Capacity Constraint Management Strategies and Supply Chain Performance of Petroleum Industry in Kenya

Abstract

Operational research methods have being used to support day-by-day decisions for batch sizing and job sequencing problems, while what-if analysis has being adopted as a decision support system in the field of supply chain. This study aimed to investigate the capacity constraint management strategies and supply chain performance of petroleum industry in Kenya and to determine the relationship between capacity constraint management strategies and supply chain performance of petroleum industry in Kenya. The study was guided by theory of constraints and the theory of supply chain management. the study adopted a descriptive cross-sectional research design which was used to establish the relationship between capacity constraint management strategies and supply chain performance in Kenyan petroleum industry. The target population included 55 oil marketing companies in Kenya. Primary data was collected by means of a semistructured questionnaire. The questionnaires was self-administered via drop and pick later method to the respective departments in Kenya Pipeline Company, Energy Regulation Commission and the Ministry of Energy. The data collected was analysed using descriptive statistics (measures of central tendency and measures of variations) and regression analysis to achieve the objectives of the study. The dependent variable in the study was supply chain performance. The independent variables for the study include the various capacity constraint management strategies used by firms in the Kenyan petroleum industry, among them: Inventory Planning Strategy, Price Control Strategy, Order Management Strategy, Material Planning Strategy and Market Readiness Strategy. the study found a positive correlation coefficient between inventory planning strategies and supply chain performance of petroleum industry in Kenya. The study further revealed that companies that use the inventory planning strategies, produce only enough goods to meet or exactly match the demand for goods. The study further found a positive correlation coefficient between price control strategy and supply chain performance of petroleum industry in Kenya. The study further revealed that it costs a firm money to keep supplies and inventory in a warehouse. A positive correlation coefficient between order management strategy and supply chain performance of petroleum industry in Kenya was revealed. The study further found that order management strategies improves customer loyalty. On material planning strategy, the study revealed that material planning strategy influences supply chain performance of petroleum industry in Kenya positively. The study further revealed that the material planning strategy contains targeted sales forecasts, production levels, inventory levels, and customer backlogs. The study found that market readiness strategy was found to have a positive correlation coefficient on supply chain performance of petroleum industry in Kenya. Supply chain performance measures have a significant impact on supply chain performance of petroleum industry in Kenya. The study recommends that oil marketing companies in the petroleum industry need to take the capacity constraint management strategies idea a step further to collaborate with competitors so as to find shared solutions to their supply chain management challenges.