Inventory management in small and medium enterprises

Abstract

PurposeThe purpose of this paper is to provide guidelines for entrepreneurs for implementing effective inventory management (IM) practices and presents the results of a survey of machine tool enterprises in Bangalore, India.Design/methodology/approachA descriptive analysis is used to present aspects of the findings, which reflect the current state of IM in machine tool enterprises. In addition, percentages, bar diagrams and correlation analysis provide a more accurate assessment of this industry sector.FindingsThe study identified several major problems in the context of IM in machine tool enterprises including the use of rule‐of‐thumb for IM, a low importance given to forecasting, random ordering of materials, low levels of training and development, and low computer use as well as a low importance given to purchasing and variable lead‐time. The study confirmed the need for managers in the machine tool sector to alter drastically their approach to IM.Research limitations/implicationsThis study of 40 SMEs in Bangalore should be extended using a larger sample representative of Indian SMEs in order to arrive at findings that are more generalizable across the machine tool sector in India.Practical implicationsThe managers of SMEs should consider seriously IM as a strategic concept simply because effective IM positively influences productivity. There is profound scope for improving the operations and performance of SMEs through the application of quality practices in IM.Originality/valueConsidering the lack of studies about IM in the context of Indian small and medium sized enterprises (SMEs), this paper helps fill a gap in the literature. A review of the policy framework concerned with SMEs suggests that policymakers do not consider critically the role of IM and related issues. It is significant to note that there is no exclusive reference to improvement in IM within the policy documents. At the same time, the literature review suggests that effective approaches to IM can improve the productivity and competitiveness of SMEs.