Influence of Supply Chain Capabilities on Firm Performance of Manufacturing Entities in Kenya

Abstract

The purpose of this study was to examine the influence of supply chain capabilities on firm performance of manufacturing entities in Kenya. Supply chain capabilities are the abilities to perform or achieve certain actions or outcomes through a set of controllable and measurable faculties, features, functions, processes, or services. The manufacturing function is often driven by the supply chain capabilities. The purpose of manufacturing is to produce value in form of products and services, through different processes and activities, which are performed by a network of organizations both upstream and downstream. These processes form an integrated supply chain where raw materials are converted into final finished products for the end consumer. Manufacturing is extremely important for the modernization of any country. It is the main activity that split the developed world from the developing one. In order to succeed as a brand manufacturer, it is important to create and maintain an efficient and effective supply chain all the way to the consumer. Therefore the performance of a manufacturing entity is influenced by the supply chain capabilities in place. Studies have been conducted in other countries relating to supply chain competence, components, practices and organizational performance in relation to manufacturing entities. However, in developing countries, more specifically in Kenya limited research has been conducted in this area. This study addresses this knowledge gap. The study was a descriptive survey as it was concerned with describing the characteristics of manufacturing entities with regards to supply chain capabilities. The population of interest for this study was manufacturing firms within Nairobi and its environs. A sample of 69 manufacturing entities was randomly selected to participate in this study. Both primary and secondary data was used for the study. Primary data was collected using questionnaires covering on the influence of supply chain capabilities on firm performance while secondary data consisted of publications and literature related to supply chain management. The data analysis methods that were employed are qualitative and quantitative techniques. In addition, a multiple regression model on the influence of supply chain capabilities versus firm performance was applied to examine the relationship between the variables. The study found out that procurement capability, inventory management capabilities, logistical capabilities, customer service capabilities and information communication technologies capabilities influenced the firm performance of manufacturing entities in varying proportions with information communication technology capabilities having the most influence on performance. The study recommends that the management of manufacturing entities should exploit supply chain capabilities on the day to day operation with the aim of ensuring and maintaining a competitive edge over other market competitors thus attaining superior firm performance. In addition, the study recommends that management of the manufacturing entities should adopt and implement the supply chain capabilities in a hierarchical order starting with the capabilities that have the highest degree of influence on firm performance. Hierarchical implementation would enable easier monitoring and evaluation of the process and better resource allocation on the supply chain capabilities. Also, further research can be conducted on the influence of supply chain capabilities but in different sectors other than manufacturing.