Supply chain management practices and profitability of Kenolkobil Limited

Abstract

The ultimate goal of firms is profit maximization, regardless of what service or product they offer or the nature of their supply chain practices. Supply chain management uses various tools and strategies to try and improve if not maximize profitability by reducing production, finance and supply costs. Where Supply chain processes are not optimized, the results will be less than optimal results posing an increasingly significant risk to supply chains and business performance. The oil industry in Kenya has become very dynamic, competitive and earns very constrained margins. For the oil marketers to make profits, they need to focus on supply chain efficiency and reduce supply, logistics and financing costs which mainly can be reduced by having smooth supply chain. This study sought to determine the relationship between supply chain management practices and Kenolkobil’s profitability. The study used descriptive research design using mainly primary data collected using questionnaires in addition to secondary data obtained from financial statements and company publications. The study population was all the employees of KenolKobil ltd and all the retail stations run by KenolKobil. Stratified random sampling was used to sample the retail stations to be involved in the study. Before processing the responses, the completed questionnaires were edited for completeness and consistency. The study found that Kenolkobil’s supply chain management practices were strongly related to profitability with coefficient of correlation of 0.8403 where adoption of superior practices led to increased profitability. The analytical model developed by the study containing profitability (dependent variable), supply chain management practices; human resources capacity and technology adopted could explain 94.5% of changes in profitability. The relationship was positive and strong with coefficient of correlation of 0.9721. The study concludes that supply chain management practices are strongly related to profitability where adoption of superior practices leads to increased profitability. The study recommended that the management to continuously improve their supply chain management practices, benchmark the same and ensure that the practices remain relevant. By maximizing the benefits of efficient supply chain, the company can save on financing costs in addition to achieving competitive advantage over the competitors in addition to the company in recruiting and retaining qualified staff.