Inventory Management Strategy and Performance of Manufacturing Firms in India

Inventory management is a determinant of operational efficiency and overall performance of
manufacturing firms where it is readily apparent. The article focuses on the correlation between
inventory management strategy and the performance of manufacturing companies in India and
specifically the differences across the firm size. A structured questionnaire was used in order to
collect primary data in 100 manufacturing firms in both small and large enterprises. The analysis
of key dimensions of the inventory management strategy, such as inventory holding cost,
inventory turnover, and production efficiency were put in the context of the firm performance
indicators such as profitability. The Mann Whitney U was used to determine the level of
differences in the perceptions and performance between small and big firms. The results have
shown that there is a considerable variation in the size of firms in terms of inventory holding
cost, inventory turnover and production efficiency and the size of firms can have a certain impact
on the practices in inventory management, as well as the performance of operations. The
difference between profitability of small and large firms was however not significant. According
to the results, operational performance among firms of different sizes depends on the strategies
of inventory management in different ways, but the impact on the profitability might be
conditional by other organizational or market factors. The research offers useful findings to
managers and policymakers in the development of inventory management strategies that are of
size to fit in order to improve efficiency and competitiveness within the Indian manufacturing
industry..