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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS

COPY RIGHT © 2014 Institute of Interdisciplinary Business Research 82

MARCH 2014

VOL 5, NO 11

EFFECTS OF MANAGEMENT OF SUPPLY CHAIN ON PERFORMANCE OF

PUBLIC HEALTH INSTITUTIONS IN MIGORI COUNTY IN KENYA.

Abigael Achieng‟ Magak

School of Human Resource Development, Entrepreneurship and Procurement

Department. Jomo Kenyatta University of Agriculture and Technology. P.O BOX 6200-

00200, Nairobi, Kenya.

ABSTRACT

This study was motivated by the desire to understand the continued decline in the

performance of public health institutions in Kenya and if poor planning of the supply

chain could be a major contributing factor. It sought to establish the effect of planning of

the supply chain management on performance of the public health institutions in Migori

County. The research adopted a mixed research approach which was both qualitative and

quantitative to do a survey of the health facilities in Migori county which has only 4

district hospitals and five sub district hospitals, this in itself was already too few to cater

for the health care needs of the entire population of the county which stood at 917, 170

during the 2009 census. The research was done through interviewing staff and analyzing

data of nine hospitals. Data analysis was based on the research questions designed at the

beginning of the research. The quantitative data from the questionnaire was analyzed

using the Statistical Package for the Social Sciences (SPSS) version 17, which was later

used to generate tabulated reports. The results of data analysis showed that stock outs

were indeed very common in the hospitals and that they affected performance. Lead time

was long most of the time due to the long bureaucracies that were involved and that

affected performance. And that much as inventory carrying cost were not so high in the

hospitals, they were always high at KEMSA and that again had a significant influence on

performance. Finally the data analysis showed that supply chain management has a

significant influence on the performance in the hospital. It recommends that purchasing

as a function should be decentralized so that each hospital can respond better to their

unique needs, and also that different hospitals should employ professionals in the

purchasing departments so as to minimize expenditure.

Key Terms: Supply chain, Stock out, Lead time, Inventory carrying cost

1.0 Introduction

1.1 Background of the study

Due to the dynamism of the business environment characterized by intense competition,

diminishing resources and internationalization among other factors, many enterprises are

forced to produce products at lower costs. Many companies can achieve competitiveness

through process efficiency, encompassing corporate internal and external business

process efficiency (Ross, 1988). Supply chain management (SCM) has the potential to

improve on key financial drivers in financial performance namely growth and capital

utilization. For example a recent study explored the financial benefits of collaborative

planning, forecasting and replenishment (CPFR) for several companies, including Procter

& Gamble, Wal-Mart, Sara lee and Nabisco. The study found that sales increased by 12

percent on average from lower stock out losses, improved promotional planning and

increased service levels. The study also revealed that Inventory and related expenses

decreased 20 to 40 percent as a result of lower safety stock because of greater confidence

in the forecasting and planning process (Timme and Christine, 2000).

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A report by USAID, (2006) identifies health organizations in sub-Saharan Africa. The

health sector ranges from traditional healers, pharmacies, and shopkeepers selling health

care products, to non-profit and for-profit clinics and hospitals. There are a variety of

reasons why people use the public health sector including convenience, perceived quality,

confidentiality, or because nothing else is available. Africans of al socio-economic

backgrounds turn to the public sector for their health care needs. Meeting health care

needs in sub-Saharan Africa is an enormous challenge for Ministries of Health (MOHs).

The public health sector is an untapped resource that could be mobilized to help achieve

Millennium development Goals (MDGs). Sub-Saharan Africa will achieve better health

sooner and more efficiently as the public sector is harnessed. MOHs can play a strategic

role in setting the stage – through policies and program interventions – that can influence

the public sector to achieve public health goals. Considering the limitations on public

health budgets and the reality of out-of-pocket spending flowing to the public health

sector, it is time to bring the public sector into the fold as an ally in the struggle to

provide quality health services to a greater number of people USAID, (2006).

The competitive realities of the 1990s appear to demand not only efficiency and high

quality but also capability (Stalk and Haut, 1990), strategic flexibility (Womack and

Ross, 1990) and attention to social environmental concerns (Schmidheny, 1992).

Increasingly, scholars are recognizing that these objectives can only be achieved through

effective strategic processes and organizational capabilities (Senge, 1990; Ulrich and

Lake, 1990). Executives and organizational members can assume a variety of roles in

strategy making process (Shrivastara and Nacham, 1989) Capability of an organization is

determined by how well two or more processes are combined to form competitive

advantage.

In practice what actually creates value for customers is a set of processes which must be

efficient. Organizations need to have the right architecture or structure in place which is

needed to carry out processes that create value. This may involve shared groups, several

departments or even several companies. With processes and architecture in place, the

manager‟s attention turns to securing the right resources. These are human and non

human. Human resources are made of enough people (with appropriate skills to do the

organizations tasks) working effectively in groups. Systems need to be in place to ensure

that strategy is being implemented on time.

1.2 Statement of the problem In 1969 Kenya had a population of 10.9 million. This has risen steadily at an increasing

rate to 38.6 million in 2009. Whilst fifty six percent of the population lives below poverty

line, there has been a substantial input from the government and development partners

which have resulted to improvements in the health sector. However, overally, key health

indictors have been on the decline and significant number of Kenyans cannot access the

medication they need (IKNPP, 2008). The population has kept on growing but the

infrastructure has remained stagnant if not in a dilapidated state. The government

budgetary allocation for health year after year has not made the situation any better. The

allocation for 2010/2011 shrunk from 7% of the total budget in 2009/2010 to 6.5% of the

12.5 billion 2010/2011 budget, way below the AU recommended budgetary proportion of

15%. Allocation for 2013/2014 has further shrunk to 2.17% of the total budget. Prudent

and efficient utilization of funds by the health institutions is therefore important as a step

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towards improving health accessibility and affordability. In Migori County, the focus of

this research, disease prevalence is high with Malaria, UTI, Diarrhoea and HIV/Aids

notably present. Malaria for example reports 170 million working days loss annually

(KHDS 2008-2009) in and its prevalence in Migori County is a key contributor to this

productivity misfortune. Infant mortality rates record 95 per 1000 with fewer than 5

recording 149 per 1000. Private hospitals are few. Public hospitals are 9. With only about

18 doctors, doctor to population ratio is 1:52280. The county displays a profile of a place

with a people in dire need of improved health services. Effort to efficiently employ

available resources to tackle the increasing health challenges in the county is a necessary

remedy. Brewer and Speh (2000) indicated the importance of performance measurement

frame work from learning perspective, customer perspective, process perspective and

financial perspective. Supply chain is major consumer of funds and therefore contributor

to the success and sustainability of organizations. This can be achieved by pursuing a

sustainable collaboration of processes. For this reason sustainable collaboration of

processes are important variables to the success of performance of organizations. Thus,

the purpose of this study, is to examine how public health organizations, particularly in

Migori County, can best manage and implement their supply chain in order to enhance

performance, like preventing running out of essential drugs which causes death.

