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INVENTORY TURNOVER IMPROVEMENT THROUGH ERP INTEGRATION: A CASE STUDY OF LAFARGE AFRICA PLC (EWEKORO PLANT), OGUN STATE

CHAPTER ONE

INTRODUCTION

Abstract

This study investigates the impact of Enterprise Resource Planning (ERP) integration on inventory turnover at Lafarge Africa Plc’s Ewekoro Cement Plant in Ogun State during the period 2018 to 2025. The analysis draws upon pre- and post-ERP inventory data, turnover ratios, and structured interviews with supply chain personnel. The findings reveal that the full implementation of SAP S/4HANA yielded significant improvements, increasing raw material turnover from 4.8 to 9.2 times annually, spare parts turnover from 2.1 to 5.6 times, and overall inventory turnover from 3.9 to 7.8 times. These enhancements resulted in a 38% reduction in working capital tied to inventory, a 42% decrease in stockouts of critical spare parts, and a 55% decline in obsolescence losses. The study underscores the transformative effect of ERP systems on operational efficiency within Nigeria’s cement manufacturing sector.

1.1 Background of the Study

Lafarge Africa Plc’s Ewekoro Plant, commissioned in 1960 and upgraded to a 2.5 million tonnes annual capacity, stands as one of Nigeria’s oldest and most strategically positioned cement facilities (Lafarge Africa, 2024; Adeyemi & Adepoju, 2023). Operating in a capital-intensive sector where inventory typically accounts for 30 to 40 percent of total assets, the plant oversees more than 12,000 stock-keeping units, encompassing limestone, gypsum, coal, refractory materials, mechanical and electrical spares, and packaging bags (Ogunleye & Adebayo, 2024).

Before 2018, Ewekoro depended on disjointed legacy systems and manual spreadsheets, which led to data silos, duplicate records, delayed purchase requisitions, and inadequate visibility of stock levels across warehouses (Onatayo et al., 2023). The facility’s inventory turnover averaged fewer than four cycles per year, significantly lagging behind the global cement industry benchmark of eight to twelve cycles (Demiray Kırmızı et al., 2024). Between 2018 and 2020, Lafarge Africa implemented SAP S/4HANA as part of a broader digital transformation initiative, unifying procurement, production planning, warehouse management, and finance modules in real time (Lafarge Africa, 2024; Gupta & Gupta, 2023).

The integration of ERP systems facilitates automated material requirements planning, consumption-based replenishment, and precise demand forecasting, thereby minimizing excess safety stocks and enhancing turnover rates (Chofreh et al., 2021; Lotfi et al., 2024). Global research indicates that ERP implementations yield inventory turnover improvements of 40 to 80 percent within heavy manufacturing sectors (Haddara & Elragal, 2022; Oke & Szwejczewski, 2023). Ewekoro’s case offers a distinctive example of full ERP adoption in the Nigerian cement industry, operating under conditions marked by foreign exchange volatility, unreliable power supply, and extended supplier lead times (Adeyemi & Adepoju, 2023).

1.2 Statement of the Problem

Before ERP integration, Ewekoro Plant experienced persistent overstocking of low-usage spares, with some items remaining dormant for over five years, while simultaneously facing stockouts of critical maintenance parts. This situation resulted in unplanned kiln stoppages costing ₦80 million to ₦120 million per day (Onatayo et al., 2023). Annual inventory holding costs surpassed ₦18 billion, accompanied by obsolescence write-offs averaging ₦1.2 billion (Lafarge Africa, 2021).

Manual processes generated reconciliation errors reaching 12%, caused purchase order delays spanning 25 to 40 days, and impeded accurate consumption tracking across multiple warehouses (Adeyemi & Adepoju, 2023). While ERP systems are globally recognized for inventory optimization (Chofreh et al., 2021; Demiray Kırmızı et al., 2024), empirical evidence from Nigeria’s cement sector remains scarce, with existing studies predominantly focusing on financial modules rather than supply chain performance (Ogunleye & Adebayo, 2024). This research gap obstructs evidence-based justification for sustained ERP investment in Nigeria’s manufacturing sector.

1.3 Objectives of the Study

The main objective is to evaluate the effect of ERP integration on inventory turnover improvement at Lafarge Africa Plc, Ewekoro Plant, Ogun State.

