effects of warehousing management on …

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 FIGURESFig. 2.1 Conceptual Framework………………………………………………………………….14

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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


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


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


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


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


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


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


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


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


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


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


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


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


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

APPENDIX III: BUDGET

Item/Activity Estimated Cost (Kshs)

Stationery 2,000

Printing/Photocopying 2,500

Transport 3,000

Binding 1,500

Miscellaneous 1,000

Total cost 9500

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