1.3 General Objectives The main objective of the study is to establish effects of management of supply chain on

performance of public health institutions in Migori County.

Specifically the study will seek:

1. To examine the relationship between stock-outs and performance in public health

institutions in Migori County.

2. To determine the effect of extended lead times on performance of public health

institutions in Migori County.

3. To establish the relationship between inventory carrying costs and performance of

the public health institutions in Migori County.

1.4 Research Questions 1. Is there stock outs and how does this affect the performance of public health

institutions in Migori County?

2. Is there a relationship between extended lead times and customer satisfaction

among public health institutions in Migori County?

3. Is inventory carrying cost a major contributor to the high running cost in public

health institutions in Migori County?

1.5 Justification of the study Public Health facilities have over the years experienced erratic and sometimes non-

supply of essential drug and medical commodities. Recurrent stock-outs, expiry of drugs

and unreliable delivery schedules forced some Kenyans to avoid seeking health services

from government run health institutions. This scenario has weighed on Kenyans as the

burden of diseases snowballed, even as expenditure on health sector increased and the

number of qualified personnel increase in the medical discipline. Therefore access to

drugs and other medical supplies is a missing link between availability of skilled service

providers and a successful health care outcome. The study emphasized the role of supply

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chain to the academic world and the need to practically practice modern supply chain

practices in our public health facilities in order to improve and sustain them.

1.6 Scope The study covered Migori County. Migori County is an administrative unit within

Nyanza Province in Kenya. It is located in south western Kenya bordering Homabay,

Kisii and Narok Counties. It is also important to note that Migori County is bordering the

Kenya Tanzania boarder and hence a lot of business activities take place there. It is home

to Rongo, Awendo, Suna East, Suna West, Uriri, Nyatike, Kuria East, and Kuria West

constituencies. It covers 2005 Sq km and is populated at 1028579 as at 2009 census. Of

this population 43% of people live below the poverty line with the children between 0-14

years dominating at 49% and those above 65years trailing at 3%. The population density

is 353 people per Kilometer squared. Nilotes are a majority with Bantu and Cushitic

speaking groups dotting the region. Economic mainstay is on fishing and fish trade, small

scale gold mining, tourism, and agriculture with concentration on sugarcane, maize,

beans, sorghum, groundnuts, sweet potatoes and sweet bananas. Prominent features are

Thim Lich Ohinga ruins, Nyatike gold mines, Sony Sugar Manufacturing Company and

coming up Kuria Sugar Company.

2.0 LITERATURE REVIEW

2.1 Stock-outs and efficiency. The earliest contributors to our understanding of management of organizations are

management theorist that included practicing managers as well as social scientists. Whilst

more present theorist have tended to be academic, management consultants and

practicing managers tended to reflect upon theories about their personnel experiences in

management with the objective of producing assets of rational principals of management

to be applied universally to achieve organizational efficiency. (Cole, 2004) The classical

theory was developed by Henry Fayol (1841-1925) and FW Tailor (1856 -1915).

Another sociologist by the name Max Weber (1846-1924) developed a theory of

authority of structures and called it bureaucracy. Weber believed in “red tape” that is

excesses of paper work and rules leading to gross inefficiency.

It is not until the later half of the 19th

century that the importance of efficiency has been

widely recognized. In fact there are still organizations that regard supply chain as a

routine, clerical or service section with the role of spending. (Lysons, 1996). The role,

importance and urgency in which organizations can start saving cost are by appreciating

the role of supply chain‟s contribution toward reducing costs. Obsolete, redundant or

surplus materials are simply money sitting on a shelf and still require more money to

spend in managing them. The rapid adoption of just in time (JIT) approaches in recent

years reflect that stocks are expensive and opportunities should be sought to make better

use of money they represent on the shelf (Jessop and Morrison, 1994)

As industrial revolution brought changes, managerial thinking became dominated by

economic and military theory with the result that adversarial relationship dominating

business life. It is obvious that these approaches have impaired the competitive

advantage of business, made work difficult and organizations less attractive place to

work; Management was construed as rather mechanistic process in which decision

makers made their plans through command-and-control mechanism. Business had

hierarchical structures that defined who should obey who (Greenhalgh, 2001). Managers

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role in the old paradigm are almost constrained. Their primary mission is compared with

providing machine maintenance to ensure that work continues according to plan.

To accomplish this, management is organized into hierarchy with most comprehensive

responsibilities at the top and most tasks specific at the bottom. Each manager‟s job is to

assure machine runs smoothly with no interruptions or departures from designed

parameters. The problem with machine system is that it is designed and built to stay in a

fixed form. It does not adjust its structures as everything around it changes. Machines

can never be better than design. Yet in reality, organizations are relational systems that

do not operate according to the law of physics or machines. It the empowered worker, not

hierarchical systems designers, who are in the best position to achieve continuous

improvement and responsiveness to customer‟s quality and efficiency. They make this

effort when they feel that they are included as members of an organizational community

(Greehalgh, 2001).

Until the late 1997, there was minimal collaboration between public and private sectors

within the UN or international development system, and relationships were often

abrasive, with little trust on either side. Partnerships that did exist were largely limited to

public sector relationships between donor agencies and recipient country governments.

Although the UN Charter allowed for suitable arrangements for consultation with non-

governmental, not-for-profit organizations, the relationship between Un agencies and

NGOs in the 1960s hardly constituted partnerships. Consultation was informal,

sometimes challenging, with NGOs often being described as “pressure groups” (Buse &

Walt, 2000)

Changing markets and technology have heightened this appreciation of inter-dependence.

In particular, new developments in biotechnology are making drug and vaccine discovery

and development increasingly expensive (pecoul et al. 1999) as are changes in

intellectual property rights. New York, International AIDS Vaccine Initiative, 1996

Concomitantly, extensive consolidation of the pharmaceutical industry has led to greater

competition within companies thus increasing the opportunity costs associated with

investment in tropical diseases. These changes have encouraged some health advocates to

explore ways in which public and private decision-makers could join forces to develop

and provide health promoting goods to developing countries at an affordable price, while

minimizing risk and guaranteeing a return to the public sector (Buse and Walt, 2000).

