AN EXAMINATION OF FACTORS AFFECTING THE EFFICIENCY OF INVENTORY

MANAGEMENT IN ORGANISATIONS IN KENYA.

(A SURVEY OF FIRMS IN NAKURU TOWN)

PAULINE THUKU

A RESEARCH PROJECT REPORT SUBMITTED AT THE KENYA METHODIST

UNIVERSITY AS A PARTIAL FULFILMENT OF THE REQUIREMENTS OF THE

AWARD OF DIPLOMA DEGREE IN BUSINESS ADMINISTRATION AT THE KENYA

METHODIST UNIVERSITY

(PROCUREMENT OPTION)

2017
 DECLARATION

Declaration by candidate

This research project is my original work and has not been presented by anyone else for any

award in any institution or other examination body.

. .

SIGNATURE

PAULINE THUKU DATE

Declaration by supervisor

This research project has been submitted with my approval as the supervisor at Kenya Methodist

University.

.. .

SIGNATURE DATE

VIVIAN CHERONO

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 DEDICATION

This research project is dedicated for my uncle, my sister and the family for their financial

support throughout my education and in writing the research project.

3
 ACKNOWLEGEMENT

I wish to express to my sincere thanks and gratitude to the Almighty God who has granted me

the gift of life and the opportunity for pursing my studies, His guidance and blessings have

continually been with me. Secondly my sincere gratitudes goes to my supervisor Vivian

Cherono for her guidance advice and patience throughout the writing of my research project;

Lastly, I would like to thank my classmates who were sources of encouragement and guidance

through the writing period.

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 ABSTRACT

Inventory constitutes the most significant part of current assets in many manufacturing
companies. Firms in Nakuru town neither keep excess inventories to avoid an unnecessary tying
down of funds as well as loss in fund due to pilferage, spoilage and obsolescence nor maintain
too low inventories so as to meet users demand as at when needed. This study sought to examine
the factors affecting the efficiency of inventory management in organizations in Kenya. The
population for this study constituted 152 employees who work at with four firms in Nakuru
town. Stratified random sampling was used to select a sample size of 70 respondents. Primary
data was collected using a self-administered questionnaire and was analyzed by descriptive
statistics. The study established that procurement procedures had a positive impact on the
efficiency of inventory management among firms in Nakuru town. The study revealed that
documentation is crucial in ensuring efficient inventory management, stock records provide the
management with the information which is used to ensure accountability through stocktaking and
stock audit exercise. Also, funding positively affects efficiency of inventory management among
firms in Nakuru town to a great extent. The study therefore recommended that there is need for
firms in Nakuru town to enhance their procurement procedures through elimination of
overlapping or conflicting jobs or duties and behaviour of the system is predicable.
.

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 TABLE OF CONTENTS
DECLARATION.............................................................................................................................ii
DEDICATION................................................................................................................................iii
ACKNOWLEGEMENT.................................................................................................................iv
ABSTRACT....................................................................................................................................v
CHAPTER ONE..............................................................................................................................1
1.0 INTRODUCTION..................................................................................................................1
1.1 Background Of The Study......................................................................................................1
1.2 Statement Of Problem............................................................................................................4
1.3 Objectives...............................................................................................................................6
1.3.1 General Objectives..............................................................................................................6
1.3.2 Specific Objectives..............................................................................................................6
1.4 Research Questions................................................................................................................6
1.5 Significance Of The Study.....................................................................................................7
1.6 Scope Of The Study................................................................................................................7
1.7 Limitation Of The Study........................................................................................................7
CHAPTER TWO.............................................................................................................................9
LITERATURE REVIEW.................................................................................................................9
2.0 INTRODUCTION..................................................................................................................9
2.1 Theoretical Review.................................................................................................................9
2.1.1 Adaptive Structuration Theory............................................................................................9
2.1.2 Theory of Inventory and Production.................................................................................10
2.1.3 Scientific Management Theory.........................................................................................11
2.2 Empirical Review.................................................................................................................13
2.3 Conceptual review................................................................................................................14
2.3.1 Effect of procurement procedures on efficiency of inventory management.....................14
2.3.2 Effect of documentation on efficiency of inventory management....................................15
2.3.3 Effect of funding on efficiency of inventory management................................................17
2.3.4 Effects of skills possessed by staff on efficiency of inventory management....................18
2.4 Research Gaps......................................................................................................................20

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CHAPTER THREE.......................................................................................................................21
RESEARCH METHODOLOGY..................................................................................................21
3.1 Introduction..........................................................................................................................21
3.2 Research Design...................................................................................................................21
3.3 Target Population..................................................................................................................21
3.4 Sample size and procedures.................................................................................................22
3.5 Data collection methods.......................................................................................................22
3.6 Pilot Test...............................................................................................................................23
3.6.1 Reliability of the Research Instrument..............................................................................23
3.6.2 Validity of the Research Instrument..................................................................................23
3.7 Data collection procedures...................................................................................................24
3.8 Data analysis techniques......................................................................................................24
CHAPTER FOUR.........................................................................................................................25
4.0 Data Analysis and Presentation............................................................................................25
4.1 Introduction..........................................................................................................................25
4.2 Findings................................................................................................................................25
4.2.1. Response Rate..................................................................................................................25
4.2.2 Education levels................................................................................................................27
4.2.3 Gender Response...............................................................................................................28
4.2.4 Age of respondents............................................................................................................30
4.2.5 Effect of procurement procedures on efficiency of inventory management.....................31
4.2.6 Effect of documentation on efficiency of inventory management....................................32
4.2.7 Effect of funding on efficiency of inventory management................................................34
4.2.8 Effects of skills possessed by staff on efficiency of inventory management....................36
CHAPTER FIVE...........................................................................................................................38
5.0 SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS,
RECOMMENDATIONS AND SUGGESTIONS.........................................................................38
5.1 Introduction..........................................................................................................................38
5.2 Summary and findings..........................................................................................................38
5.3 Conclusion............................................................................................................................39
5.4 Recommendations of the study............................................................................................39

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 5.5 Suggestions for further Reading...........................................................................................40
REFERENCES..............................................................................................................................41
APPENDIX I: QUESTIONNAIRE............................................................................................45
APPENDIX II: RESEARCH BUDGET....................................................................................49

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 CHAPTER ONE

1.0 Introduction

This chapter gives the background of the study, statement of the problem, research objectives,

and research questions, significance of the study, scope of study and limitations of the study.

