EFFECTS OF INFORMATION TECHNOLOY ON INVENTORY

MANAGEMENT IN HEALTHCARE ORGANIZATIONS IN KENYA: A CASE

STUDY OF KENYATTA NATIONAL HOSPITAL

BY

SUSAN WAITHERERO MUMBI

RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE AWARD OF DIPLOMA IN PURCHASING AND

SUPPLIES MANAGEMENT OF THE KENYA INSTITUTE OF MANAGEMENT

MARCH 2011

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DECLARATION

Declaration by the Student

This research project is my original work and has not been presented to any other

examination body. No part of this work should be reproduced without my consent or that

of Kenya Institute of Management

Name: Susan Waitherero Mumbi Signature……………. Date……………

MSA/DPSM/ 01910

Declaration by Supervisor

This project has been submitted for defense with my approval as the Kenya Institute of

Management Lecturer.

Name: --------------------------------- .Signature------------------- Date--------------

Lecturer Supervising

For and on behalf of the Kenya Institute of Management

Name………………………….Signature----------------------Date---------------

Branch Manager

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DEDICATION

This research project dedicated to my family members who encouraged and supported

my course. Again to my close friends, as a token of appreciation for their support,

patience and understanding throughout the duration of this course. To you all I say thank

you.

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ACKNOWLEDGEMENT

First I give thanks to God for giving me strength and divine wisdom throughout my time

of study. I give thanks also to the Kenya Institute of Management for according me such

an opportunity to train and develop managerial skills with them. Thanks to all those

lecturers who were involved in developing and shaping my destiny.

Special thanks to my lecturers, my researcher supervisor Mr. J. Mwangeka for his

unlimited guidance throughout the time of this research. Last but not least, I would like to

thank my parents, brothers and sisters for without their encouragement and support, I

would not have completed this study. Finally, I thank the entire management and staff of

Kenyatta National Hospital for allowing me to use their company as the case study.

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ABSTRACT

The purpose of the study was to investigate the effects of information technology on

inventory management in health care organization in Kenya with specific reference to

Kenyatta National Hospital. The objectives of the study were to: determine the effect of

quality control in inventory management. Examine the contribution of customer

satisfaction in inventory management, examine the contribution of better data processing

in inventory management and establish the effect of reduction of operations cost in

inventory management.

A descriptive research design was adopted in the study. The researcher used descriptive

research design as it is the most applicable as the problem has been defined specifically.

Stratified random sampling was employed to select a sample size of 60 respondents from

a target population of 6000 respondents. Stratified random sampling was used during

sampling as it was very appropriate since it is not biased hence it gave every member of

the population an equal chance to participate in the research study. The researcher used

questionnaires to collect data. The questionnaires were designed and pre-tested to

determine the validity and reliability before being used in the actual study.

The findings of the study were; quality control was good and closely monitored by the

management at all stages thus ensuring efficiency and effectiveness of services. Better

data processing improved inventory management due to computerization. Improved

documentation was an indication of proper inventory management that resulted from

customer satisfaction and management needs to check and follow up operation costs so

that goods supplied are of the right quality, quantity and price.

The research recommendations were; any defects should be monitored and corrected on

the spot and set quality standards in the organization. Customer satisfaction should be

guaranteed by all health care institutions. Abolish use of manual data processing and

should have backups for better data processing and organizations should lower they

operations cost in order to survive in the current competitive business world. Further

study to be done in similar area to cover other factors and how to assist implementing of

strategic methods or techniques in inventory control management.

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TABLE OF CONTENTS

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LIST OF TABLES

LIST OF FIGURES

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LIST OF ABBREVIATIONS

KNH Kenyatta National Hospital

LPO Local Purchase Order

KIM Kenya Institute of Management

ISO International Organization of Standardization

ICT Information Communication Technology

IT Information Technology

MOH Ministry of Health

WIP Work-in-progress

JIT Just –in-time

TQM Total Quality Management

KEBS Kenya Bureau of Standards

MSA Mombasa

EDI Electronic Data Interchange

CD-ROM Compact Disc - read only memory

MSA Mombasa

DPSM Diploma in Purchasing and Supplies Management

PDF Permanent Data Formatting

viii

OPERATIONAL DEFINITION OF TERMS

Management This is the process, by which organization managers identify,

develop and effectively release the potentials of employees for the

benefit of both the organization and the individual workers

Quality Quality is a function of excellence value or grade as determined

over a period of time by society generally or by designated bodies

in specialized fields.

Suppliers Suppliers are individuals or businesses that provide goods or

services to vendors in return for the agreed upon compensation

Information its use of microelectronics based combination of computing and

Technology telecommunications.

Raw Material A raw material is something that is acted upon or used by or by

human labor or for use as a building material to create some

product or structure

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CHAPTER ONEINTRODUCTION OF THE STUDY

1.1. Introduction

This chapter contains background of the study, statement of the problem, objectives of

the study, research questions, significance of the study, limitations and the scope in that

order.

1.2. Background of the Study

Information Technology is defined as the acquisitions, processing, storage and

dissemination of vocal, pictorial, textual and numeric information by a microelectronics

based combination of computing and telecommunications. The major components of IT

are therefore computer and telecommunication. Computer is a device which is capable of

automatically accepting data, applying sequence of process to the data and applying the

results of these processes, while telecommunications is concerned with the transmission

of information over distances by such means as electronic signals, a long conductor, light

signals a long optical or by radio waves. (Lysons 1996).

A research was carried on how information technology had brought enormous offer on

every aspect of business James (2006). He argues that information department had

transitioned from a back office support function to an integral planning mechanisms for

designing what must be E-supply and E-business model that will ensure future viability

for the firm and its position in value chain. He added that in today’s environment new E-

technology software appears virtually overnight and begin attracting traditional

companies that have been late in developing a cyber channel of customers response. He

further said that the use of information technology collaboration with supply chain

partner to design new business models with great response to customers demand.

Technology is the most dramatic force that is now shaping the destiny of business.

According to John (2004) the much heralded "information age" has arrived swiftly.

Change of technology can render some product/ service obsolete.

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New technology replaces an older technology in order for efficiency to be attained,

quicker innovation should be exercised. According to McCathy, (1994) underlying any

economic environment is its technological base, technical skills and equipments which

affect the economic resources which are converted into output. Technological

development affect information communication technology (ICT) into two ways:- new

processes and new procedures. Computers also allow more sophisticated planning and

control. These process changes are accompanied by an exiting explosion of high tech

products.

Inventories are stock of materials of any kind stored for future use. Inventory control is a

technique required to maintain work in progress and finished products. Inventory

planning is therefore a critical operation which needs better management in order to

improve on the corporate cash flow and return on investment.

American Accounting term refers to inventory as the value or quantity of raw material,

components, assemblies, consumables, work-in-progress (WIP) and finished stock that

are kept or stored for use as the need arises, (Lysons 1996)

Lack of comprehensive inventory control management technique often causes customer

levels to drop hence failing the programmes Lyson (2000). Therefore in order to satisfy

customers and to achieve the corporate objectives, organizations need to manage

inventory in a cost effective manner. In order to achieve this, materials manager must

migrate from the methods of “eyeball inventory control” that is; a method where a

manager stands in the middle of the store looks around, and if he happens to notice that

some items are out of stock, they are ordered. Such kind of inventory control is very

expensive to the company and it causes stock outs that brings loses of sales, increases

backorder costs, delays cash flow and accelerates loss of customers. therefore the general

objective of inventory control is to maintain stock levels so that the combined costs are at

minimum, and this can be done by establishing two factors, when to order and how many

to order.

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According to Lysons (1996), inventory control is defined as the techniques used to ensure

those stocks of raw material or other supplies work-in-progress and finished goods are

kept at levels which provide maximum service levels at minimum cost. The approaches

include continuous review of excess and obsolete inventory, which involves evaluating

inventory status on regular basis.

In order to keep abreast of changing conditions after stock levels have been established,

stock should be carefully reviewed at suitable intervals to ensure the system of stock

control is not rendered ineffective (David 1994).

