Factors Responsible for Inventory Turnover at Traditional Red Brick Kilns of Sindh, Pakistan

Abstract

This research is about finding impact of different factors / costs on overall inventory turnover at a traditional and manual red brick kiln of Sindh. After noting shortage of bricks in target area it was need of the time to conduct such study. Inventory is stock of bricks that are manufactured at kilns. Inventory turnover ratio tells about the sales skill of the kiln management. It tells about times brick inventory is sold. Higher ratio is better. The main product inventory is red brick. Sample includes random 90 kilns sub divided into small, medium and large sizes. Research is applied, with questionnaire form and survey technique used. Kiln Inventory model is simple multiple linear regression model. SPSS is used. Variables are inventory turnover (Y variable), clay order size, clay orders, fuel order size , fuel orders ,holding cost and ordering cost. Production of average bricks is 230429, 2465477 and 7147059 bricks for small, medium and large kilns respectively. Inventory turnover ratio is 10 , 9.6 and 8.7 for small, medium and large kilns respectively. SPSS results tell that model used is valid with adjusted R2 of 0.473. All variables are significant (except one). Strongest beta/coefficient of the model is that of ‘holding cost’ of inventory. Clay orders (Quantity) has negative insignificant impact on the Inventory Turnover at an average kiln. Intercept tells that if all dependent variables are zero still kilns will turn over (i.e. sale) inventory 4.8 times (±1.7). Clay Orders and clay order size have both negative relationships with Inventory T.O. kiln should purchase to minimize inventory costs such as holding costs and ordering costs . Clay economic order quantity should be (EOQ) 131, 558 and 1099 maunds for small, medium and large kilns. Fuel economic order quantity should be (EOQ) 55, 1491 and 3869 maunds for small, medium and large kilns. Turnover is biggest for small kilns so should be taxed less.