Factors Affecting Procurement Performance In The Milk Processing . - IJSR
International Journal of Science and Research (IJSR)ISSN (Online): 2319-7064Factors Affecting Procurement Performance in theMilk Processing Firms in Kiambu CountySamuel Mburu Karanu1, A. Njeru21MBA Student: Jomo Kenyatta University of Agriculture and Technology, Kenya2Lecturer: Jomo Kenyatta University of Agriculture and Technology, KenyaAbstract: Given the impact of procurement activities on the operation and effectiveness of procurement processes, it is essential thatthese activities be performed by qualified staff with high professional and ethical standards and using sound procedures anchored inappropriate policies and regulations. Procurement is one of the vital functions in an organization and it plays a vital role in acquiringthe needed resources at the time required. The purpose of this study was to assess the factors affecting procurement Performance in themilk processing firms in Kiambu County. The study also sought to assess the effect of information technology, employees' incompetence,organizational culture and packaging policy on procurement performance in the milk processing firms in Kiambu County. The paperadopted a descriptive survey method. The target population included milk processing firms in Kiambu County. The sample was selectedfrom managers working in various milk processing firms in Kiambu County. Purposive sampling technique was used to select a samplefrom the managers in various milk processing firms in the County. Self administered questionnaires were used to collect primary datafrom the field. Qualitative data from the open ended questions was analysed by use of content analysis and the findings were presentedin a prose form Descriptive statistics and inferential statistics were used in this study to analyze quantitative data, which was obtainedfrom the closed ended questions. Descriptive statistics used in this study include mean, standard deviation, percentages and frequencies.Further, multiple regression analysis was used to establish the relationship between the dependent and the independent variables.Quantitative data was presented in form of bar graphs, pie charts and frequency tables. This study established that organizationalculture contributed most to the procurement process in the milk processing firms in Kiambu County followed by employees' competencethen organizational culture while packaging policy contributed the least to the procurement process in the milk processing firms inKiambu County. This study recommends that milk processing firms should also adopt information technology in all sectors and interlink various departments within the organization. In addition, they should adopt information technology in the human resourcemanagement and in connecting various departments within the organization and linking the organization with other firms.Keywords: Employees competence, Procurement performance, Organizational culture, Packaging policy, Information technology1. IntroductionThe procurement function has not been given the recognitionit deserves in developing countries, in most public entities,regardless of the effort by the partners like the World Bank,the International Trade Organization, the United NationsConference on Trade and Development, the World TradeOrganization and, others [1]. This could be deliberate orsheer ignorance on the value the procurement function couldcontribute to any organization.In most developing countries, the procurement function istransitioning from a clerical non strategic unit to an effectivesocio-economic unit that is able to influence decisions andadd value [2]. Developing countries in one way or anotherhave reformed their public procurement regulations. Thereforms have not been limited to regulations only, includedpublic procurement process, methods, procurementorganizational structure, and the workforce. None the less,most developing countries are facing a problem of rapidchanges in procurement requirements. The changes areimpacting pressure on how the procurement functionperforms its internal and external processes and proceduresin order to achieve its objectives [3]. The ability to realizeprocurement goals is influenced by internal forces andexternal forces. Interactions between various elements,professionalism, staffing levels and budget dordecentralized, procurement regulations, rules, guidelines,and internal control policies, all need attention and influencethe performance of the procurement function [4]. InPaper ID: 08011402addition, the process of procurement is faced by thechallenges imposed by a variety of environment factors(external factors) such as market, legal environment,political environment, organizational and socio-economicenvironmental factors.Despite the progress made in the public sector procurementprocesses, there is little to say about the private sector [5]. Itis also important to note that the procurement Act does notdirectly address sustainable procurement and the