Guidelines for Inventory Cost Reduction in Finished Goods for Competitive Advantage

Abstract

Inventory cost is an important cost included in the total cost of logistics in Thailand, which tends to increase continuously, whereas entrepreneurs still encountered difficulty in draining existing inventory into the market thus affecting their performance in inventory management. The purpose of this study was to investigate inventory management and define guidelines to reduce inventory costs in finished goods to create competitive advantages in the industrial business sector. The finding, then, was used to develop a structural equation model. This study was conducted both qualitatively and quantitatively. Questionnaires were used to interview 500 executives of industrial business organizations. Descriptive, referential, and multiple statistics were employed to analyze the data. The study revealed that 4 major guideline areas for reducing inventory costs for the finished goods were found, prioritized as follows: data insight (X̅ = 4.33), alliance-centric (X̅ = 4.22), resource management (X̅ = 4.22), and innovation technology (X̅ = 4.19). As for the hypothesis test, it was found that small and medium-sized businesses, and large businesses differently prioritized guidelines to reduce inventory costs in the finished goods at the statistical significance level of 0.05. The analysis of the developed structural equation model revealed that the evaluation criteria were consistent with the empirical data with its Chi-square Probability, the Relative Chi-square, Goodness of Fit Index, and the Root Mean Square Error of Approximation of 0.055, 1.172, 0.959, and 0.019, respectively.