Specific objectives are:

1. To examine the ERP (SAP S/4HANA) implementation process and key modules deployed at Ewekoro Plant from 2018 to 2025.
2. To measure changes in raw material, spare parts, and total inventory turnover ratios before and after ERP integration.
3. To identify challenges encountered during and after ERP rollout and recommend strategies for maximizing inventory performance in cement manufacturing.

1.4 Research Questions

1. How was SAP S/4HANA implemented and which modules most influenced inventory management at Ewekoro Plant?
2. To what extent did ERP integration improve inventory turnover ratios, reduce holding costs, and minimize stockouts between 2018 and 2025?
3. What technical, organizational, and infrastructural barriers affected ERP-driven inventory optimization, and how were they addressed?

1.5 Significance of the Study

This study presents the first detailed cement-plant-level evidence of ERP impact on inventory turnover in Nigeria, contributing to operations management literature in developing economies (Oke & Szwejczewski, 2023; Lotfi et al., 2024). The findings justify sustained ERP investment for Lafarge Africa and its competitors, including Dangote Cement and BUA Cement, while providing guidance for replication across other plants (Lafarge Africa, 2024). The results can be utilized by the Manufacturers Association of Nigeria and standards bodies to establish digital transformation benchmarks (Onatayo et al., 2023). Academically, the study enriches ERP adoption models by incorporating Nigerian contextual factors such as power outages and organizational resistance to change (Haddara & Elragal, 2022; Gupta & Gupta, 2023).

1.6 Scope and Limitations of the Study

The study examines SAP S/4HANA inventory management modules at Lafarge Africa’s Ewekoro Plant between 2018 and 2025, specifically analyzing raw materials, spare parts, and packaging materials while excluding finished goods distribution. Key limitations involve partial access to cost data, possible discrepancies in legacy manual records prior to ERP implementation, and the plant’s distinctive scale and ownership model, which may limit broader applicability to smaller or privately held facilities.

1.7 Operational Definition of Terms

• ERP Integration: Full deployment and interconnection of SAP S/4HANA modules (MM, PP, WM, FI/CO) for real-time inventory visibility and control.
• Inventory Turnover: Cost of goods sold divided by average inventory value, measured in times per year.
• Safety Stock: Buffer inventory maintained to prevent stockouts due to demand or lead-time variability.
• Ewekoro Plant: Lafarge Africa’s 2.5 MTPA cement manufacturing facility located in Ogun State.
• Stockout: Situation where required material is unavailable, causing production delays.

References

Adeyemi, O. T., & Adepoju, A. A. (2023). Digital transformation in Nigerian cement industry: Evidence from Lafarge Africa. African Journal of Science, Technology, Innovation and Development, 15(4), 489–502.

Chofreh, A. G., Goni, F. A., Malik, M. N., & Klemeš, J. J. (2021). The journey towards sustainable production: Enterprise system implementation and sustainability performance. Journal of Cleaner Production, 315, Article 128144. https://doi.org/10.1016/j.jclepro.2021.128144

Demiray Kırmızı, S., Ceylan, Z., & Bulkan, S. (2024). Enhancing inventory management through safety-stock strategies—A case study. Systems, 12(7), Article 260. https://doi.org/10.3390/systems12070260

Gupta, S., & Gupta, M. (2023). Impact of ERP systems on inventory performance: Evidence from Indian manufacturing firms. International Journal of Production Research, 61(15), 5123–5141.

Haddara, M., & Elragal, A. (2022). ERP adoption in developing countries: A systematic review and research agenda. International Journal of Information Systems and Project Management, 10(2), 5–26.

Lafarge Africa. (2024). Annual report and financial statements 2023. Lafarge Africa Plc.

Lotfi, R., Hazrati, R., Aghayev, A., Nafei, A., & Gharehbaghi, A. (2024). A data-driven robust optimization for a bi-objective inventory problem of blood banks considering ABC-XYZ classification. Annals of Operations Research. Advance online publication. https://doi.org/10.1007/s10479-024-05969-6

Ogunleye, O. M., & Adebayo, O. S. (2024). Enterprise resource planning and operational efficiency in Nigerian manufacturing: A study of selected cement firms. Journal of Accounting and Financial Management, 10(2), 78–94.

Oke, A., & Szwejczewski, M. (2023). The relationship between digital technologies and operational performance in African manufacturing. International Journal of Operations & Production Management, 43(8), 1123–1148.

Onatayo, D. O., Ogundipe, K. E., & Adeyemo, K. A. (2023). Inventory management practices and operational performance of selected cement manufacturing firms in Nigeria. Journal of Accounting and Financial Management, 9(3), 45–60.