factorsaffecting it in specific industries such as the dairy industry[6] .The Kenyan dairy industry just like all monopolies isless regulated hence, exercises much more flexibility andwith a higher degree of discretion in their operations [7]opines. These dairies tend to deal with the same suppliers ofmilk and other products repeatedly and therefore tends totake for granted procurement of processes.One of the basic rules of procurement is that in the end, it isimportant to think in terms of the total cost of the processand products. This includes not only the purchase price, butalso time and resources that are expended in the pursuit ofcommodities [8]. Many procurement activities suffer fromneglect, lack of direction, poor co-ordination, lack of opencompetition and transparency, differing levels of corruptionand most importantly not having a cadre of trained andqualified procurement specialists, who are competent toconduct and manage such procurements, in a professional,timely and cost effective manner. Inflexible and bureaucraticsystems of procurement contribute to unacceptable contractdelays, increased costs, the potential for manipulation ofVolume 3 Issue 1, January 2014www.ijsr.net104
International Journal of Science and Research (IJSR)ISSN (Online): 2319-7064contract awards and lack of fair competition, all of whichinfluence the procurement process and performancenegatively.Despite the fact that there are various studies that focus onprocurement performance. For instance, Kiragu [9]conducted a study on the impact of information technologyon procurement process in Kenya for companies listed inNairobi Securities Exchange. However, there is no knownstudy that has been conducted on factors affectingprocurement performance in milk processing firms. Thisstudy therefore sought to fill this gap by assessing factorsaffecting procurement Performance in the milk processingfirms in Kiambu County.1.1 Research ObjectivesThe overall objective of this study was to assess the factorsaffecting procurement Performance in the milk processingfirms in Kiambu County. The specific objectives of thisstudy were;1. To assess the effect of information technology onprocurement performance in the milk processing firms inKiambu County.2. To determine the effect of employees competence onprocurement performance in the milk processing firms inKiambu County.3. To examine the effect of organizational culture onprocurement performance in the milk processing firms inKiambu County.4. To establish the effect of packaging policy onprocurement performance in the milk processing firms inKiambu County.2. Theoretical BackgroundThe Resource based view or theory investigates the firm’sstrategies and practices on the basis of the internal resourcesand capabilities of the firm. This implies that competitiveadvantage can be achieved through resources that arevaluable, rare, inimitable, and cannot be substituted [10].Procurement is used to gain a competitive advantage. TheRBV therefore is useful because it can be used to measurehow the resources of an organization affect the practice ofprocurement. Procurement performance can enable anorganization to build and sustain its competitive advantagethrough innovation and developing new products andservices. This occurs when the firm invests in research anddevelopment to come up with practices and technologies thatare both environmentally and socially friendly. Suchcapabilities enable a firm not only to improve its efficiencybut also to respond quickly to external forces. A firm withthe ability to implement procurement practices can easilyhandle the legal and environmental requirements in thebusiness environment. This will result in good economic,social and environmental performance [6].countries.On the other hand, UTAUT provides a refined view of howthe determinants of intention and behavior evolve over time.It assumes that there are three direct determinants ofintention to use (performance expectancy, effort expectancy,and social influence) and two direct determinants of usagebehavior (intention and facilitating conditions) [11]. Theserelationships are moderated by gender, age, experience, andvoluntariness of use. Empirical testing of UTAUT showsthat performance expectancy, effort expectancy, and socialinfluence have significant relationships with the intention touse technologies. Later studies found that social influenceaffect perceived usefulness and perceived ease of use. Inrelation to this study most milk processing firms have beenreluctant in fully adopting information communication andtechnology in their procurement processes. The adoption ofinformation communication and technology has highly beeninfluenced by age, experience, perceived complexity as wellas social influence.In the late 1950s and early 1960s, Frederick Herzbergdeveloped what would be a very famous theory known asthe Dual-Structure Theory. Originally called the ‘TwoFactor’ Theory, it went on to play a very important role ininfluencing managers’ decisions on