Effect Of Inventory Management Techniques On Operational Performance Of Star-rated Hotels In Nairobi City, Kenya

Abstract

Inventory management is a key cog in the manufacturing industry, forming a key part of the organizational strategic management decisions. In today‟s business environment that is highly volatile, uncertain, complex, and ambiguous (VUCA), big savings can be achieved through efficient inventory management. In the service sector, the field of inventory management is gaining more traction because of the concerted efforts to minimize costs, meet customer demand, maximize revenue and achieve strategic fit. The hotel industry is highly volatile and greatly susceptible to external shocks, experiences cyclic demand fluctuations and the hotel products are highly perishable. With this in mind, hotels must adopt different inventory management techniques. The general objective of the study was to establish the effect of inventory management techniques on operational performance. The specific objectives of the study were; to establish the effect of strategic supplier partnership on the operational performance, to determine the effect of vendor managed inventory on the operational performance, to establish the effect of just-in-time practices on the operational performance and to establish the effect of yield management practices on the operational performance of star-rated hotels in Nairobi. The study used quantitative descriptive research design and applied simple random sampling technique to select a sample of 30 hotels rated between 3 and 5 stars. The respondents were 90 senior managers and data was collected by the use of self-administered questionnaires. . Data was analyzed by Statistical Packages for Social Sciences and was presented in frequency tables, pie charts and bar graphs. The study established that inventory management practices helped hotels reduce cost, boost efficiency, improve product quality and boost room yield. Yield management was identified as the most preferred inventory management practice followed by SSP, JIT and VMI. The regression results showed a positive correlation between inventory management practices and operational performance. The study recommends the deepening of strategic relationships with core suppliers, exploring more VMI and JIT arrangements as well as adoption of automated demand tracking and distribution systems. The study recommended further studies on the impact of inventory management techniques in star rated restaurants.