The Asia Pacific medical supplies and pharmaceutical marker is as US$ 93 billion

business and throughout the region, expenditure on medical supplies, consumables,

product and pharmaceuticals is set to rise in line with Asia‟s growing demand for

improved health care. Hospitals, labs and clinics are deeply dependent on the availability

and timely arrival of these products from their key suppliers in order to ensure the quality

of patient care. For many buyers, the question is not so much what to buy, since most

hospitals and group practices have been relying on a “trusted” range of medical products

for many years, but how they buy, which is typically unplanned, de-centralized, and

labor-intensive. Health care product manufacturers are saddled with their own set of

issues. Reliant to a large degree on local distributors, there is dissatisfaction with the

quality of warehousing and distribution services and a shortage of reliable market

research information to support strategic sales and marketing efforts, (HNA, 2001).

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There has been a paradigm shift and movement from a world in which the state had sole

responsibility for public good and business maximized profits independently of the

interests of society at large, to a world where success depends on the close synergy of

interests among business, civil society and the state (Buse and Walt, 2000).

2.2 Inventory Lead time. Drawing up a broad plan of where business is going and how it will operate include

organizing people, coordinating all the organization‟s efforts and activities, and

monitoring to check that what is planned is actually carried out. Coordination involves

determining the timing and sequencing of activities so that they much properly, allocating

the appropriate proportions or resources, times and priority (Gray & Fayol, 1984).

The essence of planning is to make present decisions with knowledge of their futurity. It

is the futurity that determines the time span. Results that require long gestation period

will be obtained only if initiated early enough. Hence the answer to questions like what

must be done today, if one wants to be in some particular place in future. The time

decision itself is a risk taking decision in the planning process. It largely determines the

allocation of resources and effort and therefore postponing it is in itself a risk taking

which is an irrevocable decision (Drucker, 1974).

Risk governance is vital for any management frame work. The question is not what all

the risk we are likely to face is; it is what risks can kill an organization and how they

might manifest themselves. Supply chain faces many threats of unexpected and

uncontrolled events and hence there is need to think strategically and work out and find

out what level of risks is acceptable. (Prahaland & Ramaswamy, 2004) The world

Health Assembly resolution 2003, recognized the potential of “contracting” to improve

health system performance. However, contracting, if poorly planned and executed also

has inherent risks (Chandra and Doshi, 2005). India is actively involved on the issue of

contracting therefore, the health planners have to pay due attention on the emerging

issues and latest trends on contracting health services. The magnitudes of inputs required

in health systems are enormous. It may not be possible, even in most developed

countries to render medical care to the whole community free of cost and by one actor,

whether private or public. The one viable alternative can be a joint effort both by public

and private sectors. The participation may be at the level of provision of inputs in respect

of manpower, materials, supply chain management and funding or at the level of

management process in rendering the care. It is also true that there is definite risk with

the contracting system as well. This risk can be reduced to some extent by performance

based contracts, where a payment to the contractor depends at least partially on the

achievement of the particular outcome (Chandra and Doshi, 2005).

The world has changed. Hierarchies have become flattened, reengineered, delayered,

decentralized, globalized, downsized and populated with a generation of young diverse

knowledge workers who do not like to be controlled. Command and control mechanism

have given way to empowerment, whilst markets and contracts have given way to

strategic advances of various types. Organizations that will make out the best of new era

are those that really put their act together and well, those that successfully integrate

strategy, processes, business arrangements, resources, systems, and empowered work

force, This cannot be accomplished unless managers do a good job of creating, shaping

and sustaining business relationship. To achieve their goals, organizations needed a best-

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of-breed solution to support its online procurement and logistics services. The Asia

Pacific medical supplies and pharmaceutical market identified the importance of

partnering with the world‟s best technology, logistics and service provider organizations

to ensure a high quality solution across the supply chain (HNA, 2001). HNA provides

additional and potentially dramatic direct cost savings by offering suppliers high-quality,

lower-cost warehousing services, while at the same time encouraging more rational and

analytical consolidated ordering by providing Buyers with the necessary Web-based

order entry, purchasing methodologies and inventory management services to :" generate

significant indirect and direct cost savings. With planned operations in four Asian hubs

(Japan, Hong Kong, Singapore, and Australia), HNA will need to quickly adapt its

platform and supporting Infrastructure to meet the unique procurement and logistics

needs of its customers (HNA, 2001).

The tenet of improving public health organization‟s employee effectiveness is through

feedback, employee support and development. Outcomes of such human resource

development are successful recruitment and retention, higher job satisfaction, successful

problem solving, and flexibility with potential to meet present and future challenges

(Perlman, 1994). This is linked to learning organizations where people continually

expand their capacity to create the results they truly desire, where new and expansive

patterns of thinking are nurtured, where collective aspiration is set free, and where people

are continually learning to see the whole together (Senge, 1990). This empowerment is a

source of competitive advantage because it is the key to continuous improvement.

So just what is supply chain, (James & Womack 1994) described supply chain in Harvard

Business Review as an extended enterprise consisting of a number of business through

which order flow upstream from market place to raw material supplier. Supply chain can

be described as a connected series of activities concerned with planning, coordinating and

controlling materials, parts and finished goods from suppliers to customers. It is

concerned with distinct flows of material and information through organization (Mason

& Jones, 2004).

In most public sectors as in public health sector organizations, supply chain remains

relatively under recognized, understaffed and lack influence over bigger areas of spend.

This will have to change. The management of organizations will have to understand the

supply chain dynamics and establish performance metrics that lead to competitive

advantage. When a former British chancellor announced a mammoth chop-off the budget

of sterling pound 21.5 billion from the central and local government spending in order to

cater for more pressing need of health sector, supply chain was expected to save half of

that amount. That puts supply chain in an extremely important position, they now carry

the heavy burden of trying to make government political plans bear fruit.

2.3 Current issues of carrying costs and efforts to reduce cost of doing business Public procurement oversight authority (PPOA) now had the onerous task of helping

streamline the public procurement sector and to an extent public sector in a move

development partners and ordinary citizens expect will result in arresting wasteful

spending and corruption witnessed in the Government tendering processes. When the

Nation Rainbow Coalition (NARC) Government took the reins of the country‟s

administration in 2003, Treasury moved quickly to save the services of government from

loosing over Kshs. 100 billions in unpaid claims (pending bills) by briefcase contractors

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for what was later discovered by Treasury to be fictitious claims that was reduced to

Kshs. 1 billion. It is in light of such excessive misuse of scarce public and private

resources by public servants, that Kenyans welcomed the new authority with the hope

that with a modern system of public procurement, there will be fairness and competition

among suppliers of goods and services to the Government (Ministry of Finance, 2008).

To achieve our Vision 2030 growth objective, the Government was of the view that apart

from maintaining macro-economic stability, many of our regulations were inefficient,

ineffective and increased the cost of doing business and therefore hampered the growth

and competitiveness of our public sector. The Government, therefore, embraced bolder

and more aggressive reforms to ease the legal, regulatory and institutional bottlenecks

necessary to create an enabling environment for public sector activities, and to arrest the

decline in our global and regional competitiveness (Ministry of Finance , 2008).