1.1 Background of the study

Inventory Management plays a decisive role in the enhancement of efficiency and

competitiveness of business enterprises. Effective inventory management entails holding an

appropriate amount of inventory. Too much inventory consumes physical space, creates a

financial burden, and increases the possibility of damage, spoilage and loss. On the other hand,

too little inventory often disrupts business operations, and increases the likelihood of poor

customer service (Dimitrios, 2008). As Rajeev (2008) argues, there is increased need for business

enterprises to embrace effective inventory management practices as a strategy to improve their

competitiveness.

Empirical evidence suggests that institutions throughout the world have adopted inventory

management systems into their operations. Jones and Riley (1985) argued that changes in the

corporate environment would necessitate and result in changes of inventory management. In

particular, institutions will seek for systems that will enable them manage their supply chains

more effectively and efficiently (Jones & Riley, 1985). In the current century, the inventory

management practices have changed significantly. Developments in IT have made most of the

institutional processes within organizations more efficient (Gunasekaran, Patel & Tirtiroglu,

2001). It is for this reason that system developers and technological experts have linked up with

inventory managers to develop systems that will enhance the efficiency of the inventory

1
management process (Cachon & Fisher, 2000). Furthermore, there has been an increase in the

demand for more effective supply chain management processes. Lai, Wong and Cheng (2006)

posit that the adoption of IT has become inevitable in the enhancement of supply chain

performance. Institutions are increasingly being pressurized by their supply chain partners to

adopt information technology. However, institutional inventory management practices differ

from one institution to another. It is therefore the duty of an institution to adopt inventory

systems that will suite its operations and activities.

Inventory management systems are developed with the aim of reducing costs associated with

inventory management. Inventory management systems are however described as complex

systems to develop (Jones & Riley, 1985). This is attributed to the fact that inventory

management spans through most of the departments within an institution each having its own

heterogeneous functions. Moreover, institutions should integrate their inventory management

systems with those of their suppliers (Power, 2005). By so doing, the efficiency of the supply

chain process will be significantly enhanced. According to Power (2005), developing integrated

inventory systems is one of the challenges that organizations face as they develop inventory

systems. In addition, complex systems are costly to develop and thus discourage organizations

from developing them. According to Cagliano, DeMarco, Rafele and Volpe (2011), adoption of

inventory management systems have huge initial cost implications for the firm but the firm

stands to benefit in the long run. Some of the benefits cited in the study include: increased

operational efficiency, lower institutional and operational costs, shorter lead-times and reduced

inventory (Cagliano 2011). In Kenya, more and more institutions including small-scale

enterprises are increasingly adopting inventory management systems with the aim of achieving

competitive advantage and enhancing their performance (Nyabwanga & Ojera, 2012).

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Nyabwanga and Ojera (2012) conducted a research study in Nakuru County whose study

population was 230 small-scale enterprises out of which were 69 manufacturing firms and 161

trading companies. The findings of the study revealed that more and more small scale enterprise

were adopting inventory management systems into their operations. The findings further

revealed that inventory management enhances business performance. Irungu and Wanjau (2011)

argue that Kenyan supermarkets are increasingly adopting inventory management systems in

order to enhance their operational efficiency, customer service and performance. This suggests

that inventory management spans across the globe. This study will examine the factors affecting

the efficiency of inventory management in organizations in Kenya with reference to Firms in

Nakuru Town.

1.2 Statement of problem

Inventory constitutes the most significant part of current assets in many manufacturing

companies. Because of the relative largeness of inventories maintained by the Manufacturing

firm considerable sum of an organizations fund is being committed to them. It thus becomes

absolutely imperative to manage inventories efficiently so as to avoid unnecessary cost and

ensure high quality product to customers (Thai, 2009). Many business organisations the world

over do not give inventory management the prominence it deserves in spite of its varied

importance. The problem of inventory management has existing for too long. This problem is

still with us to date and is a universal rather than a peculiar problem. Thus, it is not limited to a

single organisation but all business for it is not only limited to the private sector with its

background motive of profit maximizations, such as Nakuru town firms (Leung, 2007). The

problem of inventory management may be attributable to the failure, on the part of the top

management officials, to give a deserved attention to the function of stores as well as their

3
inability to employ the services of as well qualified stores officer to take charge of stores

supervision and management. Added to this problem is the issue of the dearth of storage facilities

and the habit of stores procedure violation by the top, the middle, and the junior cadre

personnels in the organisation (Neef, 2001). Inventory management represents an important

development for the purchasing process (Neef, 2001). In order for organizations to be

competitive and stay updated, there is need to have a paradigm shift in the way procurement is

carried out so as to solve numerous procurement problems evident in the business world

especially in developing economies which include increased corruption, high costs of doing

businesses, a lot of non-value adding paper work procedures, long time elapse to respond to

tenders and non-competitiveness (Chartered Institute of Purchasing and Supplies, 2011).

Firms in Nakuru town neither keep excess inventories to avoid an unnecessary tying down of

funds as well as loss in fund due to pilferage, spoilage and obsolescence nor maintain too low

inventories so as to meet users demand as at when needed. Therefore, the mere fact that

inefficiency in inventory management affects virtually the organizational objectives necessitates

this type of research work. According to Sunil and Sameer (2008), to compete more effectively

in a global marketplace, it is important that firms understand the issue of inventory management

and align their purchasing to the diverse environments in which they operate. This study sought

to examine the factors affecting the efficiency of inventory management in organizations in

Kenya with reference to Firms in Nakuru Town.

