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EFFECTS OF WAREHOUSING MANAGEMENT ON ORGANIZATIONAL
EFFICIENCY, A CASE STUDY OF OURU SUPER STORES, KISII
ODHIAMBO CHRISTINE ALUOCH
A RESEARCH PROJECT SUBMITTED TO THE BOARD OF UNDERGRADUATE
STUDIES IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD
OF THE DIPLOMA IN PURCHASING AND SUPPLIES MANAGEMENT SCHOOL OF
BUSINESS AND ECONOMICS, KISII UNIVERSITY.
SEPTEMBER, 2017
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DECLARATION AND RECOMMENDATION
DECLARATION
This is to certify that this Research Project is my original work and has not been presented or
submitted for the Award of Diploma or Degree in any institution.
Signature……………………………… Date……………………………
CBO5/10001/16
ODHIAMBO CHRISTINE ALUOCH
RECOMENDATION
This Research Project has been submitted for examination with my approval as the University
Supervisor.
Signature……………………………… Date……………………………
Mr. Kennedy Kerongosi
Lecturer,
School of Business and Economics
Kisii University.
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DEDICATION
Special dedication to my parents, Mr. and Mrs. Richard, dear brothers and sisters who have also
contributed in a great deal towards my spiritual, academic, social, economic growth. God bless
you abundantly.
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ACKNOWLEDGMENT
I would like to acknowledge my Almighty God for His free gift of life during the research
period. I will also like to acknowledge the efforts of my supervisor Mr. Kennedy Kerongosi for
his supervision during the preparation my Research Project.
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ABSTRACT
The general objective of the study was to assess the effects of warehousing management onorganizational efficiency, a case study of Ouru Super Stores, Kisii. The study was guided by thefollowing specific objectives; to determine how inventory classification contributes to storesefficiency, to find out how Material codification contributes to stores efficiency and to find outhow Material inspection enhance stores efficiency of Ouru Super Stores, Kisii. The studyadopted a descriptive case study design to obtain pertinent and precise information on the currentstatus of the phenomena, situations and groups under study Mugenda and Mugenda (1999). Thetarget population of the study included employees of Ouru Super Stores whose target populationis 126. The study used 30% from each department to draw a sample size of 39 respondents. Theinstruments were presented to my supervisor who examined the content of the instrument andmake necessary corrections to justify validity. Reliability of questionnaires was determined bytest-retest. The respondents were requested to respond to questionnaires for the second time toconfirm the consistence level of the resulting; second responses were conducted after three days.The completed questionnaires were edited for completeness and consistency. Descriptivetechnique was used to analyze data collected where statistical measure of central tendency likemean, weighted average and percentages. Questionnaires were coded sequentially to ensureuniformity during presentation. It also involved searching for irregularities as well as pattern inrelation to research questions. The words and phrases were categorized based on researchobjectives. The analyzed data was presented in frequency tables, percentages and explanations.The study found out that better coordination of the people and activities dealing with materials isone of the contributions of inventory classification to stores efficiency; similarly, the study foundout that hastened inventory turnover, better communication and cooperation and reduction ofmaterial obsolescence are also the contribution of inventory classification to stores efficiency.Reduction of inventory costs is one of the contributions of material codification to storesefficiency; on the other hand the study found out that efficiency in procurement and quickcommunication are also the contribution of material codification to stores efficiency. Qualitydelivery is one of the contributions of material inspection to stores efficiency of Ouru SuperStores, Kisii, on the other hand, the study found out that stores efficiency and quality service tothe organization and the clients are also part of the contribution of material inspection to storesefficiency. Based on the study conclusion; the researcher recommends that; Ouru Super Stores,Kisii should embrace material codification and classification since it will help it for Bettercoordination of the people and activities dealing with materials, Elimination of bulk-purchasing,Low price of material and equipment, hastening inventory turnover, better communication andcooperation between the various departments. Ouru Super Stores, Kisii should embrace materialinspection to maximize the use of the firms' resources by ensuring adequate supply of materialsfor production process and also minimizing cost of holding excessive inventories. The studysuggest the following topic for further studies; the effect of stock management systems onperformance of the procurement performance.
