DO FIRMS’ INVENTORY MANAGEMENT AFFECT THE LOYALTY OF THEIR CUSTOMERS? EVIDENCE FROM WATER BOTTLING COMPANIES IN ASHANTI REGION

Inventory constitutes greater proportion of manufacturing firms’ current assets of which water bottling companies are of no exception. Hence, prudent management of such inventory can be of a great source of competitive advantage in relation to maintaining and/or increasing market share. This can be realized if such inventory management systems metamorphosed into enhanced customer loyalty. This study sought to establish whether firms’ inventory management practices have effect on the loyalty of their customers. Five (5) water bottling companies in Ashanti region of Ghana were selected. This study employed an explanatory research design and multiple linear regression analysis to establish such effects. Purposive and convenient sampling technique were used to select 150 staff and 150 customers of from these companies. Primary data were gathered through the use of questionnaires. The reliability and validity of these questionnaires are assessed using Cronbach Alpha and common method bias (total variance explained). Specifically, the findings disclose that lean inventory system and information technology are the dual inventory management systems that have significant positive effect on customer loyalty when we control for customers’ years of work with the company and education. Also, educational background of customers as a control variable has significant positive effect on their loyalty to the firm. The study therefore concludes that, using lean inventory system and information technology as a mixed method for managing inventory can serve as a useful tool for maximizing customers’ loyalty to companies. Also, higher educational rank of customers leads to them becoming more loyal when lean inventory system and information technology are used in managing inventory. The theoretical implication of this paper is that, it is the first of its kind in Ghana to establish how inventory management practices impact on the loyalty of firms’ customers. It also offers insight to firms’ managements on the right approach to inventory management that leads to enhancement of customer loyalty.