Inventory Optimization Practices and Operational Performance of Fast- Moving Consumer Goods Manufacturing Firms in Kilifi County, Kenya

Inventory optimization practices are critical for FMCG manufacturing firms in Kenya’s competitive market in order to improve their operational performance. Effective inventory optimization practices can significantly enhance operational efficiency, reduce costs, increase firm’s revenue and improve customer satisfaction besides making them have comparative advantage against others in the market. The fast-moving consumer manufacturing firms have been experiencing performance challenges that affect their daily operations through increased production costs, increased lead-time, poor customer satisfaction. The study sought to determine the effect of inventory optimization practices on the operational performance of fast-moving consumer manufacturing firms in Kilifi County, Kenya. The study looked specifically at inventory forecasting, inventory visibility, ordering processes, and the role of safety stock levels in improving operational performance. The study targeted 11 Fast-moving consumer manufacturing firms in Kilifi County, Kenya as unit of analysis while procurement officers, logistic officers, transport officers, distribution officers and warehouse officers were the unit of observation. The target population was 2922 and therefore the sample size of 351 respondents was determined using Yamane 1967 sampling formula. The study adopted stratified random sampling. The research was anchored on three theories. Systems Theory, Dynamic Capability Theory, and the model of Economic Order quantity (EOQ). The study used causal research design, the study targeted 351 respondents comprising of procurement officers, logistic officers, transport officers, ware-housing officers. Primary data was collected through structured questionnaires. Collected data was analyzed using SPSS version 29 where descriptive statistics such as means, standard deviation, frequencies and percentages were used. Regression analysis was done to test the strength and direction of linear relationship between variables. A pilot test was conducted with 10% of the sample size and all were above the Cronbach’s alpha of 0.7. Inventory forecasting demonstrated a strong positive relationship with performance, reflected in a coefficient (β) of 0.345 and a P-value of 0.000. Inventory visibility also had a meaningful impact, with a coefficient of 0.315 and a p-value of 0.000. Safety stock levels had the most substantial influence, with a coefficient of 0.540 and a P-value of 0.000. The study concluded that effective inventory forecasting plays a key role in boosting the performance of FMCG manufacturing firms in Kilifi County. The study found that strong inventory visibility significantly improves firm performance. The study concluded that efficient and accurate order management has a positive effect on operational performance of FMCG firm in Kilifi County, Kenya.