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TABLES OF CONTENTS
DECLARATION AND RECOMMENDATION.........................................................................ii
DEDICATION..............................................................................................................................iii
ACKNOWLEDGMENT..............................................................................................................iv
ABSTRACT....................................................................................................................................v
LIST OF FIGURES......................................................................................................................ix
LIST OF TABLES.........................................................................................................................x
LIST OF ABBREVIATIONS.......................................................................................................xi
CHAPTER ONE............................................................................................................................1
INTRODUCTION.........................................................................................................................1
1.1 Background of the Study...........................................................................................................1
1.2 Statement of the Problem...........................................................................................................2
1.3 General Objective of the Study..................................................................................................3
1.4 Specific Objectives of the Study................................................................................................3
1.5 Research Questions....................................................................................................................3
1.6 Significance of the Study...........................................................................................................3
1.7 Limitations of the Study............................................................................................................4
1.8 Scope and Justification of the Study..........................................................................................4
1.9 Assumptions of the Study..........................................................................................................4
1.10 Operational Definition of Terms..............................................................................................4
CHAPTER TWO...........................................................................................................................5
LITERATURE REVIEW..............................................................................................................5
2.1 Concept on Warehousing Management.....................................................................................5
2.2 Theoretical Framework..............................................................................................................5
2.2.1 Materials Requirement Planning (MRP)................................................................................6
2.2.2 Just In Time.............................................................................................................................7
2.2.3 ABC Analysis..........................................................................................................................8
2.2.4 Economic Order Quantity Model...........................................................................................9
2.3 Empirical Literature Review....................................................................................................10
2.3.1 Inventory Classification........................................................................................................10
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2.3.2 Material Codification............................................................................................................11
2.3.3 Material Inspection...............................................................................................................13
2.4 Conceptual Framework............................................................................................................14
CHAPTER THREE.....................................................................................................................15
RESEARCH DESIGN AND METHODOLOGY.....................................................................15
3.1 Introduction..............................................................................................................................15
3.2 Research Design......................................................................................................................15
3.3 Target Population.....................................................................................................................15
3.4 Sampling Technique................................................................................................................16
3.5 Instrumentation........................................................................................................................16
3.5.1 Validity of the Research Instrument......................................................................................16
3.5.2 Reliability of the Research Instrument.................................................................................16
3.6 Data Analysis and Presentation...............................................................................................17
CHAPTER FOUR.......................................................................................................................18
DATA ANALYSIS INTERPRETATION AND DISCUSSION................................................18
4.1 Response Rate..........................................................................................................................18
4.2 Background Information..........................................................................................................18
4.2.1 Gender Respondents.............................................................................................................18
4.2.2 Age Bracket..........................................................................................................................18
4.2.4 Education Level....................................................................................................................19
4.3 Contribution of Inventory Classification to Stores Efficiency................................................20
4.4 Contribution of Material Codification to Stores Efficiency....................................................20
4.5 Contribution of Material Inspection to Stores Efficiency........................................................21
CHAPTER FIVE.........................................................................................................................23
SUMMARY OF THE FINDINGS, CONCLUSIONS AND RECOMMENDATIONS..........23
5.1 Summary of the Findings.........................................................................................................23
5.2 Conclusions..............................................................................................................................23
5.4 Recommendations....................................................................................................................24
5.5 Suggestions for Further Studies...............................................................................................24
REFERENCES............................................................................................................................25
APPENDICES..............................................................................................................................27
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APPENDIX: I LETTER OF INTRODUCTION......................................................................27
APPENDIX: II QUESTIONNAIRE..........................................................................................28
APPENDIX II: WORK PLAN...................................................................................................32
APPENDIX III: BUDGET..........................................................................................................33
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LIST OF TABLESTable 3.1 Target Population……………………………………………………………………...15
Table 3.2 Sample size Determination……………………………………………………………16
Table 4.1 Response Rate18
Table 4.2 Gender Respondents18
Table 4.3 Age Bracket19
Table 4.4 Education Level19
Table 4.5 Contribution of Inventory Classification to Stores Efficiency20
Table 4.6 Contribution of Material Codification to Stores Efficiency21
Table 4.7 Contribution of Material Inspection to Stores Efficiency
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LIST OF ABBREVIATIONSEOQ - Economic Order Quantity
EDI -Electronic Data Interchange
JIT -Just in Time
MRP - Materials Requirement Planning MRO - Maintenance, Repair Operations
VMIS - Vendor Managed Inventory Systems
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CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
In today’s highly competitive global marketplace, the pressure on organizations to find new ways
to create value and deliver it to their customers grows ever stronger. The increasing need for
industry to compete with its products in a global market across cost, quality and service
dimensions has given rise to the need to develop more efficient warehousing strategies.
Warehousing has come to be recognized as a distinct function with the rise of mass production
systems. Warehousing is the storage of goods, whereas distribution center precedes a post-
production warehouse for finished goods held for distribution. Therefore, warehousing and
distribution centres basically have the same function of goods and products storage (Coyle at el,
2003). The warehouse and distribution centres are very important nodes in a supply chain
network. They perform valuable functions that support the movement of materials, storing goods,
processing products, de-aggregating vehicle loads, creating stock keeping unit assortments and
assembling shipments (Andre Langevin and Riopel Diana, 2005). The efficient management of
warehouses helps to optimise the existing production and distribution processes and greatly assist
in the goal of cost reduction and service enhancement.
In today’s competitive environment, companies must operate at maximum efficiency and provide
superior service to ensure profitability. Three factors has been found to affect efficiency and
effectiveness of the warehouse operations with respect to fast moving consumer goods industry
such as simplicity/complexity of the warehouse management systems, product slotting
techniques and layout planning of the warehouse (Lakmal AGDP and Wickramarachchi WADN,
2011). The organizations ability to effectively manage the warehouse, reduce costs and
fulfillment operations is critical to their success. It is pertinent to mention that the organizations
face great challenges in managing warehouses. The role and importance of warehouses in
American economy has been altered to great extent due to changes in the way of raw materials,
intermediate goods, and finished products (John and Bowen, 2008). In the current scenario when
customer satisfaction and service have become a prime reason for a business to stand apart from
its competition, the need for effective warehouse management is largely seen more as a necessity.
Thus, the warehouse operating system must be designed for receiving inventory, timely order
fulfillment to automated validation of warehouse activities and accurate inventory control to
achieve peak performance across the entire enterprise.
Warehousing network plays a major role in the success of the physical distribution of products. It
is observed that the leading firms adopt and implement the different warehousing strategies such
as capacity switching, hub networking, cobbling and outsourcing (Sople V.V, 2010). Both the
analytic and simulation models are proposed for improving warehouse design practices. Analytic
models are usually design-oriented, explore many alternatives quickly to find solutions. On the
other hand, simulation models are usually analysis oriented. They provide an assessment of a
given design, but usually have limited capability for exploring the design space. There is an
important need to integrate both approaches to achieve more flexibility in analyzing warehouse
problems (Gu Jinxiang, 2010).
1.2 Statement of the Problem
Many business organizations spend a lot of resources installing inventory management systems
with the aim of minimizing their total operating costs, and enhance service delivery to customers.
