Inventory Management Practices and Productivity of Large Manufacturing Firms in Nairobi, Kenya

Abstract

The past 20 years have seen an increase in research focusing on operational issues relating to supply chain management. Most of the research has been related to multiechelon inventory models. Inventory plays a big part in the manufacturing firms as it accounts for more than 50% of the annual turnover. The motivation of the study was based on the fact that long term success and survival of any organization depends entirely on how well organizations are managing their costs. The study focused on answering the following research questions; what inventory management practices are being used in large manufacturing firms in Nairobi, Kenya? Is there any relationship between inventory management practices and productivity of large manufacturing firms in Nairobi, Kenya? The study was based on theory of constraints and Lean theory. The Research design used was descriptive design. The population of study comprised of large manufacturing companies that are based in Nairobi. According to the Kenya Association of Manufacturers, there are a total of 499 large manufacturing companies operating in Nairobi. The sample size of the study included 50 large manufacturing companies. The study used primary data which was collected using a questionnaire and data was analyzed using descriptive statistics including mean and standard deviation by use of the relevant computer packages such as Microsoft Office Excel and Statistical Package for Social Sciences (SPSS) program. The study concluded that inventory management practices positively affect the productivity of large manufacturing firms in Nairobi, Kenya. Effective inventory management has become a critical issue for firms’ productivity. Large manufacturing firms have saved millions of dollars in costs and decreased inventories while improving efficiency and customer satisfaction though inventory management practices. Inventory management has resulted to integration of better production methods to minimize costs and wastages. The study recommends that inventory management should to be recognized as a top management function; control measures should be taken on stock by fully adopting lean inventory systems that greatly improve the performance of the procurement function; strategic supplier relationships should be maintained by adopting Vendor Managed Inventory; firms should adopt information technology in inventory management; and adhere to the legal policies in place as they will help the procurement function to manage its inventory and improve on performance because of the legal framework that is provided.