DETERMINANTS OF ELECTRONIC PROCUREMENT ON SUPPLY … · seven in number and they are Nyankoba,...

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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS

COPY RIGHT © 2013 Institute of Interdisciplinary Business Research

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DETERMINANTS OF ELECTRONIC PROCUREMENT ON SUPPLY CHAIN

PERFORMANCE: A SURVEY OF TEA FACTORIES IN KISII COUNTY-KENYA

Kevin Moindi Omai

School of Human Resource Development,

Entrepreneurship and Procurement Department.

Jomo Kenyatta University of Agriculture and Technology.

P.O BOX 6200-00200, Nairobi, Kenya.

ABSTRACT

The study sought to establish the determinants of electronic procurement on supply chain

performance, the determinants of study were partner relationship, information sharing, supply

chain integration and supplier appraisal. The research adopted a mixed research approach which

was both qualitative and quantitative to do a survey with Kisii County Tea Factories which were

seven in number and they are Nyankoba, Kiamokama, Rianyamwamu, Nyamache, Itumbe,

Tendere and Eberege. The departments covered were Procurement, Finance, Administration and

those involved with Technical matters. The results of data analysis showed that e-procurement

could promote information sharing and supply chain integration. Information sharing

demonstrated the development of partner relationship and supported supply chain integration.

The partner relationship has variant level of importance across different Factories, since price

and quality are more important concerns for the Factories. Finally, the analysis showed that

supply chain integration is significantly related to supply chain performance. A questionnaire

was used in data collection and analysis was done using Statistical Package for Social Sciences

Version (SPSS) 17. SPSS version 17 package was used because it is a comprehensive system for

analyzing data and can take data from many types of files and use them to generate descriptive

statistics and tabulated reports. The tools used for data analysis were measures of central

tendency which were mean, median and mode. From the study, the following are the

recommendations as established by the research: There is need to improve the current ERP

Chaipro software so that it can bring on board a Purchase to Pay (P2P) process for low value

purchases. Also, there is need to modify the system to take care of security concerns and this can

enhance trust between the Tea Factories and its suppliers as this will even make them move to a

co-destiny relationship within the relationship spectrum.

Keywords: Electronic Procurement, Information Sharing, Partner Relationship, Supply Chain

Integration, Supplier Appraisal and Supply Chain Performance.

1.1 Introduction

Procuring entities today are continuously facing external and internal problems when sourcing

for their needs by the use of traditional procurement procedures. Problems such as poor

information sharing between purchasers and suppliers, non-automated supplier appraisal

systems, adversarial relationship and non responsive supply chain integration exist in this

electronic age as said by the Chartered Institute of Purchasing and Supplies (2011). Electronic

procurement systems represent an important development for the purchasing process (Neef,

2001). In order for organizations to be competitive and stay updated, there is need to have a

paradigm shift in the way procurement is carried out so as to solve numerous procurement

problems evident in the business world especially in developing economies which include

increased corruption, high costs of doing businesses, a lot of non value adding paper work

procedures, long time elapse to respond to tenders and non competitiveness (Chartered Institute

of Purchasing and Supplies, 2011).

The following geocentric orientation gave e-procurement a global perspective as it was adopted

from the Transparency International (2006). In Brazil it helps in sharing of information between

the procuring entities and supplying firms. In Chile, Mexico, Peru and Venezuela, it is obligatory

to use e-procurement in every step of the procurement process. However, in Philippines where e-

procurement systems have not been properly developed, they only use it in transactional and

information exchange during the procurement process. In Malaysia, e-procurement has been in

use since December 2004 when the Malaysian Treasury issued new guidelines for public

procurement on infrastructure maintenance projects. More emphasizes were put on the use of

open e-procurement competitive tenders to curb corruption. For Malaysia as Transparency

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International (TI) report of 2006 says, e-procurement reduced corruption by 5.9% compared to

earlier figures of 3.7% when paper based work was being done.