However, many audits done by other studies reveal that there is an increased level of
discrepancies in the manner in which the warehouse management systems are harmonized in an
organization. On a number of occasions, there are cases of misstatements and inaccurate and
fraudulent records detected within the system. Many organizations have trouble resulting from
operating losses and cash flow problems. Quite often, piles of obsolete stock are seen within the
premises of these institutions, resulting in huge write offs eating into the bottom line of these
institutions. Many a times, stock outs are also experienced resulting in high customer turnover
and therefore low sales and poor service delivery to customers. warehouse management normally
becomes reportable issues (condition) and is always raised in the management letters to many
institutions where very little attention is given in the management of inventories as records are
inadequate (Lizardo, 2009) This study therefore sought to evaluate the effects of warehousing
management on the organizational efficiency of Ouru Super Stores, Kisii and make
recommendations on the areas that require improvement for effective and efficient inventory
management.
1.3 General Objective of the Study
The general objective of the study was to assess the effects of warehousing management on
organizational efficiency, a case study of Ouru Super Stores, Kisii.
1.4 Specific Objectives of the Study
The study was guided by the following specific objectives
i. To determine how Inventory classification contributes to stores efficiency of Ouru Super
Stores, Kisii.
ii. To find out how Material codification contributes to stores efficiency of Ouru Super
Stores, Kisii.
iii. To find out how Material inspection enhance stores efficiency of Ouru Super Stores, Kisii
1.5 Research Questions
The study sought to answer the following research questions;
i. Does inventory classification contribute to stores efficiency of Ouru Super Stores, Kisii?
ii. Does material codification contribute to stores efficiency of Ouru Super Stores, Kisii?
iii. Does material inspection enhance stores efficiency of Ouru Super Stores, Kisii?
1.6 Significance of the Study
This research work is of much significance to the researcher who wants to upgrade and broaden
his knowledge in various competitive warehousing management which has accepted to be the
most suitable method for ensuring values for money in all procurement activities.
Again it may be of immense importance to the organization under study when it comes to the
procurement of goods, works and services using state funds and also to all public sector
organizations as well as other private companies which seek value for money in their day to day
purchases since it would serve as a reference note.
Additionally it may serve as a guide for further studies for students who are pursuing the same
program.
1.7 Limitations of the Study
Limitations are matters and occurrences that arise in a study which are out of the researcher's
control. The major challenges that the researcher faced during the course of the study may be
unwillingness of the respondents who may not disclose the company’s information in fear of
victimization but the researcher tried to convince them that any information given out was
treated confidentially and is purposely for academic.
1.8 Scope and Justification of the Study
The study was based at Ouru Super Stores, Kisii. The study will be concerned with the effects of
warehousing management on organizational efficiency, a case study of Ouru Super Stores, Kisii.
It was carried out during the month of June 2017.
1.9 Assumptions of the Study
It is assumed that the respondents was available during the research period and will provide
viable and reliable information for analysis.
1.10 Operational Definition of Terms Material Management-Refers to the processes that ensure product availability while reducing
investment costs
Organization :Refers to a social entity formed by group of people, an intricate human
strategies designed to achieve certain objectives.
CHAPTER TWO
LITERATURE REVIEW
2.1 Concept on Warehousing Management
A Well implemented warehousing system helps in coordinating operations in the stores. This is
imperative in ensuring smoothing of production and this benefits the organization from the
economies of scale and improved customer service. Well implemented warehousing systems are
designed to help in the specification of inventory procedures, operation and control. An
inventory warehousing system is primarily concerned with proper material handling and
safeguarding of inventory specifically designed for side loading in small quantities (Ronald
2009).
Vendor Managed Inventory systems (VMIS) strive towards closer cooperation between the
members of supply chains in the area of inventory and demand management Vendor Managed
Inventory is an inventory management process that falls under the ‘push’ stock management
processes and as such, Kor (2008) argues that these are processes are triggered by interpretation
of an expected demand. Vendor Managed Inventory/Consignment Stock is inventory that is in
the possession of the buyer (shop, warehouse or store), but is still owned by the supplier whose
payment is done once sold (Likert, 2010).
The VMI initiative has the goal of accomplishing deeper integration and collaboration between
the members of the supply chain in order to cope with the ever decreasing time windows for
product and service fulfillment in order to improve operational efficiency. If a company’s
Procurement & Logistics Department is successful, the company will have better chances of
surviving. This can be best illustrated in retail chain firms that have to deal with multiple
suppliers and large volume of inventory hence storage burden is distributed between the supply
and the buyer (Angulo, 2009).
2.2 Theoretical Framework
A theory is an organized system of accepted knowledge that applies in a variety of circumstances
to explain a specific set of phenomenon. There are four theories of inventory planning that
include, Materials requirement planning (MRP).Just In Time (JIT), ABC Analysis and Economic
Order Quantity (EOQ).
2.2.1 Materials Requirement Planning (MRP)
According to Biederman, (2004), one of the assumptions behind the lot sizing models is that
demand for an item is independent of all other demands. This situation is true for most
manufactures of finished goods. However sub-assemblies, raw materials and parts do not exhibit
this independence. Demand for these items is dependent on the assembly schedule for finished
goods. Similarly, many Maintenance, Repair Operations (MRO) items which are Supplies
consumed in the production process but which do not either become part of the end product or
are not central to the firm's output, MRO items include consumables (such as cleaning,
laboratory, or office supplies), industrial equipment (such as compressors, pumps, valves) and
plant upkeep supplies (such as gaskets, lubricants, repair tools), and computers, fixtures and
furniture. The replenishment of these items depends on maintenance schedule. Recognition of
the existence of demand dependence lies behind the techniques known as materials requirement
planning (MRP).
