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UNIVERSITY OF KABIANGA
SCHOOL OF BUSINESS AND ECONOMICS
CHALLENGES FACING PROCUREMENT DEPARTMENT IN USING
INVENTORY MANAGEMENT SYSTEM
A SURVEY OF SELECTED SUPERMARKETS WITHIN KERICHO TOWN
HELLEN CHEBII CHEPKWONY
BBM/336/13
A RESEARCH PROJECT SUBMITTED TO THE UNIVERSIY OF KABIANGA
FOR THE AWARD OF BACHELOR OF BUSINESS
MANAGEMENT(PROCUREMENT OPTION)
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AUGUST 2015
DECLARATION
I declare that this research project is my original work and has not been presented for any
award of a degree in any university.
SIGN. DATE
NAME:
SUPERVISOR
This research project has been submitted for examination with my approval as University
Supervisor.
SIGN. DATE
NAME: DR. KIRUI
DEPARTMENT OF ACCOUNTING, FINANCE AND ECONOMICS
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ACKNOWLEDGEMENT
My first and foremost thanks are to Almighty God for providing us with power of mind,
good health and continual sustenance.
I also deeply indebted to my supervisor Mr. Kirui whom we sincerely thank for his
numerous advices, guidance, encouragement and his tireless effort in our work, during
the whole period and thereby making this project successful.
Special thanks to all University of Kabianga lecturers for their tireless efforts in shaping
our knowledge on management and practice on the same. Surely they have added value
to our career. Warm thanks to librarian for having allowed us access the library materials
which aided the success and completion of this work.
Thanks to management of Tuskys, Ukwala, Uchumi, Pakmart, Stagematt and Ngororga
supermarkets for allowing me to conduct my research project within their organization.
We further convey these thanks to all respondents for their co-operation and genuine
information.
May God bless you all.
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TABLE OF CONTENTS
DECLARATION ................................................................................................................ ii
ACKNOWLEDGEMENT ................................................................................................. iii
TABLE OF CONTENTS ................................................................................................... iv
LIST OF ABBREVIATIONS ............................................................................................ vi
DEFINITION OF OPERATIONALIZATION TERMS .................................................. vii
ABSTRACT ..................................................................................................................... viii
1.0 CHAPTER ONE: INTRODUCTION ....................................................................... 1
1.1 Background of the Study ........................................................................................ 1
1.2 Statement of the Problem ....................................................................................... 2
1.3 General Objectives of the Study ............................................................................ 3
1.4 Specific Objectives .................................................................................................. 3
1.5 Research Questions ................................................................................................. 3
1.6 Significance of the Study ........................................................................................ 4
1.7 Scope and Limitations of the Study ....................................................................... 4
2.0 CHAPTER TWO: LITERATURE REVIEW .......................................................... 5
2.1 Review of Empirical Literature ............................................................................. 5
2.2 Review of Theoretical Literature .......................................................................... 8
2.2.1 Challenges facing Inventory Management Systems ..................................... 8
2.2.2 Causes of challenges facing use of Inventory Management Systems ........ 11
Information technology ............................................................................................. 11
2.2.3 Factors Influencing Inventory Management ............................................... 14
2.2.4 Types of Inventory Management Systems ................................................... 15
2.2.5 Effects of inventory management systems on organizational performance
................................................................................................................................... 21
2.3 Summary and Gaps to be filled by this research ............................................... 23
2.5 Conceptual Framework ........................................................................................ 24
3.1 Research Design .................................................................................................... 25
3.2 Target Population ................................................................................................. 25
3.3 Data Collection Instrument and Procedure ....................................................... 25
3. 4 Data Analysis and Presentation .......................................................................... 26
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CHAPTER FOUR: DATA ANALYSIS AND PRESENTATION OF FINDINGS .. 27
4.1 Introduction to Data Analysis .............................................................................. 27
4.2 Demographic Characteristics of Respondents ................................................... 27
4.2.1 Gender of the Respondents ........................................................................... 27
4.2.2 Age Bracket of the Respondents ................................................................... 28
4.2.3 Employees Duration of service ..................................................................... 29
4.2.4 Level of Education ......................................................................................... 30
4.2.5 Staffs performing inventory management roles in supermarkets ............. 31
4.3 Findings .................................................................................................................. 32
4.3.1 Inventory management systems used in supermarkets .................................... 32
4.3.2 Effects of inventory management systems on procurement performance ....... 33
4.3.3 Ways in which inventory management systems affect procurement of
goods and services ................................................................................................... 33
4.3.4 Challenges faced in the implementation of inventory management systems
................................................................................................................................... 34
4.3.5 Measures taken to counter the inventory management systems ............... 35
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSIONS AND
RECOMMENDATIONS ................................................................................................ 38
5.1 Summary of Findings ........................................................................................... 38
5.2 Conclusions ............................................................................................................ 39
5.3 Recommendations ................................................................................................. 40
5.4 Suggestions for Further Studies .......................................................................... 40
REFERENCES ................................................................................................................. 41
APPENDICES ................................................................................................................. 42
APPENDIX 1: LETTER OF CONSENT ..................................................................... 42
APPENDIX 2: RESEARCH QUESTIONAIRE .......................................................... 43
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LIST OF ABBREVIATIONS
CBD - Central Business District
JIT - Just In Time
MRP - Material Requirement Planning
EOQ - Economic Order Quality
ERP - Enterprise Resource Planning
DRP - Distribution Requirement Planning
VMI - Vendor Managed Inventory
MM - Material Management
PDM - Physical Distribution management
IMS - Inventory Management Systems
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DEFINITION OF OPERATIONALIZATION TERMS
Redundant stock Stock which is more than needed/ surplus
E Commerce This refers to any form of business transaction in which
Parties interact electronically rather than by physical contact.
Procurement process This refers to ways, systems and procedures that
Organizations use in the acquisition and disposal of
Materials that facilitate the smooth running of operations in
the organization.
Lead time This is a period taken to obtain a requirement from the time
the need is ascertained to its fulfillment .
Information Technology This is the automation and integration of vocal and pictorial
Information by a micro based electronic combatant.
Inventory Management: The overseeing and controlling of the ordering, storage and
Use of components
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ABSTRACT
Inventory management is an important activity in organizational purchasing and supplies
practices management systems. This study is aimed at investing challenges facing the
inventory management system in procurement departments of selected supermarkets in
Kericho Town. The objectives of the study were: To establish the different types of
inventory management systems used in Kericho Supermarkets, To establish the extent to
which inventory management systems affects performance of the supermarkets in
Kericho, To identify the challenges facing inventory management in the procurement
departments of supermarkets in Kericho, and to find out how supermarkets in Kericho
cope with the challenges facing inventory management systems in the procurement
department. This study is significant in that it exposes the inventory management systems
applied in Kericho supermarkets, the challenges experienced and the how to overcome
them. This will enable procurement departments to improve their system for efficiency
purpose. The target population for the study is six employees in purchasing, supplies and
stores sections under procurement departments in the six selected supermarkets in
Kericho CBD. The study used questionnaires as the main data collection instrument; the
questionnaire consisted both open and closed ended questions. The data collected was
analyzed using descriptive statistical tools such as frequencies and percentages. The
presentation was done using tables, graphs and pie charts so as to facilitate clear
interpretation of the results and drawn conclusions. The study found out that all
supermarkets surveyed 100% use economic order quantity to control inventory 83% use
material requirement planning and enterprise requirement respectively none of the
supermarkets 0% use just-in-time. 73% indicated that inventory management systems
have greatly improved procurement performance in their supermarkets. All respondents
indicated that inventory management systems have made it easy to monitor stocks and
has minimized stocks out in supermarkets in Kericho. All respondents (100%) cited the
lack of qualified manpower as a major challenge experienced in the implementing
inventory management systems, 73% cited the changes in technology 67% cited lead
time uncertainties and the unreliability of suppliers. The most effective measure put in
place to curb the challenges experienced in the implementation of inventory management
systems is the adoption of advanced information technologies cited by 83%
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1.0 CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
Inventory is a term used to describe all the goods and the material held by an
organization for sale or use, also its a list of items held in stock. The management of
inventory involves; how much to order and when to order. The complexity of inventory
management has increased regarding consideration of where inventory should be held
and what specific lines of items should be available at specific locations.
