ABSTRACT
The purpose of the study was to assess the effect of inventory management practices on warehouse operations efficiency in Ouru Superstore Kisii town. This study was important to management of Ouru Superstore in adopting ways of efficient inventory management practices. The study was a basic to unearth certain problems relating to material management and inventory management practices and went along way to enhance interest in new concepts, approaches and philosophies aimed at better cost control over inventories. This study was of benefit to students carrying out researches on inventory management practices in corporate organizations especially warehouses, and finally add to existing literature on the subject. The research applied a case study where questionnaires were used to collect quantitative data. The target population was 80 employees of Ouru Superstore Kisii town, where a sample of 20 persons were taken using purposive sampling and simple random sampling methods. The collected data was analyzed using descriptive statistical techniques such as percentages, frequencies and weighted averages. Analyzed data will be presented in tables and charts. The study found out that the effect of inventory management practices on warehouse operations efficiency are: improved labor productivity, enhanced customer services, facilitates standardization of inventory movements, improved cycle counting, more efficient use available warehouse space, faster inventory turns and reduction inventory paper work. The study suggested that further research be done on the following areas: the study can be carried out using other warehouses in different towns to make results have better generalization.
TABLE OF CONTENTS
DECLARATION……………………………………………………………………………ii
DEDICATION ………………………………..……………………………………………iii
ACKNOWLEDGEMENT………………………………………………………………….iv
ABSTRACT …………………………………………………………………….…………..v
LIST OF ABBREVIATION………………………………….………..………………….vi
LIST OF FIGURES ……………………………….………….…………..………..…………….vii
TABLE OF CONTENTS………………………………………………….……..……….viii
CHAPTER ONE……………………………………………………………………….….. 1
- INTRODUCTION…………………………………………………..…………….…….1
1.1 Background of the study …………………………………………………………….. …1
1.2 Statement of the problem…………………………………………………………………2
1.3 Objective of the Study……………………………………………………………….….3
1.3.1 General objective of the study………………………………………………….3
1.3.2 Specific objective………………………………………………………………..3
1.4 research questions……………………………………………………………….………..3
1.5 scope of the study…………………………………………………………………………3
1.6 significance of the study………………………………………………………………….3
1.7 assumptions of the study……………………………………………………………..….4
1.8 limitations………………………………………………………………………………….4
1.9 Operation definition of terms……………………………………………………………..5
CHAPTER TWO………………………………………………………………………………6
LITERATURE REVIEW………………………………………..……………………………6
2.1 Concept of inventory management………………………………………………………………………………6
2.2 Inventory management techniques……..…………………….……………………..………7
2.2.1 The economic order quantity (EOQ) model…………………………………………7
2.2 The ABC analysis techniques…………………………………………………………….8
2.2.3 Just in time techniques (JIT)……….…………………’…………………………………9
2.2.4 Material Requirement Planning……………………….………………………………10
2.2.5 Vendor Managed inventory …………………………….……………….………..10
2.3 Replenishment system…………………………………………..…………………..…….11
2.4 Inventory holding costs………………………………………………………………………..12
2.5 Inventory Purchase Budget………………………………………………………………..12
2.6 Inventory Tracking…………………………………………….……………………………….13
2.7 The Lead Time…….………………………………………….………………………………..13
2.8 Re Order Point………….…………………………………….………………………………..13
2.9 Warehousing…………………………………………………………….…………………………14
2.9.1 Warehousing and store management……………….……………….…………….14
2.9.2 Store operations……………………………………….………………..….…..14
2.10 The Techniques used in store inventory control………………………….……………….15
2.11 Conceptual Frame Work…………………………………….………..…………………..18
3.0 CHAPTER THREE……………………………………………………..……………….20
RESEARCH METHODOLOGY……………………………………..……….………………20
3.1 Research design……………………………………..…………………….…………………20
3.2 Study area..………………………………………..………………….………………………..20
3.3 Target population………………………………………..……………………………………20
3.4 Sample size and sampling procedure………..…………..……….…………………..………..20
3.5 Research instrument……………………………………..………….……………….……….21
3.5.1 Validity of the instrument…………………………….…………………………….21
3.5.2 The reliability of the instruments………………….………………………….……22
3.5.3 Data collection procedure…………………..…………………..……………………………22
3.6 Data analysis and presentation……………………………..……..……………………………22
CHAPTER FOUR……………………………………………………………………………..23
DATA ANALSIS, RESULTS AND DISCUSSION………………………………………….23
4.1 Questionnaire Return Rate……………………………………………………………..
4.2 Demographic characteristics of the sample……………………………………………
4.2.1 Tenure of employment……………………………………………………………..
4.3 Findings on objective one………………………………………………………………..
Findings on objective two………………………………………………………………..
