Supply Chain Risks and Performance of Manufacturing Firms in Kenya

Abstract

The manufacturing sector is vital to Kenya’s economic growth, employment, and Vision 2030, yet faces operational challenges such as reliance on imports, infrastructure gaps, regulatory hurdles, and rising sustainability expectations. These challenges cause supply chain disruptions, reducing customer satisfaction, market share, and profitability. Limited empirical research examines how supply chain risks affect Kenyan manufacturing performance and the moderating role of supply chain adaptability, creating a critical knowledge gap. The general objective of the study was to determine the moderating role of supply chain adaptability on the relationship between supply chain risks and performance of manufacturing firms in Kenya. The study specifically determined the effect of legal risks and performance of manufacturing firms, to assess the effect of material flow risks and performance of manufacturing firms, to analyze the effect of financial risks and performance of manufacturing firms, to establish the effect of environmental risks and performance of manufacturing firms, to determine the effect of political risks and performance of manufacturing firms and to determine the moderating role of supply chain adaptability on the relationship between supply chain risks (legal risks , material flow risk, financial flow risks environmental risks and political risks) and performance of manufacturing firms among the manufacturing firms in Kenya. This study was informed be Contingency Theory, Normal Accident Theory (NAT), Resource Based View and Cultural Theory of Individual Perceptions of Environmental Risks. The research design was explanatory survey research design. The target population of this study was 682 manufacturing firms in Kenya. From the target population of 682 firms, a random sample of 169 firms was selected where procurement manager and assistance manager were chosen giving a total sample size of 338. This study used questionnaires to collect data relevant to the study. The variables were tested for reliability by computing the Cronbach alpha statistical tests. Quantitative data collected were analyzed using descriptive statistical techniques which were frequencies, mean and standard deviation. Whereas inferential statistics to be used were, ANOVA/T test, Pearson correlation and the Regression Analysis Model. To test moderating effect the study used hierarchical regression model at 0.05 level of significance. The study established that legal risk, material flow risks, financial flow risks and environmental risks have a positive influence on the performance of manufacturing firms. However, political risk had no effect on firm performance. In addition, supply chain adaptability significantly moderated the relationship between supply chain risks and firm performance. Therefore, it is utmost necessary for manufacturing firms to comply with the country’s law and regulations on supply chain operation. Also, manufacturing firms should leverage on the existing infrastructure and skills to reduce material flow risk and improve the performance of their firms. In addition, it is recommended for firms to have adequate visibility into the financial stability of their entire supplier community. Finally, it is important for firms to enforce environmental incident notices at manufacturing sites and undertake environmental and financial due diligence when purchasing or selling goods/services.