In Surabaya, Indonesia, e-procurement for small contracts has meant a 50% in a state budget and

for big contracts 23%. Although in this country, there is bit of manual systems in use. The

benefits of e-procurement in Surabaya as stated by Transparency International (2006) are:

increased efficiency, enhanced transparency, better risk management, higher levels of integrity,

significantly better access to government procurement for small and medium size enterprises,

corruption avoidance and cost saving on average up to 20% as compared to traditional

procurement.

Procurement is part of supply chain management activities. In general, supply chain management

has been exploded onto the business scene as one of corporate management’s major concerns over

the past decades. The reasons are clear; almost 70% of a firm’s sales revenues are, on average,

spent on supply chain-related activities from material purchases to the distribution of goods and

services of finished products to the end customers (Presutti, 2003). Supply Chain Management

has become an essential pre-requisite to stay in the competitive global environment for

profitability especially for profit government corporations and entities (Thai, 2009).

As the world’s economy becomes increasingly competitive, sustaining competitiveness and the

resulting profitability depend less on the ability to raise prices. Instead, firms need to compete on

the basis of product innovation, higher quality, and faster response time, all of which must be

delivered, in most cases simultaneously and always at the lowest costs attainable through effective

and efficient procurements (Presutti, 2003). Those competitive dimensions cannot be delivered

without an effectively managed supply chain. Firms with the most competitive supply chains are

and will continue to be the big winners in contemporary business.

No industry is left untouched, in today’s customer-focused marketplace; Supply Chain

Management has become a key to competitive advantage (Grieger, 2003). The business processes

of a company, such as distribution, research and development, operations and logistics, are

heavily influenced by global competition, high-speed information availability, continuously

changing business relationships, shorter innovation cycles and an increasing complexity of

products. By using electronic means, managers of agencies and entities can create better

customized solutions as well as convert isolated production and logistics functions to an efficient

virtual value-added e-web by the use of ERP systems as well as online platforms.

The supply chain encompasses all activities associated with the flow and transformation of goods

from the raw materials stage through to the end user, as well as associated information flow.

Supply Chain Management is the integration of these activities through improved supply chain

relationships to achieve sustainable competitive advantage (Handfield and Nichols, 1999). The

above definition suggests that all of the links in the supply chain must be strong and well

integrated. In addition, in the study of (Li et al., 2005), there are seven dimensions in Supply

Chain Management practices, including strategic supplier partnership, customer relationship,

information sharing, information quality, internal lean practices, supplier appraisals and

postponement.

A recent survey showed that 76% of the Managers expect supply management to contribute to

shareholder value, as firms continue to move toward more outsourcing (Nelson et al., 2001). The

potential impact on competitiveness and profitability is enormous because the average

manufacturing firm spends about 50% of its sales revenue on the purchases of goods and services

including means of transport needed to produce its final product (Nelson et al., 2001). Electronic

procurement has a profound influence on how to manage supply chains of organizations (Eng,

2004). It is e-procurement, the productive use of the internet to improve the effectiveness and

efficiency of the end of the supply chain as well as conduct effective appraisals in any supply

chain activity.

E-procurement creates a higher profile for supply management and boosts its visibility to top

management (Presutti, 2003). The increasing emphasis on supply chain management has created a

greater focus on the supply management link in the supply chain. This focus will become even

more intense as firms continue to adopt e-procurement strategies to leverage the competitive

advantages of the internet. Managers need to understand the impact of technology and gain

competency in the practices for e-procurement (Presutti, 2003).

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In order to understand e-procurement along with its application in Kenyan tea factories, this

study used the characteristics of supply chain and explored the relation between e-procurement

and supply chain performance through the use of Chaipro ERP system for KTDA network in

Kenya. Based on the seven dimensions in the discussion of (Li et al., 2005), the study compressed

these dimensions into four factors: embraced partner relationship, information sharing, supply

chain integration and supplier appraisal. Since procurement is a very important element in supply

chain, to understand procurement in more detail, this study used these factors as study constructs

to explore the determinants of e-procurement on supply chain performance. The study aimed to

discuss the relationship between e-procurement and supply chain performance and investigated

the essential roles of partner relationship, information sharing, supply chain integration and

supplier appraisal as played in the system.

