INVENTORY MANAGEMENT SYSTEMS AND PROFITABILITY OF SMALL AND MEDIUM MANUFACTURING FIRMS IN NAIROBI CITY COUNTY, KENYA
INVENTORY MANAGEMENT SYSTEMS AND PROFITABILITY OF SMALL AND MEDIUM MANUFACTURING FIRMS IN NAIROBI CITY COUNTY, KENYA
Rosaline Karimi Njagi - Student, School Business, Economics and Tourism, Kenyatta University, Kenya
Dr. Salome Musau - Lecturer, School of Business, Economics and Tourism, Kenyatta University, Kenya
ABSTRACT
Inventory management is a critical component of operational efficiency particularly in manufacturing sector’ small and medium-sized enterprises (SMEs). In Kenya’s Nairobi City County, many SMEs face challenges related to inadequate inventory management systems, which can significantly impact their profitability. Therefore, the present study sought to ascertain inventory management systems effects on profitability of Kenya’s Nairobi City County small and medium manufacturing firms with specific objectives on establishing effects of lean inventory system, Economic Order Quantity system and Just in Time inventory system. Dynamic theory of profit, theory of constraints, Economic Order Quantity model, Innovation Diffusion and Just-In-Time model theory anchored the examination. Employing descriptive research, Nairobi’s SMMEs as target population was categorized as follows; food and beverage production, textiles and apparel, metal fabrication, plastics, woodwork and electronics. The respondents were the 1333 owners of the firms. The study employed a stratified sampling design and purposive sampling method for respondents’ selection where 308 forms the sample size. The research employed a questionnaire as its primary tool. The research systematically collected quantitative data which were analyzed using descriptive statistics, summarizing key features specifically mean and standard deviation which describe central tendency, variability, and distribution. Inferential statistics of correlation and regression analysis was adopted. The diagnostic tests comprised normality, multi-collinearity and autocorrelation tests. Tables and figures presented findings clearly. The study found that there was a positive significant relationship between establish lean inventory system, economic order quantity system and just in time inventory system and Kenya’s Nairobi City County SMME’s profitability. The study concludes that lean inventory solutions significantly lower the expenses associated with obsolescence, insurance, and storage by reducing excess inventory. The economic order quantity system allows businesses to release capital that would typically be engaged in surplus inventory, facilitating reinvestment in growth opportunities or enhancements to profit margins. The just-in-time inventory system removes waste from production, allowing businesses to enhance product quality. The study recommends that companies should ensure proper process standardization by implementing clear and consistent procedures for inventory management, which helps enhance efficiency and minimize errors. The businesses ought to focus on reducing ordering expenses by making fewer, larger orders to lower the administrative costs linked to ordering and receiving inventory. The companies ought to perform precise forecasting to accurately anticipate demand, which assists in ensuring that supplies arrive on time, reducing delays and surplus inventory.