MRP Systems attempt to support the activities of manufacturing, maintenance or use by meeting
the needs of the master schedule. in order to determine needs, MRP systems need an accurate bill
of materials for each final product or project. These bills can take many forms but it is
conceptually advantageous to view them as structural trees. Seven general types of structural tree
can be identified. Process industries such as oil refiners, drug and food manufacturers generally
take a few raw materials and make a much larger number of end products.
Manufactures/assemblies such as the automobile companies make a number of components
purchase others and assemble them into finished products. Each type of firm can use MRP
profitably but the greatest complexity of its operations. The goals of MRP are to minimize
inventor, to maintain a high service coverage and to co-ordinate delivery schedules for
manufacturing and purchasing activities. These aims often conflict in other systems but under
MRP are achievable simultaneously. The feature and ability of modern MRP systems to allow
rapid re-planning, searching and in response to the changes of dynamic environment are
responsible for attractiveness of MRP. (Chopra&Meidl,2001).
2.2.2 Just In Time
Although the history of Just In Time ( JIT) traces back to Henry Ford who applied Just in Time
principles to manage inventory in the Ford Automobile Company during the early part of the
20th Century, the origins of the JIT as a management strategy traces to Taiichi Onho of the
Toyota Manufacturing Company. He developed Just in Time strategy as a means of competitive
advantage during the post-World War II period in Japan.
The post-World War II Japanese automobile industry faced a crisis of existence, and companies
such as Toyota looked to benchmark their thriving American counterparts. The productivity of an
American car worker was nine times that of a Japanese car worker at that time, and Taiichi Onho
sought ways to reach such levels.
Just in time (JIT) is a production strategy that strives to improve a business' return on investment
by reducing in-process inventory and associated carrying costs. Just in time is a type of
operations management approach which originated in Japan in the 1950s. It was adopted by
Toyota and other Japanese manufacturing firms, with excellent results: Toyota and other
companies that adopted the approach ended up raising productivity (through the elimination of
waste) significantly. To meet JIT objectives, the process relies on signals or Kanban between
different points, which are involved in the process, which tell production when to make the next
part. Kanban are usually 'tickets' but can be simple visual signals, such as the presence or
absence of a part on a shelf. Implemented correctly, JIT focuses on continuous improvement and
can improve a manufacturing organization's return on investment, quality, and efficiency. To
achieve continuous improvement key areas of focus could be flow, employee involvement and
quality. (Bailey et al, 2005).
Just In time relies on other elements in the inventory chain as well. For instance, its effective
application cannot be independent of other key components of a lean manufacturing system or it
can "end up with the opposite of the desired result. In recent years manufacturers have continued
to try to hone forecasting methods such as applying a trailing 13-week average as a better
predictor for JIT planning; however, some research demonstrates that basing JIT on the
presumption of stability is inherently flawed.
Christopher (2005) defines JIT as the uninterrupted flow of 100% acceptable materials delivered
on due date as option cost 100% of time. the cited authors relate this definition for dozens of
techniques including supplier certification materials, requirements planning, MRP
Manufacturing resource Planning, (MRP 11), bar coding systems, contracting, electronic data
interchange (EDI) Value analysis and work simplification. This type of purchasing production
and inventory control has the great advantage of locating and fixing quality problems
immediately. Christopher (2005) makes the point, 'It is like large rocks under the water in a lake''.
If the water level is too high one can see the necks and avoid the danger. Similarly if the
inventory is small, the defects are spotted and corrected immediately. There is less scrap and
remark, and quality improves dramatically. The supplier provides full time on site personnel who
attend design-engineering meeting, investigates their products and use the company's purchase
orders to affect delivery. (Christopher, 2005).
2.2.3 ABC Analysis
Lysons & Farrington (2006) defines ABC Analysis as a method for inventory categorization used
in inventory planning materials management. In this approach normally 3 types of inventory
items are separated: A Items: these require tight control and Just-in-time management, because
even if they are present only in small numbers, they make up a large percentage of Inventory on
a cost basis Items: these can be less tightly controlled because they are and/or less expensive than
A-Items, C Items: these require only very limited or no control, because they are large in
numbers and very cheap.
Smarus (2008) contents that; a big organization has a large number of items. All items cannot be
given equal attention, it is therefore essential to determine the items or group of items that
deserve the maximum control. One of the most important considerations for control is the value
of the annual consumption of inventory items. It has been observed that a small number of
inventory items consume a very large share of inventory consumption during the year. Further a
little larger number of inventory items covers a moderate share of annual inventory consumption.
This brought out the concept of ABC analysis.
In his study, Christopher (2005) found out that, ABC analysis is an important tool to control
inventory investment in an organization. It provides good guidelines for adopting appropriate
purchasing policy for different categories of items and also for amount of attention, which is
required from different levels of management, to be given to various items. Any stock is
segregated into different sections. These items are classified into 3 sections, A, B and C. The
logic of segregating these items into sections is that section A consists of limited number of items
that are very expensive. Section B has items that are not expensive and the number of units that
is to be ordered is also not very large. The section C consists of numerous items, which have a
low monetary value. The logic behind such segregation is that every section is viewed differently
by the cost accountant, due the difference in order time, reorder time and delivery period. For
example, though the unites in section A are less, their monetary value is also high and so is their
delivery period. The ABC analysis is a simple and probably the most effective of all stock
control methods.
Bierderman (2004) stressed that, maintaining inventory through counting, placing orders,
receiving stock, takes personnel time and costs money, ABC analysis helps in placing the orders,
deciding the quantity of purchase, safety stock thus saving the organization from unnecessary
stock outs hence enhancing effecting inventory management.