The history of KTDA dated back to 1957, when the first small-holder tea factory was set up at

the foothills of Mt. Kenya in Ragati, Nyeri County. The factory was managed through a

management agreement with multinational tea companies. On June 30, 2000 KTDA (the

Authority) was transformed into a private company, KTDA (the Agency) Ltd and registered

under the Companies Act. The year 2010 saw the re-structuring of the Agency, leading to the

establishment of KTDA Holdings Limited and KTDA Management Services (MS) Limited, a

subsidiary of KTDA Holdings Limited. KTDA (MS) currently manages 65 tea processing

factories spread in all tea growing regions across Kenya (KTDA, 2011). But all the factories are

linked nationally through an ERP system by the use of extranet which is internally linked to all

functional department of each Unit supported by Safaricom as Internet Service Provider.

1.2 Statement of the Problem The procurement function in Kenya has been characterized by massive scandals and indignity

which have been attributed to poor handling of procurement information thus leading to excessive

corruption (Thai, 2009). There is need to have a robust automated procurement system which is

interlinked and this will lead to enhanced competitiveness and lowered costs (Ogot et al., 2009).

Several workshops and meetings have been held within the procurement function to improve the

performance of the supply chain but they have inadequately addressed how e-procurement can

enhance supply chain performance through partner relationship, information sharing, supply chain

integration and supplier appraisal within supply chain system (Public Procurement Oversight

Authority, 2010). Weak ICT infrastructure and its adoption in support of e-procurement is a

challenge to procurement (Imbuga et al., 2011).

Although Leung (2007) has evaluated information sharing on e-procurement, he has not given

emphasis on supply chain performance and this need to be investigated. A good example of the

core mandate system that will be deployed in the authority (PPOA) is e-procurement, once this is

implemented and linked to procurement entities, it will be a tool for the compliance function to

use in the monitoring and evaluating of procurement entities (PPOA, 2011). Also, many firms in

Kenya and the world over have registered dismal Supply Chain Performance in terms of partner

relationship, information sharing, supply chain integration and supplier appraisal within supply

chain system because of the inefficient and unsustainable procurement procedures as it has been

witnessed in the Kenyan Public sector. Employees have been fired because of low performance

rate, persistent lateness and wrong attitude to work (Weele, 2005). This called for the need of

critically looking at the determinants of e-procurement on Supply Chain Performance.

1.3 General Research Objective

Based on the information provided, the general research objective was to establish the

determinants of e-procurement on supply chain performance in Tea Factories in Kisii-Kenya.

1.3.1 Specific Research Objectives i. To find out if partner relationship enhances the performance of supply chain function in

Tea Factories.

ii. To establish if the information sharing enhances the performance of the supply chain

function in Tea Factories.

iii. To establish if e-procurement and supply chain integration have positive effects on supply

chain performance in Tea Factories.

iv. To determine if electronic supplier appraisal is possible to enhance the performance of the

supply chain function in Tea Factories.

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1.4 Research Questions Based on the above objectives, my general research question was: What are the determinants of

e-procurement on supply chain performance in Tea Factories? Other specific research questions

were:

i. Does partner relationship enhance supply chain performance in Tea Factories?

ii. Has the need for information sharing enhance the performance of the supply chain

function in Tea Factories?

iii. Has the need to have e-procurement and supply chain integration affect supply chain

performance positively in Tea Factories?

iv. Is electronic supplier appraisal possible to enhance the performance of the supply chain

function in Tea Factories?

