OVERCOMING INVENTORY MANAGEMENT CHALLENGES IN NIGERIA’S MANUFACTURING SECTOR

Question and Answer

Q: What are the key challenges faced by manufacturing businesses in Nigeria regarding inventory management?

A: Manufacturing businesses in Nigeria face several challenges regarding inventory management. According to a study conducted by Taisha Associates, inventory constitutes a major segment of total investment in manufacturing companies, therefore its management remains very crucial. The study also reveals that inventory management has a significant effect on the return on assets, investment, net operating margin, and net income of manufacturing firms in Nigeria.

Some of the key challenges faced by manufacturing businesses in Nigeria regarding inventory management include:

  1. Poor forecasting: Inaccurate demand forecasting can lead to overstocking or understocking of inventory, which can result in increased costs and reduced profitability.
  2. Inadequate storage facilities: Lack of proper storage facilities can lead to damage or spoilage of inventory, which can result in increased costs and reduced profitability.
  3. Inefficient supply chain management: Inefficient supply chain management can lead to delays in the delivery of raw materials or finished goods, which can result in increased costs and reduced profitability.
  4. Inadequate inventory control: Inadequate inventory control can lead to theft, loss, or misplacement of inventory, which can result in increased costs and reduced profitability.
  5. Inadequate training of personnel: Inadequate training of personnel can lead to errors in inventory management, which can result in increased costs and reduced profitability.

To overcome these challenges, manufacturing businesses in Nigeria can adopt the Just-in-Time (JIT) system of inventory. This system helps to avoid tying down capital on inventory and reduces credit sales or average collection period for easy conversion of inventory to cash.

In addition, companies should maintain a closer watch on their inventory conversion period by constantly reviewing processes of payment by creditors to avoid liquidation.

Professionals in the field of inventory management should be hired by these companies for advice.