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 1.3 Objectives

1.3.1 General Objectives.

The general objective of the study was to examine factors affecting the efficiency of inventory

management in organizations in Kenya with reference to Firms in Nakuru Town.

1.3.2 Specific Objectives.

The specific objectives of the study were:

i. To investigate the effect of procurement procedures on efficiency of inventory

management among Firms in Nakuru Town.

ii. To determine the effect of documentation on efficiency of inventory management among

Firms in Nakuru Town.

iii. To investigate the effect of funding on efficiency of inventory management among Firms

in Nakuru Town.

iv. To investigate the effects of skills possessed by staff on efficiency of inventory

management among Firms in Nakuru Town.

1.4 Research questions

i. Do procurement procedures affect efficiency of inventory management among Firms in

Nakuru Town?

ii. Does documentation affect the efficiency of inventory management among Firms in

Nakuru Town?

iii. How does funding affect efficiency of inventory management among Firms in Nakuru

Town?

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iv. Do skills possessed by staff affect efficiency of inventory management among Firms in

Nakuru Town?

1.5 Significance of the study

The study findings were used as basis for further research and investigations in form of literature.

The findings provided information to managers in different organizations especially on knowing

how to compare actual performance and inventory management.

The findings were beneficial to other upcoming researchers to investigate further about the

impact of inventory management on organizational performance of other organizations other

than the ones in Nakuru town

The study further encouraged government to set up educational institutions to provide training on

how to manage inventory in organizations

1.6 Scope of the study

The study focused on factors affecting the efficiency of inventory management in organizations

in Kenya with reference to Firms in Nakuru Town. The study was conducted from February 2017

to March 2017.

1.7 Limitation of the study

Firstly, there was a challenge of apathy of some respondents in taking part of the study. In this

result, the study only focused on selected firms. Secondly, time constraints and inadequate

financial and material resources were challenges that limited the depth of coverage of the

research work. Inadequate time frame was a challenge as a longer time and enough resources

6
could help to unearth adequate findings especially with other institutions in other regions of the

country to determine how inventory management affect their service delivery level.

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 CHAPTER TWO

LITERATURE REVIEW

2.0 INTRODUCTION

This chapter discusses the literature review of the research study, literature review provide the

study with an explanation of the theoretical rationale of the problem being studied as well as

what research has already been done and how the findings relate to the problem at hand.

2.1 THEORETICAL REVIEW

2.1.1 Adaptive Structuration Theory

Based on Structuration theory, the study intends to determine factors affecting the efficiency of

inventory management in organizations in Kenya. Structuration theory was first proposed by

Anthony Giddens in his Constitution of Society in 1984, which was an attempt to reconcile

social systems and the micro/macro perspectives of organizational structure. De Sanctis and

Poole (2014) borrowed from Giddens in order to propose AST and the rise of group decision

support systems. AST provides the model whereby the interaction between advancing

information technologies, social structures, and human interaction is described, and which

focuses on the social structures, rules, and resources provided by information technologies as the

basis for human activity. AST is a viable approach in studying how information technology

affects effective inventory management in an organization because it examines the change from

distinct perspectives.

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2.1.2 Theory of Inventory and Production

The theory of inventory and production is described as specialty in operations research and is

commonly referred to as the mathematical theory of inventory and production (Hillier &

Lieberman, 2016). The theory is concerned with the development and adoption of inventory and

production systems that are effective and that will result in the minimization of institutional cost.

In this connection, the theory studies the following organizational functions: supply chain,

warehousing, manufacturing and production, spare part allocation, and logistics.

According to Hillier and Lieberman (2007), institutions should follow the following steps in

order to have an effective inventory management system: (1) develop a mathematical model

which describes the behavior of inventory; (2) design and adopt an optimal inventory policy with

respect to the firms mathematical model; (3) develop a computerized information processing

system that will provide information on the current inventory levels; (4) use the current inventory

levels information to apply the optimal inventory policy to replenish existing inventory levels. In

addition, the theory of inventory and production considers and uses the following measures:

ordering costs, shortage costs, holding costs, salvage costs, discount rates, and revenues.

2.1.3 Scientific Management Theory

To examine factors affecting the efficiency of inventory management in organizations in Kenya,

the study is based on scientific management theory. The theory basically consists of the works of

Fredrick Taylor. Fredrick Taylor started the era of modern management in the late nineteenth and

early twentieth centuries; Taylor consistently sought to overthrow management by rule of thumb

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and replace it with actual timed observations leading to the one best practice Watson (2008). He

advocated for the systematic training of workers in the one best practice rather than allowing

them personal discretion in their tasks. He further believed that the workload would be evenly

distributed between the workers and management with management performing the science and

instruction and the workers performing the labor, each group doing the work for which it was

best suited. Taylors strongest positive legacy was the concept of breaking a complex task down

into a number of subtasks, and optimizing the performance of the subtasks, hence, his stopwatch

measured time trials (Osdorne & Rubinstein, 2015). As a result, he proposed four underlying

principles of management.

2.2 EMPIRICAL REVIEW

2.2.1 The effect of procurement procedures on efficiency of inventory management

Brackus (2009) argue that material control is concerned with two parts of Accounting;

physical property and value of the property. Brackus (2010) shows material control as one of

the policy procedures employed in the management of material s and these include internal

checks as in continuous, period, spot and .or any other type of control established by

management to carry out activities aimed at ensuring an effective and efficient material

management procedure. Other forms of material control include ensuring high security of

the store house and stock yard, good custody of keys, limiting access to premises and making

of materials as in coding, to minimize theft, segregation of prescribed item.

Pandey (2015) describes accounting as the use of statistical and accounting measures to

maintain knowledge of the quantities of SNM present in each of a facility. It includes the

10
use of physical inventories and materials balances to verify the presence of materials or to

detect the loss of material after it occurs, in particular, through theft by one or more insiders.

