AN EMPIRICAL INVESTIGATION OF SUPPLY CHAIN MANAGEMENT
BEST PRACTICES IN LARGE PRIVATE MANUFACTURING FIRMS IN
KENYA 1 A) Introduction Large companies today mainly focus on becoming efficient and flexible in their manufacturing methods in order to handle uncertainty in the business environment, they need different strategies to manage the flow of goods from the point of production to the end user. However, they have not been able to formulate the right strategies required to achieve this noble task in S!. "his call for a strategic fit of an organi#ation$s core competencies, strategy and core capability, which is an emerging paradigm in the study of strategic management and specifically in S!. orporations have increasingly turned to global markets for their supplies. "he globali#ation of supply chains has forced companies to look for better and more inter%linked systems between S! competencies, multiple S! strategies and the implementation processes and S! capabilities to coordinate the flow of materials into and out of the company as opposed to the fragmented systems, which have characteri#ed many organi#ations. ompanies and distribution channels today compete more on the basis of time and quality, having defect%free products to customers faster and more reliably than the competitor is no longer seen as a competitive advantage but simply as a market place requirement. ustomers consistently demand that products are delivered faster, on time, and with no damage. "his can only be achieved with proper coordination of efforts by linking systems and processes to create synergy. &ach of these necessitates better coordination with suppliers and distributors, and constitutes the linkage between S! core competencies' strategy and S! core capabilities, which are not easy to match. "his combination creates a competitive edge within the system that cannot be copied by the competitor in the market place' hence becomes core capability of the firm. "he global orientation and increased performance%based competition, combined with rapidly changing technology and economic conditions, all contribute to market place uncertainty. "his uncertainty requires greater flexibility on the part of the individual companies and distribution channels, which in turn, demands for more ( flexibility in channel relationships. )or this to be achieved, a firm must have a fit between S! competencies, implementation of strategy and S! capability with its suppliers and distributors. "his will enhance competitive advantage of the business and improve corporate performance. B) Literture Re!ie" *t is, therefore, important to reflect on the views of various strategic management scholars on the concept of strategic management as it relates to this paper and how it affects the micro%and macro%economic environment. Strategic management is the organi#ation$s pre%selected means or approach to achieving its goals or ob+ectives, while coping with current and future external conditions ,-igman, 1../0. Strategic management aims at achieving an enterprise$s mission and ob+ectives by reconciling its resources with opportunities and threats in the business environment ,Smit et al., 1..10. *t is concerned with policy decisions affecting the entire organi#ation the overall ob+ective being to position the organi#ation to deal effectively with its environment. "hese explanations give clarity on the relationships and linkages between and amongst the variables of the study. However, understanding S! philosophy is required in order to appreciate the linkage with strategic management. 2revious studies in S! have considered the measurement of competencies, strategy, capabilities and the effect of each on performance. )or example, aeldries and van -ierdonck ,1.330 used strategy and performance as key variables in a study between strategy and performance of large firms in 4elgium' they used survey methodology. 5ohnson and Scholes ,1...0 did a similar study in 6S7 and used the same methodology and variables. -ay ,1..80 used core capabilities as independent variable and performance as the dependent variable, using a baseline survey methodology. Stanley and 9regory ,(//10 used strategy implementation as the independent variable and performance as the dependent variable applying a triangulation methodology consisting of literature review, survey and case studies. 1 !anufacturing is an important sector in :enya and it makes a substantial contribution to the country$s economic development. *t has the potential to generate foreign exchange earnings through exports and diversify the country$s economy. "his sector has grown over time both in terms of its contribution to the country$s gross domestic product and employment. "he average si#e of this sector for tropical 7frica is 3 per cent. -espite the importance and si#e of this sector in :enya, it is still very small when compared to that of the industriali#ed nations 6nited ;ations *ndustrial -evelopment <rgani#ation ,,6;*-<0 1.3=0. :enya$s manufacturing sector is going through a ma+or transition period largely due to the structural reform process, which the :enya 9overnment has been implementing since the mid% eighties with a view to improving the economic and social environment of the country. :enya 7ssociation of !anufacturers ,(//(0 posits that removal of price controls, foreign exchange controls and introduction of investment incentives have, however, not resulted in ma+or changes in the overall economy. *n particular, they have not improved the manufacturing performance. "herefore, to build a self%sustaining industrial sector, it is necessary to establish strategic linkages within the domestic economy. Some efforts have to be made to promote strategic options among supply chains so as to enhance spread effects of industrial growth and to facilitate transfer of technology, skills and growth of small and medium scale sub%contractors. "he linkages of the study variables in S! in :enya are weak and because of this, there exists little inter%industry integration in the country. "his has resulted in consistently low manufacturing value added in the sector ,:7! 1.3.0. 9rowth in the sector was, however, impeded by depressed domestic demand, increased oil prices and transport costs. >ising operating costs mainly as a result of high power costs coupled with deteriorating road and rail networks further dampened growth in the sector. "he growth in manufacturing sector was mainly attributed to rise in output of the agro%processing industries. "hese included sugar, milk, grain milling, fish, tea, oils and fats processing sub%sectors. <ther key sub% 8 sectors of manufacturing that performed well were? manufacture of cigarettes, cement production, batteries ,both motor vehicles and dry cells0, motor vehicle assembly and production of galvani#ed sheets. "he :enya 9overnment has always been committed to developing a mixed economy where both public and private sector companies are present ,:enya 9overnment, -evelopment 2lan 1.3.