Logistics Infrastructure and Supply Efficiency of Petroleum Products in Kenya: A Survey of Oil Marketing Companies in Kenya

Abstract

In Kenya, petroleum products are a major source of commercial energy accounting for about 80% of the country’s commercial energy requirements. Petroleum products consumed in Kenya are imported from the Gulf region as refined petroleum products thus this calls for efficient management of downstream petroleum sector. However, the country has been faced with frequent fuel shortages leading to unstable fuel prices which result to high cost of production incurred by manufacturers. The purpose of the study was to establish the effects of Logistics Infrastructure on Supply Efficiency of Petroleum Products in Kenya. The specific objectives were to establish effect of oil Storage Infrastructure, effect of Transport Infrastructure, effect of Handling Infrastructure, and effect of Clearing Infrastructure on Supply Efficiency of Petroleum Products in Kenya. The study adopted the Supply chain operations reference (SCOR) theory, queuing theory, resource-based theory, and network theory. The research design was explanatory research design. The target population was 120 managers of the Oil Marketing companies in Kenya consisting of 60 operations managers and 60 supply managers from the firms. The study used the census method because the target population was small. Data was collected using structured questionnaires. Descriptive statistics was used to analyze the collected data while the relationship between the dependent and the independent variables was tested using regression analysis. The descriptive results showed that Storage Infrastructure (mean=2.49, SD=1.018), Transport Infrastructure (mean=2.36, SD=1.027), Handling Infrastructure (mean=2.23, SD=.838), and Clearing Infrastructure (mean=2.31, SD=.932) all slightly affected Supply Efficiency of Petroleum Products in Kenya. The Correlation results showed that infrastructure variables were all positively and significantly related with supply chain efficiency; with Storage Infrastructure (r=.239, p=.013), Transport Infrastructure (r=.419, p<.001), Handling Infrastructure (r=.436, p<.001), and Clearing Infrastructure (r=.562, p<.001). Regression results indicated that 40.2% (r2=.402) of variance in the supply chain efficiency in Oil Marketing companies is accounted for by Logistics Infrastructure. Further, Storage Infrastructure showed positive but not significant effect on Supply Efficiency (β=.027, p=.657), while Transport Infrastructure (β=.134, p<.001), Handling Infrastructure (β=.183, p<.001) and Clearing Infrastructure (β=.504, p<.001) were found to have positive and significant effect on Supply Efficiency. The study concluded that improvement of Logistics Infrastructure improves Supply Efficiency of petroleum products in the country. The study recommended that the government agencies in partnership with the oil marketing companies should invest in Storage Infrastructure, Transport Infrastructure, Handling Infrastructure and Clearing Infrastructure to improve supply chain efficiency in the oil marketing firms in Kenya