Brackus (2009) noted that Accounting material control is concerned with the safe guarding the

enterprises property in form of materials by properly recording the receipts, consumption of

materials and the balance in storage. Batuka (2007) examines application of various materials

control techniques on the fact that material control procedures vary in complexity and accuracy.

According to Kotabo (2009), though there are many systems for control of stock, both manual

and automatic, there are really two basic approaches on which these systems are based.

Recording method which may take place either when materials fall to a pre-determined level

or according to eh situation discovered when levels are received on a periodic regular basis.

The action level method of controlling sock by quality which involves fixing stock levels for

each commodity which is recorded in the stock system . Under the action level methods of

provision, commodities are ordered at unspecified intervals as and when ordering levels are

related. This means that orders can only be placed usually for one item at time.

Nyanga (2010) say that in any efficient business material levels are established with as much

care as production levels, a careless choice of the material level can easily precipitate

production slow down caused by lack of badly needed materials. He continues that as a

result of tighter controls over materials , items and meticulous records keeping, the cost of

maintaining adequate levels of materials is reduced with adverse effects on the continuity of

operations.

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2.2.2 The effect of documentation on efficiency of inventory management

It is paramount to note that there is great need for stocks taking to keep track of physical

stock and to cross check the accuracy of stock records. Stoke taking is the complete process

of verifying the physical quantity of the entire range of materials (items) held at a given point in

time (Robert, 2014). Robert (2014) said that the reasons for physical stock taking are to

verify the accuracy of stock records that support the value shown in the balance sheet by

physical verification of the item. This may even disclose frauds, theft or loss and any weakness

in the system of custody and control of stock. Van (2014) asserted that the size and number of

surpluses and deficiencies revealed by stock taking is a good criteria to assess the efficiency of

store keeping methods and material control procedures. According to Olubodum (2015), the

EMPM is a model that can be used by any contractor regardless of the size of firm. It is

meant to promote good practice in materials management with the ultimate goal of

combining the advantages of centralization and decentralization in material acquisition process

to maximum effect. In order to achieve this, the model seeks to increase the involvement of

site personnel in the flow materials to the site.

Hence, requiring that individual site managers should become middlemen between the

supplier and the purchasing manager who is usually based in the head office. At the same

time, it requires that site managers become more active in planning for materials required for the

works. This would mean that a site manger can prevent material from being brought to site

before it is actually required, especially where a delay has risen in the programme

(Olubodum, 2015). Olunondum continues that the main objective of EMPM is to produce

material schedules which can reinforce the just- in time principle of materials management. The

objective being to produce material schedules which are beneficial to the site manager. The

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system synchronizes material scheduling with planning and control of the project. Three stages

are involved; Stage one is the preparation of the construction element identification list (CEIL).

During this stage, consideration is given to dividing the stages of a house construction into the

construction elements. Stage two is preparation of the materials summary schedule (MSS). This

involves establishing the materials required for each major element already identified in the stage

one. By taking each individual element, for instance, foundations, all the materials that are

required for foundation construction are identified and listed separately on a materials

summary schedule (MSS)

2.2.3 The effect of funding on efficiency of inventory management

Cordell (2016) noted that proposes that the cost of materials is based n bargaining leverage,

quantities and delivery time Cordell continues that organization with potential for long term

purchase volume can command better bargaining leverage. While orders in large quantities may

result in lower unit prices, they may also increase holding costs and thus cause problems in cash

flow. Requirements of short delivery time also adversely affect unit prices. Furthermore, design

characteristics which include items of odd sizes are shape should be a void. Since such items

normally are not available in the standard stockpile, purchasing them causes higher prices. Order

costs include expenses of making requisitions, analyzing alternatives, writing purchase orders,

receiving materials, checking on orders, and m maintaining records of the entire process. Order

costs usually only a small portion of total costs for material management in construction projects,

although may require substantial time.

Tersine (2012), say that the holding costs or carrying costs are primarily the result of capital

costs, handling, storage, obsolescence, shrinkage and deterioration. Capital costs results from the

13
opportunity cost or financial expenses of capital tied up in inventory. Once payment for goods is

made, borrowing costs are incurred or capital must be inverted from other productive uses.

Consequently, a capital carrying cost is incurred equal to the value of the inventory during a

period multiplied by the interest rate obtainable or paid during that period. He notes that capital

costs only accumulate when payment for materials actually occurs; many organizations attempt

to delay payments as long as possible to minimize such costs. Handling and storage represent the

movement and protection charges incurred for materials. Storage costs also include the

disruption caused to other project activities by inventories of materials that get in the way.

Lange, (2016), adds that obsolescence is the risk that an item will lose value because of changes

in specification shrinkages are the decrease in inventory over time due to theft or lose.

2.2.4 The effects of skills possessed by staff on efficiency of inventory management

Inventory management challenges can interfere with a companys profits and customer service.

They can cost a business more money and can lead to an excess of inventory overstock that is

difficult to move. Most of these problems are usually due to poor inventory processes and out-of-

date systems (Gourdin et al, 2009). According to Lambert et al (2009), mentions a number of

challenges in inventory management which include: unqualified employees in charge of

inventory, using a measure of performance for their business that is too narrow, a flawed or

unrealistic business plan for a business for the future and not identifying shortages ahead of time.

Having people in charge of inventory without adequate training, experience or who neglects the

job will lead to inventory problems that will result into poor organizational performance. The use

of a measure of performance for business that is too narrow. This is a situation where the

performance measure are not wide enough and do not encompass all the aspects of the

14
organization. Many areas get overlooked and can lead to either inventory shortages or inventory

stockpiling.