The scope of inventory management is influenced with whether its primarily concerned
with material management (MM), or physical distribution management (PDM) and it
covers a wider variety of activities depending on whether the organization is centralized
or decentralized. Inventory management comprises of activities such as; demand
management that are required in operation services in the right quality, right quantity, in
the right place and at the right price and time. According to Kodler and Armstring (2008)
supermarket is a relatively large, low cost, low margin, high volume self-service
operation designed to serve the consumers or customers total needs for grocery and house
hold products. Supermarkets are however the most frequently shopped type or retail
outlets and this result to high level of competition; investors have also started
supermarkets in Kericho Town due to faster growth economically and increased
population.
The procurement department is an organizational unit of the supermarket whose duties
may include responsibility for part or all of purchasing function and perhaps additional
activities as well in this department buying activities, interviewing sales people ,
negotiating with potential suppliers, selecting suppliers, analyzing bids, issuing purchase
orders, handling problems with suppliers, maintaining appropriate records, material
studies, product design, quality maintenance and commodity managements are the main
activities carried out, as per the purchasing, suppliers and store keeping sections. Since
the supermarket hold a variety of goods and services, the demand of consumers or
customers and nature of goods and services among other factors are the determinates on
which inventory management system should be employed for satisfactory results to all
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involved, that is the customers, suppliers, supermarket (owners, management, and
employees) as well as the government.
Inventory management system used in the supermarkets have to be efficient and effective
to allow sufficient flow of goods and services in and out of the supermarkets to the
satisfaction of customers or consumers, suppliers, management, government and the
owners of the supermarkets.
The most applicable inventory management systems in Kericho supermarkets as per the
research are Material Requirement Planning (MRP), Distribution Requirement Planning
(DRP), Economic Order Quantity (EOQ), Vender Managed Inventory (VMI), and
Enterprise Resources Planning (ERP) which through the use of information technology
like computers; Bar coding, electronic data interchange, e-commerce, and e-
procurement, enabling the matching of demand and supply on the right quantity quality,
at the right place and time.
Lead time uncertainties, redundant (surplus) stock, and loss of customer goodwill,
inventory turnover and inventory policies are some of the direct challenges facing
inventory management systems in Kericho supermarkets.
Factors affecting the performance of the procurement departments in Kericho
supermarkets include the ethical purchasing practices like treatment of suppliers, personal
purchases for employees and, handling of confidential information, employing the
qualified personnel, installing advanced information technology is quite expensive and
costly to maintain, inflation, political instability, and reliable suppliers. Further still
decision making on inventory management system in supermarkets is also challenging.
1.2 Statement of the Problem
Supermarkets play a very key role in Kenyans distribution systems especially for house
hold goods. Supermarkets hold large volume of goods and are characterized by a beehive
of shopping activities, for efficient flow of goods in and out of the supermarket; the
procurement department has to ensure proper inventory management systems are in place
to match the demand and supply forces and to be competitive in the market at the lowest
cost possible. Competition in the supermarket business is very high indicated by the rate
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of growth of this industry and the number emerging new entrants. The market also
remains very dynamic as a result of the changes in technology, globalization, customer
tastes and preferences. To remain relevant in the supermarket business, one has to ensure
that customer demands are responded to on time and also respond to the changing
environmental conditions. Proper inventory management systems play a key role in
ensuring timely delivery of goods. This study seeks to establish the challenges facing the
inventory management system in procurement departments of selected supermarkets in
Kericho Municipality.
1.3 General Objectives of the Study
The general objective of the study was to establish the challenges facing inventory
management systems in procurement departments in Kericho supermarkets.
1.4 Specific Objectives
The specific objectives of the study were:
i. To establish the different types of inventory management systems used in
Kericho Supermarkets.
ii. To establish the extent to which inventory management systems affects
procurement performance of the supermarkets in Kericho
iii. To identify the challenges facing inventory management in the procurement
departments of supermarkets in Kericho
iv. To find out how supermarkets in Kericho cope with the challenges facing
inventory management systems in the procurement department.
1.5 Research Questions
The study sought to answer the following questions:
i. What are the inventory management systems used in the Kericho supermarkets?
ii. To what extent does an inventory management system affect procurement
performance of the supermarkets?
iii. What are the challenges facing the implementation of inventory management
systems in Kericho supermarkets?
iv. How do supermarkets in Kericho respond to the challenges experienced in the
implementation of inventory management systems?
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1.6 Significance of the Study
The research study is important as it stimulates the procurement officers of the
supermarkets to think on the efficiency, challenges and the measures to deal with the
challenges facing the procurement department as well as implementing the appropriate
inventory management system to enable continuous flow of goods and services in and out
of the supermarkets. The supermarkets therefore can improve their customer service rates
and remain competitive.
By shedding light into the challenges experienced in the implementation of inventory
management systems, and the coping mechanisms, Supermarkets shared their
experiences which will help them come up with coping strategies. As a result they were
able to respond to customer demands more efficiently and retain their customers. The
study has also helped in contributing to the existing body of knowledge on the topic.
1.7 Scope and Limitations of the Study
The study focused on the supermarkets in Kericho Town. Most of the supermarkets in
Kericho Town operate as regional branches under the head quarter based in Nairobi. It
focuses on the challenges facing inventory management systems in procurement
department in the supermarkets. The research was carried out commencing July, 2015.
The survey did not cover the whole country, therefore for generalization of the study in
the whole country; more similar researches need to be done in various other towns in
Kenya.
Owing to the busy schedules in the procurement department, some respondents did not
have time to respond to questionnaires immediately. To overcome this, the researchers
used the drop and pick method to administer questionnaires whereby respondents will be
give one week to respond at their own convenient time.
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2.0 CHAPTER TWO: LITERATURE REVIEW
2.1 Review of Empirical Literature
Odeny (1987), in his study on inventory management. A case of shortages of drugs at
Kenyatta National Hospital found out those drug shortages was caused by fluctuations in
demand and acquisitions lead times. The duration between placing an order and its
receipts are very lengthy and fluctuate considerably from one order to another for some
drug. According to Yego (1995) studied the extent of usage of forecasting techniques in
large manufacturing firms in Nairobi. The study sought to find out the most commonly
used and the problems encountered in applying the methods used including rapid and
inconsistent environmental changes, difficulty in understanding expensiveness in
development and inaccuracy of the methods.
Rhys McNabb (2006) has drawn attention to faulty forecasting of demand and inability of
suppliers to move quickly to changes in demand for such a problem to be solved. The
suppliers should ensure that they are aware to product demand in the market. This study
considered product quality as one of the factor that affects product preference. This is so
because for better results in anything, good quality matters.
