Influence of Inventory Management Practices on Customer Retention of Quoted Manufacturing Companies

Abstract

The manufacturing sector plays a crucial role in Nigeria’s economic development, contributing approximately 8.23% to the nation’s Gross Domestic Product (GDP) in the fourth quarter of 2023. Despite this contribution, manufacturing firms continue to experience persistent challenges in managing inventory effectively due to limited resources, inadequate adoption of modern inventory technologies, and insufficient managerial expertise in inventory control. While effective inventory management systems are essential for improving operational efficiency and sustaining customer relationships, empirical evidence on how specific dimensions of inventory management practices influence customer retention in Nigeria remains limited. This study therefore examines the influence of inventory management practices (IMPs) on customer retention among quoted manufacturing companies in Nigeria. Data were collected through a structured questionnaire administered to operational and managerial staff of selected quoted manufacturing firms in Southwest Nigeria. Out of 298 questionnaires distributed, 268 valid responses were obtained, representing a 90.5% response rate. The data were analysed using descriptive statistics and Partial Least Squares Structural Equation Modelling (PLS-SEM) due to its suitability for predictive analysis and complex model estimation. The findings reveal that technology-driven inventory management practices have the strongest and most significant positive influence on customer retention (β = 0.314, t = 3.603, p < 0.001). This suggests that the adoption of digital inventory systems enhances inventory visibility, improves delivery reliability, and reduces stock-out occurrences, thereby strengthening customer loyalty. The study contributes to the literature by providing empirical evidence on the disaggregated effects of inventory management practices on customer retention within the context of developing economies. The findings also offer practical implications for production managers and policy stakeholders by highlighting the importance of technology-enabled inventory systems in improving customer satisfaction and retention in the manufacturing sector.