Material requirement, planning approach (MRP) is a product oriented computerized

technique carried at minimizing inventory and maintaining delivery schedules. It aims at

synchronizing ordering and delivery between the purchase and the supplier to the

advantage of each to overcome material shortages due to emergencies and late delivering.

The approach ensures that items are available when wanted and not before, this

minimizes inventory and maintain delivery schedules Kenneth (1996). MRP is an

approach to stocks and scheduling that is widely used in situations where demand is

dependent.

According to Lysons (1996), just-in-time (JIT) purchasing is an inventory control whose

goal is to maintain just enough materials in just the right place on just the right amount of

product. It originated in Japan in 1950s, as he observed the benefits of JIT as low

inventory costs, fast detection and correction of unsatisfactory quality and reduced

inventory of purchased parts, raw materials and finished goods. When inventory moves

so fast that firms, essentially hold zero inventory on hand, they follow the system known

as lean supply chain which is a combination of JIT transportation. All three elements

combined to create supply chain that minimizes inventory investment and eliminates

wastes. JIT system does not tolerate high inventory levels.

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According to David (1994), JIT is based on elimination of waste where possible. JIT is a

“pull” system in the sense that replenishment is triggered only when the a mount

available reaches a certain level and stock is pulled through the system only when

needed.

ABC analysis/pareto analysis approach, Lyson (1996) states that ABC analysis is the

application to stock that majority of inventory value will be represented by relatively few

items, while the percentages will vary between organizations. Inventory will be

approximately segmented in the proportions as below.

Table 1:1 ABS Analysis of Inventory

Category (usage) Approximate % of inventory Approximate % of usage

value

A. High value 10 60

B. Moderate value 30 30

C. Low value 60 10

Source: Lysons (1996)

It is further stared that tight control should be exercised over category A and possible B

and less to category C, ABC analysis is simply the refinement of the idea of the, being

two categories of stock into a series of three categories widely employed.

Category A items are small in number, high in usage value and needs high control.

Category B is medium in number, medium usage value and needs moderate control.

Category C is high in number, low usage value and many. It is suggested that is not

appropriate to be highly concerned with control of category C items because they are

many and trivial from the financial point of view.

The action level approach according to David (1994), the basic method of controlling

stock quantity is by means of fixing each commodity stock levels that are recorded in the

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stock control system and subsequently used as a means of indicating when some action is

necessary. They include: minimum stock level, reorder level, danger level and maximum

stock level.

Inventory is grouped as: finished goods which are ready for dispatch, primary inventory

that is raw materials work in progress and finished goods. Support inventories for

example, consumables, that is all supplies in an undertaking that are classified as indirect

and which do not form part of a saleable product. Raw materials, that is, unprocessed

state waiting conversion into a product.

The inventories are routine inventory; that is, stock that are held, replenished and

depleted in the normal course of business, buffer stock – these stocks are held on ‘just in

case basis’ are intended to be draw upon if anything goes wrong with the proper control

of the routine stocks, insurance inventory – these are items usually of a high value or long

lead time or both which are held incase some breakdown occurs which can only be

remedied by calling these materials rapidly in use, Work-in-progress – materials in a pay

finished or partially assembled state are held, seasonal stocks - these are held over and

above normal stocks to cope with expected higher demand at certain and redundant

stocks – most organizations however, well regulated have small stocks of materials,

which are of no use to the organizations.

The economics of inventory management is determined by an analysis of the cost

incurred in obtaining and carrying inventories. Analysis is based on acquisition costs,

holding cost and cost of stock outs.

Acquisition costs analyses imply some costs in ordering irrespective of the quantity of

orders, this includes preliminary costs, placement costs and post placement costs. In

practice, it varies with the complexity of the order and seniority of staff involved,

whether order preparation is manual or computerized and whether repeat orders cost less

than initial order.

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Holding costs are costs related to the value of inventory and costs proportional to the

physical characteristic of inventory. Cost of stock outs is the cost of being out of

inventory. It comprises of costs of idle time and fixed overheads spread over a reduced

out put. Where the costs of individual stocks outs are computed, these should be

expressed in annual figures to ensure compatibilities with acquisition and holding costs.

Monczka etal (2002) reasoned that one of the draw backs of holding excessive inventory

is the effect it has on a firm’s working capital. If we hold excessive inventory, then

founds are tied up unnecessarily which could have been used more productively

elsewhere.

These costs include; Unit costs which is the price a firm pays for spare parts ordered,

Ordering costs, which are costs, connected with acquiring materials, Quality coast, which

helps to identify the causes of problems, Other costs including packing costs and

transportation costs and Carrying costs, which reflect cost of capital, cost of storage and

cost of obsolescence, deterioration and loss.

David etal (1994) had the usually approach to the control of inventory as the control of

inputs to the stores. Irrespective of the inventory control employed, the stock controller

must consider: availability of supplies determined by delivery period taken by the

supplier, frequency of delivery that is, the geographical location of the source of supply

or nature of the material affects the size and frequency of deliveries, rate of issue based

on meeting the practical needs of the operating functions, price discounts for quantities

which influences the quantity purchased, probable requirements for future consumption

indicated by past performance, unit of issue, which should be employed consistently in

ordering and provisioning procedures, allocations where specific quantities of stock are

set aside for special jobs or capital projects, this most be taken into account when

controlling the amount n stock if the materials are also used for other purposes and cost

of ordering – items should be ordered in sufficiently large quantities to avoid

unreasonable expense in preparing large number of small orders.

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Management is a set of activities directed at the efficient and effective utilization of

resources in the pursuit of one or more goals. Management is working with human,

financial and physical resources to learn and acquire ability to translate knowledge into

performance to be superior in the relevant field. Management is the principal activity

that makes a difference in how well organization serve people affected by them. How

successful an organization an organization achieves its objectives and satisfies social

responsibilities as well as how an organization will probably achieve its goal.

Trustworthiness as we see it primarily stems from ethical and consistent organizational

behavior. Building competence in supplier relationship is about developing supplier’s

skills, experience and creativity.

Profile of Kenyatta National Hospital

Kenyatta National Hospital (KNH) is the oldest hospital in the country founded in 1901

as the Native Civil hospital and then King George VI in 1952. It is currently the largest

National referral, teaching and research hospital. The national hospital is the Moi

Teaching and referral Hospital in Eldoret. Following the KNH Board Order of 1987

contained in the legal Notice No.109 (Kenya Gazette Supplement No. 23 of 10th April

1987) Kenyatta National Hospital was established as a state corporation under the State

Corporation Act. According to the legal Notice the function of the hospital were stated as

follows:

To receive patients on referral from other hospital or institution within or outside Kenya

for specialized health care. To provide facilities for medical education for the University

of Nairobi and for research either directly, or through other cooperating health

institutions. To provide facilities for education and training in nursing and other health

and allied professions and to participate, as a national referral hospital in national health

planning. KNH has a board with a responsibility of administration management and

development of the hospital.

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The board comprises 11 members and the Hospital Director is the secretary of the board.

The committees are: Finance/Tender Board Committee, Maintenance and Development

Committee and Establishment Committee.

KNH has turned 104 years and it had its Centenary Celebration in 2001. The Hospital

was built to fulfill the role of being a National Referral and Teaching Hospital, as well as

to provide medical research environment. Established in 1901 with a bed capacity of 40,

KNH became a State Corporation in 1987 with a Board of Management and is at the apex

of the referral system in the Health Sector in Kenya. It covers an area of 45.7 hectares

and within the KNH complex are College of Health Sciences (University of Nairobi), the

Kenya Medical Training College; Kenya Medical Research Institute and National

Laboratory Service (Ministry of Health – MOH).