employee motivation.Herzberg and his associates started by asking around 200accountants and engineers in Pittsburg to recall times theyfelt satisfied and motivated by their jobs and times they feltdissatisfied and unmotivated. He then went on to ask them todescribe the reasons behind those good and bad feelings [6].Surprisingly, Herzberg found that ‘entirely different’ factorswere related to the employees’ feelings about their jobs. Forinstance, those who stated they were not satisfied becausetheir jobs were ‘low-paid’ would not necessarily identify‘high pay’ as a cause of satisfaction and motivation. Thosepeople instead claimed that factors such as recognition orachievement were some of the main causes of jobsatisfaction and motivation. In relation to this study, theprocurement performance highly depends on thecommitment of the employees. The commitment of theemployees highly depends on their motivation and jobsatsifaction. There are various motivation factors that can beused by variuous firms to enhance their empoloyees jobsatsifaction: recognation, working environment, bonuses andjob security.3. Conceptual FrameworkThe conceptual framework in this study shows therelationship between the independent variables and thedependent variable. A conceptual framework gives anillustration of the relationship between variables in the studyeither graphically or diagrammatically. It helps the reader tosee at a glance the proposed relationships in the question andalso to understand their significance in the given relationship[12].Organizations with high levels of internal integrationprocesses and resources are more likely to adopt newprocurement practices. The practice of procurement istherefore related to the resources within an organization.This explains the huge disparities in the practice of standardprocurement between the developing and the developedPaper ID: 08011402Volume 3 Issue 1, January 2014www.ijsr.net105
International Journal of Science and Research (IJSR)ISSN (Online): 2319-7064researcher selected a sample of 55 managers from 11 milkprocessing firms in Kiambu County. Managers were targetedas they are the people mandated in making decisions whichmostly influence the running of milk processors andprocurement activities in this sector. The main instrumentsused for data collection was a questionnaire. Thequestionnaire had both open and close ended questions thisway both qualitative and quantitative data was collected.Qualitative data from the open ended questions was analysedby use of content analysis and the findings were presented ina prose form. Descriptive statistics and inferential statisticswere used in this study to analyse quantitative data, whichwas obtained from the closed ended questions. Further,multiple regression analysis was used to establish therelationship between the dependent and the independentvariables. Analyzed data was presented in frequency tables,means and standard deviation. Further presentation involvedcross tabulations since both the independent and dependentvariables are ordinal in nature.6. Results and Discussion6.1 Information TechnologyIndependent Variables Dependent VariableFigure 1: Conceptual Framework4. Research GapThere is a lot of empirical literature on procurement ationally and locally. However, most of these studieshave been conducted in other countries with differentdemographic, economic, political and environmentaldifferences from Kenya and hence their findings cannot begeneralized to the Kenyan case. In addition, studies thathave been conducted are case studies and hence theirfindings cannot be generalized to the to the milk processingindustry.None of these studies focused on the influence zational culture and packaging policy on procurementperformance in the milk processing firms in Kenya. Thisstudy sought to fill this research gap by assessing the factorsaffecting procurement Performance in the milk processingfirms in Kiambu County.5. Research MethodologyThe researcher used descriptive survey method. Thepopulation consisted of 11 milk processing firms in KiambuCounty. Kiambu County was selected as it hosts some of thelargest dairy processing firms in Kenya such as Brooksideand Fresha Dairies. The target population was all the 11milk processing plants in Kiambu County as contained in theKenya Dairy Board report of 2012. The target population ofthis study was 451 staffs working in milk processing firms inKiambu County. Using stratified random sampling thePaper ID: 08011402The study sought to assess the effect of informationtechnology on procurement performance in the milkprocessing firms in Kiambu County. This study establishedthat most of the milk processing firms in Kiambu Countyhad adopted information technology in the procurementdepartment. IT investment pays for itself more quickly whenused in a broader way, where possible with companywideapplication [5]. It further increases transparency becauseperformance indicators are uniformly raised and benchmarkscan be set. In addition, most of the firms