1.5 Justification of Study

The research identified the loopholes of using e-procurement on enhancing supply chain

performance. The areas under consideration may be used by the concerned stakeholders in

procurement to effectively implement the findings to enhance efficiency in terms of information

sharing, partner relationship and supply chain integration on supply chain performance. They can

also be used to explain effective, efficient and economic supplier appraisal techniques using the

three mentioned areas. It has also laid a solid background on what stakeholders that are intending

to use e-procurement to effectively put systems in place.

Procurement being an area that is attracting a lot of professional, academic and scholarly

attention, my project can be used as a reference to promote the general academic and scholarly

input to the understanding of this body of knowledge.

1.6 Scope of Study

The scope of study need to be limited to the variables (Botha and Toit 1999). Concentration

mainly was on pre- and post contract stages. The items considered were e-procurement, partner

relationships, information sharing, supply chain integration and supplier appraisal. There could

be other variables to determine supply chain performance but in this study, only the four

mentioned were considered. The Tea Factories under consideration included: Nyankoba,

Kiamokama, Rianyamwamu, Nyamache, Itumbe, Tendere and Eberege.

1.7 Limitations

Generalizations of the study findings were limited by:

i. Some of the sample group was drawn from Kisii County-Kenya; a small research area

that had unique challenges, which may not exist in other Tea Factories. Consequently, the

study findings will not be representative of all public agencies.

ii. Certain areas of investigation which could have attracted the supplying firms such as the

big turn-key contracts and international e-procurement contracts that normally use a lot of

agency funds might not be captured in the study.

iii. There is scarce literature on e-procurement in Kenya to provide for considerable base for

detail analysis on the subject.

Literature Review

2.1 Procurement

Andersson & Norrman (2002) stated the phases for logistic service purchasing: ―In principle the

same basic phases were identified by the other group of authors for selecting providers for more

advanced services: preparation and identification of requirements; provider selection and

negotiation; monitoring provider performance. Sain et al., (2004) also said that Procurement has

a broader meaning and included the processes of strategy development, supplier selection,

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negotiation, supplier evaluation, and supplier development. However, the most representative

model of procurement transaction processes was the four-phase of transactions: information,

negotiation, settlement, and after-sales. The model can be well suited for conceptualizing the

transaction processes between the buyers and suppliers of electronic marketplace (e-marketplaces)

as well as the internal activities of the buyers at a high-level granularity (Kim & Shunk, 2004;

Skjott-Larsen et al. 2003),. In all of these, there were no significant differences between them.

The concepts Presutti (2003) provided which embrace most processes of procurement, the

purchasing processes including four stages: defining requirement (specification development,

early involvement by supplier, inputs of a cross-functional buying team), selecting supplier (pre-

qualify suppliers, generate requests for proposals, evaluating proposals and select qualified

supplier), contract agreement (formal contract negotiations, ordering routines and transaction

processing establishment) and supplier evaluation ( supplier performance assessment, supplier-

rating).

2.1.1 E-procurement

The e-procurement defined here is not the same as what Albrecht et al. (2005), described; a

number of organizations have recently adopted e-procurement systems to purchase indirect

materials for processes like operations, sales, maintenance and administration. Only those vendors

connected to a buyer’s e-procurement system are visible to the buyer. Kim and Shunk (2004)

mentioned that in a narrow sense, e-procurement systems can be defined as the web-based

systems building at the buying organizations, i.e. buyer-centric (buy-side, buyer-managed, buyer-

focused, buyer-specific, or buyer-oriented) e-procurement systems such as intranet (internal,

desktop, or end-user’s) e-procurement systems and buy-centric private e-marketplaces managed

by a single buyer.

Sain et al. (2004), had a wider definition for e-procurement: E-procurement can be considered as

the electronic integration and management of all procurement activities, including purchase

request, authorization, ordering, delivery and payment between a purchaser and a supplier. Croom

(2000) also mentioned that e-procurement systems in essence mirror the procurement process

through the provision of two distinct, but connected, infrastructures – internal processing and

external communication with the supply base.

