Inventory Control As Astrategy for Effective Performance of an Organization

View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by The Management Univesity of Africa Repository INVENTORY CONTROL AS ASTRATEGY FOR EFFECTIVE PERFORMANCE OF AN ORGANIZATION: A CASE OF NAKUMATT SUPERMARKET IN KENYA ISAAC WILLINNGTON SONGA A RESEARCH PROJECT REPORT SUBMITTED TO THE SHOOL OF BUSINESS MANAGEMENT AND LEADERSHIP IN PARTIAL FULFULLMENT FOR THE BACHELOR DEGREE IN BUSINESS MANAGEMENT AND LEADERSHIP OF MANAGEMENT UNIVERSITY OF AFRICA OCTOBER 2016 DECLARATION AND RECOMMENDATION This is my original work and has not been presented for any award in any other institution or university other than Management University of Africa (MUA) for academic credit. Signed:………………………………date………………………………. Isaac Willington Songa BML/00056/2/2012 DECLARATION BY SUPERVISOR This work has been presented for examination with my approval as the appointed university supervisor Signed:……………………………date…………………………. Dr. Emmanuel Awour i DEDICATION This research is dedicated to my mum Gaudencia Songa, my late father Fredrick Songa, my uncle DonatusNdubi and to the entire MUA family. ii ACKNOWLEDGEMENTS It is with pleasure that I would like to acknowledge my uncle and his family for their support towards my academic achievements. I would also like to acknowledge my colleagues who have given me both moral and academic support. Finally, I would like to acknowledge the entire MUA family for having accepted me to be part of them; iii ABSTRACT The rising numbers of business enterprises in Kenya has seen few of these businesses make it to the end or give anticipated profit by owners. Several factors including poor management, unfavourable government policy, inadequate capital and stiff competition has been associated to failure of these businesses. The main aim of this study is to access the impact of inventory management and control on the growth and success of small scale businesses in Kenya. The Specific objectives of this study being, to determine the level of understanding by the management of these businesses on issues of inventory management and control in businesses. Third, to determine factors those are limiting supermarkets from managing their inventories adopted by different businesses in controlling and managing its inventory. The study used a cross-sectional surveyed design to collect the required information. The target population of the study was 100 employees from two branches of Nakumatt supermarkets in Kenya. Questionnaires were used as a tool of data collection; the data was then analysed using descriptive statistics, frequent table and charts. The main findings of the study were; most of the small enterprises have not yet embraced the use of inventory control and management to the advantage of the business. Third, inadequate use of modern technology i.e. E.D.I has limited most of organizations from implementing inventory management and control systems given that they are still using old methods in carrying out their daily activities. The earlier business entity starts implementing inventory control systems in their operations the better for the future performance of their businesses. Inventory control by businesses, accrue to more profits due to reduced wastages and avoidance of unnecessary expenses hence boosting performance of businesses. iv DEFINITION OF TERMS Inventory Quantity of raw materials, components, assemblies, consumables, work-in-progress and finished stock that are kept for use as need arise Strategy- The direction and scope of an organization over the long-term which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations (Johnson and Scholes; 2009). Inventory control Inventory management is the process of designing and maintaining inventory systems for controlling the planned balance between inventory and sales. Lead times the time interval between the initiation and the completion of a production process. Such as the time taken between placing an order and receiving it Customer service Refer to those activities that occur at the interface between the customer and the corporation which enhance or facilitate the sale and use of the corporation’s product and service AcABC analysis An inventory classification technique in which the items in inventory are classified according to the value generated in annual sales v EOQ An approach of determining the optimal inventory level that takes into account the inventory carrying costs, stock-out costs and total costs which are helpful in the determination of the appropriate inventory levels to hold Just-in-time An inventory control system that attempts to reduce inventory levels by coordinating demand and supply by the point where the desired item arrives just in time for use vi LIST OF ABBREVIATION EOQ -Economic Order Quantity CBD -Central business district ABC - Activity based costing vii TABLE OF CONTENTS DECLARATION AND RECOMDATION…………………………………………..i DEDICATION……………………………………………………………………..... ii ACKNOWLEDGEMENT…...