Inventory Management Practices And Financial Performance Of Manufacturing Firms In Kenya: Case Of Agrochemical Firms

Abstract

Inventories occupy the most strategic position in the structure of working capital of most firms and enterprises and are an important component to the success and expenditure reduction of a firm. They make up an important part of a manufacturing firm’s production process as they facilitate continued production. The general objective of this study is to assess the relationship between inventory management practices and performance of manufacturing firms in Kenya using a case of agro-chemical firms. To achieve this objective, the study will be guided by four specific objectives: to determine the effects of net transactions approach to inventory management on performance of manufacturing firms in Kenya; To establish the effects of the Just in Time (JIT) on performance of manufacturing firms in Kenya; To establish the effects of Vendor Managed Inventory(VMI) on performance of manufacturing firms in Kenya and to determine the influence of forecasting and replenishment on performance of manufacturing firms in Kenya. The study will adopt a descriptive survey design on a population of 65 Agro-chemicals in Kenya. The respondents will collect data from operation managers, procurement managers, procurement officers and stores managers. This study will employ a survey of all the 65 existing firms. The study will target the procurement managers, operations managers and stores managers at the agro-chemical firms. 30% of the target population will be sampled to get 98 respondents for the study. The study will collect primary data using a questionnaire. The collected data will be analyzed using mean, standard deviation, frequencies and percentages. Regression analysis will be used to test for the relationship between the independent variable and the dependent variable. The study concludes that net transactions approach’s main concern is planning for all the resources that the organization needs to run its operations and hence improve its performance. The study further concludes that implementation of JIT in a company leads to cost reductions in the production system. The study also concludes that VMI is guided by contracts that guide the inventory of the agrochemical firm aimed at improving its performance. The study further concludes that ROE of agrochemical firms had improved due to inventory. The study recommends that the top management of all Manufacturing firms in Kenya should strengthen their abilities of re-planning in order to improve performance. The top management of manufacturing firms in Kenya should adopt pull method whereby goods are produced in each manufacturing stage only as they are needed. Vendor managed inventory systems should be adopted in order to enable manufactures to reduce or exclude inventory leading to higher performance. Forecasting should be geared towards making prediction of the future demand ensuring that performance is high.