Inventory management practices of small, medium and micro enterprises in the Cape Metropole, South Africa

Abstract

Small, medium and micro enterprises (SMMEs) in South Africa are perceived to be failing partly due to ineffective management practices. Using a questionnaire survey, this study sought to determine the inventory-management practices of SMMEs operating in the Cape Metropole, and to evaluate the effectiveness of the inventory-management practices currently used by these entities. In addition, the study sought to determine the challenges, if any, that are experienced by SMMEs from the inventory-management practices currently used. This study was motivated by a dearth of research on inventory-management practices of SMMEs. The findings of the study revealed that most of the SMMEs used ‘Rule of Thumb’ as an inventory-management practice. Regarding the effectiveness of the practices used, the study revealed that the SMMEs investigated were perceived to be moderately effective, with SMMEs practising good inventory management techniques such as warehousing, stocktaking, budgeting, good ordering habits and segregation of warehouse duties. In relation to the challenges faced by SMMEs from the inventory-management practices currently used, the findings suggested that theft, shortage of inventory, errors due to incompetent staff, physical inventory not matching up with records and an inability to keep up with the demand of the customers were some of the main challenges faced. This study contributes to the literature on inventory-management practices of SMMEs and fills the gap of knowledge in this neglected area of research. The findings of this study are of significance to the decision-makers of SMEs as they will be enlightened on the best practices and different inventory-management practices that are vital for their businesses’ survival and that have been adopted by their competitors. This should enable them to evaluate their own inventory-management practices and to decide whether to improve, change or continue with their current practice. The South African Government could also draw on the findings of this research to inform its future intervention strategies meant to improve the survival rates of these entities. This could be in the form of the creation of short courses meant to assist SMMEs to improve their inventory-management practices.