INFLUENCE OF INVENTORY MANAGEMENT PRACTICES ON ORGANIZATIONAL PERFORMANCE OF SUGAR MANUFACTURING FIRMS IN KENYA

Abstract

In today’s world of intense competition managing inventory efficiently has become an important operational weapon for products and service firms wishing to survive the competitive pressures. Many of Kenya's sugar producing companies have been operating poorly, and others have suffered significant losses that have caused some sugar companies to fail. Some sugar businesses have capacity issues and inadequate inventory, which prevents them from timely cane collection from farmers. The main aim of this study was to establish the effect of inventory management practices on organizational performance of sugar manufacturing firms in Kenya. The specific objectives were; to analyze the effect of economic order quantity adoption on organizational performance of sugar manufacturing firms in Kenya, to assess the effect of Just in Time production technique on organizational performance of sugar manufacturing firms in Kenya, to establish the effect of ABC analysis on organizational performance of sugar manufacturing firms in Kenya and to evaluate the effect of vendor managed inventory practice on organizational performance of sugar manufacturing firms in Kenya. The study was guided by lean manufacturing theory, Economic order theory and theory of constraints. This study was anchored on pragmatism philosophy and correlational research design. The target population for this study was 144 respondents consisting of; procurement managers, stores managers, chief engineers, dry production managers, field supervisors, volume supervisors, finance managers, marketing managers and factory managers. The study used simple random sampling to select 108 respondents. Primary data was collected through the use of questionnaires while secondary data were collected from financial statements. Expert analysis and factor analysis were used to assess the construct validity of the questionnaire. Reliability of primary data was measured using Cronbach alpha. Descriptive statistic such as frequencies and percentages were generated. Inferential statistics consisted of multiple regression and Pearson correlation coefficient. Results were presented in form of tables’ charts and graphs. The results show that economic order quantity adoption, just in time production technique, ABC analysis and vendor managed inventory had a positive and significant effect on organizational performance with a regression coefficient of 0.988, 1.406, 1.668 and 1.539 respectively. Inventory management practices causes 61.6% variation in organizational performance. The results will help managers of sugar firms to come up with regulations that enhance cost reductions and improve organizational efficiency. The study would also act as a source of reference material for future researchers on inventory management practices. The study concluded that economic order quantity adoption, just in time production technique, ABC analysis and vendor managed inventory had a positive and significant effect on organizational performance. The study recommended that sugar firms should train procurement officers who will be able to adopt economic order quantity effectively. The management of sugar firms should ensure that their firms maximize the utilization of its capacity.