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ISSN 2349-7807
International Journal of Recent Research in Commerce Economics and Management (IJRRCEM)
Vol. 5, Issue 2, pp: (33-54), Month: April - June 2018, Available at: www.paperpublications.org
FACTORS AFFECTING INVENTORY
MANAGEMENT PRACTICES ON SERVICE
DELIVERY IN COUNTY GOVERNMENT
HOSPITALS IN KENYA
(A CASE OF TRANS NZOIA COUNTY)
1 2
Mukuna, Khasakhala, David, Dr. Osoro, Antony
1(Msc. Procurement And Logistics), Jomo Kenyatta University of Agriculture& Technology
2
(Lecturer Ph.D), Jomo Kenyatta University of Agriculture & Technology
Abstract: Managing stock effectively is important for any organization, running a hospital is no exception because
without enough stock, services to patients will come to a halt. Stock represents the largest single investment in
assets for most organizations. Health facilities must provide 24-hour services and accordingly, the need to keep
stocks of certain medicines and other medical supplies to be able to discharge their duties effectively. It is a
generally held opinion that where stock management by health facilities is poor, delivery of healthcare is normally
affected. Hence, this study examined the factors affecting inventory management practices on service delivery
using Trans-Nzoia County Referrals Hospitals. The specific objectives for this study were inventory technique,
training, lead time and information technology. This study was to be enhanced in different theories relevant to the
variables covered under this study. The target population was 400 management staff working at the following
departments; Human Resource and Administration ,Finance, Audit, Procurement Stores ,Inspection, Transport
,Kitchen and Cleaning which include the senior, middle and junior staffs involved directly or indirectly. Sample
sizes of 120 respondents were selected from the population. The research designs used were both quantitative and
qualitative since it contains both numeric and word as the design. Data was presented in the form of tables.
Questionnaires were used to collect data which contained both open and closed ended questions and covered all the
areas of inventory management to come up with good raw data and descriptive statistics data analysis method
applied to analyze data using Statistical Package for Social Sciences version 20. The study concluded that the
inventory management practices affect the service delivery of health of public hospitals. There were certain
limitations such as resource constraint which prohibited collecting information from the respondents and time
constraint was also a challenge. Although the study was on the factors affecting of inventory management practices
on the service delivery in hospital, it is recommended that the similar studies should be done in other sectors of the
Kenya economy for comparison purposes and to allow for generalization of findings on the inventory management
in Kenya.
Keywords: Inventory techniques, Training, Lead time and Inventory management practices.
1. INTRODUCTION
Background of the study:
In the earlier years, Inventory Management was treated as a cost Centre, since Purchasing Department was spending
money on inventory while Stores was holding huge stock of inventory, blocking money and space, Ramakrishna (2008 ).
However, with the process of liberation and opening up of global economy, there has been a drastic change in the
business environment, resulting in manufacturing organizations exposed to intense competition in the market place.
Page | 33
Paper Publications
ISSN 2349-7807
International Journal of Recent Research in Commerce Economics and Management (IJRRCEM)
Vol. 5, Issue 2, pp: (33-54), Month: April - June 2018, Available at: www.paperpublications.org
Service companies worldwide has been working out various strategies to face the challenges and to cut down
manufacturing costs to remain competitive.The terms “stock” and “inventory” can be used interchangeably. Coyle et al.
(2012), defines inventory as raw materials, work-in-progress, finished goods and supplies required for creation of a
company‟s goods and services. It is also the number of units and/or value of the stock of goods a company holds. The
basic reason why stock is held is so as to avoid stock out and it resulting problems. The extent of the stock is influenced
by operational needs of the organization, time required to obtain deliveries of stock, availability of capital, cost of storage
and the need for detailed records in the form of stock issues which should be kept through the use of store records. Having
considered funds available, storage facility available, rate of consumption of materials, lead time, margin of safety, and
the stock level can then be set for each material. Stock levels should also be indicated on the stock records. Items should
not be issued unless covered by Materials Requisition form.
According to Kotler (2013), inventory management refers to all the activities involved in developing and managing the
inventory levels of raw materials, semi-finished materials (work-in-progress) and finished good so that adequate supplies
are available and the costs of over or under stocks are low. Inventories are essential for keeping the production wheels
moving, keep the market going and the distribution system intact. They serve as lubrication and spring for the production
and distribution systems of organizations. Managing stock effectively is important for any organization, running a
hospital is no exception because without enough stock, health services to patients will come to a halt. Stock represents the
largest single investment in assets for most organizations.In most organizations, employees have become habituated with
high levels of commodity availability resulting in higher stock holding levels. (Chopra & Meindl, 2015). Inventory
management aim is holding inventories at the most reduced conceivable cost, given the goals to guarantee continuous
supplies for progressing operations. Management needs to discover a tradeoff between the distinctive cost parts when
deciding for example, the inventory holding costs, cost of providing stock and expenses coming about because of lacking
inventories. (Blanchard, 2010).
