Effect of Demand Forecasting Practices and Performance of Small and Medium-sized Enterprises in Kajiado County, Kenya

Effective inventory management is essential for reducing operational costs and enhancing customer satisfaction, particularly among Small and Medium Enterprises (SMES). This study examined the relationship between inventory management practices and the performance of SMES in Kajiado County, Kenya. Specifically, it assessed the influence of demand forecasting practices, on SME performance. Guided by the Theory of Constraints, Resource-Based View Theory, and Stakeholder Involvement Theory, the study adopted a descriptive survey design targeting 180 SMES in Kitenge town, with a sample of 54 respondents. Both primary and secondary data were collected using structured questionnaires and reviewed records. Descriptive statistics (means, standard deviations, and percentages) and inferential statistics (regression analysis) were conducted using SPSS. The findings revealed that most SMES frequently used qualitative and quantitative demand forecasting methods and maintained structured inventory records. Regression analysis showed that demand forecasting practices had a statistically significant positive effect on SME performance (β = 0.574, p < 0.05), with the overall model explaining 71.2% of the variation in performance (Adjusted R² = 0.712). The study concludes that inventory management practices, particularly demand forecasting, accurate record-keeping, effective control, and disposal strategies, are positively associated with improved SME performance. It recommends that SMES should enhance their demand forecasting by combining qualitative and quantitative methods, including trend analysis and managerial input