KNH has 50 wards, 20 out-patient clinics, 24 theatres (16 specialized) and Accident &

Emergency Department. Out of the total bed capacity of 1800, 225 beds are for the

Private Wing. There is a Doctors Plaza consisting of 60 suites for various consultant

specialties. The hospital offers a wide range of diagnostic services such as Laboratories,

Radiology/Imaging and Endoscopy among other specialized services. The average bed

occupancy rate goes to 300%. In addition, at any given day the Hospital hosts in its wards

between 2500 and 3000 patients. On average the Hospital caters for over 95,000 in-

patients and over 600,000 out-patients annually.

1.3. Statement of the Problem

Kenyatta National Hospital the largest referral hospital where most patients from

different parts of Kenya are referred to incase of any complications is faced with

inventory management problems. According to procurement records, delivery and

supply of products such as drugs, equipments, hospital materials, were never received in

good time. This is because of inefficiency in inventory management hence causing

unnecessary delay in the hospital operations. There have been complains on how patients

are kept waiting on the queues for very long time close to four hours either to see the

doctor, or to be admitted, or to be given drugs (Mboya 2008).

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On the other hand, frequent emergencies caused by road or fire accidents can not be

ignored as doctors have to attend to emergencies first thus making process even more

worse. Although efforts have been made to ensure effective inventory management

through use of information technology process in the hospital is upheld, there are still

some drawbacks. It is therefore as a result of these drawbacks (quality control,

customer satisfaction, better data processing and reduction of operation costs) that this

study will try to investigate how they affect inventory management process in public

sector in Kenya.

1.4. Objectives of the Study

1.4.1. General Objective

The general purpose of the study was to investigate the effects of information technology

on inventory management in healthcare organizations in Kenya.

1.4.2 Specific Objectives of the Study

The study aimed

(i) To determine the effect of quality control on inventory management in healthcare

organizations in Kenya.

(ii) To examine the contribution of customer satisfaction on inventory management

in healthcare organizations in Kenya.

(iii) To establish the contribution of data processing on inventory management in

healthcare organizations in Kenya.

(iv) To assess the effect of reduction of operations cost on inventory management in

healthcare organizations in Kenya.

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1.5 Research Questions

The study answered the following questions:-

(i) To what extent does quality control affect inventory management in healthcare

organizations in Kenya?

(ii) How does customer satisfaction affect inventory management in healthcare

organizations in Kenya?

(iii) What is the effect of data processing in inventory management in healthcare

organizations in Kenya?

(iv) How does reduction of operations cost affect inventory management in healthcare

organizations in Kenya?

1.6 Significance of the Study

1.6.2 Organizations

The study is of great significance to the various institutions since has established the

major challenges facing procurement officers in today’s organization. The study has

highlighted a full description of these factors, their causes and how they affect

procedures, this will make it possible to pinpoint the crucial areas that need much

attention when executing public procurement activities, this will influence government

organizations to effectively implement appropriate solution that will eliminate the most

of organization procurement practices.

1.6.3 Procurement Team

The study will have a great impact towards creating foundation for development of

effective procurement strategies that will help the procurement team in carrying out their

daily activities. Procurement officers will know how to handle the challenges facing them

therefore will lead to effective planning and running of the organization.

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1.6.4 The General Public

The study is of great significance to the general public since it explains the pros and cons

of information technology on inventory management to the procurement in organizations.

Unnecessary delays affecting the procurement officers and those factors that have been

creating pressure to the other organization departments will now be dealt with amicably.

1.6.5 Scholars and Research Students

The study is also of great significance to various scholars, students and researchers who

might be involved in procurement research activities, the documented report of this study

will be easily acquired from the library and it will equip the learners with more

knowledge and skills on problems facing the procurement in today’s organization. This

will lead to development of further research activities that will address other factors that

will not be addressed by this study and hence providing more effective solutions to

effectively handle procurement challenges.

1.7 Limitations of the Study

1.7.1 Uncooperative Respondent

Cases of uncooperative respondents were experienced by the researcher and this affected

achievement of a high response rate. As a result, it led to a number of questionnaires not

being returned from some of the respondents who failed to voluntarily participate in

answering of the questionnaires. To this effect, researcher was forced to engage the

respondents in a brief interview to let them know the importance of this study as a

strategy to avoid lack of cooperation.

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1.7.2 Confidentiality and Sensitivity

Confidentiality and sensitivity of the study posed a major limitation since most of the

respondents were barred by the organization confidentiality policy to expose some of the

internal organization matters. The respondent also feared that the findings might be used

as a weapon to terminate their employment contracts. The researcher assured the

respondents of the confidentiality of the information to fight the fear in them.

1.7.3 Opinions and Biasness

The individuals who were involved in answering the questionnaires answered the

questions based from their opinions but not from the existing facts in the organization.

This made some of the respondents to be biased. The researcher therefore had to employ

qualitative techniques to select and document, reliable and accurate findings.

1.8 Scope of the Study

The study was limited to the study of inventory management of the organization in

relation to quality control, customer satisfaction, better data processing and reduction of

operation costs. The research was carried out at Kenyatta National Hospital organization

headquarters. The hospital is situated in the western part of Nairobi city, 1.5 kilometers

from city centre, off Ngong Road. KNH headquarters has a staff population of 6,000

employees. These employees fall in various categories, from subordinates staff, cleaners,

operators, nurses, Doctors, assistant and the top management. This study took a period

of four months effective December2010 March 2011 to complete the entire research

work.

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CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This chapter contains a reviewed literature on effects of information technology on

inventory management. Extension literature has been reviewed on specific objectives of

quality control, customer satisfaction, better data processing and reduction of operations

costs.

2.2 Review of Past Studies

2.2.1 Quality Control

In its broadest sense, quality is a degree of excellence: the extent to which something is

fit for its purpose. In the narrow sense, product or service quality is defined as

conformance with requirement, freedom from defects or contamination, or simply a

degree of customer satisfaction. In quality management, quality according to (ISO

9000:2000) is degree to which inherent characteristics fulfills requirements. Quality has

different meanings depending on the product and also to different people. The concept of

Quality on anything, may it be a product or service has to do with psychological

expectation of the users/consumers towards performance or achievements of the desired

results. Against this background there must be knowledge of the expected results against

some benchmark.

All those planned and systematic action necessary to provide adequate confidence that a

product or service will satisfy given requirements for quality. As defined in ISO

9000:2000 it is part of quality management system focused on providing confidence that

quality requirements will be fulfilled. Quality is the result of a comparison between what

was required and what was provided. It is judged not by the producer but by the receiver.

The judgment can be made of an intention, as is the case when selecting suppliers, or an

output, as is the case when purchasing a product or service. It is a criminal offence under

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The Standards Act, Cap 496 of the Laws of Kenya, to display the Diamond Mark of

Quality without a current and valid permit issued by KEBS.

 According to Sorrensed (1980) quality is whatever customers expect to be and what they

say it is. He proposes that a compromise in quality results in heavy losses for the

company. A product or a service that fails to meet this will cost the company in terms of

repair cost or making amendments to the product and the company will add the cost of

making amendments to the customers. Soaners and Angus (2004) stated that quality is a

degree or grade of excellent or worth; it is any kind of property that exists as magnitude

or multitude.

Total quality management (TQM) as mentioned by Thomas (1995), is where there is a

defined culture of quality awareness and quality improvement in every department and at

every level in the organization. Organizations practicing TQM have a long-term

commitment to quality and consider quality to be core value of the organization. They

take an external view of quality as compared to traditional western internal view.

Responsibility of operation is to run the quality process at optimal effectiveness to meet

quality goals under operating conditions. However due to deficiencies in the original plan

the process fails to achieve the optimal point leading to chronic waste. Since the waste is

inherent it proves that the operating system are unable to get rid of it instead they carry

out quality control to keep the waste from getting worse. Usually quality control is

essentially the activities and techniques employed to achieve and maintain the quality of

a product, process or service.

According to Strategic Management Journal Volume 16, (1995) “as a pervasive part of

business thinking as quarterly financial results and yet TQM`s role as a strategic resource

remains virtually unexamined in strategic management research. Drawing on the resource

approach and other theoretical perspectives. This article examines TQM as a potential

source of sustainable competitive advantage reviews existing empirical evidence and

reports findings from a new empirical evidence study of TQM performance

consequences.

