Inventory decision-making by small Sowetan retailers

Themari Eicker,J Orpha Cilliers

doi:10.4102/jtscm.v12i0.387

Abstract

Background: The importance of South African small businesses, especially retailers, in improving communities’ standards of living necessitates sound business strategies to survive and remain competitive. Selecting appropriate business strategies is cardinal for the sustainable development and growth of all types of businesses, including small businesses. The supply chain strategy defines how operations in the supply chain will support the overall competitive strategy and is orientated to promote either responsiveness or cost-efficiency. It is imperative that all inventory decisions be aligned with the orientation of the selected supply chain strategy.Objectives: The aim of this article was firstly to determine how small retailers operating within the boundaries of Soweto, a township in Gauteng, South Africa, manage their inventory decisions considering the orientation of the supply chain strategy; and secondly, to investigate whether retail industries differ in terms of inventory decisions.Method: A survey was conducted among 650 formal, independent small businesses operating within Soweto of which 556 were classified as retailers based on the Standard Industrial Classification. Structured interviewer-completed questionnaires were used to obtain quantitative data from owners or managers. Both descriptive and inferential analyses were performed to determine the orientation of the retailers’ supply chain strategy based on their inventory decisions relating to the average rate of purchasing inventory, the amount of inventory purchased, as well as the quality and variety of products offered to customers. Five hypotheses were formulated to determine whether a difference exists between six industry groups with regard to the management of inventory.Results: It was established that small township retailers predominantly manage their inventory decisions responsively. It was also concluded that differences exist in terms of how small township retailers manage their inventory based on the industry in which they operate. The results showed that retail hardware stores are focused on making inventory decisions more cost-efficiently than the other industry groups, whereas retail general stores are focused on making inventory decisions more responsively than the other industry groups.Conclusion: The owners or managers of small township retailers need to be educated in terms of inventory management decisions. This article can be used as an educational platform to show how small township retailers can identify the aligned inventory decisions for supporting a selected supply chain strategy orientation. Generally, small township retailers may maintain their competitive advantage if they align all business strategies to promote responsiveness. Since the industry in which small retailers operate influences inventory management decisions in terms of responsiveness and cost-efficiency, owners or managers must consider the specific industry in which they operate before making such decisions.

Highlights

Inventory is one of the most expensive assets within a business and should be managed effectively – which implies that the right amount of inventory is purchased at the right price and time to support the business’s day-to-day activities (Monczka et al 2016:621–622; Wisner, Tan & Leong 2016:209)
Considering the South African government’s continued drive to develop small township retailers, the importance of retailers to provide customers with products or services, as well as the importance of managing inventory aligned with the selected supply chain strategy, the purpose of this article is firstly, to determine how small retailers operating within the boundaries of Soweto manage their inventory decisions considering the orientation of the supply chain strategy; and secondly, to investigate whether retail industries differ in terms of inventory decisions
The importance of developing small township retail business remains a priority of the South African government

Summary

Introduction

Inventory is one of the most expensive assets within a business and should be managed effectively – which implies that the right amount of inventory is purchased at the right price and time to support the business’s day-to-day activities (Monczka et al 2016:621–622; Wisner, Tan & Leong 2016:209). As with all management decisions, inventory decisions should be aligned with the competitive strategy and different functional strategies (of which the supply chain strategy forms part of) (Chopra & Meindl 2016:35–37) Such an alignment requires that the type of product (or service) offering forms the starting point when http://www.jtscm.co.za. The supply chain guides the process of ensuring that inputs are purchased and that products are produced and distributed in the correct quantities, at the right time and to the right location. This strategy is implemented while balancing overall costs and satisfying customers’ service-level requirements (Qrunfleh & Tarafdar 2013:571). It is imperative that all inventory decisions be aligned with the orientation of the selected supply chain strategy

Objectives

Methods

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Conclusion