Inventory Challenges Facing the Performance of Logistic Firms in Kenya : A Case of Freight Forwarders Kenya Limited

The research was carried out to investigate inventory challenges facing the performance of logistics firms in Kenya, Freight Forwarders Kenya Limited a leading Logistical company in East and Central Africa was used as the case study. The general objective of the study was to investigate the inventory challenges facing logistic firms. The specific objectives were to analyze how inventory cost, lead time, technology and level of inventory affects the organizations performance. The researcher used relationship marketing theory, deterministic inventory model and Economic Order quantity theories in the course of the research to relate how the challenges are affecting the performance of firms. Sampling method was employed in the cause of data collection for analysis a target population of 68 employees of FFK was targeted and a sample size of 58 was used In the course of research. The researcher collected primary data from Freight forwarders Kenya Limited by means of questionnaire’s those who gave their input were Top level managers, Middle level managers, supervisors and low level employees. Secondary data was also utilized from existing literature in analyzing and coming up with conclusions. Data was analyzed using descriptive analysis and inferential analysis using the SPSS Statistics to come up with sound conclusions regarding inventory challenges facing Logistical challenges in Kenya. © 2017 Elixir All rights reserved. Elixir Fin. Mgmt. 106 (2017) 46355-46363 Finance Management Available online at www.elixirpublishers. com (Elixir International Journal) Nyaribo Job Rodgers and Kavale Stanley / Elixir Fin. Mgmt. 106 (2017) 46355-46363 46356 Shin and Soenen (1998) also reported a strong negative relation between the cash conversion cycle and corporate profitability for a large sample of public American firms. Still in the USA, Chen, Murray and Owen (2005), by examining how the market values the firms with respect to their various inventories policies, reported that firms with abnormally high inventories have abnormally poor stock returns, firms with abnormally low inventories have ordinary stock returns while firms with slightly lower than average inventories perform best over time. Notably, Vastag and Whybark (2005) by means of an international group of manufacturing companies found no significant relationship between inventory turnover and performance. In the African context, Lwiki, Ojera, Mugenda and Wachira (2013) study of the relationship of inventory management practices and financial performance amongst 8 Kenyan sugar manufacturers revealed a strong positive correlation relationship. Logistic firms in Kenya Kenya is globally known and recognized as a major hub for the East and Central African countries. This is due to its long coastal strip and highly connects road, rail and airways networks. According to the World Bank Report (2005) the location of Kenya as a gateway and a hub within region into the interior and remote places of Eastern and Central Africa, has enabled development of logistic firms both local and international firms. This has improved the operations of the logistic firms in Kenya making Kenya amongst the top countries embracing international trade. Gichuru(2012 cited in Atieno. 2014 p. 5) Logistics firms are faced with a lot of challenges raging from planning to financial sustainability. Among the top challenges include escalating fuel prices, environmental degradation from waste produced by their machinery, green movement lobby groups that advocate for mandatory participation in environmental initiatives and Government regulations enforced via National Environmental Management Authority (NEMA). Additionally, major challenges faced by most of these logistic firms in Kenya are lack of well-maintained road and rail networks.However, the government of Kenya has embarked on major projects to facilitate cheap and affordable transportation within the country. This has seen the government of Kenya collaboration with China and Japan commissioning the construction of standard gauge railway lines and LAPSET projects to provide and facilitate fast and affordable transportation within the country. (Atieno. 2014, Garcia, 2013) Freight Forwarders Kenya Limited Freight Forwarders Kenya Limited was incorporated in 1973, following the amalgamations of three local forwarders. The primary shareholder, Kenya General Agency, has been involved in the logistics industry since 1932. The firm has concentrated on developing a regional network of offices and infrastructure throughout East and Central Africa. The firm’s main emphasis is on handling Specialized Projects and their subsidiary companies to provide Transportation and Materials Handling / Storage services. Freight Forwarders Kenya Ltd specializes in providing Logistics services to the humanitarian, mining, oil & gas and infrastructure industries. Project Management works through a network of specially selected associated partners. Internationally, the firm works through a network of specially selected agency partners. These agents are selected on the basis of their ability to provide international freight forwarding, as well as specialized Project Logistics services under Freight Forwarders Kenya Limited central management, thus providing quality services to its clients all over the world(Freight Forwarders, 2010) The organization’s Mission objective isto be a market leader in the Clearing and Forwarding Industry, the mission is to maintain a reputation for excellence by providing superior logistics services in a professional and competitive manner, thereby promoting and enhancing regional and international tradeFreight Forwarders Kenya Limited services are delivered in the most regions of East Africa, including remote areas of Tanzania, Kenya, Uganda, Eastern D.R. C. , Rwanda, Burundi and South Sudan. The organization is well positioned regionally to meet various demands from different clients. The firm has been able to provide specialized services in areas lacking basic infrastructure. Using specialized equipment, Freight Forwarders Kenya Limited often provide the initial supply chain to make a project possible despite the lack of infrastructure. Freight Forwarders Kenya Limited prepare cargo for shipment in an efficient manner, they charter vessels and aircrafts; draft road surveys and access sites; setup logistic platforms and load optimization plans to transport, haul, lift, move, carry and deliver cargo within deadlines. (Freight forwarders, 2010) Inventory challenges in organizations are a factor that has seen many organizations failing to achieve their goals. Good inventory management practices enable a firm to reduce and control costs, reduce lead time and improve service delivery. To continue meeting the ever changing demands of customers within organizations, organizations need to have proper inventory management practices with good plans. To successfully manage inventory, top management and the employees should be actively involved in key decisions on supply of goods and services (Drurry, 2011). According to Lapide (2010) and Eckert, (2012) an organization that provides enough and appropriate resource planning for inventory management as well as invest in modern technologies and research, improves on their performance and efficiency. In their study, Bhausaheb&Routroy, (2010) shows that companies are keen in managing their inventory so as to reduce costs, improve the quality of service, enhance product availability and ultimately ensure customer satisfaction. Today’s customer focused business environments are facing the challenge of creating processes that are responsive to the demands of the customers. It is through the process of inventory management that an organization can maintain continuity of production operations by maintaining a smooth flow of raw materials without shortages. (Christopher, 2011, Shapiro, 2009). Logistic firms in Kenya have faced numerous challenges pertaining management of inventories. According to Sheila andMutua(2010, cited in Thogori andGathenya 2014, p 109) Kenya have been accused of poor inventory management techniques and this has greatly affected their ability to satisfy their customers. The main challenge today among firms in Kenya is the need to enhance efficiency while at the same time achieving effectiveness thus improving customer satisfaction (heikilla, 2002). Due to these challenges therefore many firms fail to determine how to control the inventory flows effectively to obtain the best overall inventory performance. Nyaribo Job Rodgers and Kavale Stanley / Elixir Fin. Mgmt. 106 (2017) 46355-46363 46357 Since inventory control manages to cover a wide range of aspects, its main aim is to ensure inventory monitoring and ordering Inventorycost, inventory lead time, control limits, and replenishment decisions. It is therefore for this reason that the researcher proposes to find out the inventory challenges facing performance of logistic firms at FFK. Objectives of the study. 1. To investigate the extent to which inventory cost is a challenge to the performance of Freight Forwarders Kenya Limited. 2. To establish how lead is a challenge to the performance of Freight Forwarders Kenya Limited. 3. To determine the extent to which technology is a challenge to the performanceofFreight Forwarders Kenya Limited 4. To determine how inventory levels is a challenge to the performance of Freight Forwarders Kenya Limited.