The Effect of Information sharing and Inventory Management in the Supply Chain Practices on Firms’ Performance: Empirical Evidence from Some Selected Companies of Ethiopia

Abstract

The objective of this paper is to investigate empirically the effect of information sharing and inventory management practice on firms’ performance. To achieve the stated objective the study targeted supply chain practices of some companies operating in Ethiopia. Data were collected from 170 respondents including employees, suppliers, and distributors of the companies under investigation. Before the analysis of data, the accuracy of data entry, the existence of missing values, normality of data distribution and outliers checked and proved the nonexistence of serious issues. The specified objective and proposed hypotheses in this study tested by structural equation modelling (SEM). The result shows information sharing and inventory management practices have a direct and significant effect on the firm’s performance. Similarly, the higher share of information leads to better inventory management practice, which in turn leads to a greater performance of firms. The study concludes that information sharing has both direct and indirect effects on a firm's performance in the supply chain practices; whereas inventory management practices have a direct effect on the firm's performance. Generally, the results of the study have major theoretical and practical implications. Theoretically, it offers concrete evidence on the significant effects of information sharing and inventory management in the supply chain practices on firm’s performance in developing countries; and hence contributes to the scarce body of literature and reduces the gaps of knowledge in the developing countries on the specified area of study. Besides the theoretical implication, practically the study allows the companies and industries under the considerations to recognize the significant effects of information sharing and inventory management practices on firm’s performance and to use this information to develop and enhance culture of information sharing and usage of sound inventory management techniques in the supply chain practices for the enhancement of organizational performance.