2.3.7 Value Creation

2.3.7.1 Introduction

Value is the quality which a product or service comes with and it makes the client or customer tofeel that they have benefited more from a product or service Many people usually focus on thequality of a product before they make a purchase or benefit from a service They usually want tofeel the value of a product that they use their resources upon Ethical practices in inventorymanagement usually ensure that an organization is able to maintain and increase the value of itsproducts and services because they ensure that they acquire the most quality and valuable rawmaterials and store them in the right manner and avoid any cases of losses (Lee, 2012)

Public institutions which are ethical in their operations and functions especially when it comes toinventory management have over the years been able to maintain a good value of their products

or services This has made them more popular as compared to unethical institutions in the

society This has improved on the performance of many public institutions and their efficiencyand made them more admirable in the society therefore gaining a competitive advantage, marketdominance and increasing their market share as well as the stock in these institutions (David,2010).

2.3.7.2 Employees

Employees are usually the most important assets internally within any given institution Theyensure that the organization is able to operate effectively and efficiency is maintained within thedifferent activities and operations of the organization Employees should be well taken care ofwithin the institution for them to be able to fully give their potential and focus on the realization

of the organization goals and objectives and maximize their potential in achievement of theorganization goals (William, 2011)

2.3.7.3 Client Satisfaction

Every organization and institution strives hard to ensure that their customers are satisfied withinthe business environment This way, the value of the institution and its goods and services is alsoincreased This makes sure that the clients are satisfied and it also retains them More clients arealso usually attracted to the organization and this facilitates a positive transformation of theinstitution Customer loyalty is created and maintained The organization image and reputation isalso improved over the long run Proper inventory management usually contributes largely toclient satisfaction within the institution (David, 2010)

2.4 Empirical Literature Review

2.4.1 Review of studies done on this area

Several studies conducted on various public institutions in many countries have shown that many

of them are still lagging behind when it comes to ethical practices in inventory management andare still incurring a lot of costs which are unnecessary (Malakooti, 2013) This is because most ofthem use the same old methods of inventory management which are filled with unethicalpractices instead of employing more technologically advanced, innovative and creative inventorymanagement systems, methods and practices in their operations Studies go ahead to show thatmany of these institutions still lag behind in taking initiatives of going to the field and study theneeds, choices and preferences of the customers and the societal expected practices (Lee, 2012)

Research and studies have shown that for the survival of many of these public institutions to beassured and ensured, they need to start adopting new technologically advanced control andmonitoring systems over their inventory or stocks because they are timely as well as costefficient and generally improve the performance of the firm (William, 2011) Research alsoshows that institutions need to seek ideas from their clients in order to know their preferences,choices and wants in order to offer services which are relevant in the market and to their clientsthus cut down on their inventory acquisition, storage and sale costs (Malakooti, 2013).

According to annual reports of various public institutions in the world that have registeredgreater success are the ones which have adopted ethical ways of inventory management and costcontrol within their operations and this shows that for any retail chain to remain on top of theirperformance they have to continuously study the market and adopt new ways of inventorymanagement under the most ethical ways in the society This will help them to perform in apositive way, improve their efficiency and increase their value (Nicholas, 2010)

2.4.2 Critique of existing Literature

There are many researchers and scholars in the world today but not so many of them have carriedout extensive research on this area of study Therefore there is little knowledge available in thisarea especially where public institutions are concerned Also most available literature on thistopic is incomplete, inconsistent and generally not so accurate or shallow in details Authors anddifferent writers have also not paid so much attention in writing about this topic and those who

do basically criticize the available information More studies and funds need to be done and setrespectively for more research on this topic in order to address and close the research gap thatexists

2.5 Conceptual Framework

2.5.1 A figure showing the conceptual framework diagram:

Independent variables Dependent Variable

2.5.2 Discussion

Inventory management strategies are constantly changing due to new innovations and variedcustomer preferences and needs hence public institutions need to constantly reduce their costs toavoid losses as they acquire, store and sell different goods and materials within their operations

in the market (Malakooti, 2013) These public institutions also need to cut on their operationalcosts and put more efforts in managing their stocks or inventories They need to get the necessaryinformation and data on how to effectively manage their inventories and this will help inimproving their performance and efficiency in their operations This will enable them to offerservices which are relevant to their clients and this will reduce losses and increase returns (Lee,2012)

There are many benefits which come with proper inventory management and this means that forany public institution to be more successful in this sector, it needs to capitalize on these benefitswhich are brought about by ethical practices and proper inventory management (William, 2011).This means that with a close monitoring and control within these organizations inventories theywill be able to grow in the market in terms of market share, dominance, position as well asperformance This will also lead to low operational costs within the organization and therefore

Ethical Practices

InventoryManagement

Profitability(Returns/Profit levelsand Inventory Cost)Efficiency(Average StockTurnover and Store)Value Creation

(Employees and Client Satisfaction)