Inventory management plays a crucial role in inventory of business firms in enhancing effectiveness and efficiency. It has
been of sympathy toward numerous years to business firms around the world. Organizations in their operations have been
constantly in hunt down wellsprings of reasonable upper hand. In this way, with a specific end goal to enhance their
aggressiveness there is requirement for business endeavors to grasp powerful practices in overseeing stock. (Rajeev,
2008).In the world today, every organization wants not only to mitigate the system wide cost, but also to maintain
minimum inventories along the supply chain while maximizing the service level requirements of the customer (Sandeep,
2007). This however cannot be achieved without modern technologies. The advancement of technology and innovation
has shortened the product life cycle and thus improved inventory management systems of firms. This has led to reduced
costs, increased efficiency and thus boosted performance of firms It is physical unthinkable and unsound economically
having goods arriving in a system exactly when demands occurs. Clients would need to sit tight for longer period before
satisfying what they requested in situations where there is no stock at hand.Management of inventory involves control of
company‟s materials stored and used with the aim of exactly providing what is required when and where it is required
incurring the least possible cost when minimum of residual stock is employed (Agha, 2010). Wisner and Leong (2011)
define inventory management is the process of efficiently overseeing the constant flow of units into and out of an existing
inventory. This process usually involves controlling the transfer in of units in order to prevent the inventory from
becoming too high or dwindling to levels that could put the operation of the company into jeopardy.
Agus and Noor (2010), proper inventory management also seeks to control the costs associated with the inventory, both
from the perspective of the total value of goods included and the tax burden generated by the cumulative value of the
inventory. Brigham and Gapenski (2013), argue that inventory management is important because firms will ensure assets
and stock are well managed and accurate demand forecasting is maintained to avoid unplanned procurement processes.
This will assist the firm in executing successful procurement processes that match demand and supply forces.
Agus and Noor (2010), points out that demand forecasting helps the organization to minimize operational costs,
increased efficiency and on time delivery of goods and services. This enables the organization to plan for the future
demand by meeting the growing needs of customers. This highly contributes to improved customer satisfaction due to
quality of goods and services offered.Inventory management practices are activities and functions used by organizations
to manage stocks of finished products, semi-finished products and raw materials. Proper implementation of these
activities enables the firm to minimize waste and costs and increase revenue (Jianbin and Yang 2013). Some of the
inventory management practices used discussed in this study includes; economic order quantity, radio frequency
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Paper Publications
ISSN 2349-7807
International Journal of Recent Research in Commerce Economics and Management (IJRRCEM)
Vol. 5, Issue 2, pp: (33-54), Month: April - June 2018, Available at: www.paperpublications.org
identification systems, vendor management inventory, enterprise resource planning, Just in Time, ABC Analysis and E-
procurement.)Inventory management is the active control program which allows the management of sales, purchases and
payments. According to Coyle et al (2012), inventory is a critical factor for success in many companies. They further
stressed that inventory plays a dual role in companies. Inventory impacts the cost of sales, but it also supports order
fulfillment (customer service). As stated earlier in chapter one, Inventory management is vital for the successful operation
of most organizations due to the cost inventory represents. Effective management of inventory is a major concern for
firms in all industries (Mentzer, et al., 2007). In order to achieve this, there is therefore the need for firms to effectively
and efficiently manage their inventories. There are two main concerns about inventory management.
First, inventory management concerns the level of customer service, that is, to have the right goods in sufficient
quantities, in the right place and at the right time. Another concern is the cost of ordering and carrying inventories
(Stevenson, 2015).
Global Perspective of Inventory Management Practices:
Brigham and Gapenski (2013), argue that inventory management is important because firms will ensure assets and stock
are well managed and accurate demand forecasting is maintained to avoid unplanned procurement processes. This will
assist the firm in executing successful procurement processes that match demand and supply forces. Dobler (2014) argues
that well and efficiently controlled inventories can contribute to the effective operation of the firm and hence the firm‟s
overall profit. Proper management of inventory plays a big role in enabling other operations such as production,
purchases, sales, marketing and financial management to be carried out smoothly. Basic challenge however is to
determine the inventory level that works most effectively with the operating system or system existing within the
organization. Management historically, inventory management globally has often meant too much inventory and too little
management or too little inventory and too much management. There can be severe penalties for excesses in either
direction. Inventory problems have proliferated as technological progress has increased the organization‟s ability to
produce good in greater quantities, faster and with multiple design variations. The public has compounded the problem by
its receptiveness to variations and frequent design changes (Ayad, 2011).Since the mid-1980s the strategic benefits of
inventory management and production planning and scheduling have become obvious. The business press has highlighted
the success of Japanese, European, North American firms in achieving unparalleled effectiveness and efficiency in
manufacturing and distribution. In recent years, many of the firms have raised the bar‟,yet again by coordinating with
other firms in their supply chains. For instance, instead of responding to unknown and variable demand, they share
information so that the variability of the demand they observe is significantly lower (Silver, Pykeab and Peterson,
2016).Countries have different policies and plans in relations to the personal and population-based healthcare goals within
their societies. Healthcare systems are organizations established to meet the health needs of target populations. In all
cases, according to the World Health Organization (WHO), a well-functioning healthcare system requires a robust
financing mechanism; a well-trained and adequately paid workforce; reliable information on which to base decisions and
policies and well-maintained facilities and logistics to deliver quality medicines and technologies.