The Government in October 2007, in an effort to further reduces the cost of doing

business in the country, enacted and put into operation the Licensing Laws (Repeals and

Amendment Act) which eliminated an additional 205 licenses and simplified another 371.

It‟s also notable that regulatory authorities whose licenses were deferred undertook

internal administrative and legal reforms that have so far resulted in consolidation of

many licenses, reducing on administrative procedures and thus reducing the cost of

compliance for businesses. (Ministry of Finance, 2008).

The Government‟s policy reforms on economic recovery strategy for wealth and

employment creation (2003-2007), focuses on health reforms and emphasizes the need to

improve access to health care by improving procurement and distribution of medicines,

(KNPP, 2008). In the public sector, essential medicines (KEDL), known as Kenya

essential drug list are procured, stored and distributed by KEMSA. KEMSA undertakes

procurement and distribution centrally for Kenya‟s public health sector, and is

undergoing reform to streamline and strengthen this important function (KNPP, 2008).

Kirunda (2008) says that national medical stores of Uganda undertook, for over six

months, to deliver pediatric antiretroviral drugs in vain. The hospitals had received the

last supply form NMS in February last year and the drugs had a shelf life of only three

months. Instances of reports of medicines expiring in the national medical stores and

others vanishing before reaching their destinations have been around for years. This is

happening despite the establishment of NMS, corporation as the main supplier of bulk

medicines to all the public health facilities in the Uganda. This indicates that governance

of the institutes contributes to such shortages and hence it could indicate that the staff are

not satisfied with existing structure and hence resort to diversion or purely

underperformance.

In the meanwhile, drug shortages meant that some infants went without drugs for several

days. At some centers, patients were switched back from second-line to first-line

treatment even though first-line therapy previously had failed, reports cited scenarios

from 2007. The danger with such a situation is that it leads to drug resistance, whose

costs are immense, according to the Centre for Global Development which has formed a

working group to address the emerging crisis (Kirunda, 2008).

According to the head of CGD‟s working group on drug resistance, the cost of improper

management of medicines and health care in the developing world will be measured not

only in terms of wasted money but also in lives needlessly lost (Kirunda, 2008).

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The public health sector must protect consumers by regulating and ensuring quality

within the public health sector. Even in countries where the private sectors are strong,

significant numbers of consumers will continue to go to public sector providers. This

does not mean, however, that they will receive quality care. Consumers are not always

able to judge the competency of public providers, even when they perceive them to be

friendly and caring. For this reason, the public sector must play a regulatory and

oversight role in licensing and regulating public providers to ensure quality USAID,

(2006).

The private sector can provide public financing of the public health sector to create more

efficiency which will then allow the public sector to better target their resources to

community health insurance. They create an enabling environment for the public health

sector through legislation and regulation and establishing formal partnerships with the

public health sector to encourage delivery of certain kinds of health services, such as

family planning and reproductive health. Public-Private partnerships, contracting

services, Leasing equipment and facilities USAID, (2006).

In the contribution to the second Kenya National Health Sector Strategic Plan (NHSSP

II) 2004-2010 of the Ministry of Health, Elizaphani (2007) observed that whereas the

supply of pharmaceutical and non-pharmaceutical products to faith based organizations

has been cost-effective and efficient for many years, public sector provision has been

largely supply-driven and unsatisfactory. In 1997, key stakeholders proposed measures

to implement the policy imperative of the Kenya Health Policy Framework 1994- 2010.

The main thrust of the proposed mechanism was a shift from a supply driven to a demand

– driven system. This required institutional, legal and policy related interventions.

These efforts led to the creation of the Kenya Medical Supplies Agency (KEMSA) in

2001. It was equally proposed that most supplies be centrally procured to ensure quality

and economies of scale. It was envisaged that KEMSA would take over the central

procurement functions currently handled by the MOH headquarters, whilst improving the

logistics capacity of the supply chain. The medium-term procurement plan for health

commodities (MTPP) would guide the central procurement requirement. The required

reforms to procure and distribute supplies were thus expected to Institute appropriate

procedures for decentralized (demand driven) procurement, including quantification of

requirements, costing, budgeting, purchasing, warehousing, stock management,

promotion of rational use and accounting.

2.4 Supply chain management and improvement on performance Opportunities to strengthen the supply of KEDL include improving efficiency in

medicine quantification, streamlining procurement procedures and processes, improving

storages conditions, improving distribution functions and strengthening quality control

testing, post market surveillance and improving disposal procedures (KNPP,2008).

KEMSA has to focus on a shift from push supply to a pull supply systems. This requires

capacity strengthening of procurement and supply management at all levels and

concurrent integration of existing paralleled distribution systems that are uncoordinated,

and often duplicative and wasteful (KNPP, 2008). The storage infrastructure needs

improvement in terms of capacity, design, maintenance and security and development of

guidelines and tools and comprehensive training in management In order to improve the

performance of personnel to better manage stocks and prevent losses through expiry and

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pilferage. Good pharmaceutical procurement practice (GPPP) by procurement agencies

and quality control (QC) testing recognizes the use of QC institution to ensure that all

medicines in the country are registered by the pharmacy and Poisons board.

Disruptions in supply chain can be expensive. A recent study by (Frazelle, 2002) showed

that there was a 9 to 10 percent decline in share price on a day following announcements

of supply disruptions. The study further suggested that Supply planning follows logistics

planning because there is a need for inventory availability schedule and fill rate

requirements. It is important therefore to hold each logistics activity accountable to

business measurements that align the execution and planning of activities in the chain.

Inventory availability is the most important aspect of customer service in an organization

and they are ironically the most expensive costs and also difficult to turn back to liquid

asset after acquisitioning (Frazelle, 2002).

The challenges facing managers is to ensure that efficient inventory levels are in place in

each required category hence inventory levels should be minimized while satisfying

customer service requirement. Financial performance indicators of organizations

performance include total supply chain cost (TSC) which include cost related to supply

planning, supplies management and procurement cost, telecommunication, office space

and purchase order costs (POC). Labour is typically the most expensive element in

purchase order costs and so reducing person hours per purchase is critical success factor.

Additionally the key to reducing inventory level then is to dramatically reduce cost per

purchase order. Other relevant costs drivers to inventory carrying costs are transportation

and warehousing (Frazelle, 2002).