It is commonly defined as an organization’s indirect procurement using the internet, as

procurement is the concept closely inter-related with the supplier’s selling activities. Also, Tatsis

et al. (2006), developed the following definition; e-procurement is the integration, management,

automation, optimization and enablement of an organization’s procurement process, using

electronic tools and technologies and web-based applications.

Based on these, e-procurement in this study was defined as an organization’s procurement using

the internet technologies (Kim & Shunk, 2004) with support to sourcing, procurement, tendering

and ordering fulfillment processes De Boer et al. (2002),. Such system allows employees to order

goods and services directly form their own computers through the web. Requests and orders are

channeled through various forms of hub or database, which acts as an online catalogue of

specifications, prices and, often, authorization rules. It also allows employees to search for items,

check availability, place and track orders and initiate payment on delivery (Croom & Johnson,

2003).

2.1.2 E-marketplace

The adopted forms of e-procurement are mainly in Electric Data Interchange (EDI) and e-

marketplace. Albrecht et al. (2005), stated that the mainline E-business architectures are: EDI,

company websites, B2B hubs, e-procurement system, and web services. All of them were

encompassed in the definition.

Kim & Shunk (2004) have defined the taxonomy in more detail and clear manners for e-

procurement systems: Buyer-centric e-procurement systems, included intranet e-procurement

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systems, buy-side private e-marketplaces, and buy-side consortium e-marketplaces; supplier-

centric e-procurement systems, included e-storefronts (sell-side private e-marketplaces, web

storefronts, virtual storefronts, online shops, or merchant servers) and sell-side consortium e-

marketplaces.

Neutral e-marketplaces, included independent, third party e-marketplaces: End-to-end electronic

document/message exchange systems, including Internet-enabled EDI, XML/EDI, extranet,

standard-based messaging systems (i.e. XML-based e-business framework such as ebXML and

RosettaNet) and e-mail. Especially, the e-marketplace today is getting mature and popular as

internet has prevailed over the world. They emerged in different industries, supporting the

exchange of goods and services of different kinds, with and for different types of actors, and are

following different architectural principles. Most observers have assumed that e-marketplace

would come to dominate the e-business landscape. Therefore, following the trend, there is need to

know more about e-marketplace. On one hand, it can help us understand the practical applications

of e-procurement. On the other hand, some definitions, characteristics or nature may represent a

part of e-procurement.

An e-marketplace effectively brings players together in a real-time marketplace to perform basic

exchange transactions, such as price and production specifications, and strategic supply chain

collaboration, as forecasting demand and new product development. The primary objectives are to

streamline complex business processes and gain efficiency. It is based on the notion of

aggregating buyers and sellers in a single contact point to allow participant organizations to enjoy

greater economies of scale and liquidity; and to buy or sell anything easily, quickly and

economically (Wamego, 2005). E-marketplaces also enable companies to eliminate geographical

barriers, and expand globally to reap profits in new markets that were once out of reach (Eng,

2004).

For a clear overview, this study collected a number of authors’ definitions regarding e-

marketplace (see Table 2-1). Drawing from the literatures, the researcher pictured that e-

marketplace is an inter-organizational information system, an e-procurement solution/application

and a medium between buyers and sellers. When considering these definitions the concerns of e-

procurement must be examined which according to (Ogot et al., 2009), included: authentication,

confidentiality, integrity and security.

Table 2-1 E-market Place Definitions

An EM separates the negotiating function from the physical transfer of

product or commodity in which the market trades. It can manage buyers

and sellers’ offers as well as moving products directly from buyers and

sellers, regardless of their location and can provide instant market

information to all traders.

McCoy & Sarhan

(1988)

An inter-organizational information system that allows the participating

buyer and seller to exchange information about prices and product

offering.

Bakos (1991)

Facilitates the exchange of information, goods and services and payments.

In the process, they create economic value for buyers, sellers, market

intermediaries and for society at large.

