Wanyama, Dorcas N - Information Technology and Warehousing Performance

INFORMATION TECHNOLOGY AND WAREHOUSING
PERFORMANCE OF SUGAR COMPANIES IN WESTERN

KENYA
DORCAS NAFULA WANYAMA
A RESEARCH PROJECT SUBMITTED IN PARTIAL

FULFILMENT OF THE REQUIREMENT FOR THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION, SCHOOL OF
BUSINESS, UNIVERSITY OF NAIROBI
NOVEMBER, 2015
DECLARATION
I declare to the best of my knowledge that this is my original work and has not been
presented for a degree in any university.
WANYAMA DORCAS NAFULA
D61/64578/2010
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Signature………………………. Date: 14 November, 2015
This research project has been submitted for examination with my approval as
the University Supervisor.
MR. GERALD ONDIEK
DEPARTMENT OF MANAGEMENT SCIENCE
UNIVERSITY OF NAIROBI
th
Signature……………………………… Date: 14 November, 2015
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DEDICATION
This research project is dedicated to my family, son and friends.
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ACKNOWLEDGEMENTS
I wish to give special acknowledgement to my Supervisor, Mr. Gerald Ondiek for his
guidance and supervision. The Lecturers of the Department of Management Science
who took as through our programme in Kisumu Campus. The Coordinator Kisumu
Campus, Mr. Alex Jaleha and the great staff who made my stay in UON a great
experience.
My appreciation goes to the sugar companies that took the time to assist with data
collection, special mention, Muhoroni Sugar the HR Manager and the warehouse
Supervisor and his team, Mumias Sugar Warehouse supervisor Phylis, and HR
Manager training officers Peter and the Secretary, Trans mara Sugar Company, the
CEO, HR Manager and Mr. Ringui, Nzoia Sugar Company the HR Manager, Training
Officer and the Warehouse Supervisors.
Finally I thank God for seeing me through this whole journey.
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ABSTRACT
The study was conducted to establish the effect of information technology on

warehousing performance of sugar companies in Western Kenya. The study objectives
specifically sought to establish the extent of information technology adoption in the
sugar companies and determine the influence of information technology on
warehousing performance. The study sought to determine if information technology
that has been known to remove fatigue from human to machine and ensures accuracy
and efficiency had any effect on warehouse core assets like labour, equipment, time
and space. The study was conducted in Western Kenya targeting the eleven listed
sugar companies but only four responded. The study was conducted through cross
sectional survey design and data was collected using questionnaires and interview
responses. The findings were measured using a likert scale of 1-5. Data analysis was
done by use of descriptive statistics as the data points were few. Data presentation was
also done by use of tables. The study established that the sugar companies had not
fully adopted the use of information technology systems in the warehouses with a
mean of 3.8 but a performance index of 2.8. On the influence of IT on warehouse
performance the companies averaged a mean of 4 but a performance index of 3.1. The
perfect order index gave a percentage of 43% meaning orders were not met perfectly.
The study concluded that warehousing performance of the sugar companies was
largely affected by use of manual systems. The companies were unable to meet
demand with perennial stock outs and cane shortages whose visibility could be
controlled directly from the warehouse. The sugar industry in Kenya had the highest
costs of production compared to other sugar producing countries both in Africa and
internationally. Some of the costs could be hidden in warehousing. The study
recommended that because success or failure of a company was largely determined by
practices in the warehouses it was important for the companies to fully implement and
integrate the information technology systems with the existing specialized equipment
or invest in technology to reduce costs and ensure accuracy and visibility of the
product in factories, warehouses, in transit and even at point of sale. The study
suggested for further studies in warehouse design of the sugar companies, use of third
party logistic providers, use of cheap labour against automation and benchmarking of
the warehouses.
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TABLE OF CONTENT
DECLARATION........................................................................................................... ii
DEDICATION.............................................................................................................. iii
ACKNOWLEDGEMENTS ........................................................................................ iv
ABSTRACT ................................................................................................................... v
LIST OF TABLES ..................................................................................................... viii
LIST OF FIGURES ...................................................................................................... x
ABBREVIATIONS AND ACRONYMS .................................................................... xi
CHAPTER ONE: INTRODUCTION ......................................................................... 1
1.1 Background of the Study .......................................................................................... 1
1.1.1.The Concept of Information Technology ................................................. 2
1.1.2.The Concept of Warehousing ................................................................... 4
1.1.4. Sugar Industry in Kenya ........................................................................... 6
1.3 Research Objectives ................................................................................................ 10
1.5 Value of the Study .................................................................................................. 10
CHAPTER TWO: LITERATURE REVIEW .......................................................... 12
2.1. Introduction ........................................................................................................... 12

2.2. Theoretical underpinning of the study ................................................................... 12
2.3. Extent of IT adoption in warehousing ................................................................... 13
2.3.1. Information Technology and its influence on warehousing performance14
2.4 The Extent of IT adoption and warehousing performance ..................................... 15
2.4.1 IT and its Influence in Warehousing Performance ....................................... 16
2.4.2JIT and Modern Concepts on Warehousing............................................ 17
2.5 Conceptual Model ................................................................................................... 19
CHAPTER THREE: RESEARCH METHODOLOGY ......................................... 20
3.1 Introduction ........................................................................................................... 20

3.2 Research Design .................................................................................................... 20
3.3 Population of Study ............................................................................................... 20
3.4 Data collection ....................................................................................................... 21
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3.5 Data analysis and presentation ..............................................................................21
4.1 Response Level ....................................................................................... 22
4.2 Findings on Contextual Factors ............................................................................. 22
4.2.1 Ownership of the warehouses ................................................................. 22
4.2.2 Specialized equipment ............................................................................ 23
4.2.3 Age of the Companies ............................................................................. 24
4.2.4 Labour ..................................................................................................... 25
4.2.5 Constraints and opportunities ................................................................. 25
4.3. Extent of IT adoption in the Sugar Companies ..................................................... 26
4.3.1 Existence of warehouse management systems ....................................... 26
4.3.2 Level of mechanization ........................................................................... 27
4.3.3 Adoption of IT in the various departments in the companies ................. 30
4.4 Influence of IT on Warehouse Performance .........................................................33
4.4.1 IT influence on warehouse metrics ......................................................... 33
4.4.2 Influence of IT on warehouses functions ................................................ 34
4.4.3 IT influence on communication .............................................................. 34
4.4.4: IT influence on forecasting, planning in the sugar value chain ................... 35
4.4.5 IT influence on Order fulfilment............................................................ 36
5.1 Summary of the Study ...........................................................................................50
5.2 Conclusions ...........................................................................................................52
5.3 Recommendations .................................................................................................54