But just what exactly do boards want from supply chain? The answer is a combination of

operational efficiency and strategic effectiveness. A public healthcare provider will

require security of supply and that means to always have the right instruments in

operating theaters or right ingredients for its patient meals. It is also means that decisions

should be made based on value for money, which is defined as the optimal combination

of whole life cost and quality to meet customer‟s requirements. Therefore cost reduction

is certainly high on many board agendas particularly in today‟s environment and because

every dollar saved on external spends is potentially a dollar added to the bottom line.

(Geraint & John, 2002). Supply quality indicators is provided for by perfect purchase

order percentage (PPOP) provided for in the numbers of orders that arrive in time without

damages, with perfect documentation, at the right location, correct specification and in

correct quantities. This should be monitored for each vendor and each location (Frazelle,

2002).

Forecasting is important to improve on performance. Inaccurate focusing is brought about

by failure of organizations to hold any one accountable for the accuracy and its

measurement. Bias is introduced in focusing if true demand is not recorded. This will

result to back orders and overstated demand patterns as evidenced by cancellation of

orders and/or returns. Ignorance is due to lack of awareness of high-level industry and

economic trends provided by customer information, major promotional events and/or

price shifts (Frazelle, 2002). Gaming (customers lack trust for the vendors capability to

stock product), customers often orders more than truly needed to protect against

shortages in case of unsatisfied demand. Back orders, are often unreported and therefore

are not incorporated into the forecast process. It is important that demand is captured

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close to the point of consumption as much as possible. Contribution to inventory

carrying cost (ICC) include opportunity cost of capital (rate of return that could

reasonably be achieved for each dollar not invested in inventory), storage and handling

method, loss due to obsolescence, damage and or pilferage, insurance and taxes.

Frazelle, (2002), showed that lead time (L), the time that taken from placement of order

until the time the inventory is available is very key to satisfying customers demand.

Supplier relationship enhanced by face to face, telecommunication or internet need to be

aggressively and strategically developed. The reliability, predictability and value added

links with suppliers serves as foundation for ability to serve customers reliably and with

increasing value. Wal-mart‟s and Dell‟s suppliers‟ relationship is foundation of their

business success. Supplier relationship and partnership imply sharing in profit and losses

stemming from changes in material, information of cash flows between the partners. A

recent program initiated by Procter and Gamble (P&G), customers were given product

discounts from implementing standard guidelines for receiving dock operation allowing

P&G trucks and carriers to unload faster. This has evolved to the point of permitting

suppliers place replacement orders on behalf of customers using vendor managed

inventory (VMI) and monitoring component inventory level of their customers from the

vendor‟s premises. This is made possible by electronic data interchange.

Failure to share demand information, suppliers are left guessing future demands and leads

to erring by offering excess inventory built in at every point where guessing occurs.

Demand and information sharing eliminates the guesswork in supply chain and inventory

planning. In world class supply chain, order processing is done by e-procurement,

purchase orders placed electronically. This has cut the cost of orders by half (Frazelle,

2002). In some cases price never fall but the soft savings-time of order to receipt of goods

and time created within supply chain are valuable. In other instances, supply

rationalization has had huge discounted prices that have made perfect order cost

effective. Freed from administration burden, more time can be devoted to supplier

management, monitoring performance, review of business need with users and suppliers

(Parkinson, 2002).

In supply chain, transportation is the most expensive activity representing 40% of most

organization logistics expenses (Frazelle, 2002). It is therefore important to reduce

transportation costs while maintaining or improving customer service levels.

Transportation quality and reliability are just as important as cycle time. Time is literally

money in transportation: Quick transit loading and unloading times, vehicle detention

time and delayed in traffic jam for instance translates into greater leverage of the

organization‟s capita. A shipment delivered quickly to wrong location or with damages

is of no use to the shipper or the shipper‟s customer. A shipment that is claim free, on

time arrival, lowest possible transportation cost, and right quantity and meets the

shipper‟s customer satisfaction may be a good quality indicator of a successful shipment

(Frazelle, 2002). Net work design or type of shipment and fleet management choice is

very critical. Productivity is expressed in terms of utility of container and vehicles by

way of percentage cube or weight for the former and availability in hours per vehicle and

number of deliveries per hour per vehicle for the latter.

Logistics of supply management makes it possible for an organization to optimize service

offerings through the identifications of best practice, common (key) infrastructure

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components, systems analysis, processes and training with consequent improvements in

the bottom line performance. It provides the results by relying on simple, explicit

objective linkages between business outcomes (metrics), process (ways if working) and

the necessary enablers (IT and people) to achieve business targets. It ensures coherency

between business units and between enterprises because there is a common agreement on

metrics-the performance measurements framework describing what is meaningful

measure and align with performance attributes such as asset management, cost control,

flexibility and responsiveness. Process reference model integrate the well known

concepts of business process reengineering, benchmarking and process measurement into

cross functional frame work. This is the missing knowledge gap and once the captured,

the process reference model can be implemented to achieve competitive advantage,

describe unambiguously, communicated, measured, managed and controlled, tuned and

returned to specific purpose of improving performance and bottom line.

2.5 Performance

Over the past decades, there is a growing acknowledgement of quality and safety

concerns in health care and the need to close the „quality gap‟. Many stakeholders,

including health care providers (individual professionals and organizations such as

hospitals or nursing homes), consumers, insurers/payers, health services researchers,

quality improvement organizations and government entities, have become engaged in the

movement towards improvement of health care quality and safety .

Understanding progress in quality improvement is however hampered by an insufficient

ability to consistently assess the quality of health care, or to compare performances

among individual health care providers or organizations (Burns, 2002). The need for a

level of standardization has led to the external endorsement of sets of performance

indicators and their reporting for accountability. These performance indicators may

pertain to a specific medical condition or profession or an area of health care (e.g. mental

health care, rehabilitation, nursing home or hospital care).

Concerning hospital care, sets of performance indicators may be used by various

institutions, including national regulatory boards, health care insurers and consumers‟

organizations. Besides quality improvement alone, the usage of performance indicators

may facilitate consumers‟ choices for specific providers and health care insurer‟s

decisions on purchasing of health services. (Kowalski,1991).

In The Netherlands, a mandatory set of national performance indicators (Basisset

Prestatie-indicatoren) has been implemented in hospital care since 2003, and this set is

currently being extended with condition-specific sets of performance indicators . Based

on the results obtained for these sets of performance indicators, a considerable number of

improvement projects have already been initiated in Dutch hospitals, either or not on the

instigation of the Netherlands Health Care Inspectorate .

Apart from the obvious advantages on the organizational level, the usage of performance

indicators may give rise to a number of managerial issues. Hospitals are confronted with

a rapidly growing number of externally imposed sets of data to be gathered, leading to

increasing registration activities and costs, with the impact on patient outcomes being to a

considerable extent unknown. A major issue is therefore the harmonization of the sets of

national hospital performance indicators with other, externally imposed initiatives to

assess and monitor the quality of hospital care. (Stevenson, 2002). Moreover,

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harmonization with internal quality management systems and planning and control cycles

of individual hospitals is needed. It has however been noted that harmonization may be

only in part feasible and desirable. Strategic choices are therefore needed, to balance on

the one side the efforts needed to comply with externally defined performance indicators

and on the other side their potential benefits on the organizational level.