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The findings suggest that most features generally associated with TQM such as quality

training, process improvement and benchmarking do not generally produce advantage but

that certain tact, behavioral, imperfectly, imitable, cultures such as open culture,

employee empowerment and executive commitment can produce advantage. The author

concludes that these task resources and non TQM and techniques drive TQM success and

organizations that acquire them can out perform competitors with or without

accompanying TQM ideology.

As stated by Lucey (1995), most products are established as of four performance levels:

low, average, high or superior. Performance quality refers to the level at which the

products primary characteristics operate. The important question then is whether offering

higher product performance can produce higher profitability. The strategic planning

institute studied the effect of higher relative product quality premium price; they benefit

from more repeat purchasing, consumer loyalty and positive word of mouth and their cost

of delivery, more quality were not much higher than for business units producing low

quality (Kotler 2000).

Quality link to profitability does not mean that the firm should design the highest

performance level possible. There are diminishing returns to ever increasing

performance. The manufacturers must design a performance level appropriate to the

target market and competitor’s performance levels. A company must also manage

performance quality through time. Three strategies available: the first where the

manufacturers continuously improve the product often produces the highest returns and

market share. The second strategy is to maintain product quality at a given level. Many

companies leave their quality unaltered at its initial formulation unless glaring faults or

opportunities occur. The third strategy is to reduce product quality through time, some

companies cut quality to offset rising costs while others reduce quality deliberately in

order to increase current profits although this course or action often hurts long run

profitability (Cole 1996).

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Quality control involves monitoring to ensure that defects or potential defects are spotted.

Thus it has to do with defect detection and correction achievable through inspections and

setting quality standards at the design stage. It uses a series of inspections and tests to

check that the planned quality is actually achieved hence emphazing on controlling after

occurrence. Standardization plays an important role. It emphases on quality assurance

where defect prevention through putting in place quality systems that will ensure quality

products are produced. This gives a customer a guarantee of quality be measuring

product conformance with process and performance specifications (Martin 1990).

According to Sorenson (1950) quality control benefits the organization in several ways.

Suppliers’ quality control system reduces the buyers inspection cost and his confidence in

the reliability of the supplier increases. Minimum possible rejection and wider

acceptance of the supply is made possible by good and effective quality control system.

Goodwill of both vendor and purchaser goes high as there are fewer difficulties and

problems in the market for the quality product and sometimes inspection at the

purchaser’s end is eliminated if with each consignment the vendor certificate and

statistical data regarding the quality of supply is enclosed.

Quality products enable the organization gain popularity and large market share. Market

share analysis evaluates a company’s performance in comparison to that of its

competitors. Sales analysis may show a healthy increase in revenues but this may be due

to market growth rather than can improved performance over competitors. It should be

recognized that a market share decline is not always a symptoms of poor performance.

This is why outcomes should be compared to marketing objectives and performance

standards (Jobber 2007)

Some companies want to maximize their market share. They believe that a higher sales

volume will lead to lower unit costs and higher long run profit. Datta (2006). Market

share has been used to describe and analyze an industry and the participants therein.

These can be specific or broad measures. They may focus on the product and quality.

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Such as performance data versus specifications, percentage of product returns, and

number of customer complaints

Irrespective of the system of stock control in use, it is clear that, if large quantities are

ordered on an infrequent basis, then the risk of being out of stock will be dismissed and

the cost of acquisition will also be reduced (Jessop 1994). These costs will be offered by

the higher average investment in stock leading to greater stock hold costs.

Jessop (1994), went further and said that if a policy of ordering ‘little and often is

adopted, then stock holding costs will be reduced while ordering or acquisition costs rise.

The possibility of running out of stock may also be greater. To reduce ordering costs due

to frequent ordering and minimize stock holding costs due to large quantities being

ordered, an optimum order quantity is set to be ordered after a certain period of time.

This solves the problem of understocking and overstocking

Figure 2.1 Optimum ordering quantities

Cost of storage

¦

¦ Cost of ordering

¦

EOQ Quantity Ordered

Source: Jessop (1994)

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Cos

t

2.2.2 Customer Satisfaction

According to Gearson (1993), he said that all things done to achieve excellent quality and

services are unimportant if the customer is not satisfied.

He defines the customers’ satisfaction as the perception that his or her expectations have

been surpassed. He recommends asking customers what they want at all times thus

fulfilling their expectations.

The concept of customer service and care defines the link between sales, service and

satisfaction. The scholar focuses on the importance of providing superior customer

service and royalties and their earning indefinitely. A customer is satisfied when his or

her needs, real or perceived are met or exceeded. Quality customer service is however

what the customer perceives as quality before one can measure how well they are

providing customer service; one needs to have a customer system in place, Sorrensed

(1950). This will only succeed when there is total management commitment. This

commitment must begin at the top i.e. from the chief executive, Managing director,

chairman or the owner. They must develop and communicate a clear vision of what the

service quality is going to be and how it will be implemented. He further says that

everything possible must be done to know your customers intimately and to understand

them totally. This means knowing their likes and dislikes in regards to the business. The

changes they may want you to make, their needs, their wants, expectations for now and

the future, what motivates them to buy or change in suppliers and what you must do to

satisfy them, retain them and make them loyal should conform to the standardization set.

Customer service quality performance results in customer satisfaction and loyalty could

be provided by competent qualified staff therefore once hired they should be trained

extensively to provide superior customer service.

Customer problems, as observed by Martin (1990) should be turned into opportunities for

customer care. Roots of common problems and complaints are removed and the system

actually improves in the process. The organization should identify the strengths and

18

weakness in the purchasing and supply system; it should also describe exactly how

customers would be treated.

As proposed by Sorrensed (1950), for customers to be satisfied one has to solve their

queries courteously and promptly. To him the issue of company attitude towards the

customer is the key. He proposes that the company should make promises it can keep

because the more promises it keeps the more the customers accept. Kottler (2001)

suggests that in order to produce and deliver customer satisfaction two concepts must be

in place that is the value, chain and supply chain. Value chain is a tool used to create

more customer value. Each firm has a collection of activities performed to design,

produce, and market, deliver and performs the firms products. It has the five primary

activities and four support activities. Primary activities include inbound logistics

operations, outbound logistics, marketing and sales and services. The support activities

include procurement, technology development, human resource and firms’ infrastructure

for all these activities to succeed there should be co-ordination between departments

hence creating an enabling environment for acquisition of the ISO 9000 series certificate.

According to Porter (1996), he developed a powerful framework for analyzing both

private and public institutions and formulating appropriate competitive strategies. He

came up with a model that identifies the forces that determine the intensity of competition

in a given company and therefore profit potential. The four forces highlighted in the

model are rivalry among existing firms, threats of new entrants, threat of substitute

products and the bargaining power of the supplier. Management should carefully analyze

these factors when a competitive strategy is being formulated with a mind of meeting ISO

standards. Porter (1996) points out that the key success strategy is to develop a position

that is invulnerable to attack from these factors as much as possible. He went further with

strategies that he called generic strategies that tend to insulate firms from damaging

effects of the competitive forces. These strategies are viewed as general approaches to out

perform competitors in any company and to enable the industry to compete internally.

19

Focus-this has to do with concentrating on specific buyer, group and segment of the

product line or service line area whereas the low cost and differentiation strategies aim at

achieving fewer goals that meet the local standards in terms of operations. Company wide

the focus or niche approach concentrates on servicing a more narrowly defined market.

The bottom line is that the firm can serve a limited market more efficiently than those

companies that are competing more broadly. Focus is whereby a company pays attention

to specific market segments.