5.4 Areas for future Research ......................................................................................56
5.5 Limitations of the study ......................................................................................... 57
REFERENCES ............................................................................................................ 58
APPENDICES ............................................................................................................. 65
APPENDIX 1: QUESTIONNAIRE ............................................................................. 65
APPENDIX 2: TABLE 1: PERFORMANCE METRICS OF A WAREHOUSE ........ 70
APPENDIX 3: LIST OF SUGAR COMPANIES IN WESTERN KENYA ................ 71
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LIST OF TABLES
Table 1: Type of warehouse......................................................................................... 22
Table 2: Age of the companies.....................................................................................24
Table 3: Turnover.........................................................................................................25
Table 4: Warehouse Management System................................................................... 26
Table 5: Manual Systems.............................................................................................27
Table 6: Mechanized Systems......................................................................................28
Table 7: Semi-automated systems................................................................................28
Table 8: Automated systems........................................................................................ 29
Table 9: Extent of Adoption of IT use in the warehouse............................................. 30
Table 10: Extent IT has been used to link all levels in the organization......................30
Table 11: Employee use of IT systems........................................................................ 31
Table 12: IT and its adequacy for operations...............................................................32
Table 13: Use of IT technologies like RFID, Barcodes............................................... 32
Table 14: Warehouse metrics....................................................................................... 33
Table 15: Warehouse functions....................................................................................34
Table 16: Communication between the company and stakeholders............................34
Table 17: IT and decision making................................................................................35
Table 18: Order fulfilment........................................................................................... 36
Table 19: Order fill rate................................................................................................36
Table 20: Order accuracy.............................................................................................37
Table 21: Line accuracy...............................................................................................37
Table 22: Order cycle time...........................................................................................38
Table 23: Perfect order completion..............................................................................38
Table 24: IT influence on inventory management.......................................................39
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Table 25: Inventory accuracy.......................................................................................39
Table 26: Inventory visibility.......................................................................................40
Table 27: Damaged inventory......................................................................................40
Table 28: Storage utilization........................................................................................ 41
Table 29: Dock to stock time....................................................................................... 42
Table 30: Condition of building, floors, lighting.........................................................42
Table 31: Condition of material and storage equipment..............................................43
Table 32: Distance material is moved..........................................................................43
Table 33: Double handling...........................................................................................44
Table 34: Safety........................................................................................................... 44
Table 35: Ideal warehouse........................................................................................... 45
Table 36: Mean of IT Adoption....................................................................................45
Table 37: Mean Warehouse Performance.................................................................... 47
Table 38: Perfect order index.......................................................................................48
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LIST OF FIGURES
Figure 1: Conceptual framework.................................................................................19
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ABBREVIATIONS AND ACRONYMS
COMESA Common Markets for Eastern and Southern Africa
CBA Collective Bargaining Agreement
ERP Enterprise Resource Planning
ICT Information Communication Technology
IT Information Technology
JIT Just in time
KESREF Kenya Sugar Research Foundation
MHS Material Handling Systems
MHEs Material Handling Equipment
POI Perfect Order Index
RFID Radio Frequency Identification
SKU Storage Keeping Unit
SCE Supply Chain Execution
TMS Transport Management System
XML eXtensible Markup Language
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CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
According to Tompkins (2010) every product has three values: a function value, a
time value and a place value. Manufacturing adds the value of function by producing
product to satisfy customer. Warehousing provides a time and place value by getting
the product to the right location at the right time. Information technology provides
information to support operations that provide the value. Warehousing adds value to
the system by ensuring adequate stock and reducing cost of the total system.
Logistical excellence or the competitive advantage of the warehouse can be distorted
if the firm has frequent stock outs, shipping errors, damage to product, incorrect
documentation, safety and hygiene problems (Otieno, Ondieki & Odera, 2012).
According to Mukopi & Iravo, (2015) sugar companies in Kenya do not manage and
control their inventory holding leading to staying off production and stock outs. It was
reported that the sugar companies had the highest production costs compared to other
sugar producing companies in the COMESA region. Cited problems were
inefficiencies along the whole value chain, high transport costs, high labour turnover,
low space utilization and poor maintenance of equipment.
Research on warehouse performance in other countries was minimal with
concentration mainly being sugar prices and policies (Koo and Taylor, 2012), unique
problems of individual countries (Zimmermann and Zeddies 2002) and (Tarimo and
Takaruma 1998). In India, warehousing was generally a neglected area and therefore
was not used as a strategic area for developing competitive advantage. Compared to
developed countries most material handling systems (MHS) are manual and smaller in
size unlike their counterparts in developed countries who operate economies of scale,
use sophisticated material handling equipment and storage schemes and make use of
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the latest information and communication technology Sople (2007). Manual systems
were also used because of cheaper labour compared to western countries where labour
was scarce and cost of employment was high. Agribusiness is labour intensive and
time consuming therefore there was a lot of time wastage in the manual processes like
loading and packaging leading to errors that translated to billions of shillings lost
(Ombati, 2010) (Yadav and Savant, 2012). Therefore the extent to which the use of
tracking devices and adoption of these systems in the sugar companies in Kenya was
not known and neither were empirical studies available, hence the focus of the study.
There were many theories related to warehousing management. The resource based
view (RBV) theory by Porter stipulated that it was imperative to holistically analyze
all the operations of an organization. RBV focused on the concept of difficult to
imitate attributes of the firm as sources of superior performance and competitive
advantage (Madhani, 2009). Sugar as a commodity was not rare and could be imitated
and substituted. The theory of constraints by Elyahu Goldrat (Unghanse, 2013)
stipulated improvements work for warehouse operations. Goldrat evaluated
throughput, inventory and operating expenses and ignored efficiency and utilization
that were core to the study. The study adapted the systems theory by Ludwig von
Bertalanffy. The theory assumed that humans needed help in coping with information
overload and that had been made possible by technology (Caulfied & Maj, 2001).
1.1.1. The Concept of Information Technology
Information technology (IT) and information communication technology (ICT) and
logistics information systems (LIS) were used interchangeably. ICT and IT meant
hardware, software, telecommunications, databases and other technologies which
organizations used to improve their performance but LIS was defined as people,
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equipment, and procedures used to gather, sort, analyze, evaluate and distribute
needed, timely and accurate information to decision makers (Autry, Griffis, Goldsby
& Bobbit, 2005) ; (Nedelko, 2008); (Closs & Xu, 2000); (Porter & Millar, 2001); (Ho,
1996). The study defined IT as warehouse technologies used for tracing and tracking
material or product in the supply chain. . Ho (1996) said that the primary role of IT in
a firm was administrative, operational and competitive. According to Tompkins &
James (1998) companies involved in material handling were under constant pressure
to stay competitive. There was a limit to the extent that one could optimize
productivity in a manual handling environment without jeopardizing safety, precision
and quality levels. Porter and Millar (2001) said that computer controlled machine
tools were faster, more accurate and more flexible compared to manual operated
machines. The logistics network was a coordinated system of organizations, people,
activities information and resources. Planning involved ensuring materials or products
were at the right place at the right time and at the right cost. Execution involved the
physical creation and movement of products and materials and measurement involved
counting of products, resources, materials and activities. Coordination of information
from suppliers, customers and shippers was necessary. Currently, it was not enough to
accurately and efficiently track and account for movement of goods and their related
transactions in a factory. Estimates of demand from customers and availability of
materials from suppliers had to be far more accurate. Information had to flow
seamlessly between a firm, suppliers, customers and extended value chain (Tompkins
and Smith, 2004).
Warehouses impact on the receiving customer in many critical ways. A customer
expects accuracy, right quantity; correct timing of shipment and delivery, accuracy of
documentation and right product condition. The farmers also expected accuracy in
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measurements of their cane and correct payments. Tompkins (2008) says the key to a
company’s success was customer satisfaction. Customer satisfaction was based on the
ability to control the warehouse. An intelligent warehouse integrates computer
systems, material handling equipment, storage equipment and people into a cohesive
working element. The improvement in information quality resulted in fewer errors. It
also minimized unproductive labour hours. Proper space utilization ensures inventory
was more accurate and more locations were available for put away and storage.
Improved inventory accuracy and system directed operations allowed for higher
storage densities. The traditional problem of worker productivity suffering as storage
utilization increases was diminished. The hunting and searching aspects of picking
and put away were also eliminated.
1.1.2. The Concept of Warehousing
Speh (2009) defined warehousing as the management of time and space. Ackerman
(1990) defined it as a place where goods are stored from time of manufacturing until
they were delivered to the customer. That included the general performance of
administrative and physical functions associated with storage of goods and materials.
These functions included identification, inspection, verification, putting away and
retrieval. Warehouses provide the time and place utility necessary for a company to
prosper. Warehousing amounts to 20% of sales cost and if not managed can break or
make a company (Baker & Halim, 2007). De Koster (2008) points out attributes of an
efficient warehouse. A company should clearly know all their customers both internal
and external. There should be quality performance indicators to the workers.
Signboards with shipping errors, customer complaints and returns over time, quality
guidelines indicate sensitivity to the wishes of the customers. Employees should be
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aware of the consequences of complaints and errors to a firm. If facility was clean it
meant management organizes the processes well. In clean facilities items do not get
lost inventory and order fulfilment accuracy was higher. In a well run facility the air
was clean, noise levels were low, and it was well lit. That concurred with Bernhardt &
Raschke (1998) who believe good manufacturing practice is important in the sugar
industry before even ISO certification. All location codes should be easily readable
and bar-coded to avoid confusion. Worker positions should be designed with attention
to ergonomics since most of the work is repetitive or strenuous. Ill designed work
places leads to high absence rates and labour turnover. Safety is important, and the
layout is important to prevent accidents and collisions. Unsafe conditions can be seen
from damaged racks. Space should not be wasted. Excessively large warehouses leads
to high cost and inefficient processes due to long travel times for storage, order
picking or cross docking; but insufficient space may prevent processes from being
executed efficiently and effectively. If products have to be dropped at temporary
locations because of lack of space, if they have to be dug up because they are stored in
wrong location, or if waiting and delays occurs then the metric receives then the
warehouse was not doing well. On equipment De Koster (2008) argued that material
handling equipment that broke down frequently lead to inefficient operations and
missed deadlines. On storage and order picking, warehouse efficiency depended
largely on methods used for storing and picking products. High labour costs and larger
throughput volumes justify more automated storage, picking systems, higher level of
order picking aids like scanners mobile terminals or voice recognition equipment.
Ramaa, Subramanya & Rangaswamy (2012); Ginnis et al.,(2002); Baker & Canessa
(2009). Tompkins & James (1998) say that warehouses face challenges that make
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excellence hard to achieve for that reason warehousing performance has to be
measured. Performance was defined as valued contribution to reach organizational
goals (Melchert & Winter, 2004), while Liviu, Ana-Maria & Emil (2009) said
performance refers to the way work was done. There were two aspects of performance
measurement in warehousing i.e. economic and technical. The study concentrated on
the technical efficiency i.e. inputs and outputs (Cechura & Simon, 2014), (De Koster
2008). Internal issues to be measured in a warehouse were space utilization,
equipment utilization, labour productivity, inventory accuracy, safety and
housekeeping, theft and pilferage and contamination and damage. External issues
were stock outs, fill rate, back order rate, complaints and order accuracy. Ramaa et al.,
(2012) summarised them into order fulfilment, inventory management and warehouse
productivity. In the current supply chain manufacturers and distributors are not only
judged by the quality of their products, but also how quickly and efficiently they
deliver goods to the customers (Won & Olafsson, 2005). Tompkins and James (1998)
point out that if performance cannot be measured then performance cannot be
improved. Measuring the performance of the warehouse is critical for providing
managers with a clear vision of potential issues and opportunities for improvements,
(Abdullabhai & Acosta, 2012).
1.1.4. Sugar Industry in Kenya
Kenya’s sugar industry dates back to the 1900s when Indian labourers put up farms
around Lake Victoria. The first factory was Miwani set up in 1923, followed by
Ramisi in 1927, Muhoroni (1966), Chemelil (1968), Mumias (1973), Sony (1979) and
West Kenya 1986. Sugar is the second most important crop in Kenya providing
essential products and by products to both industrial and household consumers alike.
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The stakeholders in the industry include farmers, the government, sugar factories, out-
grower institutions like the Kenya Sugarcane Growers Association (KESGA), Kenya
Sugar Board (KSB), Kenya Sugar Research Foundation (KESREF), importers,
financial institutions, transporters, consumers and lobby groups (Omolo, 2005). The
production of sugar in Kenya is 524,000 metric tonnes while consumption is 773, 000
metric tonnes. According to the Kenya Sugar Industry strategic plan 2010-2014 the
industry is facing challenges including capacity underutilization, lack of regular
factory maintenance, poor transport infrastructure and weak corporate governance.
Kenya is not regionally competitive and according to the Lappset report (2012), the
sugar industry in Kenya has the highest costs of production of $415-500 compared to
global average of $263 per metric tonne. In 2014, the COMESA safeguards will
expire and the sugar producers will be forced to come up with cost reduction
strategies and reduce prices, reduce costs and increase productivity. Kenya is going to
suffer stiffer competition from other countries in the region that produce at low cost
and have more efficient production methods. Most of the firms are reported to
implementing strategies to improve efficiency and notable is the use of modern
technologies and equipment. The strategic plan 2010-2014 informs that a reduction of
39% in the costs can greatly improve on capacity and ensure Kenya’s sugar industry is
at par with other producers in the COMESA region. A study by Casaburi, Kremer,
Mullainathan & Ramrattan (2014) shows use of mobile telephony an element of IT by
Mumias Sugar Company. The study points out that there was an increase of 11.5% in
yields because of improved agricultural extension services. Mobile and voice
technology are some of the latest technologies being used to improve warehouse
efficiency in developed countries.
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1.2 Research Problem
Information technology provides a tool to facilitate the automation and optimization
of the material handling process. In warehousing IT can improve inventory accuracy,
facility usage, reduce labour costs and enhance order picking accuracy. Manual
systems in a warehouse increase on costs in terms of equipment, labour, space and
time. Elimination of waste in the sugar value chain and the flow of material, people,