Gathumbi (1997) did a study on the Application of inventory models in drug
management in Nairobi city council Health Services. In his study he sought to determine
the factors that hinder the application of inventory models in drug inventory management
in the Nairobi City Council Health Services and also tried to establish the behavior of
inventory parameters for selected hospitals and drugs. Lack of computers to keep of
inventory levels and lack of awareness on how best to implement the models were also
cities as constraining factors. The above study emphasizes the need for top management
support, people involvement, and necessary equipment in order to effectively use the
inventory models.
Gichira and Dickson (1987) on the problem facing entrepreneurs in Kenya they found out
those supermarkets had little understanding on marketing principles. This implies that
supermarkets should understand marketing principles to venture into promising business.
Inventory management system depends on measurement of the gap between customers
perception and expectations across a series of dimension that characterize the products.
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Odwori (2003), purchasing objectives may be broad and specific. A classic definition is
to obtain the right quality, in the right quantity, from the right source, delivered to the
right place at the right time and at the right price.
Bailey et al., (2001) in his study stated that material requirement planning was an
inventory central philosophy whose goal is to maintain just enough materials in the right
place at the right time. They further went on to explain that one of the prerequisites of the
effective implementation of MRP is the vender or suppliers reliability and that the
philosophy involved low inventories so that the incoming goods and materials are of
good importance.
Therefore, it is meant to process only as when required rather than in anticipation of MRP
philosophy. This can be easily confirmed through e-mail whether this supplier will or will
not supply. Organizations which have pursued MRP philosophy have identified the need
to established special relationship with few suppliers, the principal characteristic being
close relationship with few suppliers.
The institute of trade development in Kenya (2000) highlighted some benefit of MRP as
under elimination of delay and waste. It focuses that there are an increment in
competitive advantage due to the following: focus on simplifying production processes,
total plant maintenance, efficient flow layout, reduced set up time, data visibility, and
partnership based supply relationships, inventory control system and rapid response in
continuous improvement.
According to Osicko (2007), establishment of interdependence in the vender and
consumer relationship the goal of JIT policy is to maintain just enough parts in just the
right place and time. Therefore it is meant to process only as where required rather than
in anticipation of JIT philosophy. This can easily be confirmed through e-mail whether
this supplier will or will philosophy have identified the need to establish special
relationships with few suppliers.
Kirui (2004) on effect of operation function and stick control in an organizational
suggested that the operation of the stores function and the central of stocks cannot be
performed in an efficient manner without some means of capturing and storing
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information and facility for the analysis and use of this information . The system of stock
recording and the mechanize for the use of recording information must be very carefully
selected .This may well be the case that more than one system is employed by a single
organization records and techniques should be appropriate to the stores in question.
Computers are generally employed for the purpose of maintaining stock records indeed;
stocks control, and are ideal area for the application of electronic data processing
involving, as it does the storage of large amounts of information and processes using this
information (ibid).
Okare (2008) in his study on effects of late deliveries on an organizations operational
performance revealed that achieved of deliveries on time is a standard purchasing
objective, if goods and materials arrive late and work is not completed at the right time
,sales may be lost, production halted and damages caused.
Odwour (2002) in this stud said that purchasing objectives may be bread and specific. A
classic definition is to obtain materials of the right quality and quantity from the right
source, delivered to the right place and time, and at the right price. Materials management
is concerned with flow of materials to and from the manufacturing department. Its
objectives are to: minimize the use of the firms resources and to provide the required
level of customer services. the advantage claimed from materials management include
facilities induction of data processing and operational research techniques which
improves decision making co-coordinating , control , and improve supplies in production
to meet strategic , tactical and operational suppliers in production to meet requirements.
According to Njeru (2003) just in time is a demand pull the aim is that by limiting
production and assembly to what is actually needed, both materials and work- in-
progress inventories can be eliminated. According to Smith (1992) timely and accurate
store activates in the business enhances smooth running of the business in the
organizational as well as contributing to the profitability by not keeping the stock that is
the marker but also at the right quantity to avoid stock cuts which load to loss of
customers and overstocking which lead to extra stockholding costs.
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Omollo (2005) on factors affecting effective stock control in supermarket argues that
delay of delivery should be avoided for smooth operations, proper documentation and
improvement on stock taking and checking procedures as to improve effective stock
control measures in supermarkets.
2.2 Review of Theoretical Literature
2.2.1 Challenges facing Inventory Management Systems
2.2.1.1 Redundant stock
When one wants to address a particular problem he or she needs to examine the root
cause for it. The various authors and researchers above, approached on different issues
for example, they approached the causes of redundant stock in firms such as;
Overbuying, overstocking, false forecasting, stockpiling, change in design, and change in
demand.
Overbuying; this is as a result of purchasing goods over the minimal stock level required.
Overbuying in order to take advantage of favorable terms of discounts without regarding
holding costs. It may be caused by overstocking in order to avoid production breakdowns
or due to estimating demand. Stockpiling is anticipation of prices increase or material
shortages. The other cause is changes in design which may render stocks of materials and
components surplus. Inadequate stock controls which allows surplus to simply remain in
store thus incurring unnecessary holding cost. Over issues non-return of surplus.
(Kenneth Lysons, 2000).
Redundant stock arises in all organizations to some extent and can be defined as all
usable materials stocked in excess of requirements it can arise as a result of over-
ordering, in which case it is usually called excess or surplus stock. Other common causes
are failure to relate stock levels to declining production of certain lines, are unexpected
change in pattern of demand, particularly problem where they need against which it is
purchased have ceased to exist is often said to be absolutely (Burt 1985) while it is
unlikely that the problem of redundant stock can be eradicated completely, there are
several practices this include;
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Ensure that stock levels are as low as economical practicable in materials proving to
obsolesce, ensure that stock controllers and buyers are fully informed of changing
marketing policies , production programmes or design specification .monitoring changing
patterns of consumption in order to detect obsolesce on early stages, ensure that where
new materials is used up before the new one is Introduced , finally relate materials
requisition for production very closely to actual needs through the use of planning
techniques (IMS) such as MRP (Dobler, 1985).
2.2.1.2 Lead time uncertainties
Lead time being the period taken to obtain a requirement from time the need is
ascertained to its fulfillments, involves preparation of requisition, forwarding of
requisition to purchasing, processing by purchasing from enquiring to preparation of the
order, transmissions of order by the supplier, execution of the order by supplier,
transportation of order, receipt, inspection and storage and issues to production or sales.
2.2.1.3 Storage and issues to production or sales
In order to deal with the challenges of lead time uncertainties JIT purchasing VMI and
MRP should be applied as they reduce inspection and related delays like late delivery are
checked on.
2.2.1.4 Loss of customer good will
The customer good will explains how the goods and services offered to him are not met
satisfactorily and the value of business reputation is threatened and reduced sales may be
experienced and competition position affected too. When the inventory management
systems are employed appropriately with the help of information technology like e-
procurement, bar-coding, electronic data interchange, the goods and services will be
received and offered at the right time and place, in the quality and quantity , thus the
demand and supply will match and as a result the organization enables manufactures to
plan production to meet customer demand , ensuring long term relationship which
enable production times and quantities to be adjusted to suit the suppliers and further still
in customers favor in reduced administrative costs, enhances working capital and reduce
lead times.
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2.2.1.5 Inventory turnover (stock out)
Turnover is the total sales made by a business over a certain period of time.