Findings on objective three……………………………………………………….
CHAPTER FIVE…………………………………………………………………………….
SUMMERY, CONCLUSIONS AND RECOMMENDATIONS…………………………
5.1 Summary of Finding and Conclusion…………………………………………..
Recommendation …………………………………………………………………
REFERENCE………………………………………………..……………………………..
APPENDICES
APPENDIX : QUESTIONNAIRE
LIST OF FIGURES
Graphical presentation of EOQ……………..…………………………………………….……10
Conceptual flame work………………………………………………………….………………
4.5 graphical presentation of factors considered while determining maximum stock level…
4.7 Success of Ouru Superstore’s overall inventor management practices…………..
4.9 challenges incurred in storing goods in the store…………………………………
4.10.1 Challenges facing Ouru Superstores in adopting inventory management practices…
LIST OF ACRONYMS AND ABBREVIATIONS
DOD- Department of Defense
GAO– General Accountancy Office
EOQ– Economic Order Quantity
TC -Total Cost
CO -Ordering Cost
CC -Carrying Cost
Q -Quantity
MRP– Material Requirement Planning
JIT –Just in time techniques
VED -Vital Essential Desirable
VMI -Vendor managed inventory
FIFO -First in first out
SSE– Small Scale Enterprise
LIST OF TABLES
3.4 Sample size and sampling procedure……………………………………………
4.2.4 Tenure of employment……………………………………………………
4.4 Effect of inventory management practices on warehouse operation efficiency….
4.5 Factors considered while determining the maximum stock levels……………….
4.7 Success of Ouru superstore’s overall inventory management practices………….
4.8 The type of stock ordered by Ouru superstores most…………………………..
4.9 The inventory costing method used by Ouru superstores to value stock in its warehouse
4.10 Challenges incurred in storing goods in the store……………………………….
4.10.1 Challenges facing Ouru in adopting inventory management practices………
4.11 Effectiveness of Ouru superstore in carrying out inventory levels management practices…
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Based on the establishment that effective inventory management had the greatest effect on the financial planning model as indicated by its largest standardized beta coefficient (0.505), as by the findings of (Nyabwanga et al,2011). The study suggests that Small Scale Enterprises (SSE) shoud pay more attention to the management of inventory since it has large effect on financial performance. Therefore (SSE) should ensure that stocks are sufficient to meet customers demand while at the same time avoid holding unnecessary surplus stock that may increase holding costs. SSE should seek knowledge on how to use stock optimization techniques so as to be able to determine right quantities of stock to hold at any given time. (Nyabwanga et al, 2011).
Long-term planning for network design is considered when investing in resources or contracts with third party logistics companies.The total cost is determined based on location, transportation, and inventory costs. To optimize the logistic network model, the factors affecting costs are considered. Pujawan, (2004) studied the effective lot sizing rules by comparing the variance of order interval and quantity. He focused on order variability under different order lot sizes without considering shipping costs and location capacity in a single level system from suppliers to end customers. The majority of the studies in the literature use mathematical optimization techniques or montecarlo simulation. To consider optimizing all the systems in a company, the discrete simulation the simulation techniques is used to deal with complexity of factors and strategies, Torress, (1997).
Due to many assumptions and responses to potential factors of inventory management practices, the abstracted process in Liu of detailed process is considered as in the earlier research by suwanruji, (2004) and Kliejnen (2005) indicated simulation as a tool of methodological concerns; verification, sensitivity or what if analysis optimization and robustness and uncertainty analysis for strategic levels.
Anily and Federgruen, (1993) researched fixed renting truck cost and constant replenishment interval inventory policy. They used deterministic demand and assumed the demand is identically uniform for all regions through two echelons et al,(1999) modeled logistics network with stop over, travel, and shipping cost. Jayaraman, (1998) studied a logistics networks with the space of location limited by the dimension of products. Inventory holding and warehousing continue to play an important role in modern supply chains. A survey of logistic costs in Europe identify the cost of inventory as being 13 percent of total logistic costs, whilst warehousing accounted for a further 24 percent, Baker,(2007), however determination to control purchase and inventory costs in warehouses in many cases have not been motivated to control purchasing costs in the same way that competitive industry has.
