Enhancing Economic Performance of Nigerian Manufacturing Firms Using Quantity - Reorder Point Inventory Control System

Purpose: The purpose of the study is to explore whether there is a relationship between quantity Reorder Point Inventory Control and Economic Performance of the manufacturing firms in Nigeria. Using flour mills as a focal point Design/methodology/approach: A quantitative research design was employed, of which secondary data obtained from the annual report and account of ten-year period (2004-2013) from the studied firms was used. Data collected were estimated using regression models of which Ordinary Least Square (OLS) form the basis for estimation. Using OLS, the various cost functions were estimated. Findings: The relationship between profit and inventory; Total Cost and Inventory were also determined. Reorder point, that is the level to which stock of wheat material is allowed to fall before ordering for another raw material was equally determined for each of the studied firms. The study found out that there is a significant positive relationship between profit and demand for wheat inventory; Total cost and Inventory at the studied firms. There is a significant relationship between Reorder Point and Time at the studied Firms also; Research limitations/implications: The study is limited to flour manufacturing companies in Nigeria whose transactions and financial records are made available at Nigeria stock exchange. The assumptions that the estimated cost functions in the study are linear is also a limitation. Normally, carrying cost and ordering cost are quadratic while total cost is cubic which is beyond the scope of the study. Practical Implications: To achieve better economic performance in any organization, the firm has to meet the three fundamental attributes of customer service which are availability; operational performance and service reliability. Availability explains the capacity of a firm having inventory when desired by a customer. Operational performance is all about required time to deliver customers’ order. Service reliability involves the combined attribute of logistics and the firm’s ability to perform all related activities as well as customer provision in critical information regarding operational logistics and status. The attributes involves shipment of damaged free goods; accurate invoicing and error free. All these are found to be enhanced by the use of Reorder Point Inventory Control System. Originality/value: The paper identified attributes of Quantity Reorder Point Inventory Control System as a technique that can enable flour manufacturing firms achieve economic performance. The findings are acknowledged to be unique because they emerged from a well-organized study that employed quantitative research design.