processes and information with the utmost precision, safety and accuracy can only be
done with some of level of IT in form of computer software working in tandem with
the automated and mechanized equipment. Companies are able to develop and
maintain a flexible organization that can respond quickly to changing demands and
conditions. It also enhances information flow and facilitates decision making in
supply chain and logistics operations (Sundarakani, Tan & Over, 2012).
Warehousing core elements are equipment, labour, space and time and this greatly
affects the whole supply chain right from the suppliers to the customers therefore real
time information flow is imperative. Being able to meet customer demand means an
organization has to control all processes in the warehouse. The warehouse has moved
from being the traditional storage structure to a source of logistical excellence and a
node that links material flows between the supplier and the customer. Therefore a
firm’s operational capabilities are brought to the fore if a warehouse is performing to
its optimum (Gray, Karmarkar & Seidmann, 1992). Meaning companies are able to
ensure stock availability without carrying excesses. The companies are able to reduce
costs and control costs through proper labour and storage utilization and time. A
warehouse that ensures that a customer receives right product at the right time in the
right quantity improves a firms view. Being able to meet the competition requires
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continuous improvement through the use of new information technologies
(Karagiannaki, Papakiriakopoulos & Bardaki, 2011).
The Kenyan sugar industry experiences cane shortages, delays, queuing, low trailer
utilization, high labour costs that point to poor warehouse performance. Cane shortage
or the inventory problem experienced by the sugar companies’ pointed to warehousing
inefficiencies whereby the warehouse being the control point did not manage stock
levels. Mistrust between farmers and the companies pointed to lack of proper
communication and information sharing. The farmers complained about incorrect
payments and this would not happen if the cane was picked by an automated machine
that read the correct tonnage of cane delivered instead of keying in manually by
humans. Wesonga, Kombo, Murumba & Makworo, (2011) pointed out that some of
the factories had poor working conditions and old machines that employees deemed
dangerous. Chullen (2012) concurred in a report on occupational health in Kenyan
sugar factories. The author observed bags of sugar put on the floor of a warehouse;
that was not in conformity with good manufacturing practices and best practices in
warehousing and also brought out the problem of space utilization and poor
warehouse performance. Bula (2012) discussed high labour turnover in some of the
sugar companies, citing problems like poor working conditions, training, leadership
styles, participation in decision making, performance appraisal and a lack of
commitment on the part of staff. In research done by Marco & Mangano (2010) on the
relationship between logistic costs and maintenance of warehouses. They believed that
there was a correlation between the condition of warehouses and the performance of
business which is the main interest of the study. A lot of research in the sugar industry
worldwide was on sugar engineering, natural factors that affect cane production,
regulations and policies, subsidies, taxes but there was very little research
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on the extent of IT adoption and influence of tracking and tracing devices in the sugar
companies in Kenya. The study was important because apart from the Kenyan sugar
industry having very high costs and was on the verge of collapse because of
mismanagement; the study hoped to highlight to major stakeholders that with
globalization and integration of supply chains, warehousing was a critical factor in
ensuring competitive advantage but this could not be achieved with manual practices.
IT systems were needed to ensure seamless information flow between stakeholders
and ensure visibility of product from the farms to the point of sale. That was
necessary as with the lifting of COMESA tariffs, the country would be open to cheap
sugar imports and competition and this could lead to the collapse of the sugar
industry.
This study therefore sought to address the following question. What was the effect of
information technology on warehousing performance of sugar companies in Western
Kenya?
1.3 Research Objectives
The main objective was to determine the effect of information technology on
warehousing performance of sugar companies in Western Kenya.
Specific objectives were to:
a) Establish the extent of information technology adoption in sugar companies.
b) Determine the influence of IT on warehousing performance.
1.5 Value of the Study
The study was expected to make key significant contributions to both theory and
practice of warehouse management. The study adapted systems theory and hoped to
show that information technology had an effect on warehousing performance through
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accuracy, relevance and consistency as pointed out in (Delone and Mclean, 2003).
The study also hoped to add to the body of knowledge by forming a basis for further
research in areas related to warehousing like material handling, good manufacturing
practice and maintenance of warehouses.
The study would benefit the management of organizations which operate warehouses
to make decisions based on findings of performance measurements of the warehouses
in order to improve on efficiency and effectiveness and reduce high costs. Case
studies show companies using IT in warehouses have better forecasting and planning,
better inventory management, reduced lead times and fewer manual processes and
procedures, stronger and more focused communication. The stakeholders in the sugar
industry, for example the government, Kenya Sugar Board, Kenya Research
Foundation, the farmers and management of the sugar factories, would find the study
useful because it would point out one bottleneck that most probably has been ignored
along the supply chain and that was the performance of warehouses. The farmers
would also benefit by embracing mobile technology as a way to improve
communication between them and the companies. The government also needed to
look at physical infrastructure as most of the high costs were caused by poor
infrastructure thereby preventing implementation of IT systems. The study noted that
high costs in production were partly on high cost of energy, fuel and farm inputs and
this was transferred to the consumer. The business community needed to protect
against counterfeits by using some of the identification technologies like RFID. The
study could also be used in benchmarking warehouse performance in the
manufacturing industry in Kenya, so that other supply chains can improve on their
logistics strategies.
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CHAPTER TWO: LITERATURE REVIEW
2.1. Introduction
This chapter discussed the literature related to the study i.e. information technology
and warehousing performance of sugar companies in Western Kenya. Speh (2009)
defined warehousing as the management of time and space. Tompkins, White, Bozer
& Tanchoco (2010) argue that in today’s competitive global marketplace, facilities’
planning was a strategy. IT as a resource was an enabler while warehouse as a
resource in the study could only function efficiently, effectively and be productive if
various technologies were used to enhance operational efficiency. Warehouses use
resources (facilities, equipment, inventory, investment and labour) to produce an
economically valuable service. The warehouse could only be efficient and effective if
the following parameters were met. Right product and right quantity could only be
achieved when picking and despatching were done accurately. Delivering to the right
customer at the right time requires correct labelling and loading. In the right condition
meant the product leaves the warehouse clean and damage free. Right price meant
cost efficient operations that delivered value for money. Warehouses need information
technology to reduce errors, locate items, improve efficiency, and create visibility.
The literature focused on the objectives of the study i.e. establishing the extent of IT
adoption in the sugar companies and determining influence of IT on warehousing
performance.
2.2. Theoretical underpinning of the study
Systems theory was introduced by biologist Ludwig von Bertalanffy in 1930s as a
modelling devise that accommodated the interrelationship and overlap between
separate disciplines. It reminded us of the value of integration of parts of a problem.
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Problems cannot be solved in isolation from interrelated components. Goede (2013)
said for something to be called a system there must be purposeful activity and the
systems included communications, processes, control processes, structures and
emergent properties. The study adapted the hard systems thinking because it dealt
with real world problem solving mechanisms, machines of which IT was an enabler to
equipment and computer software. Sugar industry was largely all about material
handling right from the fields to the consumer and hence the relevance to systems
theory where material handling was a subsystem of the production system; while
material handling was a system that had subsystems type of handling processes like
packing, unpacking, movement and storage involved, maintenance, mode of
transportation by suppliers, distributors, customers and waste.
2.3. Extent of IT adoption in warehousing
Lwiki, Ojera, Mugenda & Wachira (2013) argued that IT was the life blood of all
organizations and that the inventory manager needed IT to succeed in operations.
They also pointed out that to some extent the sugar companies used IT, but the
inaccuracy problems cited by farmers at weighbridges and conditions of some of the
warehouses gave the impression that there could be a lack of adoption of IT in some
of the sugar company warehouses. Warehouses are different in operations and
individual companies decide on the type of IT to use in order to assist in operations.
There were two elements in IT use and that was the computers for directing and
planning and mechanization. De Koster (2008) said that nowadays warehouses do not
run without a sufficient level of information systems. Best in class warehouses use
systems for electronic information exchange with suppliers, customers, carriers,
customs authorities and brokers in the supply chain. They use WMS for managing
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warehouse processes and use appropriate tools to support important warehouse
processes. The systems come in a great variety varying from simple spreadsheet
applications, to software packages like enterprise resource planning (ERP), radio
frequency identification (RFID). Firms can gain competitive advantage by operational
effectiveness, doing the same as the competitor but doing it better Azevedo, Ferreira
& Leitao (2007).
2.3.1. Information Technology and its influence on warehousing performance
According to Kivinen & Lukka (2003), companies are constantly trying to find ways
of reducing the cost structure, how fixed costs can be transformed to variable costs.
The primary aim of automation was to reduce costs of operations Varila, Seppanen &
Heinonen. Burinskiene (2012) said warehouse productivity could only be achieved by
looking at the processes. The author pointed out that in manual warehouses, the
forklift became the most expensive equipment because of labour, maintenance costs
and equipment. The research suggested reducing duplicative or multiple handling of
pallet, and non-productive movements and construction of routes. Racks in
warehouses were filled by shelving lifts instead of forklifts. Transfers were done
automatically utilizing belt and roller conveyors. Information gathering and
distribution were carried out automatically. The role of labour had changed from
performing the above to monitoring and controlling the system. Labour costs could be
reduced by use of automation. Sugar factories needed to ensure proper maintenance of
existing equipment because a study by Marco and Mangano (2010) showed that was a
relation between high costs in a warehouse and maintenance of equipment.
14
2.4 The Extent of IT adoption and warehousing performance
Warehouses are replacing human or manual work with automation. The primary aim
of automation was reduction of costs of operations. There were two aspects of IT in a
warehouse i.e. computerization and level of mechanization and automation. Hou, Wu
and Yang (2010) said that warehouse activities were in close relationship so that any
decision based upon the previous activities would impact efficiency and cost of
subsequent activities. Initially warehouse managers made decisions using traditional
methods in storage management which Hou et al., (2010) termed as complicated,
inconsistent, labour intensive and time consuming. Manually operated systems
required use of memory and experience on the part of the employee to remember
location of items. Karagiannaki, Papakiriakopoulous and Bardaki (2011) pointed out
that contextual factors affected the performance of a warehouse and also IT
implementation. The most common automation applications in warehouses were
hybrid lift trucks, horizontal transfer systems and automated storage and retrieval
systems. The benefits of automation were reducing labour, increasing speed, accuracy
and reliability, lowering energy costs and better use of space. A fully automated
warehouse worked nonstop and was able to increase throughput capacity. Less
manpower was needed and number of shifts could be reduced and also the dilemma of
demanding high productivity from staff and hiring extra workforce. An automated
warehouse required less handling space. Goods were stored more efficiently and there
was also less paper usage. There was an increased predictability of internal logistics.
There was also less time spent on staff planning and deliveries were handled with
greater efficiency. A company was able to track and trace the location and status of
goods in a supply chain. Effective material handling systems created savings that help
directly improve the bottom line. If an organization suffered from damaged products,
15
slow pick rates, a lack of space or disorganization hiring more labour would not help.
The efficiency of material handling equipments added to the performance level of the
warehouse. The mechanized system shifts the fatigue to machine and brings
effectiveness to human effort Sople (2007). Use of automated storage and retrieval
systems take advantage of overhead space to recover 60%-80% of the floor space
required by shelving and drawer systems. Improved space utilization can also extend
the useful life of existing facilities, eliminating the need for expensive square footage
expansion to meet growth requirements. The small footprint makes vertical systems
valuable for point of use storage and just in time applications (Tompkins 1998,
Tompkins 2010).
2.4.1 IT and its Influence in Warehousing Performance
According to Won and Olafsson (2005), warehouse managers aim to increase
warehouse productivity, reduce costs and fast deliveries. They said the main problems
in a warehouse were batching of orders and order picking. Batching was a method for
reducing how long customer orders have to wait in the system. The picking tasks
contributed to over 65% in warehouse operating costs. Manual operations hamper
efficiency and timeliness. Banker defines manual warehouses as a warehouse where
workers move to pick location, pick the goods and then move to delivery dock. He
defined automation as use of extensive conveyors, sorting equipment; automated
storage and retrieval equipment and other material handling solutions that move
goods to workers. Automation in study was defined as any measure put in place for
operations to perform smarter with less people. Speh (2009) asked how often items
are lost, time spent searching for them, times spent checking the work of order pickers
or receivers, how many shipments were returned , how much was spent in cycle
16
counting. Kivinen and Likka (2004) point out that the only way to control costs was
to identify the relationships between expenditures and relationships that cause them.
Varila, Sepannon & Heinonen, (2005) said that cost efficiency was one of the
cornerstones of logistics business. Speh (2009) pointed out that there were four
categories of costs in a warehouse. The handling cost dealt with all expenses
associated with moving product in or out of the warehouse. The largest component
was labour which was used to handle the products that move through the distribution
centre. It also included all costs associated with equipment used to handle products in
the warehouse. Storage costs were associated with goods at rest. These were related to
the cost of occupying facility and were expressed on monthly basis. Operations and
administration included costs such as line supervision, clerical effort, information
technology, supplies, insurance and taxes. The cost of logistics could not be controlled
without controlling the processes and activities.
2.4.2 JIT and Modern Concepts on Warehousing
JIT is a management concept that aims at eliminating waste associated with time,
labour and storage space. The concept implied that a company produces only that
which was needed by the customer, when it was needed and in the quantity required.
The company only produced only what the customer requested to actual orders and
not forecasting. The problem was compounded by warehouses having excess
inventory and other times having nothing, a case of Kenyan sugar companies.
Inventory in this concept was seen as sign of poor management. JIT ensures better
product quality, higher productivity and lower production costs. According Kuse,
Castro & Takahashi (1995), information systems play an important role in
establishing JIT and shortening lead times. In Kenya a study by Ondiek & Kisombe
17
(2013) on lean manufacturing show some level of adoption of lean practices in some
of the sugar factories but JIT has not been adopted though Muhoroni produces on
demand. Even with the introduction of JIT the role of the warehouse is still important
in the supply chain and cannot be eliminated as it has an effect on the bottom line of a
company (Frazelle, 2001). Use of JIT can improve the overall view of warehousing
with all the seven parameters met i.e. right product, right time, right condition, right
price and right quality if its incorporated with IT systems.
Mumias Sugar Company was reported to be using Agricultural management systems
(AMS) and Enterprise Resource Planning (ERP) in its operations. The operations in
the factory were reported to be efficient because of the level of technology used and
mechanization. According to Keir (2002) South Africa was advanced in sugar
engineering but lagged behind in storage and bagging of sugar. America was known to
use third party providers for its efficient sugar warehousing and distribution. Tanzania
cited lack of storage facilities for their cane and old machines built in the 1960s
(Tarimo & Takaruma 1998). According to an article dated march 2012, India is
reported to be using Sugarcane Information System (SIS). This was in response to
communication barriers like survey of farmer’s fields, selling of produce, correct and
timely measurement of product and prompt payment. Initially farmers had to travel
twenty five kilometres for every interaction with mill or society group. They reported
frequent loss or theft of supply tickets and had difficulty coordinating when to bring
their supply to the mills; but with the introduction of SIS there had being an
improvement in communication.
18
2.5 Conceptual Model
Figure 1: Conceptual framework
Independent variable Dependent variable