Seger, Gebaner &

Farber (1999)

A meeting point where buyers and sellers can interact online. Kaplan & Sawhwey

(2000)

e-market place defined as interactive business communities providing a

central market space where a multiple companies can engage in B2B e-

commerce and other e-businesses.

Brunn, Jensen &

Skovgaad (2002)

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e-market place can be defined as an institutional medium that:

That assigns different roles within community, primarily buyers and

suppliers but also other roles like logistics service providers, banks and

other intermediaries.

That facilitates the exchange of goods services and information.

That provides an infrastructure-define protocols and processes that rule the

interaction within the community and also provide a common language.

Grieger (2003)

An interorganizational information system that allows multiple buyers and

sellers plus other stakeholders to communicate and transact through a

central market space which is supported by additional activities.

Stockdale & Standing

(2004)

A virtual market place where buyers and sellers meet to exchange

information about a product and a service that is being offered. The

ultimate aim is to negotiate and implement business transactions.

Gricar, Pucihar &

Lenart (2005)

2.1.3 The Role of E-procurement in Procurement Process

By reference to the literatures on procurement and e-procurement mentioned, e-procurement was

a technology solution or application that facilitates corporate buying through the internet use. It

pervades each major component of the purchasing process. Here e-procurement, in a broad sense,

included e-design at the specification development stage of the purchasing process, ending with

the supply manager’s efforts to evaluate and rate supplier performance (Presutti, 2003). Based on

Presutti’s study and other literatures discussed above, the e-procurement stage from purchasing

process was extended to the following four stages: e-design, e-sourcing, e-negotiation, and e-

evaluation.

E-design. Establishing buying requirements through the specification development process, has

emerged to help facilitate early supplier involvement. Buyers and suppliers communicate and

develop products and specifications on line with collaboration. The application of internet

technology to the steps of supplier selection in purchasing process is known as e-sourcing. A

proposal is requested on the internet for pre-qualified supplier. The suppliers receive the request

and submit bids electrically. Then, they evaluate the bids, negotiate on line and select the most

proper suppliers. In the contract agreement stage of purchasing process, the purchasing

department needs more involvement with it. The role of e-procurement in this stage is on-line

negotiation. It can be called e-negotiation in this study. The final stage of e-procurement that will

be extended in this study is e-evaluation. In this stage, information is critical; company requires

more proper solutions to collect detail, extensive and accurate information for evaluating and

rating suppliers. E-procurement solutions provide the firm with data warehousing capabilities and

other knowledge management tool to support this.

According to the literatures on purchasing, e-procurement and e-marketplace discussed above, the

definition of e-procurement was developed: E-procurement is organization’s procurement using

the internet technologies, including e-design, e-sourcing, e-negotiation and e-evaluation (Albrecht

et al., 2005).

2.2 Partner Relationship

Partner relationship is a critical issue for business, especially in supply chain activities.

Corporations need to be convinced that in today’s scale-driven, technology-intensive global

economy, partnerships are the supply chain’s lifeblood (Liker & Choi, 2004).There are a lot of

synonyms of partner relationship, such as partnership, supply chain relationship, buyer-supplier

relationship, strategic relationship, and obligation contractual relations (CIPS, 2010). It also has

multiplex statement. Li et al., (2005) defined strategic supplier partnership as the long-term

relationship between the organization and its suppliers. It is designed to leverage the strategic and

operational capabilities of individual participating organizations to help them achieve significant

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ongoing benefits. Skjott-Larsen et al., (2003) described a strategic partnership between any two

companies, whether it is a buyer–supplier or a third-party logistics arrangement, can be

considered as a segment of an extended supply chain. Liker & Choi (2004) used the Japan diction

keiretsu to represent the deep supplier relationship: close-knit networks of vendors that

continuously learn improve and prosper along with their parent companies. And in the literature

of Skjott-Larsen et al., (2003), they mention two patterns of relationships: Obligation Contractual

Relations (OCR) and Arm’s length Contractual Relations (ACR). OCR is more embedded in

social relations between trading partners and is also characterized by a sense of mutual trust and

open exchange of information. ACR focuses on price comparisons between different suppliers as

a major basis for comparison kept supplier–customer relationships at a distance. This study

focused on OCR, the relationship orientation was viewed as philosophy of doing business

successfully and as an organizational culture that puts the buyer-supplier relationship at the center

of a firm’s strategic and operational thinking (Panayides & So, 2005).