A flawed or unrealistic business plans leads to failure in predicting how well a company may do

in the future. This affects inventory management because if a company predicts more growth

than they actually experience, it can lead to an overstock of inventory. The opposite is true if

forecasters do not predict enough growth and are left with not enough inventories. Failure to

identify shortages a head leads to lack of enough products in stock to meet customer demands

which spoil customer relations. The staff in charge of inventory management should look over

their inventory on a regular basis to make sure enough products are in stock. According to

Braglia (2014) and Montanari (2014) are bottlenecks and weak points in delivery which slows

down deliveries and systems; bullwhip effect an over-reaction by an organization to changes in

the market that leads to un necessary over overstocking; distressed stock in inventory; excessive

inventory in stock and unable to move it quickly enough; inaccurate computer assessment of

inventory items for sale and complicated computer inventory systems.

2.3 Summary and Gaps

One might expect the seemingly infinite stream of inventory theory related research to be a key

resource for managers seeking to gain a competitive advantage through inventory control.

However, some have suggested that managers who turn to inventory theory research may find it

to be of little significance (Krautter, 2009) or that it has little to offer in terms of enhancing

inventory practices (Wagner, 2012). This led many to suggest a gap exists between inventory

theories and practice (Lenard & Roy, 2015; Silver, 2009; Wagner, 2012). While the varied

solutions offered to bridge this gap represent valuable research, input from practitioners is

15
noticeably absent (Patton & Steele, 2010). Therefore, an empirically derived agenda founded on

practitioner-identified issues, is needed (Vigoroso, 2015). There was no study that had been

comprehensively done on factors influencing efficiency inventory management in Kenyan

organizations and hence the study intended to fill these gaps.

2.4 Conceptual framework

Independent variable Dependent variable

Procurement procedures

Red tapes and paper work.

Rigid rules and policies

Documentation

Adequate personnel
Accurate recording
Stock Procedure
Posting system
Efficiency of inventory management in
organizations in Kenya
Funding
Inventory turnover
Adequate funds. Lead time
Timely dispatch of funds profitability

Skills possessed

Professional qualification

Training

Fig 2.2 conceptual Framework

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The model illustrated how the independent (Skills possessed, Funding, Documentation and

Procurement procedures) and dependent variable (Efficiency of inventory management in

organizations in Kenya) related together in the framework. There was a direct relationship

between Skills possessed, Funding, Documentation and Procurement procedures and the

dependent variable, Efficiency of inventory management in organizations in Kenya.

Source: Researcher (2017).

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 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 INTRODUCTION

3.2 Research design

A survey research design was employed on the study of organizations in Nakuru town. A survey

attempted to collect data and information. This research design was considered to be appropriate

due to a wide population under the study because it gave room for the researcher to obtain

necessary information.

3.3 Target Population

The target population according to Mugenda and Mugenda (1999) was the totality institutions

which possessed certain common characteristics that were relevant to the study. It also referred

to the number of subjects of interest to the researcher.

The target population of the study consisted of 152 individuals comprised of employees,

Procurement officers, ICT officials, supervisors and managers of selected organizations in

Nakuru town. The target population was presented as follows

Table 3.1: Distribution of Target Population

Organization No. of individuals from each departments.

Menengai oil 20

Trans Africa motors 20

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Ripleys 22

Pyrethrum 20

Unga ltd 20

Totals 152

Source: Management Records (2017)

3.4 Sampling design and sample size

According to Kurl (1984), sampling is the process by which relatively small number of

individuals objects or events is selected analyzed in order to find information about the

population. Purposive sampling technique was applied to select a sample for the study.

Respondents were selected in such a way that the sample consisted of sub-groups. In this case

the researcher used purposive sampling to locate the ideal categories for research comprising 46

percent of the target population.

Table 3.2: Distribution of Sample size

Categories No. of individuals from each departments.

Top management
10

Support staff
40

Supervisors
30

Totals 70

Source: Management Records (2017)

3.5 Data instruments

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A questionnaire was used as the Data collection instrument for the study and was developed

through the guidance of the studys objectives and research questions. It contained closed ended

question. The questionnaires were preferred to other methods because, it was easy to collect data

from a small sample population and ensured standard feedback and only relevant information

was obtained since the respondents were limited to the provided questions only.

3.6 Data collection procedure

The questionnaires were administered on a drop and pick-up later basis where the respondents

were given 3 days to go through the questions at their own pace. This was done in order to

ensure uniformity of answers and also to increase the response rate.

3.6 Reliability of the Research Instrument

According to Mugenda (1999), the reliability of an instrument is the measure of the degree to

which a research instrument yields consistent results or data after repeated trials. The reliability

of the instrument was ascertained by the test retest method and by conducting a pilot study in

new Brookside Eldoret where 4 questionnaires were randomly distributed to the management of

the industry. The instrument yielded desirable results.

3.7 Validity of the Research Instrument

According to Paton (2002), validity is the quality attributed to a proposition or a measure of the

degree to which they conform to established knowledge or truth. An attitude scale is considered

valid, for example, to the degree to which its results conform to other measures of possession of

the attitude. Validity therefore refers to the extent to which an instrument can measure what it

ought to measure. It therefore refers to the extent to which an instrument asks the right questions

20
in terms of accuracy. Mugenda et al. (1999) looked at validity as the accuracy and

meaningfulness of inferences, based on research results.

The content validity of the instrument was determined in two ways. First, the researcher

discussed the items in the instrument (questionnaire) with supervisors, lecturers and colleagues

from the School of Business. Since the determination of content validity is judgmental, all these

people helped to refine the definition of the topic of concern, the items to be scaled and the

scales to be used.

Secondly, content validity of the instrument was determined through piloting, where responses of

the subjects were checked against the research objectives. Piloting involved using 5 firms in

Eldoret town. This town was chosen because of its proximity to the research area, and hence it is

was expected that the factors under investigation closely mirrored those of Nakuru Town.

3.8 Data analysis and presentation

After the collection of data the researcher had the questionnaires edited and then analyzed using

descriptive statistics namely frequencies and percentage. Data was then presented in form of

tables pie charts and graphs which facilitated clear interpretation of results and drawing of

conclusions.