Information technology Warehouse Performance
Level of information technology Warehouse assets (equipment,

 Radio Frequency labour, space, time)
Identification
 Efficiency
 Enterprise resource
Planning
 Accuracy
 Warehouse Management
Systems
 Bar-codes
 Timeliness
 Electronic data interchange
(EDI)
 Transportation System  cost
 Mechanization and
automation
Source: Author (2013)
This model explained the relationship between information technology and
warehousing performance. It was difficult to optimize on labour productivity, space
and equipment and meet lead times when using manual systems. Computer controlled
equipment which has a million times capability of memory and are able to do things a
human being cannot therefore increasing the productivity of a warehouse. In space
utilization automated equipment ensured that all areas were covered. There was
reduction of high labour costs and extra labour needed. Using highly automated
equipment can assist the sugar companies in ensuring proper space utilization, labour
and time.
19
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction
The study was conducted through cross sectional research design. The study was
concerned with determining the effect of information technology on warehouse
performance of sugar companies in Western Kenya. It specifically intended to
investigate the relationship between information technology and warehouse
performance. Such issues were best investigated through correlation but because the
data points of the study were few correlation of the independent and dependent
variables was not done. The study instead used descriptive statistics and was able to
determine the effect of IT on warehouse performance of the sugar companies.
3.2 Research Design
The study adopted a cross sectional survey research design. The research design was
preferred because it helped the researcher to explain the causal relationships between
the variables. According to (Kothari, 2010), cross-sectional research design was ideal
where the study sought to investigate relationship between variables in studying a
phenomenon.
3.3 Population of Study
The unit of analysis was the sugar companies. The target population of the study was
all the eleven operational sugar factories situated in Western Kenya as per the Kenya
Sugar Board census report 2013/14/15. The population frame was indicated in
appendix 2. A census study of all the firms was conducted. According to Saunders et
al., (2007), census was suitable where the units of study are not too many and were
concentrated geographically in such a way that accessibility was easy and not
prohibitive in terms of cost, time and other resources. Though the study was meant to
20
be a census study, however only four companies out of the eleven (11) responded to
the questionnaires. The companies were visited according to convenience and
geographic proximity commencing with the nearest to the furthest.
3.4 Data collection
The study utilized primary data as secondary data (document analysis) relevant to the
study were not available. Primary data was collected by use of self administered
questionnaires and interview schedules. The questionnaire was divided into section A
dealing with contextual factors, section B on extent of adoption of IT and Influence of
IT were denoted by (I) and warehouse performance (Wp) see appendix I. The
respondents were warehouse supervisors in the sugar companies but in one company
the Finance Manager handled the questionnaire.
3.5 Data analysis and presentation
Data was analyzed by both quantitative and qualitative techniques. Quantitative data
was analysed by use of descriptive statistics because the sample size was too small.
Qualitative methods were also used and this was achieved by use of means and
standard deviations. Data interview and questionnaire responses were coded
appropriately and were ranked and scored using likert scale on a ratio of 1-5. Results
were presented using tables showing the responses of the respective companies.
21
CHAPTER FOUR: DATA ANALYSIS, RESULTS AND
DISCUSSION
4.1 Response Level
The study was investigating the effect of information technology on warehousing
performance of sugar companies in Western Kenya. Since it was a census study,
questionnaires were administered to all the eleven listed sugar companies in Western
Kenya, however out of eleven companies only four companies gave permission to
collect data two companies were closed and four companies did not give permission
to collect data. Therefore out of eleven questionnaires only four responded giving a
response rate of 36 % which is quite representative and can give an accurate account
of the study as displayed by Visser, Krosnick, Marquette & Curtin (1996).
4.2 Findings on Contextual Factors
Contextual factors have an influence on the performance of the warehouse. The type
of warehouse, equipment, age of the company, labour, constraints or opportunities
experienced by the companies has an effect on operations in the warehouse.
4.2.1 Ownership of the warehouses
Table 1: Type of warehouse
company private contractual percentage
A 1 0 25
B 1 0 25
C 1 0 25
D 1 0 25
4 100
Source: research data, 2015

22
The companies were asked the type of warehouse the company used. The answer was
n=4 confirmed that the companies had private warehouses giving a percentage of
100%. The study observed the warehouses were located next to the factory to allow
the movement of sugar directly from the manufacturing process to the warehouse.
This gives the company the advantage of flexibility of redesign of the warehouses to
meet specific needs and address the constraints raised by some on space and
expansion. The companies are also in control of operations hence can reduce
warehouse costs significantly and improve on efficiency. On the downside the
companies may suffer lower flexibility in investments Ling (2007).
4.2.2 Specialized equipment
On specialized equipment and material handling equipment (MHE) the companies
were asked to list specialized equipment and the study found that the companies used
conveyors and pallets in material movement and stacking. The companies had
mechanized equipment like forklifts and cranes largely used in the main factory
section. Tompkins 1998 says equipment resources expected in a warehouse are data
processing equipment, dock equipment, unit load equipment, material handling
equipment and storage equipment but the findings show a lack of investment in
specialized automated equipment in the warehouses. Automated equipment in
warehousing was a necessity because some of the functions like order picking are
known to be labour intensive taking 50% of operational warehouse costs and are also
cost intensive and time critical (Boysen & Stephan, 2012). This could contribute to
reasons cited by staff for high labour turnover like too much work because of the
manual systems used in material handling. This finding could also give credibility to
23
Ling 2007’s study above that posits lack of flexibility in investing in new
technologies.
4.2.3 Age of the Companies
Table 2: Age of the companies
Frequency Percentage Cumulative percent
Less than ten years old 1 25 25
More than twenty years old 3 75 75
Total 4 100 100
The study found that n=3 of the companies were over twenty years old giving 75%
while n=1 was three years old giving 25%. The company that was three years old
boasted of state of the art technology but the over twenty years showed a lack of
embracing technology as they had the systems but had not implemented for use in the
warehouses and neither had they improved on existing technologies. A survey by
Tompkins International also shows that aged material handling systems affect the
employee productivity by 18.2%. One of the problems bedevilling the sugar industry
was a lack of maintenance of equipment and old equipment that employees deemed
dangerous (Bula, 2012).
24
4.2.4 Labour
Table 3: Turnover
Frequency Percentage Cumulative percentage
No turnover 1 25 25
Turnover 3 75 75
Total 4 100 100
On labour turnover 25% reported that they had nil turnover, while 75% reported
having some turnover, though to them it was insignificant. On staff being part of a
collective bargaining agreement (CBA) 25% reported that none of the employees were
part of a CBA, 25% reported being part of a CBA while 50% reported being partially
part of a CBA. Labour turnover in the sugar industry was largely blamed on too much
work, long working hours, poor pay, poor working conditions, risky machines,
management and lack of growth (Wesonga, Kombo, Murumba & Makworo, 2011)
(Bula, 2012). Labour is known to be the highest cost in the warehouse therefore
reducing amount of labour, pursuing high labour productivity, good labour relations
and worker satisfaction would greatly reduce costs. This could be done by using
modern equipment that that does data entry, picking is made easier with more efficient
routes that require less walk time, packing is more accurate with scanning therefore
happier workforce because of less movement and potential for mistakes.
4.2.5 Constraints and opportunities
Constraints and opportunities found in warehousing have a moderating effect on
warehouse performance. The companies were asked to give self identified constraints
25
and opportunities in the warehouses. Company A reported that their constraint was
space and opportunity was expansion. Company B felt Company C felt its opportunity
lay in outsourcing and its constraint was manual labour. Company D felt its constraint
was technology, space and storage.
4.3. Extent of IT adoption in the Sugar Companies
The first objective sought to determine the extent of adoption of IT in the sugar
company warehouses and these were the findings.
4.3.1 Existence of warehouse management systems
Table 4: Warehouse Management System
yes No Vendor Frequency Cumulative