According to Baker (1989), he ranked the critical success to product factors influencing

competitiveness as; performance in purchasing, operation, reliability and sales price. He

stated that the new competition is not between what companies produced in their

company but between what they add to their company output in form of customer

service, financing and other things that people value hence enabling the company meet

the determinants of acquisition of ISO series certificate. The only true measure of

acceptable quality is customer satisfaction, which takes into account both objective and

subjective interpretations of the needs and expectations of customers. If customers are

satisfied with the products and services offered, the organization has not only correctly

interpreted customer needs and expectations but it is also providing products and services

of acceptable quality.

2.2.3 Data Processing

Data processing is how raw information is manipulated in order to produce a result. The

result may lead a better understanding of a problem or a situation. Data processing is a

very essential aspect of businesses all over the world. The success of a business depends

on how the volumes of data generated are handled and interpreted. There are six stages of

data processing. These include collection of the data, preparation of the collected data

for processing, data input, processing, output and interpretation of the data and finally

storage stage (Wingand 1995).

20

For the data to be available it should be collected. Collecting data can be very time

consuming and at certain time boring. It is a process that most employees will want to run

away from. It may involve travelling or having to sit for a long time. A lot money also

goes into data collection.

After data is collected, it should be prepared for processing. Raw data cannot be

processed. In today’s world, computers are the main tools of data processing. The data

collected should therefore, be prepared for the computer. There should be codes assigned

to each type of response or phenomenon. This is quite technical and if not well done, the

results will not be valid.

The third stage is the input stage. This is another time consuming process in data

processing. For large companies, a lot of people are needed for several days to have this

work done. The cost involves is so high and therefore, many businesses are resorting to

outsource for this purpose. In that way, they save cost. The volume of data that must be

entered in a day is so huge that people have set up data entry companies for that purpose.

There are many others who are freelancing in this area. Data entry does not require much

education. It is a simple process. What is required is speed and accuracy (Wingand 1995).

After the input is over, then comes the time for the processing itself. This is the time

various means and methods are used to manipulate the inputted data. In the past, when

computers were not available, or when they were not common, people had to do this. It

was then a herculean task. However, with an advent of computers the process is now very

easy. Many software programs are available for processing large volumes of data within

very short periods. Some are general while some are for specific industries and processes.

Computers have made data processing at this stage very easy. A click at a button is

enough to produce the content.

The importance of data processing is to provide information that will guide future

company policies. That makes output very important.

21

When the output is available, it should be interpreted in a way that makes it useful for the

company. Without interpretation the company does not benefit from the whole process

(Wingand 1995).

The last stage in data processing is storage. The data inputted, and the result of the

process must be stored in a safe manner. This will enable it to be used another time. If the

process is not stored, there will not be a good ground for future comparison.

According to Jessop (1994) the operation of the stores functions and the control of stock

cannot be performed in an efficient manner without some means of capturing and storing

information and a facility for the analysis and use of this information. Stock records are

expected to maintain particulars of receipts, issues and balances remaining in stock for

each individual item and in the store house from day to day. Jessop points out the

following reasons for maintaining records; to indicate the amount of stock of any item at

any time without it being necessary for the stock to be counted physically, to establish a

link between the physical stock and the stores accounts, to provide a means of

provisioning, to supply information fro stock taking, to provide a method of information

store house staff of the location of goods in the store house and to serve the purpose of

price list.

In electronic data processing, the whole process of working with electronic documents

can be divided into three basic stages – creation, transmission (delivery to designated

individuals, publications,) and storage. For the first stage, the Word Document format has

a definite advantage. The text processor Microsoft Word is the clear leader in the field of

software used for the creation of documents, which is installed on practically every office

computer. It is easy to use, possesses a wide range of functions, and, for all intents and

purposes, has long ago transformed into the de facto standard. At the same time, fully

featured editors for the creation of PDF files simply do not exist. Even professional

versions of Adobe Acrobat allow you to make only minimal changes to an already

existing document (for example, to fill out a form, add commentary, etc.).

22

In other words, in order to receive a file in the PDF format, you need to create it first in

any other format, and then after that convert it into PDF with the aid of some kind of

software. Naturally, for the end user, this is not very convenient (O’Brian 2004).

At the next stage, however, all the benefits turn out to be on the side of the PDF format.

Let's examine these in more detail. The first benefit, of course, is platform independence.

It is not important which computers are in the offices of your partners and which

operating systems they are running. It is not important, what software is installed for

reading PDF files. In any case, they will be able to view, and, if necessary, print

documents in precisely the needed form. While using the Word Document format, it is

better if both parties use the same version of software. Frankly speaking, the same

problem with versions for reading format files applies to the PDF format as well.

However, you need to take into account that this software is free. Therefore, a new

version, if the need arises, can always be downloaded from the Internet.

A second advantage of PDF is that the software for viewing files saved in this format is

free. Any person or any company can, absolutely free of charge, download the program

Acrobat Reader from the Internet, and use if for working with electronic documents. This

is especially convenient in the case of a one-way exchange of information.

A third advantage of the PDF format is that sending files to partners or clients is safe. The

fact is, documents created by Microsoft Word often become the carriers of various

viruses. In addition to this, it is sometimes necessary to use built-in defense against

unauthorized access. In this regard, PDF has some advantage, insofar as its specifications

were investigated by many independent software developers and experts in the field of

information security, who confirmed the absence of vulnerabilities and backdoors

(O’Brian 2004).

PDF has yet another, fourth advantage. The PDF format is standardized by the ISO

(International Organization for Standardization) for the archival storage of electronic

documents and exchange of information between companies.

23

In addition, the representatives of Adobe have announced that they plan on sending the

specifications of the latest version of its format to the Association for Information and

Image Management (AIIM), which intends to promote it as the general international

standard for the implementation of electronic data processing. If this takes place, which is

highly likely, the use of PDF technology for electronic data processing will be

institutionalized worldwide.

All these benefits of the PDF format are also relevant for the third stage of data

processing, the storage of electronic documents. In such a way, a very interesting

situation is apparent. On the one hand, it is best to create documents in the Word

Document format. On the other hand, for sending and storing such documents, PDF is the

most suitable format. It is possible, of course, to choose any other technology and come

to terms with its disadvantages. However, it is better to use a combined data processing

approach: create files in the Word Document format, and prior to sending them or

submitting them to an archive, convert them into PDF. This allows one to enjoy all the

pluses of both technologies and avoid their minuses (Turban 1994).

2.2.4 Reduction of Operation Cost

In today’s competitive business reality, companies must lower their operating costs and

increase productivity just to survive. Yet, many companies are reluctant to upgrade their

computer system, remembering their past experiences and not want to incur new

expenses. The tools and technologies exist but a fear of change prevents some

manufacturers, distributors and retailers from making the cultural change that is needed

to use a new technology to improve how their business operate. What they fail to realize

is that having aging software will result in higher operating costs company-wide and

excess inventory in the warehouse – meaning a decrease in bottom line profits (O’Brain

2004).

Having an un-automated warehouse resulted in poor inventory control, incorrect

shipments and large numbers of returns. When new inventory was received, shelves

were consolidated and the computer records were not properly updated.

24

This resulted in inventory being misplaced and new inventory being bought. As a result

of these issues, the company ended with excess inventory that cannot be sold. This

increase operating cost yet with computerization, operating cost are automatically

reduced.

Automating the warehouse automatically leads to reducing operating costs and improving

the company bottom line profit. When the warehouse is automated, newly received

inventory is scanned and computer files are updated in ‘real-time mode’ resulting in data

instantly available to everyone company-wide. Secondly, consolidating shelves will be

easier and more efficient as your ‘real-time’ computer files will reflect both the

consolidated and new inventory location and quantity. Thirdly, you will be able to find

misplaced inventory and prevent it from ‘collecting dust’. Fourthly, less shipping

mistakes and returns will be made as picked inventory gets scanned for accuracy. At the

staging area before being packed again, it gets scanned and verified confirming that the

correct products and quantities are being shipped to the right customer. Finally, labour

cost will be dramatically reduced. Since automating your warehouse will create a more

efficient and effective inventory environment, you can quickly reduce the size of your

inventory management department or transfer them to other areas of the company where

they are much more needed. Another excellent way to lower your labour and operating

costs and increase sales and the bottom-line profits is to effectively use the web (Sandoe

2001).