The inventing turnover is the rate at which goods flow in and out of the organization at a
given period of time. The demand and supply forces and nature of goods and services
determine the IMS to be used to meet the market demand. In order to reduce or criminate
the challenges of inventory turnover , there ERP should be used as a management system
that support and by multimodal application software integrates all the department or
functions of an enterprises resulting to faster inventing turnover , better inventing
accuracy, reduced set up times and improved customer services and cash flow.
Rate of stocks turn over / inventory turnover indicates the number of times that a stock
item has been sold and replaced in a given period and is calculated by the formula:
Rate of stock turnover = Sales or issues
Average inventory (at selling price)
For example turnover of supermarket breakfast foods is 20-25 times that of pet foods.
Therefore good stock turn varies by product and that is the challenging part affecting
selection of IMS to be employed in purchasing different products in the supermarkets.
2.2.1.6 Inventory policies
Inventory policies are the action plan or guidelines and procedures used in managing
inventories (stock).this involve stock taking and stock checking which in turn control the
flow of goods and services in and out at organizations. With the help of information
technology in the supermarket, inventory policies have been facilitated to the advantage
of organization objectives.
Some inventory policies like stock taking determines the IMS to be used and its
challenging as a decision making risk has to be made by the procurement officers in
convincing the top management what policies to be used or not to be used giving
substantial reason of the suggestion regarding the policies governing inventory in relation
to application of different inventory management system.
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When inventory policies are good then IMS supplied would give a solution to redundant
stock and need time uncertainties. Inventory turnover would be controlled considering the
inventory control systems would be in place to ensure that quality and right quantity of
goods and services are delivered at the right time and place, at an appropriate price. ERP
ensures that all the departments in the supermarkets coordinates and its with a help of
appropriate inventory policies for better results.
2.2.2 Causes of challenges facing use of Inventory Management Systems
Information technology
Research indicates that at the time of writing, more than a third of buyers currently used
the internet to conduct transactions and such usage is likely to increase dramatically.
Additionally, the web though expensive to install it supports a variety of activities such
as, identifying new sources of supply, finding product information including products,
prices and delivery as well as tracking orders and receiving technical advice and after sell
service.
Bar coding and electronic data interchange makes work easier for the procurement
departments in purchasing, storing and supplies of goods and services as it helps in
decision making on what IMS to be used in purchasing different goods.
IT therefore when appropriately used in an organization reduces or eliminates paper
transactions, shortens order cycles, reducing inventory, provide real- time information on
product availability and inventory, provide collaborative planning and intergrades its
supply chain.
Some IMS like JIT require provision of necessary systems and methods of
communication between buyers and suppliers, like EDI for it to work effectively.
Bar coding allows better control over distribution and storage, better and timelier
management information, fast and accurate data capture at every point in the supply
chain, greater responsiveness to try customs and to customers, with fewer errors in
recognition of goods and improved communication through supply chain.
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EDI enables electronic transactions of purchasing documentation as demonstrated by the
figure below.
Figure 1: Electronic Transmission of Purchasing Documentation
Source: Research Data (2015)
2.2.2.1 Inflation
Inflation is a situation where there is a persistent rise in the price is falling, whereas
others are rising and others are stable. IMS applied in purchasing and supplying of goods
and services is affected by the changes in prices which results from change in demand
and supply forces: and availability of the goods and services. This as a result affects the
procurement budget plan and inventory management of the supermarkets.
2.2.2.2 Unethical purchasing practices
The most successful relationships are those where customers and suppliers develop trust
and an understanding of their respective requirements, interests, accompanied by a
concerned for both learning from and providing assistance to each other. Dependable
purchasing supplier relationships are basis of networks and provide competitive
advantages for both parties.
The organization has ensured the following: written standards applicable to procurement
systems; ethics training and professional training is available in respect to organizations
BUYERS
MAILBOX
BUYER
COMPUTER
SUPPLIER
COMPUTER
SUPPLIER
COMPUTER
SUPPLIER
S
MAILBOX
SUPPLIERS
COMPUTER
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ethical and professional standards; departmental environment should encourage ethical
conduct. Having these in place, treatment of suppliers, handling of confidential
information, conflict of interest and responsibilities of the employers will not be issues
affecting IMS, in procurement in supermarkets.
2.2.2.3 Selection of reliable suppliers
This is Selection of suppliers in terms of quality, price, delivery types and services
together with performance on previous order on goods control concept selection of
reliable supplier becomes so difficult for the supermarket due to the many branded goods
and presence of so many suppliers in the field. This leads to presence of single food
produce but very many brands in supermarkets leading to low sales of brands since the
customers have little knowledge about them thus the choice of inventory management
system to be used has to be appropriate.
2.2.2.4 Determination of re-order criteria
This is identifying the re- order level that determines what point an order should be able
to satisfy demand. It is very difficult to obtain a level which can be satisfactory to the
control of goods.
2.2.2.5 Establishment of stock levels
This is obtained with a flexible calculation for each item based on standard re- order
performance. Standard re ordering formulas added on how much stock to be ordered,
that is the minimum and maximum stock levels that consumption based on the re-
ordering formula using the approach one can defined theoretically . Maximum stock for
each item to provide sufficient but not excessive stock to last from one order to the next
as well as minimum stock or re-order level that determines at what point an order should
be able to satisfy demand.
2.2.2.6 Political instability and legal dimensions
This affect the demand and supply of goods and services in and out of the organization,
directly and indirectly IMS is affected as there restrictions of purchases and supplies and
changes in demand and supply forces due to political instability.
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2.2.3 Factors Influencing Inventory Management
2.2.3.1 Customer service
Customer service issue might require positioning inventory close to or will all major
markets to reduce delivery times and avoid lost sales from potential stock-outs. This is
particularly relevant for products that have high suitability; where customers have other
choices; and for markets with only a few, large customers, where individual and
variability in demand cannot be spread over a large customer base. Having products for
sale in the assortment, quantity location and time that customers want them in
fundamentals to legist mission.
2.2.3.2 Production Economics
It can often be achieved by supporting long, uninterrupted production runs to achieve the
lowest cost per unit produced. This strategy usually in large quantities of finished goods
being produced that are not needed until some future time and that must be stored and
handled. This avoidable storage costs should not exceed that production cost avoidable
on the inbound side of firm logistics, safety stocks of raw materials and components are
calculated and maintained to guard costly production shut downs resulting from varieties
in supplier delivery performance.
2.2.3.3 Purchasing Economics
It can be achieved by taking advantage of purchase discounts for large quantity
purchases. As long as the amount saved on the purchase price discounts for exceeds
storage costs, companies might be willing to accumulate raw material inventories or
goods purchased for resale separately, some goods are purchased on a speculative basis
or as a hedge against possible future price increase, strikes, changing political policies or
fluctuations in the availability of critical raw materials such as speculative purchasing
also affects production economics.
2.2.3.4 Seasonality of Demand
Seasonality of demand might require the pre-production of inventory to support surges in
sales demand associated with various seasons, such as the traditions calendar seasons or
holiday season with Christmas, Easter Halloween and other holidays.
15
Similarly, certain agricultural products such as canned fruits or vegetables must be
committed to finished goods inventory when the crops are ripe. Production may occur for
only two months, leaving of ten months inventory supply to be managed.
2.2.4 Types of Inventory Management Systems
2.2.4.1 Material Requirement Planning
Lysons (2006) MRP, developed in the 1960s is a technique that assists in the detailed
planning of production and has the following characteristics .It is geared specifically to
assembly operations. It is dependent demand techniques; it is a computer-based
information system. The aim is to make available either purchased or company
manufacturing assemblies just before they are required by the next stage of production or
for delivery.