CHAPTER FOUR

4.0 Data Analysis and Presentation

4.1 Introduction
The purpose of this study was to examine factors affecting the efficiency of inventory

management in organizations in Kenya with reference to Firms in Nakuru Town. This chapter

involves interpretations of data in relations to the research objectives and research

21
questionnaires. The data was presented using statistical tools in form of tables, pie charts, graphs

and percentage. The results of the data analysis provided information that formed the basis for

discussion, conclusion and interpretations of findings and recommendations of the study.

4.2 Findings
Quantitative Analysis

4.2.1. Response Rate

Table 4.2.1 Response Rate

Sample category No. of Responses Percentage%

questionnaires
issued
Top management 10 5 10

Support staff 40 30 60

Supervisors 30 15 30

Total 70 50 100

Figure 4.2.1 Response rate

22
 Respone rate
70
60
60

50

40

30
20
20
10
10

The table and figure above indicate that 30 respondents were support staff, 15 were supervisors

and 5 were from top management. Support staff had the largest number of respondents. The

above data clearly indicates that support staffs of the organizations were the ones who

immensely participated with a highest percentage of 50% followed closely by supervisors with a

percentage of 40% the top management had the least number of responses 10% since it was not

easy to find most of them due to their tight and busy schedule.

4.2.2 Education levels

Table 4.2.2 Education levels

23
Education Level Number Percentage

Masters 8 10

Degree 24 60

Phd 8 10

Diploma 10 20

Total 50 100

Figure 4.2.2 Education levels

Education Levels
70
60
60

50

40

30
20
20
10 10
10

From the table and chart above 15 of the respondents had masters, 24 had degrees, 4 had PhDs

and 7 had diploma. Majority of the respondents lie at 48% and they had university degrees

therefore this shows that the personnel involved were qualified. The study also indicated that

24
most employees in the top management and operational level (supervisors) are knowledgeable

and competent.

4.2.3 Gender Response

Evaluation of gender was important in the study as it would indicate whether there were any

gender disparities in the organization. The findings were as follows.

Table 4.2.3 Gender response

Gender Frequency Percentage

Male 20 40

Female 30 60

Total 50 100

Figure 4.2.3 gender of response

25
 Gender Response

10

60

The study shows that 60% of the respondents who participated in the study were female and 40%

were male. This indicates that there were more females than males.

4.2.4 Age of respondents

Table 4.2.4 Age of respondents

26
Age Frequency Percentage

18-30 5 10

31-40 30 60

41-50 10 20

Above 51 5 10

Total 50 100

Figure 4.2.4 Age of respondents

Age of respondents

Above 51

41-50

31-40

18-30

0 10 20 30 40 50 60 70

The table above represents the age of respondents. The highest number of respondents were

between the age of 31-40 (60%) a total of 30 respondents, then followed by 41-50 (20%) total of

10 respondents then 18-30 (10%) a total of 5 respondents and above 51 years were (10%) a total

of 5 respondents.

27
4.2.5 To investigate the effect of procurement procedures on efficiency of inventory
management among Firms in Nakuru Town.

Table 4.2.5 Procurement procedures

procurement procedures effects Frequency Percentage

procurement reforms 20 40

conformity in behavior 10 20

understanding the steps involved 15 30

with procurement
Contract delays, increased costs 5 10

Total 50 100

Figure 4.2.5 Procurement procedures effects

28
 Procurement procedures

Contract delays, increased costs

understanding the steps involved with procurement

conformity in behavior

procurement reforms

0 5 10 15 20 25 30 35 40 45

The respondents were asked to indicate the most affecting issues regarding procurement methods

in the organization for inventory management. The figure above shows the results. It was found

that majority 40% of the respondents indicated that procurement reforms were key. This was

followed by 30% who indicated that the understanding of steps involved with procurement was a

factor, 20% indicated that another challenge facing inventory management was conformity in

behavior while 10% indicated contract delays and increased costs.

4.2.6 To determine the effect of documentation on efficiency of inventory management

among Firms in Nakuru Town
From table 4.2.6 respondents rated the extent to which documentation affected inventory

management in the organizations. Majority of the respondents 35% strongly agreed Supply chain

risks emanate from both internal and external. In addition some of the respondents 10% agreed to

the statement Timely data for consumption, inventory levels in the supply chain and stock outs

can affect performance. Lastly the 5% of the respondent agreed that internal risks are within a

business control since they emanate from the organizations on operations.

29
Table 4.2.6 Documentation on firms efficient inventory management

category Frequenc Percentag

y e
Information is critical to an effective and efficient inventory 35 70
management process
Accuracy of inventory records is necessary to provide satisfactory 10 20
customer service
Accuracy of inventory records is necessary to determine 5 10
replenishment of individual items
Total 50 100

Figure 4.2.6 Documentation on firms efficient inventory management

Documentation on inventory management

Accuracy of inventory records is necessary to determine replenishment of individual items

Accuracy of inventory records is necessary to provide satisfactory customer service

Information is critical to an effective and efficient inventory management process

0 10 20 30 40 50 60 70 80

The respondents were asked to rate the factors of Documentation on firms efficient inventory

management. It was found that on Information is critical to an effective and efficient inventory

30
management process the factor was rated to a great extent at 70% and this factor was found to

affect inventory management. On Accuracy of inventory records is necessary to provide

satisfactory customer service at 20% it was found that the respondents agreed to a great extent

that inventory records misrepresentation affected inventory management. The respondents were

neutral on Extreme weather and pandemic. On Accuracy of inventory records is necessary to

determine replenishment of individual items at 10% it was found that accurate inventory records

is necessary to determine replenishment of individual items.

4.2.7 To investigate the effect of funding on efficiency of inventory management among

Firms in Nakuru Town.
Table 4.2.7 Funding on efficiency of inventory management

The respondents were asked to rate the above statements on inventory management in the

organization. The table below shows the results. The results show that 40% of the respondents

indicated that Funds can be a constraining factor to effective inventory control when funds

allocated cannot cater wholly for the organizations material requirements within the budget

period. This was followed by 30% of those who indicated that with inadequate funds an

organization may have difficulties in running its activities, 20% indicated that With enough funds

the organization can run its activities efficiently while 10% indicated that the stature of financial

management in the organization can affect adversely its effectiveness and in the finance resource

application in various activities.

