Relationship between Demand Forecasting and Operational Performance of Stores Function in Commercial State Corporations in Kenya

Inventory management practices play a major role in the operation of many organizations. These practices help to improve firm‟s production scheduling, delivery lead times and ultimately increase its operational performance. With the reported 46.4% of state corporations making losses, achieving Vision 2030 would be impossible without a critical look into how some of the practices including material categorization. This study intended to fill this knowledge gap by examining the influence of demand forecasting practices on operational performance of stores function in commercial state corporations in Kenya. The study was anchored on the Pareto (ABC) Model. The target population for the study was 906 Senior Management, Procurement Managers and Inventory Management Officers in the 54 Commercial State Corporations in Kenya. The researcher used the sampling formula recommended by Nassiuma to arrive at 99 sample size. Data collection was done through a structured open and closed ended questionnaire. Before embarking on data collection, the instruments were piloted to ensure they are valid and reliable. The study established significant influence of maintained inventory level as demand forecasting practice on operation performance of stores functions (β=-0.223, p=0.018<0.05). The study further established significant influence of information flow as demand forecasting practice on operation performance of stores functions (β=0.372, p=0.000<0.05). The study recommends that the policy makers in the commercial state corporations in Kenya need to formulate policies that will entrench the adoption of the best demand forecasting strategy as an inventory management practices. As a matter of policy, all the commercial state corporations in Kenya should adopt inventory management practices supported by the Public Procurement and Disposal Act 2015.