MRP enables order to be tracked throughout the entire manufacturing process and assists
purchasing and control departments to move the right supplies at the right time to
manufacturing or distribution points. MRP inputs and outputs is the process that status as
the top level with a master production schedule (MPS). The information in the MPS
comes from a number of sources including orders actually received and forecast of
demand for quantities of the final product over planned times horizon subdivided into
periods known as time buckets. These buckets are not necessarily of equal duration.
Without the MPS (s) MRP cannot generate of requirements for any items.
Material requirement planning synchronize ordering and delivery of materials and
components with productions requirements achieve planned and controlled inventories
and ensures that required items are available at the right time of usage and not much
earlier, promote planning between purchasers and the suppliers to the advantage of each
and enable rapid action to be taken to overcome material or component shortages due to
emergencies or late delivery in the supermarket.
16
Orders
Forecast
Figure 2: Essential Elements of Material Requirement Planning System
Source: Kenneth (2000)
A master production schedule (MPS) specifies the firms requirements for final products
by time period. A bill of materials (BOM) is made for final product in the MPS, which
defines the components that final assembly process needs to complete that product.
Master
Production
shedule
(MPS)
MASTER
PRODUCTION
SCHEDULE
Master
Production
schedule
Master production
Schedule (MPS)
Inventory
transaction
Receipts
Issues
Inventory
file
Bills of
Materials
(BOM) MRP SOFTWARE
Primary
charges Order
release
Planned order
schedules
Reports
Secondary
Exception
Planning
reports
Performance
control reports
17
Inventory status file provides information on the status of all scheduled incoming
components. The planned lead refers to time of every process required. This represents
the total time needed to produce a product.
2.2.4.2 Distribution Requirements Planning (DRP)
Lyson (2006), distribution requirement planning is an inventory control and scheduling
that applies to MRP principles to distribution of inventories. It may also be regarded as a
method of handling stock replenishment in multi-echelon environment.
An echelon is a stepwise arrangement of troops, ships, planes. Distribution requirement
planning serves a control role in coordinating that flows of goods inside the factory with
the systems modules that places the goods in hands of the customers. It provides the basis
for integration of the manufacturing planning and control MRP system from the firm to
the field.
The emphasis in DRP is on scheduling rather than ordering. This is a time phased order
point system. Time phasing is the scheduling of inventory requirements and
replenishment by need late over a specified time horizon. Most inventory problems
would be a lot easier to solve if they are anticipated before. Distribution planning
involves managing sales forecasts, creating master schedules, and running, DRP. In short,
balancing future supply and demand.
TRAVERSE Distribution Requirements Planning enables you to plan for the future.
Youll be able to meet market demand and address your supermarkets sales plan. With,
you can determine the items you need and when you need to purchase them in order to
fulfill ll the sales goals set forth in your forecasts.
18
A SUPERMARKET MULTI- ECHLON DISTRIBUTION SYSTEM
DISTRIBUTION REQUIREMENTS PLANNING
Retails Shop/ Stores Retail Shop/ Stores
Figure 3: Essential Element of Distribution Requirement Planning System
Sources: Kenneth (2000)
2.2.4.3 Just In Time
According to Lysons (2006), JIT production is making what the customer needs, when it
is needed and in the quantity needed using the minimum resources of people, materials
and machinery. The objectives of JIT are summarized as zero defects all products will
more than meet the quantity expectations of the customer. Zero set-up time results in
shorter production to meet short production cycles and smaller inventories.
Zero inventories including work- in- progress, finished goods and sub-assembles will be
reduced to zero, this is the opposite of the traditional manufacturing philosophy of
maintaining buffer stocks as precautions against unreliable suppliers or fluctuating
demand. Zero handling the elimination so far as possible of all non-value adding
activities and zero lead time in some markets, this is impossible but the aim is to increase
flexibility by using small batches of components or assembles.
Benefits of JIT to an organization and its purchasing function in particular or some as
follows; part cost low scrap, low inventory carrying cost, quantity fast detection and
correction of unsatisfactory quantity and ultimately ,higher quantity of purchased parts.
There is designing of fast response to engineering change requirements and
administrative efficiency fewer suppliers, minimal expediting and order release work,
simplified communication and receiving activities. Productivity reduced reward; reduced
19
expectation, reduced parts-related delays and capital requirements reduced inventories of
purchased parts, raw materials, work-in-progress and finished goods.
JIT is a balanced system that achieves a smooth rapid flow of materials through the
system making the process time as short as possible by using resources in the best
possible way, it eliminates disruptions, it makes the system flexible, it reduces set up
times and lead times, minimizes inventory, and eliminates waste
2.2.4.4 Economic Order Quantity
According to Lysons (2006) the economic order quantity is the optimal ordering quantity
for an item of stock that minimizes cost. The basic EOQ model makes the following
assumptions; demand is uniform that is certain, content and continuous over time. The
lead time is constant and certain. There is no limit in order either to store capacity or
other constrains.
The cost of placing an order size is due to store capacity. The cost of planning and order
is independent to the size of the order the delivery charge is also independent of the
quantity ordered. The cost of holding a unit of stock does not depend on the quantity in
stock. All prices are constant and certain; there are no bulk purchase discounts. Exactly
the same quantity is ordered each time that a purchase is made. Cost per item is likely to
change in the course of a year, so decision to whether use average cost, replacement cost,
actual cost or anticipated future cost in the equation has to be made.
2.2.4.5 Vendor Managed Inventory (VMI)
VMI is a JIT technique in which inventory replacement decision are centralized with
upstream manufacturers or distributors. VMI may also be considered to be an extension
of DRP. It enables the manufacture or distributors to eliminate the need for customers to
reorder, reduce, or exclude inventory and control stock out.
VMI enable the manufacturers to plan production to meet customer demand, ensure long
term customer relationship, enable production times and quantities to be adjusted to suit
the suppliers and further still in customers favour it reduces administrative costs,
enhances working capital and reduces lead times ( Lyson, 2006).
20
Figure 4: Essential Element of Vendor Managed Inventory System
Source: Lyson (2006)
STEP 1: The customer sends information on items sold to distributer
This information may be collected by bar coding and scanning technology and
transmitted to the distributer by EDI or the internet.
STEP 2: the distributor processes the information and forward an acknowledgement to
the customer, giving details of the quantities and the description of the products to be
delivered, delivery date and distribution and release of the goods.
STEP 3: The distributer collect the detail of all the customers orders, which are
consolidated and sent daily to the manufacture via EDI or the internet.
STEP 4: The manufacture replenishes the distributors stock.
STEP 5: The distributer invoices the customer, who remits payment very large. Customer
may transmit their requirement directly to the manufacture, from which they receive
direct deliveries.
DISTRIBUTER
CUSTOMER
MANUFACTURE 1
2
4
3
5
21
VIM faces challenges of transfers of customer cost to the supplier, reduced working
capital, increased risk due to dependence of distributor, disclosure of potential sensitive
information to the supplier and customers may be better positioned than suppliers to
make replenishment decisions as Chopra and Meindl points out.
2.2.4.6 Enterprise Resource Planning
This is the latest and possibly the most significant development of MRP and MRP11. It is
applicable to all organizations and allows all the managers from all the function or
departments to have a consolidated view of what is or is not taking place throughout the
enterprise.
ERP is designed around a number of modules each of which can stand alone or combined
with others that is finance, logistics, manufacturing, supplier management and human
resources.
