Inventory Management Practices and Organizational Productivity in Parastatals in Kenya.

Abstract

The purpose of this study was to investigate inventory management practices and organizational productivity in Parastatals in Kenya. The research objectives were: to determine the effects of inventory management on organizational productivity in parastatals in Kenya, to determine the relationship between inventory management practices and organizational productivity in parastatals in Kenya and to establish the challenges faced by parastatals in Kenya in the implementation of inventory management practices on organizational productivity. A descriptive research design was used in this study. The target population was all the parastatals in Kenya. The latest government list of parastatals was that by December, 2015, the number of parastatal corporations stood at 103 and is classified as Agriculture, Service, Industry, Banking and Finance and Education. Stratified sampling was used to sample the parastatals within Nairobi County. Census sampling was used to select the respondents from each parastatal. The sample size was 53 respondents. This study established that a unit increase in Automatic Replenishment would lead to 0.578 increase in the organizational productivity in Parastatals in Kenya. A unit increase in ABC Inventory Model would lead to 0.642 increase in the organizational productivity in Parastatals in Kenya. A unit increase in Just-In Time (JIT) Inventory would lead to 0.784 increase in organizational productivity in Parastatals in Kenya. A unit increase in Economic Order Quantity (EOQ) would lead to 0.811 increase in organizational productivity in Parastatals in Kenya and A unit increase in Vendor Managed Inventory would lead to 0.612 increase in organizational productivity in Parastatals in Kenya. This study concluded that Economic Order Quantity (EOQ) practices have enabled Kenyan Parastatals to estimate how much of an item should be ordered and when it should be ordered. The Parastatals orders that optimal quantity for an item of stock that minimizes cost. Parastatals in Kenya use Vendor Managed Inventory (VMI) for supplier partnership and to maintain good working relations between customers and suppliers. Vendor Managed Inventory relieved the Parastatals of much of the expense of ordering, shipping the materials, counting inventory and stocking low-value items. This study recommended that long term relationships with suppliers should be sought by the Parastatals in Kenya. The Parastatals should also enhance their communication with suppliers by adopting VMI which will ultimately shift the responsibility of inventory management from the procurement function to the suppliers thus improving the organizational productivity. The Parastatals in Kenya should adopt information technology in inventory management. Parastatals in Kenya need to modernize its inventory management system to increase efficiency. Improving inventory practices calls for a high degree of collaboration and visibility across all parties as well as utilizing sophisticated technologies. The study recommends that the management should constantly expose its staff to training in order to improve their skills on inventory management and enable the employees to understand the current inventory systems which when used will help the organization reduce on costs associated with holding inventory.