2.2.4 Economic Order Quantity Model
Chopra &Meidl(2001) defines EOQ as an inventory-related equation that determines the
optimum order quantity that a company should hold in its inventory given a set cost of
production, demand rate and other variables. This is done to minimize variable inventory costs.
The equation is as provided below.
Where: S = Setup costs D = Demand rate P = Production cost I = Interest rate (considered an
opportunity cost, so the risk-free rate can be used)
The EOQ formula can be modified to determine production levels or order interval lengths, and
is used by large corporations around the world, especially those with large supply chains and
high variable costs per unit of production. Despite the equation's relative simplicity by today's
standards, it is still a core algorithm in the software packages that are sold to the largest
companies in the world.
The purpose of using the EOQ Model in this research is to assess the effect of Economic Order
Quantity in enhancing the effect of Inventory planning Controls. Schroeder (2000) asserts that
the ordering quantities which minimizes the balance of cost between inventory holding costs and
re-order costs is what is known as economic Order Quantity . To be able to calculate a basic
EOQ, certain assumptions are necessary that states that there is a known constant, stock holdings
and ordering cost. Interestingly the rates of demand are known of which price are constant per
unit. In addition replenishment is made instantaneously that is, the whole batch is delivered at
once hence no stock-out allowed.
In his study, Dave (2001) found out that the addition number of units of inventories enables the
company to minimize the total costs of inventory such as holding costs, order cost and shortage
cost. Schaider (2001) echoed his sentiments by stating that EOQ attempts to estimate the best
order quantity by balancing the conflicting cost of holding stock and of placing (Ordering) the
replenishment orders.
Schaieder (2001) States that, EOQ Contributes to strategic inventory planningsince it is used as
part of a continuous review inventory system, in which the level of inventory is monitored at all
times, and a fixed quantity is ordered each time the inventory level reaches a specific re order
point. He stressed that factors such as new product lines, promotional lines, outstanding orders
and minimum order quantities are to be considered when ordering for the Inventory. According
to Schaider (2001), ordering a large amount at one time will increase holding costs, while
making more frequent orders of fewer items will reduce holding costs but increase order costs,
the EOQ model finds the quantity that minimizes the sum of these costs and interestingly
Lyson& Farrington (2006) asserts that EOQ is a model for making such kind of decisions.
2.3 Empirical Literature Review
2.3.1 Inventory Classification
There are a number of techniques which play an important role in the inventory control
Programme. The techniques are very helpful in rationalization of inventory control approach and
assist in formulation of inventory control policies. Stocks classification is done for strategic
review, some of these techniques used by organizations are; Vital Essential and Desirable (V-E-
D), in their Study.Ballou(2000) found out that Inventories also need to be classified according to
Vital, Essential and Desirable (V -E-D), which in essence means that stress is more on
importance rather than on value. The VED analysis is done to determine the criticality of an item
and its effect on production and other services.
Again, inventories may also be classified according to Fast-moving, Slow-moving and Non-
moving items in order to see the rapidity of their use and towed out the unnecessary ones. This is
aimed at keeping the total inventory size down and reduces investment. Thus; selective control
may be exerted under different types of classification according to necessity. A single-type
approach may not prove fruitful under all circumstances. Another technique is Fast, Slow
&Nonmoving Analysis (FSN). According to Kumar (2007), in fast moving slow moving and
non-moving of inventory classification. Here, classification is based on the pattern of issues from
stores and is useful in controlling obsolescence. To carry out an FSN analysis, the date of receipt
or the last date of issue, whichever is later, is taken to determine the number of months, which
have lapsed since the last transaction. The items are usually grouped in periods of 12
months.FSN analysis is helpful in identifying active items which need to be reviewed regularly
and surplus items which have to be examined further. Non-moving items may be examined
further and their disposal can be considered.
2.3.2 Material Codification
Sree Rama Rao (2008) asserts that, Codification of materials can also be termed as the
identification of materials. This deals with uniquely identifying each item in the inventory. It is
useful in requisitioning items or the operational departments, in placing of orders by the purchase
department, in receiving and expediting the items on receipt from the supplier, in having a
unique record of each of the items in stores and in work-in-process or in warehouse so as to
facilitate the control over the inventory levels, and also in having a good control over the loss,
deterioration, obsolescence, non-movement, or pilferage of the items in the inventory. Unique
identification of the materials – whether they are raw materials, work-in-process or finished
goods – is the first step towards a good materials management system. Without it, the control
over inventory by rigorous exercises such as inventory techniques is not very effective. Without
it, confusion might prevail in the operational departments. Moreover for a good quality control
system a unique identification is a pre-requisite. There are many other advantages such as variety
reduction and standardization.
Weelearjan (2000) concurs that, Codification is another important element of inventory control
activities. It helps in avoiding duplication of items in the inventory and enables correct entries in
the bin cards, Inventory control cards and account codes.Codes, including barcodes, can make
the whole process of stock control much easier. It includes allocating codes to all groups of items
in the store for ease of control and tracking.
Sree Rama Rao (2008) further confirms that, For the purpose of identification and convenience
in storage and issue of materials, each item of material is given a distinct name. Such a process
of giving distinct names and symbols to different items of materials is called codification of
materials. Good store-keeping requires proper classification and codification of various items of
stores on stock. Stores are generally classified either by their nature or by their usage. The former
method of classification or classification by the nature of materials is most commonly used.
