Inventory Management Systems and Financial Performance of Logistic Firms in Nairobi County: A Case of Dalsey Hillblom Lynn (DHL) -Kenya

Abstract

Ineffective inventory management systems have caused supply chain enterprises to lose a lot of money thus affecting their overall performance. This happens frequently in the logistics industry, and it can be caused by a variety of things, including corruption, poor quality goods and services, and cancellations of contracts. Further, DHL (K) Global Forwarding generated equity of 59,000 euros with a net income of -571,000 euros in 2021 while DHL (K) Supply Chain reported a 2.018 equity and -1.064 net income. The negative net income shows a financial performance concern for DHL (K). The study thus focused on the effect of inventory management systems on the financial performance of logistic firms in Nairobi: a case of DHL Group-Kenya. The study had three specific objectives: To find out the inventory management systems used by DHL Group-Kenya, to assess the level of financial performance of DHL Group-Kenya, and to determine the effect of inventory management systems on financial performance of DHL Group-Kenya. The theories governing the study included Theory of Inventory and Production, Adaptive Structuration Theory, and Lean theory. Regarding methodology, the study used explanatory research design while the population was all the 365 employees including subordinate staff while target population was 267 employees from across all departments of DHL Group-Kenya based at the head office-DHL House, Mombasa Road-Nairobi, near City Cabanas. Using Yamane 1967 formula, the sample size was 160 respondents. Further, the study used stratified random sampling in selecting a final sample size of 160 respondents. The primary data was collected using closed ended questionnaire. Validity was tested using content validity index (CVI) while reliability was tested using Cronbach alpha coefficients. Data was analyzed using descriptive statistics, correlations, and multiple linear regression. Statistical Packages for Social Sciences for analysis (SPSS) version 25 was used to process data. The study found that the company used material requirement planning, Just-In-Time, and Vendor managed inventory as inventory management systems and they had positive effect on financial performance. The technology was also found to have positively moderated the relationship between inventory management systems and financial performance. The study concludes that the company uses material requirements planning (MRP), Just-In-Time (JIT), and vendor managed inventory (VMI) to promote supply dependability, reduce waste, and to enhance timely service delivery. In reference to financial performance, the study concludes that the company guaranteed timely service delivery and quality services and this has led to increased customer base and customer satisfaction. On effect of inventory management systems on financial performance, the study concludes that inventory management techniques improved financial performance as supported by evidenced improved customer satisfaction levels, lower expenses’ cost, and possession of better stock control. On technology, it concludes that the company has resorted into using Internet of Things (IoT), supply automation for service delivery, and robotic technology to reduce costs of operations and consequently, financial performance. On inventory management systems, the study recommends that the company should invest in sophisticated inventory management systems including data analytics tools that enable effective and efficient use of MRP, JIT, and VMI. Regarding financial performance, it recommends that to improve service delivery and, ultimately, customer happiness, the company should set up frequent channels for consumer feedback via questionnaires, reviews, and direct communication to continuously monitor and evaluate overall customer satisfaction and service delivery. On the effect of inventory management systems on financial performance, the study recommends that the company should completely implement JIT, MRP, and VMI inventory system.