Inventory represents the largest single investment in assets for most organizations. In most organizations, clients have
become accustomed to high levels of commodity availability, for which the result has mostly been higher inventory
levels. (Chopra and Meindl, 2015).
Regional Perspective of Service Delivery:
In a rapidly changing world, particularly in the field of inventory (materials) handling and communication, the institute
that's the hospital has to balance the need of utilizing and controlling inventory effectively. Since among its important
assets of the hospital are its stock resources, that is the drugs, treatment equipment, building material, food, which supply
them their success, creativity and drive. The hospital should therefore apply or use the proper methods of acquiring,
utilizing and monitoring the inventory for the mutual benefit of the hospital.According to Ganeshan. (2010), the
uncertainty and variability of the timing and content of information flow and goods flow leads to uncertain planning,
increased costs, stock outs and delays. Therefore, there is the need to take measures especially on inventory to deal with
uncertainties and dynamics on the operational level of business. However, in order for this to be effective, there is the
need for strategies applied at the tactical and strategic levels of organizations which will steer their supply chain strategy
to achieve competitive strategy and excellence. Inventory management is needed as being a portion of supply chain
network to guard the healthcare delivery towards any type of disturbance.
Page | 35
Paper Publications
ISSN 2349-7807
International Journal of Recent Research in Commerce Economics and Management (IJRRCEM)
Vol. 5, Issue 2, pp: (33-54), Month: April - June 2018, Available at: www.paperpublications.org
According to Versha Kaushal (General Manager, Amrita Institute of Medical Sciences), as most departments depend
heavily on supplies, inventory management can ease or cramp a health facility‟s operations. From a low-cost needle to a
high-end orthopaedic implant, micro steel instruments, supplies (health commodities) are indispensable during a patient‟s
stay at the health facility. Quality care cannot be provided on time unless required health commodities are available in
adequate quantities. Versha Kaushal, further explained that inventory management therefore plays a crucial role in
providing efficient healthcare in relation to three vital aspects of medical supplies used in the health facilities; available,
safety and affordability. Inventories represent a sizeable investment and a potential source of waste that needs to be
carefully controlled.
Local Perspective of County Government Hospitals:
Inventory is essential to organization for production activities, maintenance of plant and machinery as well as other
operational requirements. This results in tying up of money or capital which could have been used more productively. The
management of an organization becomes very concerned in inventory stocks are high. Inventory is part of the company
assets and is always reflected in the company‟s balance sheet. This therefore calls for its close scrutiny by management,
Saleemi (2010) Management is very critical about any shortage of inventory items required for production. Any increase
in the redundancy of machinery or operations due to shortages of inventory may lead to production loss and its associated
costs.These two aspects call for continuous inventory control. Inventory control and management not only looks at the
physical balance of materials but also at aspects of minimizing the inventory cost. The efficiency and effective of an
organization depends mainly on its inventory control methods systems. Poor inventory control e.g. lack of material may
result in loss of millions of shillings, loss of life of patients and it can spoil the good image of the organization. According
to the staff members, the hospital has an out dated organizational structure that is, it‟s not easy or rather it‟s hard to
establish the existing structure of professionalism as workers might be given jobs, which they did not specialize in thus
poor quality of work produced when inventory control is concern hence leading to increased total cost, (Aissaoui et al.,
2007).
Although there have been several researches in the area of inventory and supply chain management in ensuring
organizational performance, little studies have been done to view the role of inventory control in healthcare delivery
especially in Kenya. However, considering the issue of costs, supplier selection, variability and uncertainty in demand and
supply, there is the need for a focal study in this area as they are most often positively correlated to major supply chain
issues within organization such as inventory stock levels, delivery frequency, etc. (Aissaoui et al., 2007).
Inventory consists of all goods owned and held for customer satisfaction. Inventory is a necessary evil to any organisation
although there are various costs that accrue as a result of keeping inventory. It is therefore important for any organisation
to keep a good balance between the amount of inventory to keep at any one time so as to ensure that both internal and
external customers are satisfied without causing the organisation to incur high inventory costs.Inventory management is
required at different locations within a facility or within multiple locations of a supply network toprotect the regular and
planned course of production against the random disturbance of running out of materials or goods. (Williams,2015). The
scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory,
asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting,
physical inventory, available physical space for inventory, quality management, replenishment, returns and defective
goods and demand forecasting.
Statement of the Problem:
Inventory management plays an important role in an organisation‟s service delivery and ability to satisfy customers. For
many organizations, there is no doubt that inventory management enhances their operations. Organizations with high
levels of finished goods inventory can offer a wide range of products and make quick delivery from their backyards to the
customers. To continue serving the demand of customers most firms have realized the need to maintain proper inventory
management. Proper management of inventory enables firms to mitigate inventory costs, reduce lead time and on-time
delivery of goods and services.
According to Wisner et al (2011) organizations that maintain proper inventory of raw materials are more likely to
complete their production on time. According to Sarmah, (2016) inventory management control is part of the inventory
management: that helps to maintain continuity of production operations by maintaining a smooth flow of raw materials
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