Inventory Management Practices and Supply Chain Perfomance of Fast Moving Consumer Goods Manufacturers in Nairobi

Abstract

The business dynamism environment is characterized by intense competition, diminishing resources and internationalization among other factors. As a result, many manufacturing firms are forced to produce products at lower costs. Most manufacturing companies are adopting inventory control techniques which minimize operational costs hence maximizing profits. An inventory management practice improves efficiency on the supply chain and hence it plays an important role among manufacturing firms. In manufacturing firms, too much stock could lead to tied capital, increase in holding cost, theft and deterioration of materials. In addition, materials‟ shortage in manufacturing firms can lead to production process interruption, underutilization of machines and poor customers relations. This study therefore sought to identify inventory management practices implemented by FMCG manufacturers in Nairobi; and to determine the effect of inventory management practices on supply chain performance of FMCG manufacturers in Nairobi. The study used descriptive research design and the target population was 51 FMCG manufacturers in Nairobi. Primary data was collected by use of a structured questionnaires. The research instrument generated quantitative data, which was analyzed by use of descriptive statistics and inferential statistics. Descriptive statistics included measures of central tendency (mean), frequencies, percentages and measures of dispersion (standard deviation). On the other hand, inferential statistics included correlation analysis and multiple regression analysis. To identify the inventory management practices used by FMCG manufacturing firms, the study used descriptive statistics. In determining the effect of inventory management practices, the study used correlation analysis and regression analysis. The results of the study were presented by use of both graphs and tables. The study found that FMCG manufacturing firms in Nairobi County were using inventory management practices such as just in time, vender managed inventory, re-order level, economic order quantity, enterprise resource planning and material requirement planning. The study also found that inventory management practices (just in time, vendor managed inventory, reorder level, economic order quantity and enterprise resource planning) have a positive effect on supply chain performance measures, which include inventory holding cost, stock out, obsolescence as well as ordering cost. This study recommends that all FMCG should increase their JIT technique adoption so as to reduce wastes (time, finances, space and labor) in the production process. The study also recommends that all manufacturing firms should adopt Vender managed inventory systems so as to automatic stock tracking. The study further recommends that should set their reorder levels, so as to ensure that the stock is replenished whenever it goes below the set levels.