Effect of Supply Chain Strategies on the Performance of Manufacturing Firms in Kenya

Abstract

The general objective of this study was to establish the effect of supply chain strategies on the performance of manufacturing firms in Kenya. The independent variables for the study were agile supply chain strategy, risk hedging supply chain strategy, postponement supply chain strategy and lean supply chain strategy; dependent variable was performance of manufacturing firms in Kenya and environmental uncertainties was the moderator. The study was anchored on different theories such as resource based theory, contingency theory, transaction cost economics theory, dynamic capabilities and technology acceptance model. The study used a cross sectional research design. The target population was 829 respondents from manufacturing firms around the country. The study used stratified random sampling technique in data collection. A sample of 270 respondents were selected to constitute the sample. Primary data was used for the study which constituted qualitative and quantitative questions. A pilot test of 10% was done where a cronbach α threshold of 0.7 was achieved for all variables. Multiple regression model and correlation analysis was applied to examine the relationship between the study variables. The findings indicated that agile supply chain strategy, risk hedging supply chain strategy, postponement supply chain strategy, and lean supply chain strategy had a strong positive and significant effect on performance of manufacturing firms with an r values of .652, .699, .651 and .679 respectively. Further, the results indicated that environmental uncertainties have a significantly negative moderating effect on the relationship between supply chain strategies and performance of manufacturing firms with a change in R square from 73.3% to 34.6%. The study concluded that supply chain strategies are significant contributors of manufacturing firms’ performance. The most significant predictor of firm performance is lean supply chain strategy, followed risk hedging supply chain strategy, followed by postponement supply chain strategy and lastly agile supply chain strategy with coefficients β of .229, .224, .159 and .134 respectively. The study recommends that firms should be fully responsive to customer orders by incorporating electronic data interchange and enterprise resource planning to communicate seamlessly with customers. Similarly, firms should develop suppliers through collaboration product development, specifications sharing and development and capacity building. Also, manufacturing firms should delay final product assembly in order to be able to customize customer orders with their requirements. Further, manufacturing firms should conduct demand forecasts and fully utilize their labor and equipments. Lastly, manufacturing firms should regularly scan the environment through pestle and swot analysis.