had adoptedinformation technology in research and development, inraising orders, in receiving requisitions, in the tenderingprocess and in purchasing all the organizational equipments.The study established that the adoption of IT helps indetermination of re-order levels and stock controlmanagement, (increases transparency in the procurementprocess, increases transparency because performanceindicators are uniformly raised and benchmarks can be set).Information technology increases transparency becauseperformance indicators are uniformly raised and benchmarkscan be set [8]. The study also found that adoption of IT leadsto efficient distribution of information, improves bothinternal and external communication, leads todecentralization of tasks and decisions and enables betterstock control.The study further established that communication, onlineTender advertisement, computerized tendering process andcomputerized selection process influences the procurementperformance in the milk processing firms in KiambuCounty. In addition, IT offers smoother and faster processflow, efficient distribution of information, decentralizationof tasks and decisions, increased transparency and bettercontrol.It was also revealed that the adoption of Informationtechnology in the milk processing firms in Kiambu Countywas not to its maximum annually. Milk processing firmsshould also adopt information technology in all sectors andVolume 3 Issue 1, January 2014www.ijsr.net106
International Journal of Science and Research (IJSR)ISSN (Online): 2319-7064inter-link various departments within the organization. Inaddition, they should adopt information technology in thehuman resource management and in connecting variousdepartments within the organization and linking theorganization with other firms.6.2 Employees CompetenceThe study sought to determine the effect of employee’scompetence on procurement performance in the milkprocessing firms in Kiambu County. The study establishedthat most of the respondents in this study had the requiredknowledge in procurement. The performance ofprocurement function in any organization requires that theindividuals handling the procurement activity should havethe necessary professional qualifications [7]. The study alsofound that most of the respondents were satisfied with theirsalaries, but a good number of them were not satisfied withtheir salaries. It was also found that the use of bonusesincreases the satisfaction of employees which in turnincreases the productivity of employees. The study furtherrevealed that employees’ recognition in the milk processingfirms was moderate. The study also found that number ofemployees in the procurement department was not enough.The study established that employee’s atisfaction,employees’ skills and level of education influences theprocurement performance in the milk processing firms inKiambu County.firms in Kiambu County. The study established thatpackaging policy influences procurement performance in themilk processing firms to a great extent. A fundamentalrequirement for a public liquid milk supply is that it will besafe, that is, it will not be a medium for the transmission oforganisms responsible for human disease. The study alsofound that milk processing firms in Kiambu County considerthe environment when procuring packaging material.The study also revealed that most milk processing firmswere using environmental policies, economic policies, andsustainability and government policies in ensuringrecyclability, durability and quality of the packagingmaterial. The study found that cost of packaging, type ofpackaging material and biodegradability of packagingmaterial influences the procurement performance in the milkprocessing firms in Kiambu County. According to Kim,Lopetcharat and Drake [4] packaging costs, type ofpackaging material and recyclability of material influencesprocurement in organizations.6.5 Regression AnalysisA regression analysis was used to establish how informationtechnology, employee’s competence, organizational cultureand packaging policy influence procurement process in themilk processing firms in Kiambu County.The regression model was;Y β0 β1X1 β2X2 β3X3 β4X4 ε6.3 Organizational CultureThe study sought to examine the effect of organizationalculture on procurement performance in the milk processingfirms in Kiambu County. The study established thatorganizational culture influences the procurementperformance in the milk processing firms. In addition,organizational culture influences how employees approachtheir various duties and how they relate with externalstakeholders including suppliers. Organizational culture hasbeen known for a while as one of the conditions that fosterprocurement processes in organizations by creating anorganic rather than a bureaucratic organizational structure[8].The study also found that organizational values influence theprocurement performance in the milk processing firms inKiambu County to a great extent. In addition, teamworkinfluences the procurement