As it has been consistently shown that quality of health care needs improvement all over

the world, the issue has been high on the national and international political agendas for

decades. The Institute of Medicine (IOM) in the US has defined health care quality as

“the degree to which health services for individuals and populations increase the

likelihood of desired health outcomes and are consistent with current professional

knowledge”. An often used method to describe the attributes of quality of health care

includes its structure, processes and its outcomes. The structures are the innate

characteristics of providers and the system, whereas the processes pertain to what health

care providers do in delivering care, and the outcomes to what happens to patients,

particularly with respect to their health.

Independent Variables Dependent Variable

Figure 2.1 Conceptual Frame work

3.0 RESEARCH METHODOLOGY

3.1 Introduction

According to Kothari (2003) research methodology involves details in approaches and

procedures used in carrying out studies. It includes the techniques, methods and

procedures adopted in the research. This chapter discussed the research design, target

population, sample and sampling procedures, research instruments, validity and

reliability, data collection procedure and data analysis techniques.

3.2 Research Design Descriptive survey was adopted in conducting this study because it is concerned with

describing analyzing and reporting conditions that exists or existed (Kothari, 1985).

Survey method was widely used to obtain data in evaluating present practices and in

providing basis for decision (Sekaran, 1995). This design was adopted since it was

economical in terms of time and funds. This study was non-experimental in nature and

Stock-out

Performance

Inventory carrying

costs

Lead time

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was concerned mainly with explanations, descriptions and explorations of opinions,

attitudes, preferences and perceptions of senior administrators and supervisors in the

institutions. Again this design assisted the researcher to explore the existing status of

procurement planning within the hospitals and establish the contributions it makes to the

effective management of the institutions.

3.3 Study Area The study area was Migori County of 2005 sq km and a population of 1028579 and home

to Rongo, Awendo, Suna East, Suna West, Uriri, Nyatike, Kuria East and Kuria West

constituencies. Health institutions within this area were surveyed and inferential methods

used to make generalizations to the wider population. Specifically the hospitals visited

were Migori district hospital with a total of 86 beds and two cots, Rongo district hospital

with a total of 42 beds and 2 cots, Kuria district hospital with a total of 70 beds and 4

cots, Kegonga district hospital with a total of 12 beds and no cot, the sub district hospitals

visited were Isibania SBH with 26 beds, Macalder SBH with 42 beds, Karungu SBH with

24 beds, Ongo SBH and Awendo SBH. All these hospitals had one Doctor assigned to

them.

3.4 Target population A population refers to the aggregate of all cases that can conform to some designated set

of specifications. It is the entire set of relevant units of analysis or data (Kothari, 2008).

The study population comprised of all the Doctors and the medical officers in charge of

the respective hospitals whish were a total of 9, together with the supervisors and the

store keepers. This has been presented on the table below.

Table 3-4 Target Population

Rank Number

1 Doctors in charge 9

2 Supervisors 9

3 Store keepers 9

Total 27

3.5 Sampling Technique Sampling is the process of selecting a number of individuals for a study in such a way

that the individuals selected represent a large group from which they are selected

(Mugenda and Mugenda, 2003). Therefore, census survey was used. All the medical

officers in charge and supervisors of the 9 hospitals together with 9 store keepers were

interviewed for more accuracy. These hospitals were representative of the entire

population hence it was not necessary to do sampling.

3.6 Data collection Instrument Both Primary and Secondary data were collected. The selection of tools for data

collection was guided by the nature of data that was to be collected, the time available as

well as the objectives of study. Primary data was obtained using a questionnaire. The

questionnaire consisted of both open ended and closed ended questions covering issues

related to supply chain and performance. Open ended questions allowed free responses

from the respondents and the closed ended questions allowed responses from the

respondents from limited stated alternatives where a Likert scale was adopted. According

to Mugenda & Mugenda (1999), the open ended or unstructured questions permit greater

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depth of response from the respondents while the closed or structured questions are

usually easier to analyze. The Questionnaire was chosen because it was easier for the

researcher to collect a lot of information over a short period of time.

3.6.1 Validity and Reliability of Instruments

Mugenda & Mugenda (1999), defines validity as the accuracy and

meaningfulness of the inferences which are based on the research results. The

questionnaire was piloted to determine its validity. Two nurses from two different

hospitals were given the questionnaire before the actual study. Test retest method

was used to attest the reliability of the instrument (Chen, 1999).

3.7 Data Analysis The information on the questionnaires were coded to capture all the relevant information

before the data was synthesized and grouped and tabulated via a computer. The data

collected was analyzed using content analysis. Content analysis summarized data into

themes which thereafter were coded for analysis. The quantitative data from the survey

questionnaire were analyzed using the Statistical Package for the Social Sciences (SPSS)

version 17. SPSS version 17 package was used because it is a comprehensive system for

analyzing data and can take data from many types of files and use them to generate

descriptive statistics, complex statistical analysis, tabulated reports, distributions and

trends. The descriptive statistics format was also used to summarize and organize the data

in order to generalize and infer relationships.

4.0 RESULTS AND DISCUSSIONS

4.1 Introduction

This chapter presents analysis done in relation to the study objectives and research

questions in chapter one of this report under the topic, “effects of management of supply

chain on performance of public health institutions in Migori County”.

4.2 Rate of Respondents

The researcher prepared 27 copies of questionnaire for this study that were issued on 27

respondents. The response rate was 100 percent which was very good response rate.

Tables showing frequencies and percentages were generated from the questionnaire

issued to various respondents in the Public hospitals in Migori County. This information

is displayed on table 4.2.

