Inventory Management Practices and Organization Performance of Steel Industries in Nairobi County, Kenya

Abstract

Industries are key to many economies they are used as a proxy for country’s economic growth and development. The steel industry constitutes about 15% of the aggregate production by manufacturing firms hence it plays a key role in the performance of a country’s GDP and many are forecasting that its demand will continue to rise due to various development activities the national government and private firms have embarked on towards realisation of the country’s vision 2030. Inventory management is critical in the aspects of organization performance within the context of steel industries therefore steel companies must check on their inventory management practices in order not to impact on their Organization performance. This is achievable through operation at absolute minimum stock out events with prompt response to market fluctuations while at the same time carrying minimal buffer stocks. The study sought to fill the existent literature gap in the area of inventory management and organization performance in the steel industry. Descriptive research design was used in the study. The target population for this study were employees in the, Quality, administration, sales and marketing, production departments of three steel companies in Nairobi County Kenya. The study employed both primary and secondary during the stages of data collection where questionnaires were administered through drop and pick method while secondary data was obtained from the firms published comprehensive profit and loss statement particularly the company’s sales.  A sample size of 45 respondents was utilized. The pilot study was conducted using a pretest of the questioner using 10% of the respondents that is 5 respondents. The validity of the data collection instrument was examined during the pilot study using a set of experts in the area inventory management as well as the supervisors. The reliability of the data collection was examined through the use of the cronbach alpha coefficient of a threshold of 0.7 and above. The researcher used descriptive method as well as SPSS. V.23 to analyse data. The research established that there is a positive and significant correlation between Economic order quantity and organization performance of steel manufacturing companies in Nairobi County. The study also found a significant positive correlation between Material/Inventory control and organization performance. It also established an existence of a positive and significant correlation between quality control and organizational performance. However, the study found a negative correlation between Legislation and organization performance. The study concludes that organization performance among steel firms in Nairobi County is influenced by Economic order quantity, material/inventory control and quality control. The study therefore recommends that the stakeholders should consider these factors in order to improve the performance of steel manufacturing firms as well as developing policies to protect local steel manufacturing firms from stiff completion from firms in developed countries particularly from China and U.S.A.