performance in the milkprocessing firms in Kiambu County to a great extent.Further, the study found that employees’ interactioninfluence the procurement performance in the milkprocessing firms in Kiambu County. The study alsoestablished that people orientation influences theprocurement performance in the milk processing firms inKiambu County. Lastly, the study established thathierarchical levels influence the procurement performance inthe milk processing firms in Kiambu County.Whereby: β0 is the regression intercept; β1 – β4 are theregression coefficients; Y is the dependent variable(procurement performance in the milk processing firms); X1is information technology; X2 is employee’s competence; X3is organizational culture; and, X4 is packaging policy.The four independent variables that were studied, explain78.9% of the procurement performance in the milkprocessing firms in Kiambu County as represented by theadjusted R2. This therefore means that other factors notstudied in this research contribute 21.1% of the procurementperformance in the milk processing firms in KiambuCounty.Table 1: Model SummaryModel R1.892aR Square.796Adjusted RSquare.0.789Std. Error of theEstimate.45165According to table 1 below, the F calculated was found to be6.853. This shows that the overall model was significant.Further, the P-value in this study was 0.000 which was lessthan 0.05 thus the model was statistically significance inpredicting how information technology, employeescompetence, organizational culture and packaging policyinfluence procurement process in the milk processing firmsin Kiambu County.6.4 Packaging PolicyThe study also sought to establish the effect of packagingpolicy on procurement performance in the milk processingPaper ID: 08011402Volume 3 Issue 1, January 2014www.ijsr.net107
International Journal of Science and Research (IJSR)ISSN (Online): 2319-7064Table 2: Analysis of VarianceModel1 RegressionResidualTotalSum of Squares5.5928.77214.363df MeanFSig.41.398 6.853 .000a43 .20447The regression equation was therefore;Y 2.033 0.147 X1 0.157 X2 0.535 X3 0.093 X4The regression equation above has established that taking allfactors into account (information technology, employee’scompetence, organizational culture and packaging policy)constant at zero, the procurement process in the milkprocessing firms in Kiambu County will have an index of2.033. The findings presented also shows that taking allother independent variables at zero, a unit increase ininformation technology will lead to a 0.147 increase in thescores of procurement performance in the milk processingfirms in Kiambu County. The P-value was 0.013 which isless than 0.05 and thus the relationship was significant. Thestudy also found that a unit increase in employee’scompetence will lead to a 0.157 increase in the procurementprocess in the milk processing firms in Kiambu County. TheP-value was 0.006 and thus the relationship was significant.In addition, the study found that a unit increase inorganizational culture will lead to a 0.535 increase in thescores of procurement performance in the milk processingfirms in Kiambu County. The P-value was 0.003 and thusthe relationship was significant. Lastly, the study found thata unit increase in packaging policy will lead to a 0.093increase in the scores of procurement performance in themilk processing firms in Kiambu County. The P-value was0.015 and hence the relationship was insignificant since thep-value was greater than 0.05.This infers that organizational culture contributed most tothe procurement performance in the milk processing firms inKiambu County followed by employee’s competence thenorganizational culture while packaging policy contributedthe least to the procurement process in the milk processingfirms in Kiambu County.Table 3: CoefficientsB(Constant)2.033Information Technology .147Employees competence .157Organizational culture .535Packaging 6.003.0157. ConclusionThe study concludes that there is a positive relationshipbetween information technology and procurementperformance in milk manufacturing companies in KiambuCounty. The study found that a unit increase in informationtechnology will lead to a 0.147 increase in the scores ofprocurement performance in the milk processing firms. Inaddition, communication, online Tender advertisement,computerized tendering process and computerized selectionprocess influences the procurement performance in the milkprocessing firms in Kiambu County.between employee’s competence and procurementperformance in the milk manufacturing firms in KiambuCounty. The study found that a unit increase in employee’scompetence will lead to a 0.157 increase in the procurementperformance in the milk processing firms. The studyestablished that employee’s experience, professionalqualification, employees’ satisfaction, employees’ skills andlevel of education influences the procurement performancein the milk processing firms.The study further concludes that there is a positiverelationship between organizational culture and