……………………………………………………….iii ABSTRACT……………………………………………………………………...…...iv DEFINITIONS OF TERMS…………………………………………………………...v LIST OF ABBREVIATIONS……………………………………………………..….vi LIST OF ABBREVIATIONS………………………………………………………...vi CHAPTER ONE 1.1 Introduction………………………………………………………………………..1 1.2 Background of the study…………………………...……………………………....1 1.3 Organization Profile………………………...……………………………………..2 1.4 Statement of the problem…………...………………………………………..........2 1.5 General objective. …………………………………………………………............3 1.5 Specific objective. ………………………...………………………………….......3 1.6 Research Questions…..……...………………………………………….................4 1.7 Significance of study……….……………………………………………..............4 1.8 Assumptions of the study. ……………………………...……………………........5 1.9 Limitations of the study…………………………………………………………...5 CHAPTER TWO LITERATURE REVIEW………………………………….……………………….6 Introduction…………………………………….……………………………………..6 2.3 Theoretical literature review………………..…………………………………….6 2.4 Empirical studies..………..…………………………………………………..….18 2.5 Critical literature review………..……………………………………………….23 2.6 Operational frame work………..………………………………………………...30 2.7 Chapter summary…..……………………………………………………...……..31 CHAPTER THREE RESEARCH DESIGN METHODOLOGY……………………………………….32 3.1 Research design and methodology……………..………………………….……..32 viii 3.2 Introduction……..…………………………………………………...…….……..32 3.3 Research design………………………………………………………….……….32 3.4 Target population…………...………………………………................................32 3.5 Sample size.………………...…………………..………………………………...32 3.6 Data collection and description …...………………….………………………….33 3.7 Data analysis………… ……………………………….……...………………......33 CHAPTER FOUR 4.1 Presentation discussion and interpretation of findings ………………………….43 4.2 Presentation of findings……………………………………………………….…43 CHAPTER FIVE SUMMARY CONCLUSION AND RECOMMENDATION…………….…….59 5.0 INTRODUCTION……………………………………………………………...49 5.1 SUMMARY……………………………………………………………………..49 5.2 CONLUSION…………………………………………………………….....…..50 5.3 RECOMMMENDATION……………………………………………………….51 5.4 LIMITATIONS…………………………………………………………….…....52 REFERENCE…………………………………………………………………….…54 APPENDIX I………………………………………………………………………..55 APPENDIX II………………………………………………………………………56 QUESTIONAIRE……………………………………………………..……………57 ix LIST OF TABLES Table 4.1 respondent by gender………………………………………………….…34 Table 4.2 age of respondent………………………………………………...………35 Table 4.3 level of education……………………………………………………...…36 Table4.4 length of relationship with supermarket…………………………………..38 Table 4.5 standard lead-time in supermarkets………………………………………39 Table 4.6 average number of days stock is stored…………………………………..42 Table 4.7 inventory sourcing strategy………………………………………………44 Table 4.8 rationale of holding inventory……………………………..……………..46 x LIST OF FIGURES Figure 4.1 Gender……………………………………………………………………..35 Figure 4.2 Level of education…………………………………………………………37 Figure 4.4 Length of relationship with supermarket……………………………….…38 Figure 4.4 Standard lead time…………………………………………………………39 Figure 4.4 The impact of inventory control on customer service………………….….41 Figure 4.5 Average number of stock storage………………………………….……...43 Figure 4.8.2 Impact of inventory control strategies on financial performance of supermarket……………………………………………………………………..…….46 CHAPTER ONE 1.1 Introduction Supermarkets are mostly involved in transacting with already finished products which are ready for selling. In transacting with these types of merchandise, the business should always have enough stock to enable an effective and reliable supply of the products to their customers. Lack of enough stock in place may lead to loss of customers to the competition and hence a loss in the proceeds of the business. 1.2 Background of the study Businesses are nowadays taking a great look at inventory being the asset that provides a sustained competitive advantage in the business environment. Changes in business environment have led to increased importance of managing inventory. The changes that have brought great concern in the business environment includes an increase in globalization, changing demographic patterns, diversified cultures, changes in the economic variables, changes in sociology and the influx of technology in the global scene. In this case, a store and purchasing department that lacks strategic integration fails to provide the highly needed competitive advantage for the survival in the dynamically changing business environment. Thus the role played by inventory management in small scale businesses

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