percent
A 1 0 SAP 4 100
B 1 0 Oracle
C 1 0 Ebizframe
D 1 0 Sispro 100 %
Source: research data 2015
The companies were asked if they owned any warehouse management system and
n=4, therefore 100 % of the companies had some kind of warehouse management
system. The ERP systems were used in entering information into the computers. One
company pointed out that though information was real time but logistically product
availability and movement to customer would be to a low extent, meaning at times
they are not able to meet customer dates. This shows that there is a lack of inventory
visibility within the companies and this could be blamed on not fully implementing
the IT systems and the various departments not working together.
26
4.3.2 Level of mechanization
The level of mechanization was divided into four parts i.e. manual, mechanized, semi-
automated and automated. The four categories on level of mechanization were
necessary because these companies have specialized equipment which fall in
categories of purely manual, mechanized, semi-automated or automated but findings
show that none were computer controlled.
Table 5: Manual Systems
Frequency Percent Cumulative

percent
To a very low extent 1 25 25

To a moderate extent 1 25 25
To a very large extent 1 25 25
Total 3 75 75
On an ordinal scale the companies were asked to give the level of manual use in the
companies. The companies gave the following answers as concerns manual systems.
The results showed that three of four companies had different answers concerning
manual use in the warehouses. Company A reported using manual systems to a very
low extent. Company B reported using manual systems to a moderate extent.
Company C did not respond to manual systems, while company D agreed that they
used manual systems to a large extent. Though manual systems are the cheapest and
most common they are constrained by low volumes, slow speed, physical
characteristics of product and distance. Manual systems cause equipment to be idle
and be underutilized.
27
Table 6: Mechanized Systems
Frequency Percent Cumulative percent
To a low extent 1 25 25
Total 4 100 100
The results show that three out of the four companies, A, B, C reported using
mechanized equipment in operations leading to a percentage of 75% while company
D reported being mechanized to a low extent leading to a percentage of 25%.
Mechanization reduces fatigue from human to machines. Sople (2007) points out that
mechanised equipment need not be powered equipment like wheeled trolleys that
increase human abilities beyond mental and physical capabilities. Most of the
equipment observed in the companies were forklifts, pallets, trucks, conveyors and
cranes.
Table 7: Semi-automated systems

percent
Total 3 75 75
The findings show that 75% of companies responded to being moderately semi-
automated i.e company A, B, D while company C did not respond because the
company felt that the systems could not be mixed.
28
Table 8: Automated systems

percent

To a great extent 1 25 25
Total 3 75 75
Company A reported using automated systems to a very large extent, B to a moderate
extent and D to a very low extent while company C did not respond. Automation
ensures the human factor is minimised and is restricted to programming and controls.
A warehouse can either have manual systems or automated systems. The primary aim
of automation is to reduce costs of operations Varila, Seppanen & Heinonen.
Burinskiene (2012), says that travel distance of a forklift can be reduced by 27-37%
when radio frequency based process is used compared with when paper process is
used. By gaining control of your warehouse you gain control of your profitability.
Effective material handling systems create savings that help directly improve your
bottom line. If an organization suffers from damaged products, slow pick rates, a lack
of space or disorganization hiring more labour will not help. The efficiency of
material handling equipments adds to the performance level of the warehouse. The
mechanized system shifts the fatigue to machine and brings effectiveness to human
effort (Sople 2007).
29
4.3.3 Adoption of IT in the various departments in the companies
Table 9: Extent of Adoption of IT use in the warehouse

percent
Total 4 100 100
On an ordinal scale the companies were asked to what extent they had adopted the use
of IT in the warehouses. 50% reported adopting IT in the warehouse to a moderate
extent, while 50% reported to a very large extent. The companies used computers to
key in data manually for goods inbound and outbound. They reported having ERP
systems in place but integration of IT systems with equipment to aid in space
utilization; labour or time was not implemented. Operations in the warehouses were
largely manual.
Table 10: Extent IT has been used to link all levels in the organization

Total 4 100 100
On an ordinal scale the companies were asked to what extent IT was used to link all
the levels in the organization. One company 25% reported that IT linkage to all levels
of the organization was to a moderate extent, 25% reported to a great extent and 50%
to a very large extent. Seamless information flow in all departments is important. This
30
can be done through integration of WMS and ERP systems for smooth business flow
and easier tracing of costs and accuracy.
Table 11: Employee use of IT systems

Total 4 100 100
On an ordinal scale the companies were asked to what extent employees use IT
systems in the company. 50% answered to a moderate extent, while 25% to a great
extent, and while 25% to a very large extent. This showed that employees were able
to use computer systems in operations. Warehousing operations in the sugar
companies was largely done by machines that bag the sugar and then move the sugar
to the warehouse and through pallets to the waiting customers. The employees
reconcile the records through entries made in the computers hence the findings. The
first step to improving warehouse operations is to increase labour productivity.
System directed operations are required to reduce errors. Directed operations also
improve labour productivity. Operators no longer have to think about the next
operation. The system does the thinking. Five factors that must be considered to
optimize labour are operator location equipment availability, task prioritization, queue
times and task importance.
31
Table 12: IT and its adequacy for operations

percent

Total 4 100 100
On an ordinal scale 25% responded that IT was adequate for operations to a very low
extent, 25% to a low extent, 25% to a moderate extent and 25% to a great extent. The
systems in the warehouses are not computer controlled nor are they integrated with IT
systems to control space utilization by use of storage systems. Labour was largely
manual where sugar is pushed manually. According to the findings time is affected by
availability of sugar hence the mixed findings.
Table 13: Use of IT technologies like RFID, Barcodes

percent

Total 4 100 100
Despite the fact that all the companies had warehouse management systems 75 % of
the companies do not use RFID or barcodes, but one company reported using
barcodes for bagging of sugar. There are different systems and companies have a
32
choice in type of warehouse management system to use. The above are just examples
of recommended warehouse systems by experts in the field of warehousing.
4.4 Influence of IT on Warehouse Performance
The second objective was establishing the influence of IT on warehouse performance.
The study sought to determine if IT had any influence on information within the
organization and on major functions and elements in warehousing.
4.4.1 IT influence on warehouse metrics
Table 14: Warehouse metrics

Total 4 100 100
Three companies 75% reported that IT had an influence on warehousing key
performance indicators (KPIs) like space, labour, time and equipment to a moderate
extent while one company 25% reported IT having an influence to a very low extent.
The contradiction was brought about by logistics that were not perfect scoring 1 and
information entered into the systems that scored a 5. Since the systems were not
synchronized there was a difference on facts on the ground with customers having to
wait in queue for loading to be done. One company pointed out that it took one hour
to load a trailer while others have to queue awaiting their turn. Despite the findings
here IT had very little influence warehouse KPIs because as shown above IT seemed
to have been adopted in the warehouses.
33
4.4.2 Influence of IT on warehouses functions Table 15:
Warehouse functions

percent

Total 4 100 100
On an ordinal scale the companies were asked if IT had any influence on warehouse
functions like receiving, sorting, storage, picking and transportation or shipping of
products. The answers varied from 25% to a very low extent, 25% to a low extent,
25% to a great extent and 25% to a very large extent. Picking is known to be the most
expensive and laborious task in the warehouse and reducing on costs associated with
the tasks will determine productivity of a company.
4.4.3 IT influence on communication
Table 16: Communication between the company and stakeholders

percent

Total 4 100 100
34
On an ordinal scale companies were asked if IT had any influence on communication
between company and stakeholders like suppliers. Two companies (50%) reported to
a very low extent while two (50%) companies reported to a very large extent.
Communication is important at all levels of the supply chain in order to avoid stock
outs and also work modalities of meeting the deficits. Valuing the farmer the main
supplier of cane needs open communication between company and stakeholders.
4.4.4: IT influence on forecasting, planning in the sugar value chain
Table 17: IT and decision making

Total 4 100 100
On an ordinal scale the companies reported 25% to a very low extent IT having an
influence on forecasting, planning in the sugar value chain, 25% to a low extent, 25%
to a great extent and 25% to a very large extent. This shows that some of the
companies were able to plan and ensure that there are no stock outs using the IT
systems in place but this was also contradictory because at times there was surplus
cane and at times the machines were idle therefore increasing costs. Visibility of
inventory in the warehouses can go a long way in forecasting and ensuring there are
no stock outs or excesses.
35
4.4.5 IT influence on Order fulfilment
Table 18: Order fulfilment

Total 4 100 100
Order fulfilment is a very important aspect in the supply chain. On time delivery
(OTD) means the companies are able to meet deliveries on the date agreed with the
customer or before. This is influenced by production line requirements and cash flow.
This is measured by working days versus calendar days, shipping date versus item
received date, promised date versus required date, commitment date versus needed
date. The companies responded they meet the metrics 25% to a moderate extent, 50%
to a great extent, 25% to a large extent. This information could be accurate
considering one company does not have cane shortage problems and in fact reported
having excesses and been forced to turn away farmers, while one other company
reported production was done on demand.
Table 19: Order fill rate

percent
Total 4 100 100
36
Order fill rate a measure of shipping performance expressed as a percentage of the
total order and the companies had 50% this was done to a moderate extent while 50%
say it was met to a great extent.
Table 20: Order accuracy

Total 4 100 100
Order accuracy a huge contributor to costs is affected by mistakes in keying in orders
or inventory information, misplaced products, incorrect picking and packing or
mismanagement of inventory. The companies gave a response of 25% meet order
accuracy to a moderate extent while 75% reported having order accuracy to a great
extent. If specialized equipment are not used it means staff ensure accuracy is
maintained when picking orders.
Table 21: Line accuracy