procurementperformance in milk processing firms in Kiambu County. Aunit increase in organizational culture will lead to a 0.535increase in the scores of procurement performance in themilk processing firms. The study also found thatorganizational values, teamwork, employees’ interaction,people orientation and hierarchical levels influence theprocurement performance in the milk processing firms.Lastly, the study concludes that packaging policy influencesprocurement performance in the milk processing firms inKiambu County. The study found that a unit increase inpackaging policy will lead to a 0.093 increase in the scoresof procurement performance in the milk processing firms.The study found that cost of packaging, type packagingmaterial and biodegradability of packaging materialinfluences the procurement performance in the milkprocessing firms.8. RecommendationsThis study established that the adoption of Informationtechnology in the milk processing firms in Kiambu Countywas not to its maximum annually. This study thereforerecommends that milk processing firms should also adoptinformation technology in all sectors and inter-link variousdepartments within the organization. In addition, they shouldadopt information technology in the human resourcemanagement and in connecting various departments withinthe organization and linking the organization with otherfirms.The study also found that although most employees weresatisfied with their salaries, a good number of them were notsatisfied with their salaries. This study thereforerecommends that milk processing firms should streamlinethe salaries of employees so as to improve their satisfaction.The study further revealed that employees’ recognition inthe milk processing firms was moderate. The study thereforerecommends that employees’ recognition should beimproved in milk processing firms. The study also foundthat the number of employees in the procurement departmentwas not enough. The study therefore recommends that milkprocessing firms should increase the number of employeesso as to reduce workload.The study also found that teamwork and employees’interaction influence the procurement performance in themilk processing firms. This study therefore recommends thatmilk processing firms should improve on teamwork andemployees interaction.The study also concludes that there is a positive relationshipPaper ID: 08011402Volume 3 Issue 1, January 2014www.ijsr.net108
International Journal of Science and Research (IJSR)ISSN (Online): 2319-7064The study found that cost of packaging, type packagingmaterial and biodegradability of packaging materialinfluences the procurement performance in the milkprocessing firms. The study therefore recommends that milkprocessing firms should formulate policies to reduce the costof packaging by changing the type of packaging materialand biodegradability of the packaging material.[11] V., Venkatesh, M. G., Morris, G. B., Davis, & F.D.Davis, User Acceptance of Information Technology:Toward a Unified View. MIS Quarterly, 27(3), 425-478,2003[12] O. Mugenda, and A. Mugenda, Research Methods:Quantitative & Qualitative approaches, Acts Press.Nairobi, 20038.1 Future Scope of the StudyThis study sought to assess the factors affecting procurementPerformance in the milk processing firms in KiambuCounty. However, due to demographic and economicdifferences the findings of this study (conducted in KiambuCounty) cannot be generalized to other Counties. This studytherefore recommends further studies on factors affectingprocurement Performance in the milk processing firms in allcounties in Kenya. The study also recommends furtherstudies on the role of information technology in procurementperformance in milk processing firms.References[1] T.F. Gattiker, and C.R. Carter, Understanding projectchampions’ ability to gain intra-organizationalcommitment for environmental management projects”,Journal of Operations Management, 28 (1)72-85, 2002[2] G. Hidding, Sustaining strategic IT advantage in theinformation age: how strategy paradigms differ byspeed," Strategic Information Systems (10)201-222,2001[3] L., Kaufmann, C.R. Carter, & C. Buhrmann, ContextualVariables Influencing Individual Debiasing Efforts inSupplier Selection Decisions, working paper, WHU,Koblenz, 2011[4] M. K., Kim, K. K., Lopetcharat, & M. A. Drake,Influence of packaging information on consumer likingof chocolate milk. Journal Of Dairy Science, 96(8),4843-4856, 2013[5] H. Walker, & C. Harland, E-procurement in the UnitedNations: influences, issues and Impact. InternationalJournal of Operations & Production Management, 28(9) 831 – 857, 2008[6] C. L
Factors Affecting Procurement Performance in the Milk Processing Firms in Kiambu County . Abstract: Given the impact of procurement activities on the operation and effectiveness of procurement processes, . the process of procurement is faced by the challenges imposed by a variety of environment factors (external factors) such as market .
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