Abstract:
Inventory management is essential to many organizations mainly because it avails production goods and
spares when required. Due to increasing competition from globalization in the business environment
especially manufacturing sector, many companies within Kenya in the recent past have been hit by
financial constrains and are in the quest of improving their financial status by optimizing production
resources in order to increase profit margin and remain competitive. In the cement factory under this
study (BTC), expenditures on various spares and raw material contribute significantly to high cost that
result in poor financial performance. The purpose of this research was to determine the optimal spending
on spare parts and raw materials storage activities at BTC with the aim of lowering the overall inventory
cost.
This research is a case study with inductive approach whereby, data from BTC was collected and
analyzed to obtain various cost factors associated with spares and raw materials acquisition and storage.
Root cause analysis was used to identify various causes of inventory challenges, whereas inventory
turnover ratio was used to establish monetary utility of the existing system on maintaining spares,
materials and goods. Pareto analysis was conducted to identify crucial and sensitive commodities that
contributed significantly to the overall inventory cost. Subsequently, systematic applications of Economic
Order Quantity (EOQ) and Selective Control (A-class B-class C-class/ABC) were used to determine the
optimum operation strategy for inventory management.
This research outlines projected changes to inventory system at BTC. Design-out of existing material
transport system was done whereby through analysis it was established that it would have a payback
period in within its lifespan. EOQ and ABC inventory control is set for implementation within the
financial year 2018, while the goods conveyor system, would be operational in the year 2019.