Under this method of classification, the various items of stores are divided into specific groups
like construction materials, belting materials, consumable stores, and spare parts and so on. All
the items are grouped, so that each item of stores will be conveniently codified on alphabetical,
numerical or alpha-numerical basis and given a distinctive store code number. Numerical
codification system is each item is allotted a number, the numbering may be straight or in groups
or blocks. This method is very suitable for those companies where the number of items is very
large.In alphabetical codification, each item is denoted by a combination of the alphabets, for
example, A for nut, B for screw and so on. This system is not suitable if there is large number of
store items. In alpha-numeric codification, alphabets along with numbers are used for coding.
The decimal codification system is more commonly used. The number of digits in the code will
depend upon the extent of classification required. The greater the number of details to be
covered, the greater will be the number of digits. This system of inventory control makes it quick
and easy in identifying of materials; it helps to ensure a proper material control, saving of time in
material handling and eliminates the chances of wrong issue.
2.3.3 Material Inspection
In their study, Patric&Bruce (2000) found out that, quality is important all along the supply
chain, whether its checking quality at the supplier, monitoring quality along the production line,
or checking final quality of the finished items before it is delivered to the customer. However,
one area that is very important in the monitoring of quality is the inspection of items that arrive
at the facility from your suppliers. Ensuring that the parts and raw materials are of the correct
quality or specifications before the item even enters the plant are a key aspect of ensuring total
quality of the finished goods. Inspection, in this context, means the examination of incoming
consignments for quantity and quality. Very often there is a separate inspection department which
does this work, but otherwise goods are inspected by stores personnel. Whatever the system of
inspection in force, it is the duty of the stores function to see that the inspection is done before
items are accepted into stock. Quality assurance activities, and ‘co-maker’ relationships between
buyers and suppliers, have reduced the extent to which the inspection of incoming goods is
undertaken, but it remains an important activity. There are various methods of inspection which
can be adopted by the inspection committee they include Visual Inspection and sampling.
Visual Inspection is an inspection method where items that arrive at the receiving dock are first
visually checked for defects or obvious issues. Items that are in packaging may also be rejected if
the packaging is damaged. The quality department may have specific instructions for the
warehouse depending on the item that is being received.
Sampling method is when an inbound delivery arrives for a large number of a particular part; the
warehouse may not be required to inspect each and every item. In these cases the quality
department may suggest a sample of the delivery be inspected. The sample size may be
determined by the quality department and may depend on the required level of inspection, the
quantity of the items received, and the past performance of the vendor to produce items meeting
the necessary specifications. When the sample has been selected the items can then undergo
visual inspection at the receiving dock or detailed inspection by the quality department. Samples
of chemical materials may require through testing in the lab to determine whether the inbound
delivery meets the required specifications.(Lysons& Farrington, 2008).
2.4 Conceptual Framework
Independent Variables Dependent Variable
Intervening variables Researcher, 2017
Figure 2.1 Conceptual Framework
Explaining the Variables
Conceptual framework is an analytical tool with several variations and contexts. It is used to
make conceptual distinctions and organize ideas. Strong conceptual frameworks capture
something real in a way that is easy to remember and apply. The conceptual framework in this
study will give an overview of the independent variables and dependent variables that defined
the objective of the research. The independent variable included; Inventory classification,
Material Codification and Material Inspection.
Inventory Classification
Better coordination of activities
Hastens inventory turnover Better communication and cooperation
Organizational efficiency
High performance
Effective procurement High production
Material Codification
Shortening lead time
Reduction of inventory cost
Efficiency
Quick communication Material Inspection
Quality delivery
Efficiency stores
Quality service
Government rules
Organizational policies
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1 Introduction
This chapter contains the research design, target population, sample design and procedure data
collection instruments, validity and reliability of research instruments and data analysis and
presentation.
3.2 Research Design
The study adopted a descriptive case study design to obtain pertinent and precise information on
the current status of the phenomena, situations and groups under study Mugenda and Mugenda
(1999).
3.3 Target Population
The targeted population of the study will include employees of Ouru Super Stores whose
population is 126. According to Mugenda and Mugenda (1999) a population comprises the total
number of cases/items featured in the study.
Table 3.1 Target Population
Section Target
Procurement
Distribution
Warehouse
Stores
Finance
ICT
Production
Total
9
33
13
17
12
5
37
126
3.4 Sampling Technique
The study adopted stratified sampling technique since there are different sections (categories).
However, convenient sampling was used to pick or select respondents from each section
(category)
Table 3.2 Sample size Determination
Section Target Sampled
Procurement
Distribution
Warehouse
Stores
Finance
ICT
Production
Total
9
33
13
17
12
5
37
126
3
10
4
5
4
2
11
39
3.5 Instrumentation
3.5.1 Validity of the Research Instrument
Best and Khan (1992) describe validity of research instruments as the degree to which it
measures what is intended by the researcher. This judgment was made better by a team of
professional experts in a particular field Mugenda and Mugenda (1999) and Cohen (1998). The
instruments was presented to my supervisor who examined the content of the instrument and
make necessary corrections.
3.5.2 Reliability of the Research Instrument
Reliability is the ability of the instrument to provide consistent information in order to draw
informed conclusion. Reliability of questionnaires were determined by test-retest. The
respondents were requested to respond to questionnaires for the second time to confirm the
consistence level of the resulting; second responses were conducted after three days.
3.6 Data Analysis and Presentation
The completed questionnaires were edited for completeness and consistency. Descriptive
technique was used to analyze data collected where statistical measure of central tendency like
mean, weighted average and percentages. Questionnaires were coded sequentially to ensure
uniformity during presentation. It also involved searching for irregularities as well as pattern in
relation to research questions. The words and phrases were categorized based on research
objectives. The analyzed data was presented in frequency tables, percentages and explanations.