Table 4.2 Rate of Respondents

Response Frequency Percentage (%)

Actual Response 27 100%

Non response 00 00%

Total 27 100%

4.3 Stock out

It was noted that stock outs were very common in the facilities and that it in turn lead to

poor performance in the hospitals. As displayed on table 4.3, 74.1% of the respondents

strongly agreed that indeed there were stock outs in their institutions, where as nobody

was of a contrary opinion hence 0% could disagree with this. Frequency of the stock outs

was also found to be significant as 37% and 48.1% of the respondents agreed and

strongly agreed respectively that there was high rate of stock outs while 7.4% disagreed

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and 0% strongly disagreed to the same fact. On poor planning 22.2% and 37.0% of the

respondents agreed and strongly agreed respectively to the fact that poor planning was a

major contributor to stock outs on the other hand 11.1% and 11.1% of the respondents

disagreed and strongly disagreed to the facts. Of the respondents 22.2% and 77.7%

agreed and strongly agreed respectively that in deed there were long bureaucracies in

replenishing stock and of these again 25.9% and 74.1% of the respondents agreed and

strongly agreed respectively that the long bureaucracies was indeed a serious contributor

to stock outs. None of the respondents could disagree to the fact that there were long

bureaucracies and that they were causing stock outs. Again 18.5% and 55.6% of the

respondents agreed and strongly agreed respectively that stock outs were affecting the

performance of the hospitals while 7.4% and 3.7% of the respondents disagreed and

strongly disagreed respectively and 14.8% remained neutral and most of them gave

reasons that other services were could still be offered even though there could be stock

outs. Again some drugs were being delivered by the NGOs and sometimes they would

not be replenished immediately. Another major contributor to stock out was found out to

be corruption. When cost sharing was introduced in to the hospitals some little money

was collected and could be used for buying some of the supplies. This either was never

done or if done then much of the money would disappear in people‟s hands.

4.3 Table Influence of stock out on performance

SD D N A SA

F % F % F % F % F %

There is stock out 1 0% 0 0% 2 7.4% 5 18.5% 20 74.1%

Stock out frequently occur 0 0% 2 7.4% 2 7.4% 10 37.0% 13 48.1.%

Poor Planning and stock outs 3 11.1% 3 11.1% 5 18.5% 6 22.2% 10 37.0%

Long bureaucracies 0 0% 0 0% 6 22.2% 21 77.7% 0 0%

Bureaucracies and stock out 0 0% 0 0% 0 0% 7 25.9% 20 74.1%

Stock out vs service delivery 1 3.7% 2 7.4% 4 14.8% 5 18.5% 15 55.6%

SD-Strongly Disagree D-Disagree N-Neutral A-Agree SA-Strongly Agree

4.4 Lead time

This is the span of time taken between the time an order is made and when it is delivered

to the end user. In this case most of the time the drugs were ordered from KEMSA and

not from suppliers hence they could no ascertain whether the suppliers delayed or not.

However the requisition that was made through KEMSA always took too long to be

received. The fact that centralized purchasing was being practiced made it unnecessarily

long to receive the supplies table 4.4. From the questionnaires 14.8% and 74.1% of the

respondents disagreed and strongly disagreed respectively to the statement that there was

timely delivery of the drugs, while 0% could agree to this fact. 22.2% and 55.6% of the

respondents agreed and strongly agreed respectively that right choice of suppliers could

lead to shorter lead time general*ly the lead time -while 18.5% of the respondents

disagreed to that fact and none at all could strongly disagree. 14.8% and 14.8% of the

respondents disagreed and strongly disagreed to the fact that the stock brought could not

meet the exact needs of the clients while 37.0% and 7.4% of the respondents agreed and

strongly agreed respectively that stock brought to the institution could not meet the needs

of the clients 25% of the respondents remained neutral on this issue. On centralization

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18.5% and 74.1% of the respondents agreed and strongly agreed respectively that indeed

centralization of purchases lead to delayed lead times hence inefficiency while 7.4%

disagreed.

4.4 Table Relationship between Lead time and performance

SD D N A SA

F % F % F % F % F %

Poor There is timely delivery 20 74.1% 4 14.8% 3 11.1% 0 0% 0 0%

Choice of suppliers 0 0% 5 18.5% 0 0% 6 22.2% 15 55.6%

Stock and needs 4 14.8% 4 14.8% 7 25.9% 10 37.0% 2 7.4%

Centralization and 0 0% 2 7.4% 0 0% 5 18.5% 20 74.1%

efficiency

SD-Strongly Disagree D-Disagree N-Neutral A-Agree SA-Strongly Agree

4.5 Inventory carrying cost

This refers to the cost a business incurs over a certain period of time, to hold and store its

inventory. This includes warehousing costs such as rent, utilities and salaries, financial

costs such as opportunity costs and inventory cost related to perishability, pilferage,

shrinkage and insurance. According to the study 37.0% and 51.9% of the respondents

felt that inventory carrying costs were high to a large extent and to a very large extent

respectively and that 14.8% and 74.1% of the respondents felt that the high inventory

costs indeed lead to high running costs to a large extent and to a very large extent

respectively on the other hand 3.7% and 7.4% of the respondents felt that the inventory

carrying cost was high to a small extent and very small extent respectively and that of

these 0% of the respondents felt that the high inventory cost in turn lead to high running

cost to a small extent and very small extents respectively. Of the respondents 14.8% and

74.1% to a large extent and to a very large extent respectively felt that the high cost

would lead to wasted resources while 0% of the respondents felt that the high costs would

lead to wasted resources to a small extent and very small extent. Again 14.8% and 44.4%

of the respondents felt that inventory costs were manageable to a small extent and to a

very small extent respectively. However 11.1% and 29.6% of the respondents felt that

inventory carrying costs were manageable to a large extent and very large extent

respectively as seen in Table 4.5. Most of the respondents felt that the carrying cost was

very manageable especially if purchasing was decentralized and the procurement

department made active, however some felt that there core business was service delivery

in the health sector and hence outsourcing of the purchases could make the facilities to

concentrate more on their core business.

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Table 4.5 Inventory carrying cost and performance

VSE SE ME LE VLE

F % F % F % F % F %

Inventory costs are high 2 7.4% 1 3.7% 0 0% 10 37.0% 14 51.9%

Inventory and running cost 0 0% 0 0% 3 11.1% 4 14.8% 20 74.1%

High cost wasted resources 0 0% 0 0% 3 11.1% 4 14.8% 20 74.1%

Inventory costs are manageable 12 44.4% 4 14.8% 0 0% 3 11.1% 8 29.6%

VSE-Very Small Extent SE-Small Extent ME-Moderate Extent LE-Large Extent VRE-

Very Large Extent

4.6 Performance/ Service Delivered Performance in the health sector in this case was ascertained when the drugs were always

available and in the right state and standards. Of the respondents 55.6% and 25.9%

agreed and strongly agreed respectively to the fact that the drugs brought to the respective

facilities are of the required standards, while none of the respondents could disagree or

even strongly disagree to that fact. 25.9% and 37.0% of the respondents agree and

strongly agree respectively that services offered are indeed of satisfactory quality while

11.1% and 7.4% of the respondents disagreed with that stating that insufficient medical

supplies sometime hindered service delivery. On specialization 11.1% and 63.0% of the

respondents agreed and strongly agreed respectively that centralizing the purchasing

function leads to poor performance. This they gave citing that many at times due to the

long bureaucracies involved in centralization some very essential goods could be missing

at critical time and this would affect performance. Again 22.2% and 37.0% of the

respondents disagreed and strongly disagreed that quality of drugs does not affect

performance while 25.9% agreed to this fact Table 4.6. An example was given of the

vaccines, that many at time were missing from the facilities and since they are meant to

be given according to age most of the children would then receive the drugs when they

are past the right age which was very dangerous. Majority of the respondents felt that

services offered were quite satisfactory despite the few hiccups when it came to drug

supplies.