Therefore, partner relationship was defined as an ongoing relationship between firms that involve

a commitment over an extended time period, a mutual sharing of information and the risk and

rewards of relationship (Ellram & Krause, 1994). All these characteristics showed that

partnerships play an important role in procurement aspect. If we consider those companies that

use the internet throughout their supply chain, we notice that they both exchange information to a

high extent and closely integrate their systems with their partners Cagiano et al., (2003). Also the

internet can support and facilitate information sharing, both in collaborative or in market-type

relationships, and can be used to support closer integration (system coupling) with the partners

(Cagiano et al., 2003). The internet in their study meant internet tool like e-procurement that

enhances information sharing and support system coupling (supply chain system integrate).

Consequently, this will enhance partner relationship. Internet is an element of e-procurement, and

procurement belongs to activities of the supply chain. As a result, the researcher can know that e-

procurement has positive relation with partner relationship, information sharing and supply chain

integration. Johnson & Klassen (2005) also mention that e-procurement deepens strategic

partnerships between networks of firms. Therefore, it was to be expected that firms that deliver e-

procurement system in the supply chain were likely to strengthen partner relationship.

2.3 Information Sharing

The study of Tan et al., (2002) showed that information sharing related to the use of IT and

sharing including formal and informal information sharing, communicating and determining

customers’ future need and participation in sourcing decision. Li et al., (2005) mentioned that

information sharing refers to the extent to which critical and proprietary information is

communicated to one’s supply chain partner. From the description above, the information sharing

does not only share information with partners, but also provides adequate, timely and accurate

information. In other words, information sharing should include the concept of information

quality. Information quality includes such aspects as the accuracy, timeliness, adequacy, and

credibility of information exchanged Monczka et al., (1998). Lee et al., (1997) had the example

of the dysfunctional effects of inaccurate/delayed information, as information moves along the

supply chain (i.e. bullwhip effect).

Therefore, information sharing defined here included both formal and informal information

sharing with partners. And the information must ensure the quality with accuracy, timeliness,

adequacy, credibility, and criticality (Croom, 2003). Ensuring the quality of shared information

has become a critical issue of effective Supply Chain Management (Cagiano et al., 2003),

supported that internet or internet tool can facilitate information sharing and more collaboratively

with their partners. E-procurement is a kind of internet tool in their article. Eng (2004) also said

that e-marketplace provides a shared internet-based infrastructure that enables participant

organizations to communicate with one another effortlessly. And Presutti (2003) proposed that in

the e-design stage, buyer and seller share information in real time to build specifications that add

value to the resulting product. That communication helps to minimize design complexities and

avoids building in unnecessary costs into the specification.

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Anyway, e-procurement has played more and more central role in supply chain management. E-

procurement will enhance the flow of information along the supply chain, improved the

information sharing (Johnson & Klassen, 2005). As a result, if firms delivered e-procurement

system in their supply chain, they will enhance their information sharing.

2.4 Supply Chain Integration

There has been an increasing movement towards adopting the concept of supply chain integration

(Frohlich & Westbrook, 2001). Morash & Clinton (1997) mentioned that supply chain structure is

often considered to represent the organizational efforts by three or more firms to manage and

integrate materials and related information flows in order to get closer to customers. The supply

chain structure attempts to coordinate cross-functional activities into holistic business processes,

both within and across firms in the supply chain. The meaning of supply chain structure is

consistent with supply chain integration.