CHAPTER FOUR
DATA ANALYSIS INTERPRETATION AND DISCUSSION
4.1 Response Rate
The study sought to find out the response rate of the respondents, table 4.1 shows the results.
Table 4.1 Response Rate
Instrument Frequency Percentage %
Reached respondents 38 97
Not reached 1 3
Total 39 100
Source: Field Data (2017)
Table 4.1 shows that 39 questionnaires were administered. The completed questionnaires were
edited for completeness and consistency; this represented 97% total number of the respondents.
4.2 Background Information
4.2.1 Gender Respondents
The researcher sought to find out the gender of respondents in the company. Table 4.2 shows the
results.
Table 4.2 Gender of Respondents
Gender Frequency Percentage %
Male
Female
Total
27
11
38
71
29
100
Source: Field Data (2017)
It is evident that 71% of the respondents were male while 29% of the respondents were female.
This shows that the majority was male and the minority was female.
4.2.2 Age Bracket
The researcher sought to find out the age bracket of the respondents. The following are findings
as shown in the table 4.3.
Table 4.3 Age Bracket
Category Frequency Percentage %Below 30 years 6 1631-40 years 8 2641-50 years 19 50
51 years and above 5 13Total 38 100
Source: Field Data (2017)
From table 4.3 its indicated that 16% of the respondents were below 30 years, 26% were aged
between 31 and 40 years, 50% were aged between 41 and 50 years and 13% were aged 51 years
and above. This implied that the majority of the respondents were old enough to execute
procurement responsibilities.
4.2.4 Education LevelThe researcher was out to find out the level of education of the respondents in the organization,
table 4.4 show the findings.
Table 4.4 Education Level
Category Frequency Percentage %
Degree Holder
Diploma Holder
Certificate
Total
24
13
1
38
63
34
3
100
Source: Field Data (2017)
From table 4.2 it’s clear that majority of the respondents were degree holders representing 63%
of the total number of respondents, while the minority were diploma and certificate holders
represented by 34% and 3 % total number of the respondents respectively. This implied that the
organization employs more degree holders than diploma and certificate holders.
4.3 Contribution of Inventory Classification to Stores Efficiency
The study sought to find out the contribution of inventory classification to stores efficiency of
Ouru Super Stores, Kisii, table 4.5 shows the results.
Table 4.5 Contribution of Inventory Classification to Stores Efficiency
Inventory
Classification
and Stores
Efficiency
Strongly
Agree
5
Agree
4
Undecided
3
Disagree
2
Strongly
Disagree
1
∑fi ∑fiwi ∑fiwi∑fi
Coordination. 13 18 3 2 2 38 152 4.00Hastening
inventory
turnover.
15 11 7 2 3 38 147 3.87
Communication
and
cooperation.
13 15 5 2 3 38 147 3.87
Reduction
material
obsolescence.
16 6 4 8 3 38 135 3.55
Source: Field Data (2017)
It was revealed that better coordination of the people and activities dealing with materials is one
of the contribution of inventory classification to stores efficiency of Ouru Super Stores, Kisii,
this was supported by an average weight of 4.00, similarly, the study found out that hastned
inventory turnover, better communication and cooperation and reduction of material
obsolescence are also the contribution of inventory classification to stores efficiency, 3.87, 3.87,
and 3.55 total average weight supported this respectively.
4.4 Contribution of Material Codification to Stores Efficiency
The study sought to find out the contribution of material codification to stores efficiency of Ouru
Super Stores, Kisii, table 4.6 shows the results.
Table 4.6 Contribution of Material Codification to Stores Efficiency
Material
Codification and
Stores Efficiency
StronglyAgree
5
Agree
4
Undecided
3
Disagree
2
StronglyDisagree
1
∑fi ∑fiwi ∑fiwi∑fi
Reduction of
inventory cost
16 10 8 4 0 38 152 4.00
Efficiency in
procurement
17 11 5 4 1 38 153 4.03
Quick
communication
30 6 0 2 0 38 178 4.68
Source: Field Data (2017)
It was found out that reduction of inventory costs is one of the contribution of material
codification to stores efficiency of Ouru Super Stores, Kisii, this was supported by 4.00 total
average weight, on the other hand the study found out that efficiency in procurement and quick
communication are also the contribution of material codification to stores efficiency, 4.03, and
4.68 total average weight supported this respectively.
4.5 Contribution of Material Inspection to Stores Efficiency
The study sought to find out the contribution of material inspection to stores efficiency of Ouru
Super Stores, Kisii, table 4.7 shows the results.
Table 4.7 Contribution of Material Inspection to Stores Efficiency
Material
Inspection and
Stores Efficiency
Strongly
Agree
5
Agree
4
Undecided
3
Disagree
2
Strongly
Disagree
1
∑fi ∑fiwi ∑fiwi∑fi
Quality delivery 19 10 6 2 1 38 158 4.16
Efficiency stores 14 10 7 3 4 38 141 3.71
Quality service 22 6 5 2 3 38 156 4.10
Source: Field Data (2017)
It is established that quality delivery is one of the contribution of material inspection to stores
efficiency of Ouru Super Stores, Kisii, 4.16 total average weight supported this view, on the
other hand, the study found out that stores efficiency and quality service to the organization and
the clients are also part of the contribution of material inspection to stores efficiency 3.71, 4.10,
3.39, and 4.29 total average weight supported this respectively.
CHAPTER FIVE
SUMMARY OF THE FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
5.1 Summary of the Findings
5.1.1 Contribution of Inventory Classification to Stores Efficiency
It was revealed that better coordination of the people and activities dealing with materials is one
of the contributions of inventory classification to stores efficiency of Ouru Super Stores, Kisii,
similarly, the study found out that hastened inventory turnover, better communication and
cooperation and reduction of material obsolescence are also the contribution of inventory
classification to stores efficiency.
