Role of Multi-Echelon Distribution Systems on Performance of Manufacturing Firms in Kenya

Abstract

In Kenya today, manufacturing firms experience increased stock-outs due to challenges in managing safety stocks. The difficulties in managing safety stocks in multi-echelon distribution systems make it necessary for the use of technology or ICT. This study sought to establish the role of multi-echelon distribution systems on the performance of manufacturing firms in Kenya. Increasing competitive pressures are forcing companies to increase their rates of innovation. The increasing rate of innovation shortens each product’s duration in the market, thereby compressing each product’s life cycle. Without proper management, increasing product turnover will increase design and manufacturing costs. Four specific objectives are guiding the study. They include: to examine the influence of demand forecasting systems on performance of manufacturing firms in Kenya; to determine the influence of ICT integration on performance of manufacturing firms in Kenya; to establish the influence of distribution control systems on performance of manufacturing firms in Kenya and to determine the influence of lead time systems on performance of manufacturing firms in Kenya. This study was informed by; Theory of Constraints, E-Perspective model, Channel Coordination Theory, Quick Response Manufacturing Model and Organisational Theory. This study employed a descriptive survey research design to accomplish its goals since it has enough provision for the protection of bias and maximised reliability. The target population comprised of top managers of manufacturing firms that are members of the Kenya Association of Manufacturers (KAM). KAM therefore provided the sampling frame for this study. As of 2017, KAM had a membership of 903 manufacturing firms. A sample of 90 respondents was drawn from this population. Primary data was collected using semi-structured and structured questionnaires which were self-administered. Data obtained was processed and analysed using SPSS version 20.0. Both descriptive and inferential statistics were used in analysis. The results of the data analysis were presented in charts and tables. The study revealed that demand forecasting explained 7.6% of the change in the performance of manufacturing firms in Kenya. ICT integration was found to explain 33.9% of the change in the performance of manufacturing firms in Kenya. The results revealed that distribution control systems account for 18.4% of the change in performance in manufacturing firms in Kenya. The findings revealed that lead time systems accounted for 7.6% of the change in the performance of manufacturing firms in Kenya. The results showed that organisational policy had no intervening effect on performance and multi-echelon distribution systems. ICT integration and distribution control systems are the two elements of multi-echelon distribution systems which were most significant on the performance of manufacturing firms in Kenya. The study concluded that demand forecasting systems significantly influences the performance of manufacturing firms in Kenya. ICT integration significantly influences the performance of manufacturing firms in Kenya. Based on failure to fulfil assumptions for intervening effect, it was concluded that organisational policy had no intervening effect on performance and multi-echelon distribution systems. It was therefore recommended that manufacturing firms should use quantitative methods, qualitative methods, causal methods and time series for demand forecasting systems. Manufacturing firms should ensure they adopt ICT integration to achieve timeliness, consistency and accuracy in their supply chain. Manufacturing firms in Kenya should employ aspects of distribution control systems as it is one of the most critical elements of multi-echelon distribution systems. These include technology, collaborative models and avoid stock-outs. The manufacturing firms should ensure that they are proactive in activities that reduce lead time systems. It was recommended that manufacturing firms should have human resource development programs and adequate training on new technology and tools used in their respective companies.