Internet-based EDI links can be less costly than the traditional leased lines and value

added services regard network access and data transmission. As a result, the break even

point in terms of transaction volume becomes lower, especially favoring smaller

organizations. the special features of the internet and the web based allow the

development of interactive applications, enhanced by a graphical user interface with full

multimedia support, and thus enable the communication of complex information. A

growing number of internet based online auctions and bidding systems supports the

negotiation phase by proving a simple negotiation mechanism confined to price alone.

Their success is a testimony to the ease with which the internet connects a large number

of dispersed users.

25

According to Jessop (1994) the operation of the stores functions and the control of stock

cannot be performed in an efficient manner without some means of capturing and storing

information and a facility for the analysis and use of this information. Stock records are

expected to maintain particulars of receipts, issues and balances remaining in stock for

each individual item and in the store house from day to day. Jessop (1994) points out the

following reasons for maintaining records; to indicate the amount of stock of any item at

any time without it being necessary for the stock to be counted physically, to establish a

link between the physical stock and the stores accounts, to provide a means of

provisioning, to supply information fro stock taking, to provide a method of information

store house staff of the location of goods in the store house and to serve the purpose of

price list. Therefore, poor record keeping affects inventory control as receipts or issues

records are not kept therefore no indication of stock at any time which can lead to under

stocking or overstocking

Internet search engines help users find items by suing keywords supporting the

information phase, in particular to find new sources or to fulfill unexpected requirements.

Internet-based catalogs allow buying organizations to browse, search and place orders on-

line. The combine and extend many features of existing channels, such as the rich

content of printed catalogs, the convenience and intimacy of on-line shopping and the

sophisticated searching capability of CD-ROM catalogs.

2.3 Critical Review

James (2006), argued that the use of information technology has facilitated sharing of

information and collaboration with supply chain partner. He explained that there is need

for developing an E-supply and E-business model to ensure future viability of the firm

and its position in the value chain. However, he did not mention the constraints in

implementation of the system.

Ayub (2005), found out that data processing is made better by using computerized

inventory management. Using computers to capture information and then kept in flash

disc would make it easier for future retrieval or some information stored in pdf . Ayub

26

outlines that it was necessary that all organizations use computers for better data

processing rather than the manual process of record keeping.

Gordon (2004) highlighted that inventory control is a significant factor for management

of inventory and resources and should therefore e considered as a strategic profession

rather than an administrative action. However, the author stated that inventory control

was being carried out by professionals without indicating how they can acquire skills and

professional knowledge aimed at ensuring customer satisfaction is the bottom line.

Lysons (2006) points out that demand forecasting helps in planning and decision making

in business. He argued that the decision to enlarge a factory will be based on a forecast

of increased demand for the product manufactured.

Jessop (1994), argued that with fixed order quantities, inventory is replenished with

predetermined quantity of stock every time the inventory falls to specific order level.

Thus minimizing understocking and overstocking.

2.4 Summary

From the literature review, it is clear that, the management should understand the key

factors that affect inventory control function in an organization. The review came up

clearly with effect of information technology on quality control, customer satisfaction,

better data processing and reduction of operation costs to inventory management.

It’s always important to achieve organizations goal through strategic planning of the

organizations activities. Inventory management is one of most important activities in

procurement operations that have been emphasized in the public sector. A lot of

organization resources are always pumped in procurement services in order to achieve on

time delivery hence a lot of emphasis should be considered when dealing with material

specification to gain, lead times should be well known and well scheduled after

acceptance of the lead times by both the supplier and purchaser.

27

It is also necessary to realize the importance of information technology in all the

operations in the public sector more so in the health sectors. This makes retrieval of

documents fast and reduces long queues.

2.5 Conceptual Framework

This section provides an exploration framework concerning variable inter-relationships

that explains the effect of information technology on inventory management. It identifies

quality control, customer satisfaction, better data processing and reduction of operations

costs as major factors that cause impact on inventory control.

The schematic diagram provides the explanation concerning the variable relationship

Figure 2.2 Conceptual Framework

Independent variables Dependent variable

Source: Author (2011)

28

Quality Control

Customer Satisfaction

Data Processing

Reduction of Operation Costs

Inventory Management in healthcare organizations in Kenya

Quality Control

This is the measures at which customers are satisfied with the products and services

provided by a company thus customers get value of their money. Quality is the

worthiness that the customers get from the suppliers. Quality is fitness for use. Suppliers

are concerned with quality of design or specifications of the right material for the job and

communication of the requirements to the supplier in a clear and unambiguous way hence

performance quality. And conformance quality is established by inspection. Quality

control involves monitoring to ensure that defects or potential defects are spotted. It has

to do with defect detection and correction achievable through inspection and setting

quality standards at an early stage. It involves a series of inspections and tests to check

that the planned quality is actually being achieved where controlling after occurrence is

emphasized.

This is the value the customer feels subjectively and sometimes in the world of

irrationally.

This means knowing their likes and dislikes in regards to the business. The changes they

may want you to make, their needs, their wants, expectations for now and the future,

what motivates them to buy or change in suppliers and what you must do to satisfy them,

retain them and make them loyal should conform to the standardization set.

Data Processing

Data processing includes collection of the data, preparation of the collected data for

processing, data input, processing, output and interpretation of the data and finally storing

of the data. Better data processing ensures that all stages are systematically followed to

the letter with the help of computer based technology.

2.5.1 Reduction of Operation Costs

Reduction of operation costs results when the warehouse is automated, newly received

inventory is scanned and computer files are updated in ‘real-time mode’ resulting in data

29

instantly available to everyone company-wide. Secondly, consolidating shelves will be

easier and more efficient as your ‘real-time’ computer files will reflect both the

consolidated and new inventory location and quantity. Thirdly, you will be able to find

misplaced inventory and prevent it from ‘collecting dust’. Fourthly, less shipping

mistakes and returns will be made as picked inventory gets scanned for accuracy.

CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

3.1 Introduction

This chapter outlines the methodology that was used in gathering data on the factors that

affect inventory management in health care. The research design and methodology that

was used was well defined and the reasons as to why they were chosen in the study were

elaborated in the course of the study. The research design incorporated important aspects

of methodology that included study design, target population, sample design, data

collection methods and data analysis methods. This was accurately and effectively done

to ensure desirable.

3.2 Research Design

Research design is simply a guide in collecting and analyzing data in order to

accomplish a study. The research design of the study was descriptive research design.

This was because the problem was well defined specifically and there were certain issues

that the researcher wanted to establish that was, the extent to which variables are related.

In addition, descriptive research designs are objective and test specific hypothesis making

it suitable for the study.

30

3.3 Target Population

The target population included all elements in a researcher’s area of investigation. In this

study the main objective was on inventory activity. The target population included

purchasers, store personnel, finance personnel, subordinate staff, pharmacy, medical

officers, ward attendants, and human resource personnel hence the target population

included representations of all categories of staff from management to operational level

to avoid biasness and enhance accuracy.

Table 3.1 Target Population

Population Category Population Size Percentage

Procurement Department 730 12

Store personnel 410 7

Human Resource Personnel 250 4

Finance Personnel 105 2

Laboratory Staff 520 9

Pharmacy 320 5

Ward Attendants 665 11

Medical Officers 1800 30

Subordinate staff 1200 20

Total 6000 100

Source: Author (2011)

3.4 Sampling Design

Stratified random sampling was used in which the population was divided into strata and

a random sample drawn from each sample who participated in the study. The researcher

31

wanted to ensure every stratum was well represented and therefore took a sample of 1%

of each stratum as shown in table 3.2 below.