Factors under consideration Frequency Percentage

31
With enough funds the organization can run its activities 10 20
efficiently
with inadequate funds an organization may have difficulties 15 30
in running its activities
Funds can be a constraining factor to effective inventory 20 40
control when funds allocated cannot cater wholly for the
organizations material requirements within the budget period
The stature of financial management in the organization can 5 10
affect adversely its effectiveness and in the finance resource
application in various activities
Total 50 100

Figure 4.2.7 Funding effect on inventory management

Funding effect on inventory management

The stature of financial management in the organization can affect adversely its effectiveness

Funds can be a constraining factor to effective inventory control when funds allocated cannot cater wholly for the organizations material requirements within the budget period

with inadequate funds an organization may have difficulties in running its activities

With enough funds the organization can run its activities efficiently

0 5 10 15 20 25 30 35 40 45

The respondents were asked to indicate the main effects of funding on inventory management in
the organization to minimize inventory risks. The results show that the majority 40% of the

32
respondents indicated that Funds can be a constraining factor to effective inventory control when
funds allocated cannot cater wholly for the organizations material requirements within the budget
period. This was followed by 30% of those who indicated that with inadequate funds an
organization may have difficulties in running its activities, 20% indicated that With enough funds
the organization can run its activities efficiently while 10% indicated that the stature of financial
management in the organization can affect adversely its effectiveness and in the finance resource
application in various activities.

4.2.8 To investigate the effects of skills possessed by staff on efficiency of inventory

management among Firms in Nakuru Town.
The chart below shows the response rate of the employees who responded on the issue of skills

possessed on inventory managed in the organization. 40 respondents agreed whereas 10

respondents said that skills possessed is not a major cause of inventory management risks

involved in the organization, which has a percentage of 80 and 20 respectively.

Table 4.2.8 Skills possessed

Response frequency Percentage

Yes 40 80
No 10 20
Total 50 100

Figure 4.2.8 Skills possessed

33
 Skills possessed

No; 20%

Yes; 80%

The figures above show that a large number of the respondents agreed that skills possessed in the

organization is part of the inventory management challenges faced in the organization and hence

it has a negative effect to the organization inventory management.

34
 CHAPTER FIVE
5.0 SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS,
RECOMMENDATIONS AND SUGGESTIONS.

5.1 Introduction
The purpose of the study was to examine factors affecting the efficiency of inventory

management in organizations in Kenya with reference to Firms in Nakuru Town. This chapter

discusses summary of findings, conclusions and the recommendations after carrying out the

research.

5.2 Summary and findings

The study sought to establish the extent to which respondents agreed with the effect of

procurement procedures on efficiency of inventory management among Firms in Nakuru Town,

from the study findings, majority of the respondents agreed that inflexible and procurement

procedure systems of procurement contribute to unacceptable contract delays, increased costs.

The findings concurs with the findings by (Kenneth, 2005) according to Kenneth (2005),

procurement procedure systems expects conformity in behavior rather than performance since

employees are treated impersonality and they are expected to rely on rules and policies, they are

unwilling to experience individual judgment and avoid risks. The study also sought to establish

the extent to which respondents agreed with the effect of documentation on efficiency of

inventory management among Firms in Nakuru Town, from the study findings, majority of the

respondents agreed that; Accuracy of records provide the management with the information

which is used to ensure accountability. The findings concurs with the findings by (Susan, 2000)

according to Susan (2000), accuracy of inventory records is necessary to provide satisfactory

customer service, determine replenishment of individual items; ensure that material availability

35
meets repair or project demand, analyze inventory levels and dispose of excess inventory. Stock

records also provide the management with the information which is used to ensure accountability

through stocktaking and stock audit exercise. The study sought to establish the extent to which

respondents agreed with the effect of funding on efficiency of inventory management among

Firms in Nakuru Town, from the study findings, majority of the respondents agreed that with

inadequate funds an organization may have difficulties in running its activities The findings

concurs with the findings by (Dobler et al, 2000) according to Dobler et al (2000), funds can be a

constraining factor to effective inventory control when funds allocated cannot cater wholly for

the organizations material requirements within the budget period. Resources lead to a better

organizational commitment and also overcome organizational obstacles. Sufficient resources also

lead to organizational implementation success and project implementation success the stature of

financial management in the organization can affect adversely its effectiveness and in the finance

resource application in various activities. The study sought to establish the extent to which

respondents agreed with the effects of skills possessed by staff on efficiency of inventory

management among Firms in Nakuru Town, from the study findings, majority of the respondents

agreed qualified staff that is competent and skilled helps the organization to achieve its goals and

objectives by being efficient and effective when carrying out their various functions The findings

concurs with the findings by (Bailey et al, 2012) according to Bailey et al (2012), for inventory

management function to achieve a superior performance, its necessary to recruit, train and

develop personnel with the capacity and motivation to do better job. Training of staff is vital if

full use is to be made of their abilities and talents. For an organization to succeed, qualification is

therefore a prerequisite and must be matched with job requirement, hence the need to hire and

develop ambitious personnel. If staff involved in inventory management is not qualified and

36
competent, then there will be ineffectiveness in inventory management.

5.3 Conclusion
The study established that the advantages of procurement procedures are many folds, apart from

consistent employees behaviour, it eliminates overlapping or conflicting jobs or duties and

behaviour of the system is predicable, thus the study concludes that procurement procedures had

a positive impact on the efficiency of inventory management among firms in Nakuru town.