Total 4 100 100
Line accuracy shows the total number of lines shipped/transported over all orders.
The companies had 50% for achieving this to a moderate extent while 50% did this to
a great extent.
37
Table 22: Order cycle time

Total 4
Order cycle time shows the actual time to fill a customer’s order. This affects the
business in the sense that inability to meet customer demand means customers will
buy competitors product and in Kenya unfortunately this has lead to smuggling in of
sugar through the wrong channels. The companies reported meeting n=4 100% the
order cycle times.
Table 23: Perfect order completion

Total 4 100
Perfect order completion means the right product, in the right quality, right quantity at
the right time. The companies reported 25% having perfect order completion to a low
extent, 50 % to a great extent and 25% to a very large extent. This shows some
companies are meeting customer demand while some are unable to.
38
Table 24: IT influence on inventory management

Total 4 100 100
The companies reported managing their inventory to a great extent at 75% and to a
very large extent at 25%. Reports from the sugar industry report cane shortages and
idling of machines and customers waiting for days on end is some of the companies
for their sugar. The findings might be contradictory but one company reported having
excess cane while another talked of producing only by order.
Table 25: Inventory accuracy
Total 4 100
Inventory accuracy is the variance between perpetual inventory and physical
inventory. Inaccuracy in inventory leads to companies thinking they more inventory
in stock than they actually do leading to unsatisfied customers. Stock outs interrupt
production and create delivery delays, creates idle time and manufacturing
inefficiency. This has been observed in the sugar industry with closure of companies
because of lack of cane but the companies reported 25% to a moderate extent, 50% to
39
a great extent and 25% to a very large extent Lee (2006). On the hand inventory
accuracy can improve other logistical processes thereby reduce costs.
Table 26: Inventory visibility

Total 4 100
Inventory visibility is the ability of an organization to manage inventory in real time
with visibility into current inventory locations and levels. This visibility enables an
organization to streamline processes related to shipping and delivery. The companies
reported inventory visibility to 25% to a moderate extent, 50% to a great extent and
25% to a very large extent.
Table 27: Damaged inventory

Total 4 100 100
Damaged inventory increases costs in very many aspects. The findings show 25% to a
very low extent, 50% to a low extent and 25% to a moderate extent. Damage is gotten
through material handling. The companies reported that this happened during storage
when bags are caught between the conveyors or fall and open spilling the contents.
40
Unlike other products the damage was corrected there and then, but considering sugar
loss the control cannot be 100%.
Table 28: Storage utilization

Total 4 100 100
The companies pointed out that they fully utilize storage facilities 50% to a great
extent and 50% to a very large extent. Considering some of the constraints were space
and expansion this could explain the findings. The sugar companies are also affected
by excess cane availability and other times shortages leading to idle machinery. Space
utilization is also very important in warehousing. Tompkins and Harmelink (2004)
point out that space is one thing that always runs out in a warehouse. Space is a
primary finite resource. Deficiency in planning of this key factor hinders operating
efficiency of the warehouse. Cited problems are extended travel distances due to poor
layout and poor utilization of space. This is where the control of merchandise is
transferred, and if it is not accomplished safely and accurately it is impossible to
satisfy the customer. Inadequate storage planning i.e. too little or too large will result
in operational problems like lost stock, blocked aisles inaccessible material , poor
housekeeping, safety problems and low productivity. Large spaces or unutilized
spaces result in high space costs in form of land, construction, energy and equipment.
41
Table 29: Dock to stock time

To a very great extent 2 50 50
Total 4 100 100
This is the elapsed time of arrival of material through the receiving process
assignment of location entry into the inventory system and available for order. The
companies reported meeting this 50% to a great extent and 50% to a very large extent.
This is done through keying in information directly to computers.
4.5.7: Condition of the warehouse
The condition of the warehouse and maintenance of equipment also determines
warehouse performance. Excessive handling of material, untidy rooms, poor lighting
also point to poor warehouse performance. After the occupational health report 2012
the companies visited seem to have improved on the conditions of the warehouses.
Table 30: Condition of building, floors, lighting

Total 4 100 100
The companies were asked if the conditions of the buildings, floors was in good
condition a very important aspect as it points to good warehousing practice and is also
a preventive measure for accidents .The answer was 25% to a moderate extent and
75% to a great extent.
42
Table 31: Condition of material and storage equipment

Total 4 100 100
Maintenance of equipment is a major factor in reducing costs in warehousing so the
companies answered 25% this was done to a moderate extent, 75% responded it was
done to a great extent. Tompkins says that preventive maintenance is a best practice in
maintenance. He says a company has the choice of repair strategy a reactive, run to
failure strategy or a strategy that is proactive with a focus on planned maintenance
and preventive maintenance. The first strategy operates with a high level of
uncertainty by running equipment to the point of shutting down, while the second
strategy reduces uncertainty of unplanned downtime and high costs of major failures.
This is cost effective in the long term and De Marco adds that maintenance of
equipment can determine a company’s ability to compete effectively.
Table 32: Distance material is moved

Total 4 100 100
Excessive touching of material in warehousing adds costs in terms of damage loss of
quality and quantity of product. The companies reported avoiding this by 75%
reporting to a great extent while 25% reported to a very large extent. Companies
43
should reduce by selecting equipment that eliminates repetitive and strenuous manual
labour and eliminates unnecessary movement.
Table 33: Double handling

Total 4 100 100
The use of equipment prevents human contact with product and the companies
reported 50% to a moderate extent and 50% to a great extent. The companies have
manual to automated equipment therefore they felt that double handling of material;
was avoided.
Table 34: Safety

Total 4 100 100
Accidents happen in warehouses ranging from falling objects from conveyors, slips
and falls from equipment and the companies said they have ensured safety of
warehouse staff 50% to a great extent and 50% to a very large extent. The
occupational health for 2012 gave a different picture of the warehouses but with the
findings above and observation there was great improvement in most companies. The
findings also show the companies use manual to automated equipment to move
material hence preventing accidents termed ergonomic like pain, pushing or pulling.
44
Table 35: Ideal warehouse

Total 4 100 100
The supervisors were asked if that was the warehouse they would like in and 25%
said to a moderate extent, 25% to a great extent and 50% to a very large extent. Some
companies felt that their warehouses were doing well but others felt there was room
for improvement especially since some had WMS but they were not fully
implemented, others had requested for equipment that had not been received, storage
utilization issues also came up.
Table 36: Mean of IT Adoption
N statistic sum mean * Target Rating

rating Score
Manual systems 3 9 3 * 5 15
Mechanized systems 4 11 2.75 * 5 13.75
Semi-automated 3 9 3 * 5 15
Automated 3 8 2.66 * 5 13.3
Extent of IT adoption 4 14 3.5 * 5 17.5
IT and linkage to all 4 17 4.25 * 5 21.25

levels of organization
Extent of employee use 4 15 3.75 * 5 17.5
IT and adequacy for 4 12 3 * 5 15

operations
Use of RFID, barcodes 4 8 2 * 5 10
45
IT and labour 4 8 2 * 5 10
IT and time 4 12 3 * 5 15
IT and space 4 8 2 * 5 10
IT and equipment 4 8 2 * 5 10
Influence on sorting, 4 12 3 * 5 15
storage, picking
Influence on 4 12 3 * 5 15
communication
Influence on sugar value 4 11 2.75 * 5 13.75
chain
80 227.05
The integral performance model by Tompkins 1998 was partially adapted for this
study to measure the performance index because only the likert scale information was
available to test the scores for IT adoption in the warehouses. The performance index
had a rating 2.8 out of 5 and a percentage of 35. The companies reported having
computer systems installed with ERP but integration with the main elements in
warehousing like labour, equipment or space had not been done. The companies
loaded vehicles manually by pushing the sugar on pallets. Space averaged 2 meaning
sugar was stacked without any special consideration to storage systems that
completely utilize space and are able to point out unused spaces. Only one company
reported using a barcode. IT was not used in communication with major stakeholders
though a study by Casaburi, Kremer, Mullainathan & Ramrattan, (2014) showed
company A using mobile telecommunication to communicate with farmers. The
influence of IT was not felt in the companies because farmers still complained of
wrong payments arising from manual picking of the cane and manual keying in of the
information that can be tampered with or have errors. Automatic picking can ensure
accuracy of records and visibility of the same information in real time.
46
Table 37: Mean Warehouse Performance
N statistic sum Mean * Target Rating

rating Score
On time delivery 4 14 3.5 * 5 17.5
Order fill rate 4 14 3.5 * 5 17.5
Order accuracy 4 14 3.5 * 5 17.5
Line accuracy 4 16 4 * 5 20
Order cycle time 4 14 3.5 * 5 17.5
Perfect order completion 4 16 4 * 5 20
Inventory accuracy 4 14 3.5 * 5 17.5
Inventory visibility 4 14 3.5 * 5 17.5
Damaged inventory 4 9 2.25 * 5 11.25
Storage utilization 4 16 4 * 5 20
Dock to stock time 4 16 4 * 5 20
60 196.25
The performance index adapted from Tompkins 1998’s integral performance model
showed that the performance index was 3.1. Though the analysis was based on
perception measured on the likert scale the reality on the ground showed that the
sugar companies were struggling with a lot of bottlenecks. On time delivery had a
mean of 3.5 meaning the companies meet customer expectation, but on the ground
one company pointed out that production was done on order while another had a
customer that had waited for sugar for a whole week. Order fill rate had a mean of
47
3.5. Order accuracy had a mean of 3.5 with companies reporting the data entered was
accurate according to customer orders but another pointed out that sometimes when
sugar prices fluctuated customers changed the quantities ordered hence creating
confusion and mistakes because of change in invoicing. Line accuracy averaged a
mean of 3.5 and considering they used semi-automated and mechanized equipment
but differences arose from damages. Order cycle time averaged a mean of 3.5. Perfect
order completion averaged 4 meaning orders were met perfectly. Inventory accuracy
averaged a mean of 3.5, inventory visibility averaged a mean of 3.5, damaged
inventory averaged a mean of 2.25 with companies having damaged inventory to a
low extent and others moderately, but the argument was damaged bags were repaired
immediately hence the loss at warehouse level was corrected immediately. Storage
utilization averaged a 4 with companies believing they utilized space properly but
here lack of sugar was not taken into consideration and the losses it brought in terms
of idle machinery and labour. But this was contradictory in terms of IT having an
influence to a low extent on space, time, labour and equipment. Time averaged three
because the information was entered in the computers and could be assessed in real
time but logistical availability of sugar to meet customer demand was a challenge.
Perfect order index (POI) for the warehouses
This index was done to track events in the output process combining two or more
metrics. The perfect order index averaged 43%, running below 80%.
Table 38: Perfect order index
On time * Complete * Damage * Order POI