ERP is management system that, supported by multimodal application software integrates
all the department or function of an enterprise, resulting to faster inventory turnover,
improved customer service, better inventory accuracy, fewer audit, reduced set-up timers,
higher-quality work, timely revenue collection and improved cash flow.
ERP implementation is difficult because it involves fundamental change from a
functional to process approach to business, it is an expensive system , cost of training an
employees to use ERP system can be high, there may be a number of invited
consequences and it tend to focus on operational decision and have relatively weak
analytical capabilities.
2.2.5 Effects of inventory management systems on organizational performance
A good inventory management system not only applies to big business, but to small
businesses as well. Even the local mom and pop stores will benefit from inventory
management and should be utilizing it to maximize profits and potentially expand their
business.
We've come a long way from the paper and pencil which may be tried and true, but they
are cumbersome. Computers make keeping track of inventory an easy process. With the
addition of a little bit of technology, even the smallest business endeavor can become a
22
marketing giant. How do you think the big businesses started out? They began small and
as they grew, they developed an inventory management system that managers, owners
and employees could all use to effectively and efficiently manage the items that the
consumer buys.
That's what an inventory management system is all about, keeping track of what the
consumer buys. A good system will account for the name of the inventory item, how
many are in stock, where the item is located (in the store, on which shelf, in the
warehouse, in another store of the chain, etc.), when the item is sold, when the item needs
to be restocked, how much the item is sold for, how much it is bought for (buying from
the merchant at a low price, accounting for shipping fees and employee pay associated
with the handling of the product are all necessary to calculate a reasonable price to put on
the item so that it sells for a profit and yet doesn't sit on the shelf forever) and all of this
information and more can be analyzed, viewed and updated to make things run smoothly
and efficiently.
An inventory management system may also include analytics that demonstrate marketing
trends. By keeping track of what has been selling, and what hasn't been selling, the
business owner can adjust their inventory to accommodate those changes in the market.
Of course the system will also include the tangible handling of the inventory items. UPC
bar-coding, ISPN numbers of books, shipping labels, tags, receipts, invoices, and even
employee pay can all be utilized with an inventory management system. It's a little odd to
think of your employees as inventory, but it may help managing their needs in the
accounting department.
Inventory management systems vary in complexity from business to business and
industry to industry. However, no matter what you are selling, whether it is a product,
several products, a service or anything else, a good system is necessary for the growth of
the business.
A good Inventory Management System can increase productivity, eliminate losses,
increase on time deliveries and lessen overall inventory costs and carrying charges. If
installed properly, the inventory management system can interface with a variety of other
23
information systems in your company, like accounting, property management and sales
software packages, freeing you to concentrate on making your business grow.
2.3 Summary and Gaps to be filled by this research
From the above discussion its imperative to note that Inventory Management Systems
are much used in the supermarkets and keen interest must be undertaken by the
concerned parties to ensure proper application and selection of inventory management
systems that suit the demand and supply forces for effective performance as it affects the
general performance of the supermarkets.
Inventory Management Systems play a major role of eliminating or reducing redundant
stock, lead time uncertainties, loss of customer stock outs and Inventory policies hence
giving the supermarkets a competitive edge in the market. This will only occur with the
help of the employees and management involvement in selecting reliable suppliers and
using advanced information technology in managing inventories.
24
2.5 Conceptual Framework
The study will be guided by the conceptual framework below:
Intervening Variables Independent Variables Dependent Variables
Figure 2: Conceptual Framework
Source: Researchers (2015)
There are various challenges that affect inventory management in an organization such as
company inventory management policies, stock outs of goods in the market, and lead
time uncertainties. An inventory management system that is properly functioning in an
organization translates to better performance of the procurement department that can be
expressed in terms of the amount of wastage including breakages, timely delivery of
goods, smooth supply of goods at all times, which in turn translates to better customer
satisfaction.
Performance of
procurement
Department
Timely delivery of
services
Customer satisfaction
Reduced inventory
costs
Smooth supply of
goods
Reduced wastage
Inventory Management
System
Challenges
Redundant
(surplus) Stock
Lead time
uncertainties
Inventory
turnover
stock outs
Inventory
policies
25
3.0 CHAPTER THREE: RESEARCH DESIGN METHODOLOGY
3.1 Research Design
This study employed descriptive survey research design. Descriptive survey research
designs allows the use of preliminary and exploratory studies by researchers to gather
large body of information, summarize, present and interpret data for the purpose of
clarification. According to Mugenda and Mugenda (1999) the purpose of descriptive
research is to determine and reporting the way things are descriptive survey research is
intended to produce statistical information about aspects of education that interest policy
makers and educators. The study is fitted within the provisions of descriptive survey
research design because the researcher collected data and reported the way things are
without manipulating any variable.
3.2 Target Population
The study aimed to reach 6 procurement managers in 6 selected supermarkets. The
distribution of employees in these supermarkets was as shown in table 1 below.
Table 1: Distribution of the Target Population
SUPERMARKETS NUMBER OF EMPLOYEES (in Procurement departments)
Stagematt 1
Tuskys 1
Pakmart 1
Ngoororga 1
Uchumi 1
Ukwala 1
Total 6
Source: Research Data (2015)
3.3 Data Collection Instrument and Procedure
The study used questionnaires and interviews to collect primary data from the sample of
6 procurement managers i.e. one from each supermarket. The questionnaires are
structured and contain both open and closed ended questions. They were administered to
respondents on a drop and pick later basis where the respondents were given up to one
week to fill the questions.
26
3. 4 Data Analysis and Presentation
After all data is collected, the researcher conducted data editing, which involved
identification of incomplete or inaccurate responses, which are then corrected to improve
the quality of the responses. After data cleaning, the data was coded and entered in the
computer for analysis using the Statistical Package for Social Sciences (SPSS) version
17. This research is expected to yield both qualitative and quantitative data. Qualitative
data will be analyzed qualitatively using content analysis based on analysis of meanings
and implications emanating from respondents information and documented data.
Descriptive statistics were employed to analyze quantitative data. The statistics included
frequency counts, means and percentages.
27
CHAPTER FOUR: DATA ANALYSIS AND PRESENTATION OF
FINDINGS
4.1 Introduction to Data Analysis
This chapter outlines the general findings of the study based on the study objectives. The
data was analyzed and the results of the findings were discussed and presented in the
form of tables, pie charts and bar graphs. Out of 6 questionnaires that were issued out to
respondents, all of them were successfully completed and returned for analysis hence
giving the study 100% response rate. The table below shows the response rate:
Table 3: Response Rate
Respondents Number of respondents Percentage (%)
Expected responses 6 100
Received responses 6 100
Source: Research Data (2015)
4.2 Demographic Characteristics of Respondents
4.2.1 Gender of the Respondents
The distribution of respondents by gender showed that 60% were male while 40% were
female. This showed that both male and female work at the supermarkets implying that
supermarkets are practicing gender balance while employing. The findings are shown in
the figure below.
28
Figure 2: Gender of the Respondents
Source: Research Data (2015)
4.2.2 Age Bracket of the Respondents
In a bid to find out the distribution of respondents by age, the study found out that 33% of
the respondents were aged between 18 25 years, 67% were aged between 26 40 years,
and none of the respondents were aged between 41-50 years and 51 years and above. This
implies that the supermarkets are making use of young and innovative youth and also
trying to curb unemployment of the youth. The findings are illustrated in the figure
below.
Male, 60%
Female, 40%
Male Female
29
Figure 3: Age Bracket of the Respondents
Source: Research Data (2015)
4.2.3 Employees Duration of service
The study sought to establish the duration of service of the respondents at the
supermarkets.
