Relationship between supply chain risks, supply chain strategies and Performance of large scale manufacturing firms in Kenya.

Abstract

ABSTRACT

Supply chain risks is a growing global threat to manybusinesses.A survey done by Business Continuity Institute established that 85% of firms experienced at least three supply chain disruptions annually resulting in less revenues, declining customers and damaged reputations. The manufacturing sector is one of the big four plans through which the government of Kenya aims at making Kenya a newly industrializing, middle income country providing high quality life for all its citizen by the year 2030 by raising its share of GDP to 15 percent by 2022. The sector’s contribution to GDP over the last five years has taken a dip. In 2013, the sector contributed 10.7 percent of GDP but this has declined progressively to 8.4 percent as at 2017. The sector’s real value added rose by a paltry 0.2 percent in 2017 compared to a growth of 5.6 per cent in 2013.Manufacturing value addition lags at approximately USD 5 billion and there is very minimal growth and this has been associated with among other thingssupply chain disruptionsthat have led to closure and downsizing of some firms and ultimately loss of jobs stagnating its contribution to the economy between 2011 and 2017 to averagely 10% of the Country’s GDP each year instead of the expected 15%.Empirical studies reviewedonly focused on the dimension of supply demand risksignoringdemand variability risk. Consequently,information on the application of the two variables together islacking.Moreover, reviewed studies reveal lack of information on the application of the sixteen-supply chain strategies applicable to supply chain managementas most studies only considered general business strategies. Supply chain strategies, supply chain risks and performance practically exist together, since supply chain strategies preclude supply chain risks and subsequentlyconstitute performance. However, based on reviewed literature,there is no information of the three variables studied together.The purpose of the study wasto establish the relationship between supply chain strategies, supply chain risks and performance of large scale manufacturing firms in Kenya. Specifically, it sought to:determine effect of supply chain riskson performance;establish effect of supply chain strategies onperformance;and establish confounding effect of supply chain strategies on the relationship betweensupply chain risks and performance of large-scale manufacturing firms in Kenya. It was guided by Resource Based View theory and adopted acorrelationalsurvey design.The study targeted473 large scale manufacturing firms in Nairobiout of which a sample of 403 firms wereobtained through saturated sampling378 responding giving the study a response rate of 94%. From the target population Seventy (70) firms which did not take part in the final study were randomly selected to participate in the in a pilot study.Pilot results revealed 34 item instrument reliability of 0.8999.Experts review, Barlett’sSphericity test of p = 0.000 for all the subscales and factor scores correlation matrix of 0.586(SC Risk),0.388(SC Strategies, and 0.191(Performance)all <0.7 ascertained validity.The study establisheda significant effect of SC Risks on performance (F=42.471). Moreover, the study established a significant effect of SC Strategies on Performance (F=33.200).An adjustment of SC Strategies in the relationship between SC Risk and Performance revealed a significant confounding effect of SC Strategies on the relationship between SC Risk and Performance(F=39.440)and 10.4% change in adjusted R2indicating the confounding effect.The findings abetthe theoretical position that firms should avert all SC Risks as they can potential jeopardize their operations. Managers should also recognize the need for SC Strategiesto not only improve the overallfirm performance but toalso avert the SC Risk.The study recommends that all SC Risks be avertedand in particular product quality failure,physical products flow disruption and profit margin erosion, SC Strategiesrole in enhancing organizations performanceand averting the SC Risk should also be recognized.These findings would act as a preamble for further research in Supply Chain. The findings wouldalso be helpful topractitioners in understanding the role each of the sixteen SCStrategiesplays in averting SC Risk and elevating organizations performance.