delivery order free accuracy
87.5% * 100% * 56.25% * 87.5% 43%
48
The situation of the Kenyan sugar industry with a deficit of 200 metric tonnes and
frequent cane shortages could explain the POI above. The companies only perfectly
met the orders given to them at an index of 43%. The sugar industry is bedevilled by
cheap sugar imports and smuggling. The companies have been reported to bag sugar
imported from other countries because of cane shortages. Inefficiencies along the
value chain can explain the percentage as there are reported inaccuracies, delays and
queuing. Warehouses in the sugar companies were not fully automated therefore the
fatigue of keying in data was still done manually instead of automatic picking. The
sugar was also manually loaded to pallets and on to waiting vehicles. The companies
reported having ERP systems that were not fully implemented for use in the
warehouses therefore IT was not fully integrated in the warehouses hence the results.
49
CHAPTER FIVE: SUMMARY, CONCLUSION AND
RECOMMENDATIONS
5.1 Summary of the Study
Karaseck (2013) says ‘that a warehouse was performing optimally if each customer
was satisfied completely and when all warehouse and logistic processes were done in
the shortest possible time’ but the sugar industry is bedevilled by sugar shortages,
problems along the value chain and high production costs. The study therefore sought
to establish if the use of IT systems had any effect on warehousing performance and
thereby streamlining the logistical processes. The study was a census study of all the
eleven sugar companies in Western Kenya, but only four responded. The warehouse
in the sugar companies are finished products and materials. All the warehouses are
located within company premises and next to the factory for the flow of sugar from
factory directly to warehouse through the conveyors. Three of the companies were
more than twenty years old. Secondary research shows that old warehouses are slow
to embrace new technology and this was observed in the field. The issue of 3PLs and
efficiency could also be an area or research since the best sugar firms in the world
seem to be embracing 3PLs. Tompkins (1998) says this has been driven by rising
costs of information technology in warehousing and diminishing workforce
availability. The study found that the companies had not fully adopted the use of IT in
the warehouses. This was observed by the performance index of 2.8 on core assets in
warehousing. The influence of IT on warehousing performance also averaged 3.1 but
with perfect order index of 43% meant the companies were still struggling with
accuracy and perfect order completion.
50
The first objective was to find the extent of adoption of IT in the sugar companies.
The extent of IT adoption averaged an overall mean of 3.8 while the performance
index averaged a rating of 2.8 This means that at roughly 76% the companies had
adopted IT in the warehouses mainly through computerization but not automation of
processes. The study found that IT was not fully adopted in the sugar companies. One
company pointed out that despite having the ERP systems in place they were not fully
implemented. IT was not also adopted in the warehouse hence IT had not significant
effect on labour, equipment and space. The companies pointed out that logistics
practice in the companies and use of real time information in the computers conflicted
because work was done manually hence queuing and waiting for orders was
inevitable. The companies also pointed out that IT had not been adopted in forecasting
or planning in the sugar value chain, it was not greatly used between the companies
and the stakeholders. One company pointed out that one of its constraints was manual
labour therefore there was a need to improve on manual processes.
The study also sought to determine the influence of IT on warehouse performance and
overall the factors influencing warehouse performance averaged a mean of 4 and a
performance index of 3.1. Therefore at 80% the companies felt they met warehouse
performance measures order fulfilment and inventory visibility at 80%. Measurement
of warehouse efficiency could not be achieved because data was not availed. All the
variables averaged means of above 3 except for damaged inventory but logistically
that was not the real picture; though some companies felt they met the demand
because they had enough cane and were not involved in cane wars. The perfect order
fulfilment index averaged 43% showing that the companies were not able to meet
customer orders on time.
51
5.2 Conclusions
The study investigated if IT has an effect on warehouse performance of sugar
companies in Western Kenya. This was brought about by studies showing logistical
problems in the whole sugar value chain, high labour turnover, lack of maintenance of
equipment, cane shortages and stock outs, smuggling, pilferage queuing, delays and
wrong payments to farmers. The study specifically sought to determine the extent of
IT adoption in the sugar companies and its influence on warehouse performance. In
view of the findings the study concluded that because IT had not been fully adopted
the sugar companies were still experiencing challenges that would otherwise be
solved by full automation and integration of systems.
The first objective was determining the extent of IT adoption in the sugar companies.
Information technology in the sugar companies did not have a great impact on
warehouse operations or the general sugar value chain. As much as the companies had
some WMS they were not fully implemented hence were not been used. IT had not
been adopted for use in the warehouse with labour, equipment and space averaging
below 3. IT was not used for tracking and tracing of sugar hence the mean of 2. Some
of the high costs experienced in production of sugar could be coming directly from
warehousing in terms of queuing, idleness, space, labour, old equipment. On space
utilization as much as the companies report stacking to the top , because of lack of
racking and stacking systems it could be concluded that there was space wastage
(Ackerman, 1990). Another company pointed out that they lacked storage space hence
they stack until there was no more space. One company pointed out that the insurance
company advised them not to fully utilize space to the roof to avoid accidents. This
showed that operations were not fully automated as with use of IT controlled
equipment receiving, storing and picking would be done by the specialized equipment
52
and not manually hence the issue of accidents would not arise. On equipment it was
reported by one the companies that it took one hour to load one vehicle and it was
observed that there was a queue of vehicles waiting to be loaded. Pushing sugar
manually by way of pallets could be slowing the process and a need to use automated
guided vehicles to load sugar would be an option for accuracy and speed. According
to Kim, Dekker and Heij Econometric Institute Report 2013-2015, warehouse
operations are dependent on labour management. A report on occupational health
depicts high labour turnover in the sugar companies supported by Bula (2012). Cited
reasons were too much work and poor working conditions but with IT use, accuracy
and efficiency was expected because all the work would be done by IT systems
therefore incorrect documentation, re-keying in information fatigue is reduced.
The second objective was determining the influence of IT on warehouse performance.
The perfect order index was 43% meaning the companies were not filling orders
perfectly. The companies reported IT not influencing communication between them
and stakeholders and this can be detrimental to the growth of the industry.
Humphreys, Shiu & Chan, 2001 points out that in transactional relationships or one
time buyer supplier relationships large sums of money are spent in checking quality of
incoming products. There have been complaints by farmers of delays that cause cane
deterioration hence leading to lower payments than expected. The cane received has
been reported to be of lower quality as there is no collaboration between the farmers
and the companies. IT also had no influence on receiving, picking or storage of the
product because the equipment was not synchronized with existing computer systems.
Therefore the study concludes that IT had no influence on warehouse performance in
the sugar companies.
53
5.3 Recommendations
The study found that IT had no significant effect on warehousing performance of the
sugar companies. Some of the constraints raised by the companies were lack of space,
expansion, use of manual labour, storage and this were directly related to some of the
solutions IT controlled equipment could offer to the companies. The first objective
was determining extent of IT adoption and since the study concluded that IT had not
been adopted fully in the warehouses, this study recommended that:
The companies should integrate existing equipment with the WMS systems that are
not been fully utilized. The study posits that, there could be available space that had
been raised as a constraint but the space could not be seen or felt because stacking
was done manually. Therefore with improved storage systems the space and
expansion issues would not arise. Some researchers have pointed out these systems
can be integrated with existing equipment like conveyors to improve operations.
Equipment should be highly improved upon with continuous maintenance. Storage
and stacking equipment should be invested in to improve stacking for those who felt
space was a constraint and needed expansion. The constraints of expansion and lack
of space could be sorted by cube utilization combining IT and specialized equipment.
Movement of human labour should also be minimized and alternative loading systems
applied. IT systems vary, mobile technology is in high use and communication can be
highly improved between the companies and stakeholders. They needed to reconcile
information and logistical practice. There was a need to embrace technology and
automation to reduce on costs improve speed and accuracy. On the condition of the
warehouse, maintenance of equipment to reduce wear and tear using and IT systems
or WMS will aid in efficient routing activity throughout the warehouse. Consolidated
activity, associating equipment to areas of the warehouse and to appropriate work,
54
managing and enabling pickup and delivery and reduced time spent locating product
as a result of accurate inventory.
The study concluded that the companies were not using tracking and tracing systems.
RFID has been known to curb illegal or counterfeit products as in the case of
Walmart. The study would recommend these identification technologies in order to be
able to buy and sell Kenyan sugar on the shelves. A report by biznar 2015 shows 4300
bags of sugar being lost in transit such incidences could be controlled by use of RFID
and barcodes that show location of product in transit and at point of sale.
The study concluded that IT had no influence on warehouse performance. The
companies reported not monitoring cane through IT systems. Tompkins (1998) says
that in order to properly manage inventory, information on demand at all levels of the
supply chain must be maintained in real time. This includes information at point of
sale (POS) down to raw materials deliveries at suppliers. This was supported by
Lwiki, Ojera, Mugenda and Wachira (2013) in capturing of data using different IT
systems for example EDI which compares inventory variables ( stock levels, demand
and delivery dates). Despite the fact that all the companies had ERP systems in place,
it was reported that they were been used in payment of farmers and other departments
but were not been fully utilized in the warehouses. The study recommends fully
implementing these systems to create inventory visibility in the sugar value chain. It
was not proper to keep customers waiting for a product for a whole week or more. The
frustrations experienced by the customers could be the one of the reasons for the high
influx of smuggled cheap sugar. Management could also use information generated to
aid in major decision making both at strategic, tactical and operational levels. WMS
would aid in planning ahead in the warehouse and forecast inventory demands hence
have cost reducing effect. Knowing costs before they occur is a huge
55
factor in cash flow management, budgeting and bottom line profit. The companies
needed to adopt modern supplier relationships with collaborative partnerships
preferred to the old arms length relationships. The issue of farmers uprooting cane for
other food crops would not arise if the companies treated them well and paid them on
time. Forming good supplier relationships would mean cost minimization leading to
efficiency, sharing of risks and rewards, competitive positioning, resource aggregating
and sharing. This has been known to create future savings and innovations. There
would definitely be higher cane quality, improved communication Humphreys, Shiu
and Chan (2001).
5.4 Areas for future Research
i) Companies are moving to 3PLs in the warehouses to improve on efficiency. This
could be an area of further research, to ascertain if this can reduce costs the high
costs in sugar companies in Western Kenya. Studies posit that companies are
unlikely to invest in new technologies compared to 3PLs.
ii) Benchmarking of warehouse performance is another area that needs research for
the companies to improve on best practices and embrace lean practices.
iii) The aspect of cheap labour against IT adoption and automation is also another
area that needs further research because in developing countries cheap labour is
readily available compared to developed nations.
iv) The companies pointed that expansion and space in the warehouses was a
constraint. Research into whether the existing warehouses were built with proper
warehouse design and layouts that allow for flexibility and change were taken into
account.
56
5.5 Limitations of the study
The study faced a lot of challenges:
i) This was a census study covering eleven companies, but some companies
were closed and others have never given permission to collect data to date.
ii) The warehouse supervisor was to answer the questionnaire, but in some
companies the decision rested upon the person in charge, therefore even the
opportunity to use observation was not allowed as the interviews were
conducted away from the warehouse.
iii) Important figures that would have been used for benchmarking were not
availed as the companies were not comfortable in divulging figures.
57
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Contributing to Labour Tuurnover in the Sugar industry in Kenya ( a case of
Sony Sugar Company Limited), Educational Research vol 2(5) 1138-1147,
Won, J., & Olafsson S. (2005). Joint Order Batching and Order Picking in Warehouse
Operations. International Journal of Production Research, 1427-1442.
Yadav, U.J., & Sawant, B.S. (2012). A Case Study. Problems and Prospects of IT
Implementation in Sugar Factory. International Journal of Advanced Research
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th
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64
APPENDICES
APPENDIX 1: QUESTIONNAIRE
My name is Dorcas Wanyama, an MBA student at the University of Nairobi, Kisumu
campus. I am undertaking a research project on the Effect of information technology
on performance of warehouses in the sugar factories in Kenya. Being one of the major
sugar factories in Kenya, your contribution to this study will be highly appreciated.
Any information that you will provide will be used for academic purposes only and
will be treated with utmost confidentiality.
SECTION A: INTRODUCTION
1. What is the name of your sugar factory....................................................
2. What type of warehouse do you own? ....................................................
3. Where is your warehouse located?............................................................
4. Give breakdown of specialized storage equipment or material transporting