%1..10. 4ut the public sector participation in manufacturing is much smaller than the private sector and is still decreasing due to government$s change of policy' the emphasis is now being given to privati#ation of the industrial sector. "he main ob+ective of the paper was to determine S! best practices used by large private manufacturing firms in :enya, that is which are the S! best practices used by these firms@ "he findings of this paper will assist the corporate managers to make sound and informed strategic management decisions and enable them to focus on their customers more efficiently. Aith such exposition, managers will understand how firms can perform better and add value to the shareholders under S! orientation. C) Met#odo$o%& "he target population was all large private manufacturing entities in :enya, who are members of :7!. "he main reason for this choice was that these firms were likely to exhibit an elaborate S! philosophy and make use of best practices in S!. )urthermore, the focus of the research was basically in the manufacturing sector, other sectors were considered outside the scope of the paper and could not reveal substantial data for statistical analysis. *n total, there are (,/// companies in the :7! directory ,(//8B(//C0, from which all public sector firms ,where the government holds ma+ority shares0 and small companies were eliminated. "his left C// firms, which constituted the sample frame of the target population. 7 survey of C( large private manufacturing entities was carried out using a stratified sampling technique. "his was necessary to include supply chains with all the C variables of the study for equal chances of selection. 7t least 1/ percent sample of the population was considered generally acceptable method of selecting samples in such a study ,Stanley and 9regory (//10. *n this paper, the sample was stratified into agro%based industrial sector, engineering and construction industrial sector and chemical and mineral industrial sector based on the value added by each sector to the manufacturing industry. )or example, agro%based industrial sector added D3 percent, engineering and construction and industrial sector 1( percent, and chemical and mineral sector (/ percent ,:7! (//80. "he respondents in the study were located mainly in ;airobi industrial and 4aba -ogo areas respectively, which form the bulk of manufacturing sector in :enya and this is where most of the supply chain firms are found. "he sample si#e is denoted by? nE n 1 F n ( F n 1 C( firms E 1D F D F 1/ where? n is the sample si#e n 1 is agro%based industrial sector n ( is engineering and construction industrial sector n 1 is chemical and mineral industrial sector "he paper used primary data obtained through questionnaires with selected team of managers involved in S! within the C( manufacturing entities. "he questionnaire was piloted on 1/ firms prior to data collection. "his was necessary in order to identify any ambiguous and unclear questions to the respondents. "he questionnaires were then submitted to the participating firms after the pilot test in order to get the data and information required. "he instrument used for this paper was adapted from a study by Stanley and 9regory ,(//10 but modified to suit the ob+ectives of this paper. "his instrument has been used in a previous study of achieving supply chain alignment for the large private manufacturing firms in the 6nited States. 7 Likert%type scale of seven points ,where the lowest value in the scale was 1 and the highest was =0 was used to collect the data. D "o measure the consistency of the scores obtained, and how consistent they were for each individual from one administration of an instrument to another and from one set of items to another, the paper used ronbach$s alpha ,a measure of the internal consistency of the questionnaire items0 using data from all the respondents. Separate reliability tests for each of the variables were computed. "his included measuring current supply chain best practices, measuring the effect of supply chain variables, measuring level of independent effects, measuring level of supply chain core competencies, measuring the degree of supply chain strategies, measuring the implementation of supply chain strategies and measuring competitiveness relative to industry rivals. "he key statistic in interpreting the reliability of the scale was the alpha listed under the reliability co%efficient section at the end of the output. "he value of coefficient alpha ranges from #ero ,no internal consistency0 to one ,complete internal consistency0. 7s to how large the coefficient should be, a value of no less than /.=/ as a quick rule was used. 7s shown, all the measurements of the instrument attained a high degree of reliability since they were above /.=/. "ogether with correlation analysis, factor analysis was done to establish the relationships among the study variables. *n particular, factor analysis procedure was used to measure and establish S! best practices in the study as applied by various firms. "his method was necessary to reduce a set of several difficult to interpret correlated variables to few conceptually meaningful relatively independent factors, which could be easily interpreted. "his technique was applied to summari#e 1. latent variables or sub%variables representing dominant best practices in S!. "o make interpretation easier, a linear transformation on the factor solution, varimax rotation was done, which gave fewer components ,factors0 that are uncorrelated with one another. = Re'erence( 7osa &. ,1..(0. 7n &mpirical *nvestigation of 7spects of Strategy )ormulation and *mplementation within Large 2rivate !anufacturing ompanies in :enya G 6npublished 2h- "hesis 6niversity of Strathclyde 9lasgow Scotland 6.:. 7wino H. 4. ,(//(0 I2urchasing and Supply hain Strategy? 4enefits, 4arriers and 4ridgesJ 7n *ndependent onceptual Study 2aper in Strategic !anagement, School of 4usiness, 6niversity of ;airobi September (//(. aeldries ). and -ierdonck van >. ,1.330. Long >ange 2lanning 5ournal. (1,(0 81% C1. avinato 5. L. ,1.3.0. IHow to Link Logistics to )inancial >esultsJ -istribution 33,10, 1/1%1/8. entral 4ureau of Statistics, Statistical 7bstract 1..D and 1.33, 9overnment 2rinter. ox 7. ,1...0. I2ower, Kalue and S!J. Supply hain !anagement? 7n *nternational 5ournal. 8,80 1D=%1=C. -ay 9. S. ,1..80. I"he apabilities of !arket%-riven <rgani#ationsJ. 5ournal of !arketing. C3 ,<ctober0 1=%C(. -igman L. 7. ,1../0. Strategic !anagement G oncepts, -ecisions and ases. *rwin. )ortuin L. ,1.330. I2erformance *ndicators%Ahy, Ahere, and HowJ@ &uropean 5ournal of <perational >esearch. 18 ,10 1%.. 3
Thesis Draft 2telecommunications Service and Expense Management in US Businesses - An Analysis of The Telecom Supply Chain and The Impact of Internet Tools