Table 3.2 Sample Size

Population Category Population Size Sample Size Percentage

Procurement Department 730 7 12

Store personnel 410 4 7

Human Resource Personnel 250 3 4

Finance Personnel 105 1 2

Laboratory Staff 520 5 9

Pharmacy 320 3 5

Ward Attendants 665 7 11

Medical Officers 1800 18 30

Subordinate staff 1200 12 20

Total 6000 60 100

Source: Author (2011)

The researcher used stratified random sampling. This was because the researcher wanted

to make inference from a population which is not homogenous. A stratified random

sample was obtained by dividing the elements of a population into non- overlapping and

homogenous sub population called strata. Once this was obtained, the researcher selected

32

a simple randomly from each of the stratum. This was to ensure that each of the sub

population was well represented. Stratified random sampling provided a more accurate

impression of the strata.

3.5 Data Collection Methods

Information that a researcher normally requires, come from either primary or secondary

sources. Data collection methods are those employed in getting the information from the

units under investigation. Data collection methods used to collect the relevant data was

questionnaires.

Questionnaires were designed in a simple form which were easily understood and were

delivered to the respondents who were to participate in the research study. A specific

time frame was given to the respondents to fill the questionnaire

3.5.1 Questionnaires

Questionnaires were used to provide the major sources of data. This is because

questionnaires are always economical and time saving and free minded responses are

encouraged. Questionnaires were designed and given to respondents so that they can fill

at their own convenient time. The questions were both closed and open ended. Closed

questions were simply used to fill and collect the data where Yes or No answers were

expected. Open ended questions were availed and space left for filling in the relevant

explanations. This gave an opportunity to the respondents to clearly state and elaborate

their views accordingly.

3.5.2 Validity and Reliability

The questionnaires were distributed to 9 selected respondents in the nine categories

(Purchasers, Stores Personnel, Sub-ordinate Staff and Finance Staff in KNH. A specific

33

time frame was given to the respondents to complete the questionnaire. The

questionnaires were distributed to individual persons in the categories.

3.6 Data Analysis Methods

The questionnaires were carefully checked to ensure that responses were correctly

ascertained. The data was finally analyzed both qualitatively and quantitatively. This

involved the use of descriptive statistical analysis method to ensure accuracy was

obtained. The frequency tables, charts and figures were used to present the results for

easier understanding and interpretation.

CHAPTER FOUR

DATA ANALYSIS, PRESENTATION AND INTERPRETATION

4.1 Introduction

The chapter deals with analysis, presentation and interpretation of the study which was to

investigate inventory management in health care organizations. The data collected was

from Kenyatta National Hospital. The analysis was done based on the research

objectives

4.2 Presentation of Findings

4.2.1 Effect of quality control on inventory management in healthcare

organizations in Kenya.

Table 4.1 Effect of quality control on inventory management in healthcare

organizations in Kenya.

Response Frequency Percentage (%)

Yes 38 95

34

No 2 5

Total 40 100

Source: Author (2011)

Figure 4.1 Effect of quality control on inventory management in healthcare

organizations in Kenya.

Source: Author (2011)

From the table 4.1 and figure 4.8, 95% of the respondents indicated that quality control

affects inventory management. 5% of the respondents indicated that quality control does

not affect the inventory management. There was high positive response on the effect of

quality control in inventory management in hospitals as the study revealed that, the ‘yes’

respondents were majority since they understood the relationship between quality control

and inventory management.

Table 4.2. Extent of quality control on inventory management in healthcare

organizations in Kenya.

Category Frequency Percentage (%)

Very great extent 21 52

Great extent 10 25

Small extent 5 13

Moderate 4 10

Total 40 100

Source: Author (2011)

Figure 4.2 Extent of quality control in inventory management

35

Source: Author (2011)

From the above table 4.2 and figure 4.9, it can be clearly seen that the majority of

employees said quality control affect inventory management to a very great extent.

These respondents were 21 in total represented by 22%. The other 10 respondents

indicated that quality control affects inventory management to a great extent at 25%.

Those respondents who said to a small extent were 5 at 13%. Finally, 4 respondents felt

the effect was to a moderate extent this represented 10%.

4.2.2 Effect of customer satisfaction on inventory management in healthcare

organizations in Kenya

Table 4.3 Effect of customer satisfaction on inventory management

Category Frequency Percentage (%)

Yes 30 75

No 10 25

Total 40 100

Source: Author (2011)

36

Figure 4.3 Effect of customer satisfaction on inventory management

Source: Author (2011)

From the table 4.2.2 and figure 4.3 above, 30 respondents in total representing 75%

indicated that customer satisfaction has a major role in affecting inventory management

while 10 respondents in total representing 25% that customer satisfaction had no effect

on inventory management.

Table 4.4 Extent customer satisfaction affects inventory management

Extent Frequency Percentage (%)

Very great extent 19 48

Great extent 12 30

Small extent 4 10

Moderate 5 12

Total 40 100

Source: Author (2011)

37

75%

25%

Yes

No

Figure 4.4 Extent customer satisfaction affects inventory management

Source: Author (2011)

The table 4.4 and figure 4.4 above are a reflection of the response obtained on the extent

customer satisfaction affects inventory management. The results were; 19 respondents

representing 48% said that customer satisfaction affects inventory management to a very

great extent, 12 respondents representing 30% indicated that customer satisfaction affects

inventory management to great extent, 4 respondents representing 10% felt customer

satisfaction affects inventory management to small extent and 5 respondents representing

12% said customer satisfaction affects inventory management to a moderate extent .

4.2.3 Effect of Data processing on inventory management in healthcare

organizations in Kenya

Table 4.6 Effect of data processing

Response Frequency Percentage

Yes 27 67

No 13 33

Total 40 100

Source: Author (2011)

Figure 4.6 Effect of data processing

38

Source: Author (2011)

From the above table 4. 6and figure 4.6, 27 respondents in total representing 67%

indicated that the data processing affects inventory management in the health care while

13 respondents that is 33% indicated that data processing does not affect inventory

management.

Table 4.7 Extent of data processing on inventory management

Extent Frequency Percentage (%)

Very great extent 30 75

Great extent 8 20

Small extent 2 5

Moderate 0 0

Total 40 100

Source: Author (2011)

Figure 4.7 Extent of data processing on inventory management

39

Source: Author (2011)

The table 4.7 and figure 4.7 above are a reflection of the response obtained on the extent

data processing affects inventory management. The results were; 30 respondents

representing 75% said that data processing affects inventory management to a very great

extent, 8 respondents representing 20% indicated that data processing affects inventory

management to great extent, 2 respondents representing 5% said that data processing

affects inventory management to small extent. There was no response for moderate

extent.

4.2.4 Effect of reduction of operations costs on inventory management in healthcare

organizations.

Table 4.8 Effect of reduction of operations costs on inventory management

Response Frequency Percentage

Yes 20 50

No 20 50

Total 40 100

Source: Author (2011)

Figure 4.8 Effect of reduction of operations costs on inventory management

40

Source: Author (2011)

Table 4.8 and figure 4.8 above is an indication showing how reduction of operations costs

affects inventory control and the results obtained indicated equal response. 20

respondents that is 50% each for both yes and no. This is an indication showing that

reduction of operations costs does or does not have an effect on material delivery process.

Table 4.9 Extent of reduction of operations costs on inventory management

Extent Frequency Percentage

Very large extent 2 5

Large extent 31 77

Moderate extent 7 18

Low extent 0 0

Total 40 100

Source: Author (2011)

Figure 4.9 Extent of reduction of operations costs on inventory management

41

Source: Author (2011)

According to the table 4. 9and figure 4.9 above, the respondents were asked the extent to

which reduction of operation costs affected inventory management and the results

obtained were as follows: 2 respondents representing 5% indicate the effect was to a very

large extent, 31 respondents representing 77% said to a large extent while 7 respondents

representing 18% said to a moderate extent. There was no response for low extent. This

implied that reduction of operation costs affects inventory management to a large extent.

.

4.3 Summary of Data analysis

4.3.1 General Information

The response rate was the actual representation of the population. Out of the 60

questionnaires distributed 40 were returned that is 67% of the total population and only

20 questionnaires were not returned which is 33%.