The study revealed that documentation is crucial in ensuring efficient inventory management,

stock records provide the management with the information which is used to ensure

accountability through stocktaking and stock audit exercise, therefore the study concludes that

documentation had appositive impact on the efficiency of inventory management among firms in

Nakuru town. The study revealed that funding positively affect the efficiency of inventory

management among firms in Nakuru town to a great extent , thus the study concludes that

funding positively affect the efficiency of inventory management among firms in Nakuru town to

a great extent. The study revealed that for inventory management function to achieve a superior

performance, its necessary to recruit, train and develop personnel with the capacity and

motivation to do better job, thus the study concluded that the skills possessed by staff had

apositive effect on the efficiency of inventory management among firms in Nakuru town..

5.4 Recommendations of the study

The study recommends that there is need for firms in Nakuru town to enhance their procurement

procedures through elimination of overlapping or conflicting jobs or duties and behaviour of the

system is predictable as the study revealed that effective procurement procedures had a positive

impact on efficiency of inventory management among firms in Nakuru town. There is need for

organizations to ensure Accuracy of records provide the management with the information which

37
is used to ensure accountability thus the study established that Proper documentation ensures that

material availability meets repair or project demand and that accuracy of inventory records is

necessary to provide satisfactory customer. The study revealed that funding positively affect

efficiency of inventory management among firms in Nakuru town to a great extent , thus there is

need for organizations to do inventory in management through mobilizing funds as it positively

affect their efficiency .

5.5 Suggestions for further Reading

The study covered factors affecting the efficiency of inventory management in organizations in

Kenya with reference to Firms in Nakuru Town. The study was addressed by the specific

objectives of the research study. This therefore narrowed the study into 5 variables that cannot be

fully generalized to the only challenges of inventory management on organizational

performance. Suggestions for further studies are therefore encouraged in order to find out other

factors that affect inventory management and were not highlighted in the study. Further studies

will also be required to contribute towards identification of the most effective solutions to

sinventory management problems encountered by organizations.

38
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42
APPENDIX I: QUESTIONNAIRE

TO EXAMINE FACTORS AFFECTING THE EFFICIENCY OF INVENTORY

MANAGEMENT IN ORGANIZATIONS IN KENYA WITH REFERENCE TO FIRMS IN

NAKURU TOWN.

Dear respondents I humbly request you to answer this questionnaire to enable the researcher get

accurate information with regards to her field of study. It is my declaration that the information

gathered from your organization will be confidential and will only be used for this research

study.

Instructions

Answer by ticking or filling the gaps where necessary.

SECTION ONE

General information

1. Education level

Masters [ ] degree [ ] PhD [ ] diploma [ ] KCSE [ ]

2 Genders

Male [ ] female [ ]

3. Age

18-30 yrs [ ] 31-40 yrs [ ] 41-50yrs [ ] above 51 [ ]

43
4. Working experience

6-10 yrs [ ] 11-15 yrs [ ] 16 yrs and over [ ]

SECTION TWO

To investigate the effect of procurement procedures on efficiency of inventory management

among Firms in Nakuru Town.

Indicate your level of agreement with the following statements relating to effects of bureaucratic

procurement procedure on efficiency of inventory management among Firms in Nakuru town

( key =5-

Strongly Agree, 4-Agree, 3-Neutral, 2-Disagree- strongly disagree)

Statements 1 2 3 4

management should try to make procurement processes less

bureaucratic, through procurement reforms

Bureaucracy expects conformity in behavior rather than performance

By understanding the steps involved with procurement, it is possible

to get a better understanding of the real cost involved with attaining

any good or service

Inflexible and bureaucratic systems of procurement contribute to

unacceptable contract delays, increased costs

To determine the effect of documentation on efficiency of inventory management among

44
Firms in Nakuru Town.

Indicate your level of agreement with the following statements relating to effects of

documentation on

efficiency of inventory management among Firms in Nakuru town (key =5-Strongly Agree, 4-

Agree, 3-

Neutral, 2-Disagree- strongly disagree)

Statements 1 2 3 4

Information is critical to an effective and efficient inventory

management process

Accuracy of inventory records is necessary to provide satisfactory

customer service

Accuracy of inventory records is necessary to determine

replenishment of individual items

Proper documentation ensures that material availability meets repair

or project demand.

Accuracy records provide the management with the information

which is used to ensure accountability

Information is critical to an effective and efficient procurement

process

45
To investigate the effect of funding on efficiency of inventory management among Firms in

Nakuru Town.

Indicate your level of agreement with the following statements relating to effects of funding on

efficiency

of inventory management among Firms in Nakuru town ( key =5-Strongly Agree, 4-Agree, 3-

Neutral, 2-

Disagree- strongly disagree)

Statements 1 2 3 4

With enough funds the organization can run its activities efficiently

with inadequate funds an organization may have difficulties in

running its activities

Funds can be a constraining factor to effective inventory control

when funds allocated cannot cater wholly for the organizations

material requirements within the budget period

The stature of financial management in the organization can affect

adversely its effectiveness and in the finance resource application

in various activities for inventory management function to achieve

a superior performance, its necessary to recruit, train and develop

personnel with the capacity and motivation to do better job

Funds can be a constraining factor to effective inventory control

46
when funds allocated cannot cater wholly for the organizations

material requirements within the budget period

To investigate the effects of skills possessed by staff on efficiency of inventory management

among Firms in Nakuru Town.

Indicate your level of agreement with the following statements relating to effects of skills

possessed by staff on efficiency of inventory management among Firms in Nakuru town

( key =5-Strongly Agree, 4-Agree, 3-Neutral, 2-Disagree- strongly disagree)

Statements 1 2 3 4

Qualified staff that is competent and skilled helps the organization to

achieve its goals and objectives by being efficient and effective when

carrying out their various functions.

For an organization to succeed, qualification is therefore a pre-requisite and

must be matched with job requirement.

For inventory management function to achieve a superior performance, its

necessary to recruit, train and develop personnel with the capacity and

motivation to do better job.

Training of staff is vital if full use is to be made of their abilities and talents.

47
48
APPENDIX II: RESEARCH BUDGET

Item Amount

Stationery 1500

Printing 3000

Typing 2000

Photocopying 1500

Binding 1500

Total 9800

49