INFLUENCE OF INTERNAL BUSINESS VALUE CHAIN PRACTICES ON THE SUPPLY CHAIN PERFORMANCE OF LARGE MANUFACTURING FIRMS IN KENYA

Abstract

The manufacturing sector in Kenya constitutes 70 per cent of the industrial sector contribution to GDP. However, statistics show that the contribution of the manufacturing sector to GDP has continued to stagnate at about 10%, with contribution to wage employment on a declining trend. In the modern world, competition is no longer among organizations, but among supply chains. Therefore, the stagnant performance can be attributed to the fact that Kenya’s manufacturing sector supply chains have continued to lag behind in terms of value addition as was reported in a recent Kenya Economic Report. Previous studies show that adopting best practices in internal business value chain is a powerful tool for implementing value addition strategies in the supply chains hence better supply chain performance. The specific objectives for this study were to; assess the influence of supplier relationship management practices on the supply chain performance of the large manufacturing firms in Kenya; determine if process management practices affect supply chain performance of the large manufacturing firms in Kenya; find out if customer relationship management practices influence supply chain performance of the large manufacturing firms in Kenya and establish if IT support practices affect supply chain performance of the large manufacturing firms in Kenya. Cross sectional–descriptive research designs were used to conduct this study. The target population was 499 firms. Stratified sampling was used to arrive at a representative sample of 200 manufacturing firms, whereby 144 firms responded representing response rate of 72 percent. Primary data was collected using questionnaires which were dropped and picked later. Multiple linear regression model was used to show the hypothesized relationships between variables while content analysis was used to analyze qualitative data. The results indicated that BVCP had a positive and significant effect on supply chain performance of large manufacturing firms in Kenya. Furthermore, they show that 62.6% of change in supply chain performance of the large manufacturing firms in Kenya can be explained by one unit change in BVCP put together. Therefore the study recommends that manufacturing firms in Kenya should engage in SRM practices that encourage value addition within the organizations. Also firms should employ PM practices that identify cost drivers, reduce waste, embrace teamwork in process decision making within the firm. They should also implement IT software that support analytical capabilities in the plan, source, make and deliver areas of supply chain. Regarding CRM practices the study recommends that organizations should implement CRM practices, systems and software that enable value adding information about customers flow throughout the supply chain. The implications of the study findings to the manufacturing industry in Kenya is that adopting best practices in BVCP leads to improved supply chain performance therefore increased competitiveness. This will contribute to enabling the industry account for 20 per cent of GDP as stipulated in Vision 2030.Thestudy recommends further research to establish whether different sub-sectors within the manufacturing sector would yield different results due to the different nature of their operations.