Table 4.6

SA A I D SD

F % F % F % F % F %

Drugs meet standards 7 25.9% 15 55.6% 5 18.5% 0 0% 0 0%

Services are satisfactory 10 37.0% 7 25.9% 5 18.5% 3 11.1% 2 7.4%

Centralization and performance 17 63.0% 3 11.1% 0 0% 0 0% 7 25%

Quality affect performance 0 0% 7 25.9% 4 14.8% 6 22.2% 10 37.0%

SA-Strongly Agree A-Agree I-Indifferent D-Disagree SD-Strongly Disagree

4.7 Supply chain management

Supply chain is basically the link from the manufacturers, the suppliers, the facilities in

this case the hospitals and finally the end users who are the customers. In this case proper

supply chain management was gauged when there were reduction in costs especially the

carrying costs, again when there was lower or no stock outs, again when better forecasts

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were put in place and less safety stock, with all these in place performance would be

good. From Table 4.7, 25.9% and 74.1% of the respondents agreed and strongly agreed

respectively that indeed proper management of the supply chain would help in reduction

of cost and none of the respondents at all felt otherwise. On stock outs 18.5% and 55.5%

of the respondents agreed and strongly agreed respectively that there were reduction in

the rate of stock outs when supply chain was properly managed, 3.7% of the respondents

chose to remain neutral about the matter and none was of a contrary opinion. Of the

respondents 14.8% and 77.7% agreed and strongly agreed that proper management of

the supply chain would lead to better forecasts and shorter lead times, 7.4% remained

neutral while none of the respondents felt otherwise. Again 18.5% and 55.6% of the

respondents agreed and strongly agreed that proper management of the supply chain

would lead to increased customer satisfaction, while 25.9% disagreed to this fact giving

reasons that even though the supply could be well managed it would be important ensure

that service delivery was also good enough.

4.7 Table Supply chain management

SD D I A SA

F % F % F % F % F %

Reduction in costs 0 0% 0 0% 0 0% 7 25.9% 20 74.1%

Reduction in stock outs 0 0% 0 0% 1 3.7% 5 18.5% 21 55.6%

Better forecast and lead times 0 0% 0 0% 2 7.4% 4 14.8% 21 77.7%

Increased customer satisfaction 0 0% 7 25.9% 0 0% 5 18.5% 15 55.6%

SA-Strongly Agree A-Agree I-Indifferent D-Disagree SD-Strongly Disagree

5.0 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

This chapter deals with the summary, conclusions and recommendations. The entire

summary highlights on the entire effects of management of supply chain on performance

of public health institutions in Migori County. Conclusions were drawn from the answers

that the research questions sought to understand. Recommendations were based on the

conclusions drawn while also giving some research areas that can be employed to

increase awareness on management of supply chain.

5.2 Summary

The general research objective was to establish the effects of management of supply chain

on performance of public health institutions in Migori County. Those that responded to

the study were 27 out of 27 respondents and that was the actual number that was used for

the analysis.

5.2.1 Stock out

The research objective was to examine the relationship between stock outs and

performance in public health institutions in Migori County. The data collected showed that

indeed there were stock outs in the institutions and that it affected performance

negatively. Most of the respondents cited that many at times there were stock outs of some

very essential drugs or even other supplies and hence it became difficult to ensure the

services were delivered well. Like in case for example when basic things like gloves were

out of stock it became very difficult to render some services.

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5.2.2 Lead Time

The research objective was to determine the effect of extended lead times on performance

of public health institutions in Migori County. From the finding, purchasing of most of the

drugs were done through KEMSA. Requisitions could then be forwarded from different

institutions, which are unique to the different institutions. It took a long time to receive

these requisitions because many such requisitions were put by many hospitals and so

clearing took a long time. A few time the money collected in the various institutions were

used to purchase drugs and other supplies, this again would take long because of the poor

relationships between the suppliers and the hospitals themselves and also due to long

bureaucracies. The data collected showed that extended lead time affect the performance

negatively. Most of the time the orders were not delivered on time and as a result the

extended lead time lead to patients sometime going without drugs.

5.2.3 Inventory Carrying Cost

Research objective three was to establish the relationship between inventory carrying cost

and performance. The response showed that the inventory carrying cost was not so high

due to the fact that in most cases the drugs were kept in the institutions‟ premises.

However it was still noted that if decentralized purchasing could be practiced then the

inventory carrying cost at KEMSA would go down, and this would lower the running

cost of the body. On the same note at time the stores at KEMSA would be full to an

extent that some drugs would be put outside, this spoiled the conditions of the drugs.

Sometimes drugs issued were expired due to the fact that they could take too long before

being issued again this contributed to high inventory cost.

5.3 Conclusion The researcher drew the conclusions based on the research questions which had been

formulated in chapter one and they are as follows:

Is there stock outs and how does it affect performance of public health institutions in

Migori County? Stock outs are very rampant in the public health institutions and it affects

performance very negatively as could be shown by 95% of the respondents. This was in

line with Johnson & Klassen (2005) argument. This was about research question one.

Is there a relationship between extended lead times and customer satisfaction among

public health institutions in Migori County? Since most of the respondents to a large

extent agreed that there extended lead times and this affected the supply of drugs

adversely. 95% of the respondent agreed to this fact while expressing fears of even

possibility of some patients dying due to missing drugs on time. This was consistent with

research question two.

Is inventory carrying cost a major contributor to the high running cost in public health

institution in Migori County? The carrying cost was majorly felt by KEMSA because they

do bulk purchasing and was not majorly felt by the various institutions, other than that

other medical supplies that were supplied by the NGOs are the ones that were kept at the

hospitals‟ stores. This was about research question three.

5.4 Recommendations

This section was informed from the research questions that asked possible

recommendations that should be given to improve the performance in each of the three

research questions. From the study, the following are the recommendations as

established by the research: There is need to decentralize purchasing in the public health

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institutions because KEMSA gets overwhelmed and it becomes difficult to ensure

quality.

5.5 Areas for Further Research

Further research should be undertaken on the following areas: The supply chain

management at KEMSA and if an improvement in their supply chain could improve

performance in the various institutions that they supply. Again it would be important to

do a research on whether decentralized purchasing could be done in the hospitals to

address the unique needs of different institutions.

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