From the analysis most respondents were male by 25 in number representing 63% while

the remaining 15 were female representing 37%.

The response also revealed that the age group of the majority was between 26-30 years

meaning the age bracket is the young and energetic ready to work .this was represented

by 37% while the age of between 31-35 years was of 25%, below 25 years was 25% and

that of between 31-35 was 25% above 41-45 years was of 3%.

The majority of respondents were 25 representing 63% were married, 14 respondents

were single and only1 respondent representing 2% was divorced. This is an indication

42

that the organization employs mostly married employees who are believed to be more

responsible in carrying out their duties.

According to the analysis 63% which is 25 respondents had attained professional

qualifications on procurement functions and 10 of them representing 25% had reached

college level while 12% which is 5 respondents had university qualifications. This

revealed that the organization has professional qualified staff.

The results obtained also revealed that no respondent worked for less than 1 year while 5

respondents representing 12% worked between 1-5 years. Between 6-9 years work

experience were 9 representing23%.those who have worked for between 10-13 years

were 16 with 40%.15% represented 6 who worked for between 14-17 years while above

18years had 4 with 10%.this showed the researcher that majority of the respondents had

several years working experience.

The results also showed that the respondents were in the job grade of 4-6 representing

37% while job grade 7-10 and 11-14 both had 10 respondents with 25% each.

Those in job grade 15-17 were 5 representing 13%.

4.3.2 Quality Control

The study revealed that quality control affects inventory management in the health care

organizations. It was noted that for efficiency and effectiveness to be realized in the

health care , both the customers and management have to practice highest level of

integrity, being honesty and transparent in all dealings. The inventory guidelines set in

the organization have to be ethically defined where quality is the core value of the

organization at all time.

4.3.3 Customer Satisfaction

The contribution of customer satisfaction on inventory management had led to efficiency

and effectiveness in the whole inventory management process. The results showed

customer satisfaction contributed greatly to improved inventory management in the

health care as such organizations are able to match their inventory with the customer’s

needs at any given time without much delay.

4.3.4 Data processing

In response to the effect of data processing, it was revealed that good inventory

management results from better data processing. Proper data processing systems ensured

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easy of document retrieval and tracing of all the stock without having to waste much

time. It was revealed that data processing has been made easy by technology where

documents are kept in large quantities in a small storage device like flash discs thus

creating efficiency since loss of material and volumes of box files has become a thing of

the past.

4.3.5 Reduction of Operation Cost

The analysis revealed that although there was an equally mark from the respondents

regarding reduction of operation costs on inventory management, it should not be

forgotten that unless and until proper inventory mechanism is put in place, the whole

reduction operation on inventory management may not be met. Reduction of operations

costs may only work when proper methods are put in place

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1 Introduction

This chapter discusses the summary of findings, conclusions and recommendations of the

research study. The summary of findings gives an in-depth explanation of the major

factors raised by the respondents on the factors affecting material delivery process

purchasing for cost reduction. This was based on the analyzed facts in quantitative

analysis where numerical values were used to explain the effects of independent variables

on dependent variables. The findings contributed towards answering of the research

questions and making conclusions of the research study. The study gave several

recommendations and suggestions for further studies to address.

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5.2 Summary of Findings

Information technology was found to have a great effect on inventory management

process in the health care. It was found that before delivery of materials begins, there has

to be a need to generate the entire process. It was also found that when purchasing

officers delay in the ordering, the goods may not be made available in good time does

affecting the efficiency of the firm in general.

The use of better data processing was found to be a critical factor that affects inventory

management. Use of internet and other computer based technology where all departments

or sections were connected to a neutral centre improved inventory management because

all the transaction were computerized and movement of good were checked by both the

supplier and purchaser. This led to efficiency in material delivery process.

From the findings of the study, customer satisfaction had greatly contributed to improved

inventory management in most organization not only in the health care but all profit and

non- profit organizations. The findings revealed that proper documentation in

procurement department was an indication of proper inventory management which can

easily be retrieved whenever there are issuances and dispatch of similar items for ease of

reference. The study findings also revealed that with computerization, paper work was

reduced and computerized documentation is now spread over all departments besides the

procurement and supplies department as suggested by the respondents.

With reduction of operation costs, the study findings revealed that it equally affected

inventory management while a similar number of the respondents indicate that reduction

of operation coast did not very much affect inventory management. However, when the

operation costs were not checked there was a tendency of goods supplied are not of the

right quality, right quantity, and price as ordered, then there was no reduction of

operation cost.

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5.3 Answers to research questions

5.3.1 To what extent does quality control affect inventory management in

healthcare organizations in Kenya?

The extent to which quality control affects inventory management was indicated as very

great with 52%. This was attributed to lack of highest standards of quality control

professional who are competent and failure to adhere to procurement ethics as far as

inventory management is concern.

5.3.2 How does customer satisfaction affect inventory management in healthcare

organizations in Kenya?

Customer satisfaction largely affected inventory management. This was shown by 75%

respondents. Customer satisfaction had led to automation of all the inventory

management activities in the organization. The movements of goods are monitored such

that the buyer is able to know when the goods were delivery for shipments and the

distribution channels used.

5.3.3 What is the effect of data processing on inventory management in healthcare

organizations in Kenya?

The effect of better data processing was high with a large number of respondents

comprising of 67% indicating that. Some said that the extent better data processing

affects inventory management was very great. This was because better data processing

ensured effective and efficient inventory management.

5.3.5 How does reduction of operation costs affect inventory management in

heathcare organizations in Kenya?

There was equal response on the effect of reduction of operation costs on inventory

management. . A 50% tie for yes and no was an indication that the respondents

understood what reduction of operation cost meant. Reduction of operation cost is an

aspect indicating proper inventory management system put in place.

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5.4 Conclusion

All organizations especially the health care need to strictly adhere to proper inventory

management policies. Information technology is a critical factor that determines the

efficiency and effectiveness of inventory control, under utilization of information

technology in inventory management leads to high level of ineffectiveness and slows

down inventory control operations like recording of receipts and issues. The wide spread

use of computer based inventory control techniques like JIT and MRP is greatly

determined by how the company has integrated information technology particularly in

stores and procurement department where information regarding inventory had to be

shared.

Proper inventor is mandatory in cost reduction not only in purchasing but in general

business operations of the company and if possible should be computerized to reduce

the paper base transactions. This will enable the capturing and storing of information and

also facilitate the analysis and use of information. Proper keeping of records will ensure

that stock in hand is well known and hence well regulated. Customer satisfaction is

equally important in inventory management since customers always refer to the quality

products or quality service they once received from the organization.

5.5 Recommendations

After the above findings, the researcher came up with the following recommendations:

5.5.1 Quality Control

Health care organizations should be able to monitor any defects or potential defects on

the spot so as to correct these defects through proper inspection and also through setting

quality standards. Quality control systems should be put in place to reduce inspection

costs and time consume

5.5.2 Customer Satisfaction

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With customer satisfaction, health care organizations should realize that one unsatisfied

customer may lead to the collapse of the entire organization. Its inventory management

should be a system that guarantees customer satisfaction at all costs.

5.5.3 Data Processing

Although public health care organizations still use manual ways of keeping records, the

researcher recommends health care organizations ensure proper inventory management is

done and should have backups in data form stored in the computers and other storage

devices that are easy to carry and retrieve data anywhere.

5.5.4 Reduction of operation costs.

It was recommended that health care organizations should lower their operation costs and

increase productivity in order to survive in the current competitive business world.

Automation could be seen as one way of reducing operating costs and improving

company profit line.

5.6 Suggestion for further study

Inventory control is affected by many factors depending on the nature of the business

operations and the type of inventories kept. The study explored four factors that were

addressed by the specific objectives and this limited the study to explore on more other

factors that negatively affects inventory management. Suggestions for further studies is

hence advisable to contribute towards identification of more other factors that affect

inventory management and assist towards implementation of strategic methods or

techniques in inventory control management.

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