Effect of Inventory Management on Financial Performance Of Hospitality Industry in Kisumu County, Kenya

Abstract

Inventoryrefers to the value or quantity of raw materials, supplies, work in progress and finished stockthat are kept or stored for use as need arises. Inventory management is the art and science of maintaining stock levels of items incurring the least cost. Poor financial performance in medium sized hospitality establishments may be due to lack of proper inventory management. Thishas resulted to low profitability and financial instability of these. establishments. Numerous research have attempted to explain various issues surrounding inventory management methods but none has successfully managed to investigate the effect of inventory management on financial performance of hospitality industry in Kisumu county, Kenya. This study intended to establish effect of inventory management on financial performance of hospitality industry in Kisumu County, Kenya. The specific objectives of this research were: to examine the effect of economicorder quantity on financial performance of hospitality industry; to find out the effect of materialmanagement on financial performance of hospitality industry and to determine the effect of stock control on financial performance of hospitality industry in Kisumu County, Kenya. This studywas guided by a conceptual framework in which inventory management was independent variable while financial performance of hospitality industry was dependent variable. Descriptive survey research design was used to gather information for the study. The target population was 354 staff from ten medium sized hospitality establishments in Kisumu County. The sample size constituted 30% of the target population of the study. Stratified random sampling was used to sample 106 staff. Primary data was collected by use of questionnaires and interview schedule. Secondary data was collected from existing literatures. The data obtained was analyzed using descriptive statistics and Pearson correlation, described using percentages and presented using tables. The research instruments were tested for reliability using test-retest and validity using peer consultation. The study findings showed that inventory management methods have not been widely used in hospitality industry in Kisumu County as given by 51.3% response level. Majority (52.5%) of the respondents agreed that optimum stock levels affect financial performance while partly (3.8%) were not sure that increased stock improves financial performance. The study results indicated that 77.6% of the respondents asserted that depreciation of stock affects financial performance of hospitality industry. The study showed that majority of the establishments lack stock control system as given by 53.8% response level. The findings of this study could be instrumental in improving inventory management in hospitality industry and providing information to the academic fraternity. The study recommended that inventory management methods should be widely adopted in the hospitality industry. The research suggested that a similar study should be done in a different sector apart from the hospitality industry.