5.1.2 Contribution of Material Codification to Stores Efficiency
It was found out that reduction of inventory costs is one of the contribution of material
codification to stores efficiency of Ouru Super Stores, Kisii, on the other hand the study found
out that efficiency in procurement and quick communication are also the contribution of material
codification to stores efficiency.
5.1.3 Contribution of Material Inspection to Stores Efficiency
It is established that quality delivery is one of the contribution of material inspection to stores
efficiency of Ouru Super Stores, Kisii, on the other hand, the study found out that stores
efficiency and quality service to the organization and the clients are also part of the contribution
of material inspection to stores efficiency.
5.2 Conclusions
Based on the research findings the study concluded that; better coordination of the people and
activities dealing with materials is one of the contributions of inventory classification to stores
efficiency; similarly, the study found out that hastened inventory turnover, better communication
and cooperation and reduction of material obsolescence are also the contribution of inventory
classification to stores efficiency. Reduction of inventory costs is one of the contributions of
material codification to stores efficiency; on the other hand the study found out that efficiency in
procurement and quick communication are also the contribution of material codification to stores
efficiency. Quality delivery is one of the contributions of material inspection to stores efficiency
of Ouru Super Stores, Kisii, on the other hand, the study found out that stores efficiency and
quality service to the organization and the clients are also part of the contribution of material
inspection to stores efficiency.
5.4 Recommendations
Based on the study conclusion; the researcher recommends that;
Ouru Super Stores, Kisii should embrace material codification and classification since it will
help it for Better coordination of the people and activities dealing with materials, Elimination of
bulk-purchasing, Low price of material and equipment, hastening inventory turnover, better
communication and cooperation between the various departments.
Ouru Super Stores, Kisii should embrace material inspection to maximize the use of the firms'
resources by ensuring adequate supply of materials for production process and also minimizing
cost of holding excessive inventories.
5.5 Suggestions for Further Studies
The study suggest the following topic for further studies; the effect of stock management systems
on performance of the procurement performance.
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APPENDICES
APPENDIX: I LETTER OF INTRODUCTION
ODHIAMBO CHRISTINE ALUOCH P.O BOX, 300KISII
TO THE MANAGEMENT OURU SUPER STORES, KISIIP.O BOX 176KISII Dear Sir/Madam
REF: REQUEST FOR DATA COLLECTION
I am a student of Kisii University pursuing a diploma course in purchasing and supplies
management, my topic of research is “The effects of warehousing management on
organizational efficiency, a case study of Ouru Super Stores, Kisii”.
I am seeking for permission to collect data in your organization in order to complete my studies.
The information obtained will be treated with utmost confidentiality and the results of the
research will be for academic purpose only.
Yours faithfully,
Odhiambo Christine Aluoch
APPENDIX: II QUESTIONNAIRE
SECTION A:
1. What is your gender?
Male ( )
Female ( )
Please fill the following questionnaire in an appropriate box.
SECTION A. BACKGROUND INFORMATION
1. Please indicate your gender
Male [ ]
Female [ ]
2. Please indicate your age brackets.
Below 30 years [ ]
31-40 years [ ]
41-50 years [ ]
51 years and above [ ]
3. Please indicate the education level.
Degree [ ]
Diploma [ ]
Certificate [ ]
SECTION B:
2. To what extent do you agree that the following is the contribution of inventory
classification to stores efficiency of Ouru Super Stores, Kisii?
Contribution of inventory
classification to stores efficiency
Strongly
agreed
Agreed Undecided Disagreed Strongly
disagreedBetter coordination of the people
and activities dealing with
materials.Hastening inventory turnover.
Better communication and
cooperation.Reduction material obsolescence.
3. To what extent do you agree that the following is the contribution of material codification
to stores efficiency of Ouru Super Stores, Kisii?
Contribution of material
codification to stores efficiency
Strongly
agreed
Agreed Undecided Disagreed Strongly
disagreedReduction of inventory cost
Enhancing efficiency in
procurement Quick communication
4. To what extent do you agree that the following are the effect of material distribution on
the performance of the procurement in Ouru Super Stores, Kisii?
Effect of Material distribution Strongly Agreed Undecided Disagreed Strongly
agreed disagreedProviding information Enhancing quality
Enhancing material requirement
planning5. To what extent do you agree that material inspection enhance stores efficiency of Ouru
Super Stores, Kisii?
Tick where appropriate
Strongly
agreed
Agreed Undecided Disagreed Strongly
disagreed
6. To what extent do you agree that the following are the importance of material
management of Ouru Super Stores, Kisii?
importance of material
management
Strongly
agreed
Agreed Undecided Disagreed Strongly
disagreedBetter coordination of the people
and activities dealing with
materials.Hastening inventory turnover.
Better communication and
cooperation.Reduction material obsolescence.
7. To what extent do you agree that the following are the effect of inventory management
systems Ouru Super Stores, Kisii?
Effect of inventory
management systems
Strongly
agreed
Agreed Undecided Disagreed Strongly
disagreedShortening lead time Reduction of inventory cost
Enhancing efficiency in procurement Quick communication
8. To what extent do you agree that the following are the effect of material distribution on
Ouru Super Stores, Kisii?
Effect of Material distribution Strongly
agreed
Agreed Undecided Disagreed Strongly
disagreedProviding information Enhancing quality
Enhancing material requirement
planning
APPENDIX II: WORK PLAN
Phase Description Time
One Month One Day One Weak One one dayWeak
1 Proposal Development
2 Proposal Defense
3 Data Collection
4 data analysis
5 report submission