18-25 years, 33%
26-40 years, 67%
Column2, , 0 Column2, , 0
Per
cen
tage
Age bracket
30
The results are presented below:
Figure 5: Respondents Duration of service in Years
Source: Research Data (2015)
Based on the findings those who had worked for between 0-1 years were17 %, while 2
5 years were represented by 66%, 6 10 years were 17%, and none of the respondents
had worked for 11 years and above. This implies that the supermarkets allow their
employees to work in an organization for a long period and this ensures that they have
more experience and are more productive.
4.2.4 Level of Education
The study sought to establish the level of education of the respondents. The results are
presented in the figure below.
Series 1, 0-1 years, 17%
Series 1, 2-5 years, 66%
Series 1, 6-10 years, 17%
Series 1, , 0
Per
cen
tag
e
Years of service
31
Figure 4: Educational Levels of the Respondents
Source: Research Data (2011)
The distribution of the respondents by level of education showed that 67% of the
respondents had attained college education while 33% had attained university education.
There were no respondents with KCPE, KCSE or any other qualification. This implies
that majority of the respondents had attained training at colleges and some at the
university level and can be able to comprehend many issues and offer excellent services
to the community.
4.2.5 Staffs performing inventory management roles in supermarkets
To identify the different types of staff involved in inventory management in supermarkets
in Kericho respondents were asked to select by ticking on a list preselected positions and
the results tabulated below:
College level , 67%
University Level, 33%
Primary Level
Secondary level
College level
University Level
32
This indicates that majority of the supermarkets (83%) control their stocks of goods using
inventory controllers, 17% use material managers while none of the supermarkets
surveyed use stores clerks to control stocks.
4.3 Findings
4.3.1 Inventory management systems used in supermarkets
The results indicate that all supermarkets surveyed 100% use economic order quantity to
control inventory. 83% use material requirement planning and enterprise requirement
respectively, 67% use distribution requirement planning, 33% use vendor managed
Inventory controllers ,
83%
Material Managers ,
17%
Sales, Store keepers , 0%, 0%
Inventorycontrollers
Material Managers
Store keepers
Sales, Just-in-time, 0%
Sales, Material Requirement planning, 83%
Sales, Distribution requirement
planning, 67%
Sales, Economic order Quantity,
100% Sales, Enterprise
requirement planning, 83%
Sales, Vendor managed
inventory, 33%
33
inventory, none of the supermarkets 0% use just-in-time. It is therefore evident that
supermarkets adopt a combination of several methods for inventory management and
control.
4.3.2 Effects of inventory management systems on procurement performance
A larger proportion of the respondents 83% indicated that inventory management systems
have greatly improved procurement performance in their supermarkets, 17 % indicated
that inventory management systems have slightly improved procurement performance.
This clearly indicates that inventory management systems have positive impact on
procurement performance in supermarkets.
4.3.3 Ways in which inventory management systems affect procurement of goods
and services
Respondents were asked to identify the different ways in which inventory management
systems affect procurement performance and the results were plotted.
greately improved
perfomance, 5
Sales, slightly improved
perfomance , 1, 17%
no effect, 0 0
Sales, decreased efficiency to a
large extent , 0, 0%
greately improvedperfomance
slightly improvedperfomance
no effect
slightly decreasedperfomance
decreased efficiency to alarge extent
34
All respondents (100%) indicated that inventory management systems have made it easy
to monitor stocks and has minimized stocks out in supermarkets in Kericho. On the other
hand 73% of the respondents surveyed indicated that inventory management has reduced
redundant stocks and also reduced lead times in their supermarkets, 67 % indicated that
inventory management systems have reduced wastages and breakages and the cost of
handling goods in supermarkets.
4.3.4 Challenges faced in the implementation of inventory management systems
Respondents were asked to respond by selecting from a list of challenges perceived to
have affected the implementation of inventory management systems. The results were
plotted on the graph below.
Series 1, Makes it easy to monitor
stocks, 100%
Reduced redudant stocks, 73%
Reduced westages and breakages,
67% Reduced cost of handling goods,
67%
Series 1, Minimized stockouts, 100%
Series 1, Reduced leadtimes , 73%
Pe
rce
nta
ge o
f re
spo
de
nts
Efffects of inventory management on procurement perfomance
35
All respondents (100%) cited the lack of qualified manpower as a major challenge
experienced in the implementing inventory management systems, 73% cited the changes
in technology as a major challenge, 67% cited lead time uncertainties and the
unreliability of suppliers as challenges, 50% indicated that inventory management
systems implemented were obsolete and unreliable, a minority 33% cited the high cost of
maintaining inventory management systems, and lack of management zeal to implement
inventory management as key challenges faced.
4.3.5 Measures taken to counter the inventory management systems
Respondents were asked to state whether or not their organizations were putting measures
in place to counter the challenges explained before. All respondents (100%) indicated
that they were putting in place measures to counter the challenges experienced in the
implementation of inventory management systems.
Series 1, Lack of qualified
manpower, 100%
inventory management systems too
complex, 100%
Series 1, obsolete inventory
management systems, 50%
Lack of management zeal,
33%
High cost of maintaining
inventory management systems, 33%
Series 1, Changes in technology, 73%
Series 1, Lead time ubcertainities,
67%
Series 1, Unethical procurement
practices, 17%
Series 1, Company inventory policies,
17%
Series 1, Reliability of suppliers, 67%
36
To identify the measures put in place and their contribution in improving inventory
management, the respondents were allowed to select from a list of preselected measures
and to rate their influence as either great, average extent or no extent at all. The results
were tabulated on the figure below.
The most effective measure put in place to curb the challenges experienced in the
implementation of inventory management systems is the adoption of advanced
information technologies cited by 83% of the respondents as having impacted to a great
extent, and 17% as having moderate extent, none of the respondents indicated lack of
impact of IT on inventory management hence procurement performance. Management
involvement was also identified as a measure that has to a great extent helped to curb the
challenges experienced in the implementation of inventory management system by 66%
of the respondents, while 33% indicated that average extent.
The selection of reliable suppliers was also identified by 67% to have contributed to a
great extent in minimizing the effects of the challenges experienced in inventory
management, 17% cited average extent and no extent respectively. On the other hand
involvement of employees in was cited as a measure that has not contributed in
minimizing the effects of the challenges experienced in implementing inventory
Great extent , Management
Involvement, 67%
Great extent , Use of advanced IT,
83% Great extent , Selection of
reliable suppliers, 66%
Great extent , Involvement of employees, 0%
Average extent, Management
Involvement, 33%
Average extent, Use of advanced IT,
17%
Average extent, Selection of
reliable suppliers, 17%
Average extent, Involvement of
employees, 17%
No extent , Management
Involvement, 0% No extent , Use of
advanced IT, 0
Selection of reliable suppliers,
17%
No extent , Involvement of
employees, 83%
Great extent
Average extent
No extent
37
management systems cited by 0% great extent, 17% average extent and 83% no extent at
all.
Other measures cited by the procurement staff which if put in place would greatly
improve the performance of inventory management systems and mitigate the challenges
currently experienced include: adoption of online procurement systems, and
incorporation of more experts into the system.
38
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSIONS AND
RECOMMENDATIONS
5.1 Summary of Findings
Majority of the supermarkets (83%) control their stocks of goods using inventory
controllers, 17% use material managers while none of the supermarkets surveyed use
stores clerks to control stocks. All supermarkets surveyed 100% use economic order
quantity to control inventory. 83% use material requirement planning and enterprise
requirement respectively, 67% use distribution requirement planning, 33% use vendor
managed inventory, none of the supermarkets 0% use just-in-time.