equipment........................................
5. How long has this warehouse been in operation?...............................................
6. What are the annual direct labour hours?............................................................
7. What are the annual indirect hours?.......................................................................
8. Labour turnover: what is your annual labour turnover for full time employees?
9. What percentage of your direct labour hours are performed by temporary

workers?...........
10. Is your labour force part of collective bargaining unit?......................................
11. What are your self identified constraints to efficiency?......................................
12. What are your self identified opportunities?.......................................................
65
SECTION B: INFORMATION TECHNOLOGY (I) (Establish extent of IT
adoption)
I1. Do you use any warehouse management system package? Name
vendor......................
To a very To a low To a To a great To a

low extent extent moderate extent large
extent extent
[1] [2] [3] [4]
[5]
I2 What is the level of mechanization
Manual
Mechanized
Semi-
automated
Automated
I3 To what
extent have
you adopted
the use of
IT in your
warehouse
I4 To what
extent is IT
used to link
all the levels
in the
organization
I5 To what
extent can
employees
use IT
systems in
the
company
I6 Is the level
of IT and
picking and
storage
technologies
adequate for
operation
I7 Does your
66
warehouse
use any of
these
technologies
RFID,
barcodes,
EDI,
SECTION C: PERFORMANCE OF WAREHOUSE (Wp) (Determine influence of
IT on warehousing performance)
Order fulfilment To a To a To a To a To a Measure

very low moderate great large
low extent extent extent extent
extent [3] [4] [5]
[1] [2]
Wp1 On time Do you Orders on
delivery always time
have Total
orders orders
delivered shipped
on time
per
customer
requested
date
Wp2 Order fill Do your Orders
rate always fill filled
orders completely
completely Total
on first orders
shipment shipped
Wp3 Order Are orders Error free
accuracy packed, orders
picked and Total
shipped orders
perfectly shipped
Wp4 Line Are lines Error free
accuracy picked free lines
of error Total lines
shipped
Wp5 Order cycle Do you Actual
time always ship date –
meet your customer
order cycle order date
times
67
Wp6 Perfect Do you Perfect
order always deliveries
completion orders Total
delivered orders
without shipped
damage or
invoice
errors
Inventory management
Wp7 Inventory Do you Actual
accuracy always quantity
have per SKU
accurate System
inventory reported
quantities quantity
to systems
reported
quantities
Wp8 Inventory Do you Total
visibility always damage in
have KSh.
inventory Inventory
visibility value cost
from
physical
receipt to
customer
service
notice of
availability
Wp9 Damaged Do you Total
inventory always damage
have KSh
damaged Inventory
inventory value cost
Wp10 Storage Do you Average
utilization utilize occupied
space square ft
properly Total
storage
capacity
Wp11 Dock to Is order Total dock
stock time picking to stock
done on hrs
time Total
receipts
Wp12 Are the
buildings ,
floors and
technical
68
installations
in good
quality and
well
maintained
b) material
handling
systems,
racks and
product
carriers
Wp13 Is material
moved over
the shortest
possible
distance
Wp14 Is double
handling
prevented
and
appropriate
carriers
used
Wp15 Is the
facility
clean, safe,
orderly and
well lit
Wp16 Is this the
warehouse
you would
like to work
in
69
APPENDIX 2: TABLE 1: PERFORMANCE METRICS OF A WAREHOUSE
Category Measure Definition

Order On time delivery = orders on time Orders delivered on time per
fulfilment Total orders shipped customer requested date
Order fill rate = orders filled complete Order filled completely on first
total orders shipped shipment
Order accuracy = error free orders Order picked , packed and
total orders shipped shipped perfectly
Line accuracy = error free lines Lines picked
total lines shipped
Order cycle time = actual ship date – customer Time from order placement to
order date shipment
Perfect order completion = perfect deliveries Orders delivered without
total orders shipped changes, damage or invoice
errors
Inventory Inventory accuracy = actual quantity per SKU Actual inventory quantity to
manageme system reported quantity system reported quantity
nt Damaged inventory = total damage Ksh Damage measure as % of
inventory value cost inventory value
Storage utilization = average occupied square Occupied space (square
ft footage) as a % of storage
total storage capacity capacity (square footage)
Dock to stock time = total dock to stock hrs Average time from carrier
Total receipts arrival until product is available
for order picking
Inventory visibility = receipt entry time Time from physical receipt to
Physical receipt time customer service notice of
availability
Warehouse Orders per hour = orders picked/packed Average number of orders
productivit total warehouse labour hrs picked and packed per person
y per hour
Lines per hour Average number of orders lines
picked and packed person per
hour
Items per hour = items picked/ packed Average number of orders items
Total warehouse labour hrs picked and packed per hour
Cost per order = total warehouse cost Total warehousing costs , fixed
total orders shipped space, utilities and depreciation
Variable: labour/supplies
Cost as a % of sales = total warehouse cost Total warehousing cost as a %
total revenue of total company sales
Source: Ramaa et al., 2012, Hill & Ginnis
70
APPENDIX 3: LIST OF SUGAR COMPANIES IN WESTERN KENYA
1. Kibos Allied Sugar Factory
2. Chemelil Sugar Factory
3. Muhoroni Sugar Factory
4. Nzoia Sugar Factory
5. Mumias Sugar Factory
6. Sony Sugar Factory
7. West Kenya Sugar Factory
8. Butali Sugar Factory
9. Soin Sugar Factory
10. Transmara Sugar Factory
11. Miwani Sugar factory
71

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INFORMATION TECHNOLOGY AND WAREHOUSING

PERFORMANCE OF SUGAR COMPANIES IN WESTERN

DORCAS NAFULA WANYAMA

A RESEARCH PROJECT SUBMITTED IN PARTIAL

presented for a degree in any university.

WANYAMA DORCAS NAFULA

the University Supervisor.

MR. GERALD ONDIEK

DEPARTMENT OF MANAGEMENT SCIENCE

This research project is dedicated to my family, son and friends.

guidance and supervision. The Lecturers of the Department of Management Science

Officer and the Warehouse Supervisors.

Finally I thank God for seeing me through this whole journey.

The study was conducted to establish the effect of information technology on

1.1.2.The Concept of Warehousing ................................................................... 4

1.1.4. Sugar Industry in Kenya ........................................................................... 6

1.3 Research Objectives ................................................................................................ 10

1.5 Value of the Study .................................................................................................. 10

CHAPTER TWO: LITERATURE REVIEW .......................................................... 12

2.1. Introduction ........................................................................................................... 12

2.3. Extent of IT adoption in warehousing ................................................................... 13

2.3.1. Information Technology and its influence on warehousing performance14

2.4 The Extent of IT adoption and warehousing performance ..................................... 15

2.4.1 IT and its Influence in Warehousing Performance ....................................... 16

2.4.2JIT and Modern Concepts on Warehousing............................................ 17

2.5 Conceptual Model ................................................................................................... 19

CHAPTER THREE: RESEARCH METHODOLOGY ......................................... 20

3.1 Introduction ........................................................................................................... 20

3.3 Population of Study ............................................................................................... 20

3.4 Data collection ....................................................................................................... 21

4.2 Findings on Contextual Factors ............................................................................. 22

4.2.1 Ownership of the warehouses ................................................................. 22

4.2.2 Specialized equipment ............................................................................ 23

4.2.3 Age of the Companies ............................................................................. 24

4.2.4 Labour ..................................................................................................... 25

4.2.5 Constraints and opportunities ................................................................. 25

4.3. Extent of IT adoption in the Sugar Companies ..................................................... 26

4.3.1 Existence of warehouse management systems ....................................... 26

4.3.2 Level of mechanization ........................................................................... 27

4.3.3 Adoption of IT in the various departments in the companies ................. 30

4.4 Influence of IT on Warehouse Performance .........................................................33

4.4.1 IT influence on warehouse metrics ......................................................... 33

4.4.2 Influence of IT on warehouses functions ................................................ 34

4.4.3 IT influence on communication .............................................................. 34

4.4.4: IT influence on forecasting, planning in the sugar value chain ................... 35

4.4.5 IT influence on Order fulfilment............................................................ 36

5.1 Summary of the Study ...........................................................................................50

5.2 Conclusions ...........................................................................................................52

5.3 Recommendations .................................................................................................54

APPENDIX 3: LIST OF SUGAR COMPANIES IN WESTERN KENYA ................ 71

Table 1: Type of warehouse......................................................................................... 22

Table 2: Age of the companies.....................................................................................24

Table 4: Warehouse Management System................................................................... 26

Table 5: Manual Systems.............................................................................................27

Table 6: Mechanized Systems......................................................................................28

Table 7: Semi-automated systems................................................................................28

Table 8: Automated systems........................................................................................ 29

Table 9: Extent of Adoption of IT use in the warehouse............................................. 30

Table 11: Employee use of IT systems........................................................................ 31

Table 12: IT and its adequacy for operations...............................................................32

Table 13: Use of IT technologies like RFID, Barcodes............................................... 32

Table 14: Warehouse metrics....................................................................................... 33

Table 15: Warehouse functions....................................................................................34