Inventory Performance in Egyptian Industry: Analysis and Insights
| DOI | https://doi.org/10.1108/02635579010002965 |
| Date | 01 March 1990 |
| Pages | 22-28 |
| Published date | 01 March 1990 |
| Author | M. Tawfik Mady |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
Inventory
Performance
in Egyptian
Industry:
Analysis and
Insights
M.
Tawfik
Mady
22 INDUSTRIAL MANAGEMENT & DATA SYSTEMS 90,3
T
his shows the significant role that in-
ventory management could play in im-
proving profitability and productivity in
industry in Egypt.
Introduction
Excess inventory investment was recently cited as one
of the major problems in the industrial sector in Egypt.
A recent study indicated that inventory has been a
"problem" rather than an "asset" for most manufacturing
companies in Egypt[l]. The sizeable growth rate of annual
inventory balances was behind low productivity and low
return on investment (ROI) in several manufacturing
enterprises. Several governmental reports in 1986 also,
showed the public authorities' interest in and awareness
of the excess inventory in the industrial public enterprises
This study is based on the findings of "The Enterprise
Performance Project-Egypt'' research project financed by the
IDRC of Canada, Alexandria University, Egypt, 1983-87. The
author would like to express his gratitude to Dr Ahmed Sakr
Ashour, the project team leader, for his sincere help and
support.
in
Egypt[2,3].
During the 1982-87 five-year
plan,
the volume
of unsold stock for the entire public sectors (including
manufacturing) rose from $1.9 bn to $3.7 bn (calculated at
the 1986 currency exchange rate). This is about 40 per cent
increase in five years[4]. It is obvious that this excess
inventory ties up a large amount of
capital
and reduces return
on investment[5]. Because inventory often constitutes the
largest single item in the balance sheet of manufacturing
companies
—
Egyptian industry is no exception
—
and with
an estimated 30 per cent annual carrying cost, Tetz[6]
concluded that relatively minor fluctuations in inventory level
can have a significant effect on a company's interest cost
and profitability. Dervitsiotis[7] and Menipaz[8] also revealed
that penalties from holding too much inventory may be
serious enough to determine an organisation's financial and
operational health.
Understanding this problem in the Egyptian industry
requires a thorough and diagnostic investigation of
inventory performance for the whole industry and for each
industry group as well. A comparison of the Egyptian
industries with its counterparts in other industrial nations
will identify the substantial performance gap that needs
to be closed in this area.
Research Objectives
The overall goal of this research is to provide a review
analysis for the inventory performance in the industrial
public sector (IPS) in Egypt over a period of six years.
Some conventional inventory performance measurements
were used to judge the relative effectiveness of five
different industry groups in managing its inventory during
this period. A comparison with some industrial nations'
records was also conducted.
A second goal for this study was to explore the relation
between inventory performance and some other financial
indicators at the company level. This will help in explaining
the main contribution of inventory performance to the
overall performance of the manufacturing companies in
Egypt.
Research Methodology
The Sample and the
Data
A sample of 44 public manufacturing enterprises (PMEs)
belonging to five different industries in Egypt is used in
this study. PMEs are considered to be the main instrument
by which the Egyptian government realises the
development and public policy objectives. Public sector
industrial production accounted for almost 70 per cent of
industrial production by value in 1981/1982 and about 75
per cent of industrial investment.
The selected companies represent about 40 per cent of
the total number of companies in the industrial public
sector in Egypt. Also the number of companies selected
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