The Relationship between Inventory Management and the Financial Performance of Manufacturing Compani

The goal of this study is to investigate the link between inventory management and manufacturing companies' financial performance, with an emphasis on total inventory and its constituent components of raw materials, work in progress, and finished goods stocks. The study looked at the link between inventory management and manufacturing companies' financial performance in Kenya. The study is based on the storage theory, which emphasises the advantages of maintaining appropriate commodity inventories as a means of improving financial performance. To better understand the link between the independent factors and the dependent variable, the article used an analytical research design. The target population in Kenya consists of 522 manufacturing enterprises, from which a representative sample of 218 companies was chosen by stratified and random selection from the core sectors as defined by the Kenya Association of Manufacturers (KAM). Short run and dynamic models were used to analyse panel data over a ten-year period. To confirm the integrity of the results, appropriate specification tests were performed. The study discovered that raw materials, work in progress, and overall inventory had a negative impact on manufacturing companies' financial performance, but finished goods inventory has a favourable impact. The null hypothesis is that inventory management has no meaningful relationship with manufacturing enterprises' financial success.

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