Abstract

In the earlier years, inventory management was treated as a cost Centre since purchasing department was spending money on materials, while store was holding huge inventory of materials, blocking money and space (Ramakrishna, 2005). However, with the process of liberation and opening up of global economy, there has been a drastic change in the business environment, resulting in manufacturing organizations exposed to intense competition in marketplace (Ramakri shna, 2005). In the UK, a survey showed that 4O0o of the UK’s gross domestic product ~~as spent on distribution and logistics related activities (Department of Trade and Industry, UK, 2006). Such findings and developments present significant visible impact of distribution. purchasing, and inventory management on company assets. Managers in many industries, especially those in manufacturing, are trying to manage better their inventory or materials for sound profitability maximization. In Kenya for instance, inventory constitute a major cost component for any industry. Sturkhart (2007), states that the total cost of installed materials or value of materials may be 60% or more. In many cases, the cost of materials exceeds 5O0o of the total cost of goods produced. Such a large investment requires considerable planning and control so as to minimize wastage which invariably affects the financial performance of the organization (Ramakrishna, 2005). According to a survey carried out by Mutwol (2013), on the impact of the collapse of KCC, it was found that the sector had suffered so much over the past years due to lack of adequate commitment to poor material planning. poor inventory control, purchasing problems; stores control problems and material movement problems which had a negative effect on the firms’ performance, customer satisfaction and profitability.