Inventory management offers great potential for organization to reduce costs and improve customer service performance, (Jeffrey et al 2008). However, it should not be forgotten that money saved by cutting inventory costs could be used to improve the performance and add to profitability of the company.
Several organizations have over the past applied inventory management practices; studies show that the united states General Accounting Office, (GAO) use of innovative business practices to improve inventory management and the opportunities. What the researcher wanted to find out is; whether the inventory management practices help Ouru superstore to maintain the flow of inventory in his warehouse.
1.2 Statement of the Problem
It is important that a company maintain adequate stock of material for a continuous supply to the market for an un interrupted production. In doing so, such a company is exposed to two undesirable points, namely; excessive and inadequate inventories. Each of them has dangers. For instance, inventories can lead to unnecessary tying-up of the firm’s funds and loss of profit, excessive carrying cost and risk liquidity while inadequate inventories can lead to production hold ups and failure to meet delivery commitments. The financial managers prefer to keep materials. This situation indeed makes it necessary to examine the inventory management practices and techniques as this can have severe impact on the organization’s performance with associated consequences on the survival of the firm. The study is concerned with the problem of how to maintain optimum level of inventory using inventory management practices.
1.3 Objective of the Study
To assess the effect of inventory management practices on warehouse operation efficiency in Ouru Superstore Kisii Town.
1.3.1 General Objective.
The general objective of this study was to assess the effect of inventory management practices on warehouse operations efficiency
1.3.2 Specific Objectives.
(i) To establish the inventory management practices of Ouru super store
(ii) To evaluate the warehouse operation efficiency of Ouru Superstore
(iii) To determine the effect of inventory management practices on warehouse operations efficiency
1.4 Research Questions
(i) What are the inventory management practices of Ouru Super Store?
(ii) What is the Warehouse operation efficiency of Ouru Superstore?
(iii) What is the effect of the inventory management practices on the warehouse operations efficiency of Ouru Super Store?
1.5 Scope of the Study
This study was limited to assessment of effect of inventory management practices on warehouses operation efficiency taking Ouru superstore situated in kisii town as the case study. The study was conducted between May and August 2012.
1.6 Significance of the Study.
This study was important to management of Ouru super store in adopting ways of efficient inventory management practices. This study was also of immense benefit to students who carrying out researches on inventory techniques in corporate organization especially warehouses. Finally the research was significant in adding to existing literature on the subject.
1.7 Assumptions of the Study
The following were the assumptions of the study; first, the management was to allow the researcher into their premises to do the research. Ouru superstore has adopted inventory management practices. He also has a warehouse to store inventories. All research questions were to be answered honestly
1.8 Limitations of the Study
The study was limited to Ouru Superstore Kisii Town hence its findings may not be generalized to other Superstore. The management was reluctant and uncooperative in giving relevant information citing the confidentiality of the information given, this forced the researcher to engage the respondents in a brief interview to let them know the importance of this study as a strategy to avoid lack of co-operation. Ouru superstore staff may be busy hence lack time to attend the researcher as by their daily chores. The collection of data was based on the questionnaire whereby the respondents may not be accurate, honest and clean in giving their response, therefore the researcher will employ qualitative techniques to select and document, reliable and accurate findings. Some respondents were unwilling to respond because they feared that if they give factual information they may loose their job, hence the researcher assured the respondents of the confidentiality of the information to fight the fear in them.
1.9 Operational Definition of terms used in the study
Buffer stock
Is a term used to describe a level of extra stock that is maintained to mitigate risk of stock out (shortfall in raw materials or packaging) due to uncertainties in supply and demand .
Inventory
Inventory is an idle stock of physical goods that contain economic value and are held in various forms by an organization in its custody awaiting packaging, processing, transforming, use or sell in the future point of time.
A warehouse
A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses and so on.
Obsolete inventory
Refer to inventory that is not usable anymore either due to the product being at the end of its life cycle or has not sold for a set of time period generally determined by the industry.
Carrying cost of inventory
This is the cost a business incurs over a certain period of time to hold and store its inventory. Business use this figure to help them determine how much profit can be made on current inventory. It also helps them to find out if there is need to produce more or less in order to keep up with expenses o maintain the same stream.
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