A larger proportion of the respondents 73% indicated that inventory management systems
put in place have greatly improved procurement performance in their supermarkets, 17 %
indicated that inventory management systems have slightly improved procurement
performance. This clearly indicates that inventory management systems have positive
impact on procurement performance in supermarkets. All supermarkets (100%) indicated
that inventory management systems have made it easy to monitor stocks and has
minimized stocks out in supermarkets in Kericho. On the other hand 73% of the
respondents surveyed indicated that inventory management has reduced redundant stocks
and also reduced lead times in their supermarkets, 67 % indicated that inventory
management systems have reduced wastages and breakages and the cost of handling
goods in supermarkets.
All respondents (100%) cited the lack of qualified manpower as a major challenge
experienced in the implementing inventory management systems, 73% cited the changes
in technology as a major challenge, 67% cited lead time uncertainties and the
unreliability of suppliers as challenges, 50% indicated that inventory management
systems implemented were obsolete and unreliable, a minority 33% cited the high cost of
maintaining inventory management systems, and lack of management zeal to implement
inventory management as key challenges faced. All respondents (100%) indicated that
they were putting in place measures to counter the challenges experienced in the
implementation of inventory management systems.
39
The most effective measure put in place to curb the challenges experienced in the
implementation of inventory management systems is the adoption of advanced
information technologies cited by 83% of the respondents as having impacted to a great
extent, and 13% as having moderate extent, none of the respondents indicated lack of
impact of IT on inventory management hence procurement performance. Management
involvement was also identified as a measure that has to a great extent helped to curb the
challenges experienced in the implementation of inventory management system by 67%
of the respondents, while 33% indicated that average extent.
The selection of reliable suppliers was also identified by 67% to have contributed to a
great extent in minimizing the effects of the challenges experienced in inventory
management, 17% cited average extent and no extent respectively. On the other hand
involvement of employees in was cited as a measure that has not contributed in
minimizing the effects of the challenges experienced in implementing inventory
management systems cited by 0% great extent, 17% average extent and 83% no extent at
all.
5.2 Conclusions
The study concluded that inventory management systems play a key role in managing
stocks of goods. For efficient management of stocks, efficient inventory management
systems are very crucial. Supermarkets procure and sell lots of goods therefore require
having efficient inventory management systems in place. Supermarkets in Kericho have
responded by adopting up to date inventory management systems. Economic order
Quantity can be used as an efficient method of minimizing stock handling costs as it has
proven to be efficient from supermarkets experiences. The challenges experienced in
implementing inventory management systems can be countered by adoption of IT to a
large extent, management involvement and selection of the right suppliers with the right
facilities to complement the inventory management systems adopted.
40
5.3 Recommendations
The study recommends that it is also important to conduct regular evaluations on the
efficiency of inventory management systems to ensure that it continues to perform its
intended purpose always ensure continuous improvements. Small retail shops should also
consider putting inventory management systems in place as it would greatly improve
their business performance.
5.4 Suggestions for Further Studies
Further study should be carried out on:
1. A comparative analysis on the efficiency of the different inventory management
systems on procurement performance in supermarkets
2. The influence of technological changes on the performance of inventory
management systems.
41
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APPENDICES
APPENDIX 1: LETTER OF CONSENT
UNIVERSITY OF KABIANGA,
SCHOOL OF BUSINESS AND ECONOMICS,
DEPARTMENT OF ACCOUNTING, FINANCE AND ECONOMICS
P.O BOX 2030-20200,
KERICHO.
2ND
JUNE 2015.
TO: INTERNAL CONTROL MANAGER,
Dear sir/Madam
RE: REQUEST TO COLLECT RESEARCH DATA
I am a student of University of Kabianga, pursuing a Bachelor of Business Management
(Procurement Option). As a requirement of the programme, I am conducting a study on
the challenges facing procurement departments in using inventory management systems
within Kericho Town.
I am kindly requesting you to fill in the attached questionnaire. The information you
will give will be treated with utmost confidentiality and the findings of the study will be
for academic purposes only. A copy of the research study will be availed to you upon
request. We look forward to positive response.
Thank you in advance for your support.
Yours faithfully.
NAME SIGNATURE DATE
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APPENDIX 2: RESEARCH QUESTIONAIRE
SECTION A
I am a student at the University of Kabianga undertaking a degree course in Bachelor of
Business Management. As a requirement for fulfillment of this course, I am carrying out
a research on CHALLENGES FACING PROCUREMENT DEPARTMENTS IN
USING INVENTORY MANAGEMENT SYSTEMS
(A study of selected supermarkets in Kericho Town)
The Questionnaire serves the purpose of collecting data in the area of study. The
information gathered will be used for the stated purpose only.
INTRODUCTION
Kindly please answer all questions accurately and honestly by ticking ( ) and writing
where appropriate.
SECTION B
PERSONAL DETAILS:
Background information
1. GENDER
(a) Male
(b) Female
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2. AGE
(a) 18- 25 years
(b) 26 40 years
(c) 41 50 years
(d) 51 years and above
3. Year of service in procurement department in the supermarket
(a) 0-1 years
(b) 2-5 years
(c) 6-10 years
(d) 11 years and above
4. In which section are you stationed in the procurement department
(a) Purchasing
(b) Supplies
(c) Storekeeper
5. Indicate the level of education
(a) Primary level
(b) Secondary level
(c) College level
(d) University level
Any other ..
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SECTION C: PROJECT DETAILS
6. Who among the following staff perform inventory management functions in your
supermarket?
Inventory Controller
Materials manager
Storekeepers
7. Which of the following inventory management system is used in your
organization?
Inventory Management
System
Tick appropriately
Just-In-Time
Material Requirement
Planning
Distribution Requirement
Planning
Economic order Quantity
Enterprise Requirement
Planning
Vendor Managed
Inventory
Any other (specify).
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8. To what extent does the current inventory management system affect procurement
performance in your supermarket?
Effect of inventory management system (Tick as appropriate)
It has increased efficiency
Slightly improved efficiency
No effect at all
Has slightly decreased efficiency
Has decreased efficiency to a very large extent
9. In which way has the inventory management system affected procurement of
goods
Effect Tick as
appropriate
Makes it easy to monitor movement of stock
Reduced the amount of redundant stock
Reduced wastage and breakages of goods
Reduced the cost of handling goods
Minimized stock outs
Reduced lead times
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10. The following are some of the challenges facing the inventory management
systems in your supermarkets. (indicate by ticking which ones apply)
Inventory Management Challenges (Select by ticking)
Lack of qualified manpower
The systems are too complex
The systems are obsolete and inefficient
Lack of management zeal to implement inventory management
systems
The cost of maintaining the system is too high
Changes in technology
Lead time uncertainties
Unethical purchasing practices
Company inventory policies
Reliability of suppliers
Any other (specify)
11. Does your organization take any measures to curb the above challenges facing
Inventory Management Systems?
a) Yes
b) No
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12. To what extent does the following improve application of Inventory Management
System in your supermarket
Description Great Extent Average Extent No. Extent
Management
involvement
Use of advanced IT
Selection of reliable
suppliers
Involvement of
employees
13. In your own words outline any other strategy or measures which you believe your
organization should have in place to overcome the challenges identified facing Inventory
Managements systems.
1. .
2. ..
3. ..
4. ..
5. ..
THANK YOU
GOD BLESS YOU
