Factors Affecting Effective Distribution of Perishable Goods in Kenyan Retail Sector

FACTORS AFFECTING EFFECTIVE DISTRIBUTION OF PERISHABLE PRODUCTS IN THE RETAIL SECTOR IN KENYA (A CASE STUDY OF NAKUMATT KAREN) NAME: FLORAH ADHIAMBO ODHIAMBO A RESEARCH PROPORAL SUBMITTED TO THE DEPARTMENT OF ENTERPRENEURSHIP, PROCUREMENT AND DEVELOPMENT IN THE SCHOOL OF HUMAN RESOURCE DEVELOPMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DIPLOMA IN PURCHASING ANS SUPPLIES MANAGEMENT OF JOMO KENYATTA UNIVERSITY OF AGRICULTURE AND TECHNOLOGY. 2015 DECLARATION This proposal is my original work and has not been presented for a diploma in any other University …………………………… ……………………... Signature Date This proposal has been submitted for examination with my approval as University Supervisor. …………………………... ……………………… Signature Date ABSTRACT Distribution management in the Perishable productsin retail outlets in Kenya has passed through many stagesand made various strides to enhance its operations so that members and the general public arebenefiting from in a broad perspective. Although thegovernment has been involved instreamlining the distribution system in the perishable products industry, it is marred by inefficiencies. The study will be conducted out at Nakumatt Holdings which is located in Nairobi Karen shopping center. Efficiency in distribution management has not only become a cost reduction technique but also ensures goods availability and avoidance of delays through uninterrupted and timely issues. The general objective of this research will be to determine the factors affecting effective distribution of perishable products in retail sectors in Kenya with a precise reference to Nakumatt Karen.The study will be guidedby the following specific objectives: To find out the effect of warehousing on effectivedistribution of perishable products; To investigate how channel of distribution affects the effective distribution of perishables products; to assess the effect of procurement planning on effective distributionofperishable products and to establish the effect of supplier relationship on effective distribution ofperishable products.We will formulate four research questions. The answers to the research questions will establish a basis upon which factors affecting the distribution of perishable goods in Nakumatt Karen supermarket will be determined..The expected beneficiary will be as follows: Management of Nakumatt Holdings, Other Researchers and Government of Kenya. The theoretical approach that will be used in this study will be by the use of literature review and conceptual framework.In literature review we will discuss the various dimensions in distribution of perishable goods such as definition of distribution, factors affecting effective distribution, theories related to distribution and research gaps the study will seek to fulfill. In chapter three the researchers will employ a case study approach. The chapter will identify the research design, population, sample frame, sample and sampling procedure, instruments, data collection procedure, pilot test and data processing and analysis will also be used in the study. The research instrument that will be used is questionnaire. The study will use quantitative approach and data will be analyzed and presented using charts, tables and percentages. The results of the study will inform the company on the factors to put more emphasis in order to improve the desired results in the distribution effectiveness. LIST OF TABLES LIST OF FIGURES ACCRONYMS SCM: Supply Chain Management JIT: Just In Time DC: Distribution Centre SRM: Supplier relationship management SCOR:Supply Chain Operations Reference FFV:Fresh Fruits and Vegetables. DEFINITION OF TERMS Distribution- is the process of making a product or service available for use or consumption by a consumer or business user, using direct means, or using indirect means with intermediaries.it is one of the four elements of the marketing mix. Distribution management- is an overarching term that refers to numerous activities and processes such as packaging, inventory, warehousing, supply chain and logistics. Retail- is the process of selling consumer goods and/or services to customers through multiple channels of distribution to earn a profit. Perishable products- are those that worsen in quality over time, and become lesser in value. Perishable goods decay rapidly if not refrigerated, or if some other preservation technique is not employed. Supplier relationship management(SRM) - is the discipline of strategically planning for, and managing, all interactions with third party organizations that supply goods and/or services to an organization in order to maximize the value of those interactions. Procurement planning- is the process used by companies or institutions to plan purchasing activity for a specific period of time. This is commonly completed during the budgeting process. Distribution Channel- is the chain of businesses or intermediaries through which a good or service passes until it reaches the end consumer. Warehousing- is the process of storing goods within a storage facility. A sample-is the group of people who take part in the investigation. The people who take part are referred to as “participants”. Sampling- is the process of selecting participants from the population. Thetarget population- is the total group of individuals from which the sample might be drawn. Analyzing My Personality Name Institution CHAPTER I INTRODUCTION Background of the Study After a company has defined its target market and desired positioning, it should identify its effective distribution channel. A distribution channel is the external contractual organization that management operates to achieve its distribution objectives (Rosenbloom, 2011). According to Amara (2012), it is a set of management, institutions, agencies and establishments in which a product must follow from the producer to the consumer. Dent (2011) notes that distribution channel performs the work of moving goods from producers to consumers, thus, helping to overcome the place, time and possession gaps that separate services and goods from those who want and need them. They provide a link between consumption and production by filling discontinuity that exists between them (Rosenbloom, 2011). Distribution involves warehousing, inventory management, transport and delivery. These ensure flow of goods up to the end consumers where utility is created. Distribution is also the process of planning, implementing, and controlling efficient and effective flow and storage of goods, services, and related information from the point of requirement (Rosenbloom, 2011). The main purpose of distribution management is to provide the customer with the right goods delivered at the place, at the right time and right conditions in accordance with customer expectation (Dent, 2011). This implies that distribution time and channel has a strong link with the profitability of an organization especially on the perishable goods. Distributions of perishable goods have posed major threats to retail