Lean Inventory Management and Performance of Milk Processors in Kenya

Abstract

Dairy is a key contributor to the Kenyan economy and it helps in poverty alleviation and food nutrition in rural and urban areas. Dairy processing acts as a link between dairy farmers and the consumers in Kenya. However, milk processors have been facing numerous challenges that consequently affect their performance. Poor quality of milk, post-harvest losses resulting from inadequate cooling plants and seasonality of milk production in the country are among the problems the milk processors face. Raw milk, the main inventory for milk processors, is highly perishable and requires processing immediately after collection. However, this has not been the case. In fact, 54% of the invested capacities of milk processors remain underutilized. This calls for leanness in inventory that will ultimately reduce waste and improve firms’ performance through reduced complaints. This study was guided by resource orchestration and lean theory. The study was a census and the unit of analysis was all milk processors in Kenya licensed by the Kenya Dairy Board. A pilot study was conducted to enhance the questionnaire’s quality. A Cronbach Alpha of 0.8 was used. Before the regression was run, diagnostic tests were conducted to check for assumptions of linearity. An analysis of variance was conducted to test the variables’ significance and, ultimately, a multiple regression analysis was run. Maintain zero inventory and use of technology to order inventory and maintain zero inventory had positive and significant coefficients while collaboration with suppliers and members in a supply chain had a negative insignificant coefficient. The study concludes that zero inventory and use of technology to order have significant positive correlation coefficients. This implies that the two can help a firm reduce customer complaints and in return improve performance.