Capacity Utilisation and Efficiency in the Kenyan Tea Manufacturing Industry

Abstract

This study sought to find out the relationship that exists between capacity utilisation and the organisation’s efficiency in tea manufacturing and factors that determine the capacity utilisation and efficiency in tea manufacturing. Organisations are increasingly faced with the challenge of reconciling capacity of resources with business performance. With increased competition in almost all industries, organisations are striving to remain relevant and to have a competitive edge. Organisations are likely to capacity utilisation as a key measure of their performance efficiency because maintaining production capacity usually involves high level fixed costs, capacity utilisation is closely linked to production efficiency - a decline in utilisation might signal a problem with efficiency and also because too high a level of capacity utilisation might signal that a business cannot take full advantage of demand for its products and services. The study adopted a descriptive survey design. The population of the study involved all tea manufacturers in Kenya. The study used primary data. A structured questionnaire was used to elicit perceptions, feelings and attitudes of the respondents. Respondents were presented with descriptive statements in likert scale and required to rate scoring extent to which they perceive a particular statement describes the variable. The questionnaire was administered through drop and pick and email method. Descriptive analysis was used to summarise and tabulate measurements of proportions, frequencies, percentages and associations or relationships. The data was tabulated using computer packages such as SPSS. From the findings, the respondents indicated that change in weather patterns and equipment downtime highly affected business wastage. The respondents also indicated that change in weather patterns very highly affected the competitive advantage. The study collates with the literature review where Pieterse (2006) argues that efficiency measures should be used to identify waste, deficient problem areas as well as identify how best to stabilize the operating environment. The respondents also indicated that by having a fluid not rigid business strategy and a bit of diversification to business close to tea in operation. Due to lack of enough time and financial resources, the study focused on a sample of the tea manufacturers to gain an understating of the perception tea manufacturers had on capacity utilisation and efficiency. The study concludes that government policy in the introduction of new taxes and lesser subsidy, power supply, inflation rate, interest rate, various types of tea clones, tea making experience, global oil prices and engineering services affected capacity utilisation rate in the tea manufacturing industry and other agricultural based organisations. The study further concludes that rigidity to change, capacity building strategy, skills upgrading, power ,supply, inflation rate, interest rate, auction prices, compliance to various standardization requirements, labor unrest, machine plucking and market dynamics affected the efficiency of tea manufacturing industry and other agricultural based organisations. The study recommends that agricultural companies should increase their capacity flexibility in order to try and minimize costs at a time of low production and then be able to ramp up capacity in order to absorb the often high raw material that comes in during flash seasons. This way, they can still cancel out the effects of low production periods. This also goes hand in hand with improving and modernizing factory equipment, which is bound to increase efficiencies and cut cost, as well as train their employees in order to improve their quality of labour to cope with more modem machines and embrace new programs like TPM.