outlets on a global scale. Many companies worldwide have experienced several loses due to the distribution and maintenance of the fast moving consumer goods and perishable goods in the shelves (Farahani, Grunow & Günther, 2012). This happens when these materials spoil before their consumption by the customer. For example, Hopkins Company has been faced with several challenges in handling and distributing perishable goods. According to Amorim, Günther, and Almada-Lobo (2012), one of the challenges in Hopkins is how to store and distribute such products. As a result, the company has faced major losses up to 60% specifically on perishable products. Moreover, Fast Food market, a USA based retail outlet for fast consumer moving goods have faced several challenges in handling the perishable goods. As stated by Chen and Zhong (2013), cases where these problems of managing such products are external hence become uncontrollable by the management. For example, when the shelve life a product is due but the consumers are not available. As such, it is convincible that distribution of perishable product has become a worldwide issue that jeopardizes the performance of retail outlets on a global scale. Kenya is no different either, with realization that these products have become part and parcel of people’s lives in Kenya, several retail sector outlets have been dominated by products such as fruits, vegetables (George & Iravo, 2014). However, their management has posed several challenges such that it is a few retail outlets that can manage them effectively. In that manner, several kiosks and small retail outlets have either resorted to certain mechanisms that only serve few customers or have stopped their sales. This is because of a constant increase of consumption of the perishable products increases requirements and complexity put on the process of distribution of such products (George & Iravo, 2014). On the other hand, the trend of increase of consumption of such products encourages different organizations to get more and more involved in this promising field of logistics. However, majority of these enterprises face certain problems, since the critical factor of successful performance in the field of distribution of perishable products is ability of particular enterprise to create and maintain modern, dynamic and competitive system for distribution of perishable goods. As noted by Obat (2013) Kenya is one of the countries in East Africa that has been dominated by several big outlets such as Nakumatt, Ukwala, Tuskys, Naivas among others. However, these supermarkets performance have been slowed by a general performance on distribution of perishable goods. For example, The retailing industry plays a crucial role in the overall economy of Kenya contributing 10% to GDP and an estimated total wage payment of Ksh. 86.7 million within the private sector in 2012 (Economic Survey, 2013). Conversely, Obat (2013) says that a proper handling and distribution of perishable products can ultimately raise the GDP according to the consumption trend and demand of such products in the market. He further notes that several individuals in Kenya buy few perishable products due to lack of proper storage mechanism. Nakumatt Karen being one of the major retail outlets in Kenya has been hit by the performance of perishable goods. Other than shoplifting and paper work errors, the company presents huge losses of which 60% has been caused by the perishable goods on the shelves (Hidaya, 2014). This is due to their spoilage before the shelf life date. Moreover Rejection and little consumption of these products by the customers has become a major concern of the retail shop. Nakumatt holdings profile Nakumatt holdings limited was established in 1987,is the country leading retail with a total of 19 branches over Kenya holding a wide range of 50000 quality product in any branch to meet and suit the needs of all segment in the economics sector in Kenya in accessible and affordable way (Bosco, 2014). Nakumatt stays ahead of competition by providing quality and variety at a competitive price for its product. The chain has well designed stores with wide aisles to walk around and attractive display units for convenient shopping. Besides corporate endeavor, Nakumatt operations are tailored to be highly sustainable on all front, spearheading community development projects on aspects such as health, entrepreneurship, sport ,cultural, environment, education and urban restoration and given the role that retailer sector is currently sector is currently playing in the east African economy (Bosco, 2014). The retail industry is very vibrant and developing at a very fast rate. According to a recent global research study by research and markets, Nakumatt remain the fastest growing retail format followed by convenience stores (Hassler & Ryder, 2010). According to convenience stores market-worldwide (2005-2008) report; attributes, economic growth, technology advancements, rising income levels, changing consumer preferences and convenience are the major market forces for the convenience store industry. Statement of the Problem Perishable productshavebecome one of themajorchallenges that affecttheperformanceof the large retail sectors on a global scale (Haenlein, & Park, 2013). In themarket, distribution has a significantrole in theindustry as itinfluencesthesaleandservices within an organization, especially, perishable goods. Theperformance of distribution logistics of perishable goodsimpacts immensely on theperformance of an all-inclusiveorganization (Brian, 2009). It is becauseitconnectsthebody to thecustomers, thus, has an influence on customersatisfaction that affectscustomerloyalty, debatably themostsignificant asset of the organization. Theretailsectorshavebeenmostlyaffected by theperformance of perishable goods in Kenya and Worldwide (Haenlein, & Park, 2013). A 2007 studycarried by Hassler et. al revealsthat, other than paperworkerrorsandthetheft, perishable goods not sold within shelflifehavecontributed majorly to theshrinkage of accounts in the Global Retail Theft Barometer 2008.Thedistributions of theseproductshavebecomean important factor that has jeopardized their performance on theshelvesthuscontributing to shrinkageandenormousloses in retailsectors. Nakumatt, a retailshop in East Africa is one of theshops that havebeenaffected by thedistribution of perishable goods, and has incurredlossesdue to distribution of suchproducts. Asposited by Hidaya (2014), in a statement of financial controller, the perishable goodsaccountfor 60% lossesthat Nakumatt retail shopincur per year on top of shoplifting in the supermarket. The supermarket has not implementedprecisesystemssuch as Procurement Planning and warehousing that will preventthespoilage of perishable products (Hidaya, 2014). According to Cochran (2004) whenprimaryfactorsaffectingdistributionsare identified, theretailshop will reducelossesitincurs by more than 50%. Themajoraim of thisstudy will be to investigatefactorsaffecting effectivedistribution of perishable products in retailsector in Kenya