Procurement cannot operate in isolation from other elements of the business. It is important that

all functional area strategies and capabilities, including procurement, be consistent with business

unit goals and strategies (Virolainen, 1998). Lee & Whang (2001) mention that being competitive,

enlightened companies have strived to achieve greater coordination and collaboration among

supply chain partners in an approach called ―supply chain integration‖. They have advanced four

dimensions of supply chain integration, including information integration, planning

synchronization, workflow coordination, and new business models that impact on e-business. Tan

(2001) also suggested that a well-integrated supply chain should involve coordinating the flow of

the materials and information among stakeholders, and implementing product postponement and

mass customization. From above, it was said that supply chain integration involves both internal

and external process integration. Internal integration requires transportation, procurement,

manufacturing, and sales that are coordinated and integrated to achieve customer value and

satisfaction. External integration involves a firm’s links with material suppliers, carrier partners

and customers. Major external structure aspects include operational planning for just-in-time

demand-pull, transportation information sharing and information technology links among supply

chain members (Morash & Clinton, 1997).

The approach to supply chain integration proposed by Zhang et al,. (2006) is based on the concept

of dynamically integrated manufacturing systems (DIMS), within an enterprise or across a supply

chain, that are dynamically integrated for optimal performance in response to changes in the

business environment. This concept can be divided into three levels: strategic, operational and

technological. Strategic level is concerned with integration of business capabilities to optimize

business objectives, considering dynamically changing business drivers. Operational level is

concerned with the dynamic configuration and integration of physical resources (equipment,

materials and people) for optimal order fulfillment in a turbulent market. Technological is

concerned with modularized manufacturing hardware, software and technologies, which would

support the dynamic integration of physical manufacturing systems Zhang et al., (2006).

Therefore, these studies formulated a new definition of the supply chain integration. The supply

chain integration includes internal cross-functional activities such as coordination, integration in

the supply chain processes; and external activities among organizations such as planning,

communication, coordination, integration, and information exchange. Through supply chain

integration, internal processes in business run smoothly to achieve the goals of business and

clients.

Otherwise, in the study of Tan et al., (2002) they addressed supply chain integration as

comprising of five practices: searching new ways to integrate, reducing response time across

supply chain, improving integration activities across supply chain, establishing more frequent

contact with supply chain members and creating a compatible communication/information

system. All of these practices are for the purpose of creating internal cross-functional integration

and external supply chain integration.

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2.4.1 E-procurement and Supply Chain Integration

System that facilitates supply chain process through processes of automation, coordination, and

collaboration both in the firm and partners within supply chain is supply chain integration. The

utilization of e-procurement within the SCM structure yield benefits by improving the speed,

frequency and potential accuracy of communication to all links within the chain, thereby giving

assistance to enable better coordination Sain et al., (2004). Horizontal IEMPs (internet-driven e-

marketplaces) can provide a platform to simplify the purchasing process Skjott-Larsen et

al.,(2003).

Much of the value horizontal IEMPs provide is in automating workflow and reducing process

costs for both buyers and suppliers. It also speeds the request and approval process, removes

paper and errors from the process and allows employees to spend more time performing value-

added functions Skjott-Larsen et al., (2003). And the primary benefits that could be derived from

a transaction-based type of supply chain services concentrate on automation of processing orders,

payments and deliveries, reverse auctions, inventory clearance, scheduling, online catalogues,

negotiations, and 24-hours availability (Eng, 2004).

Also Croom & Johnson (2003) identified five main improvements in the procurement process that

e-procurement enables: supporting managers’ budgetary control, offering robust process

performance with fewer failures, offering far greater transparency and accessibility across the

whole process for all stakeholders, improving systems reliability, ensuring compliance to process,

and improving management information reinforced user compliance. All of these benefits

integrate supply chain system more easily.

The internet tool (e-procurement) can be used to support closer integration with partners Cagiano

et al., (2003). The formation of those IEMPs that facilitate collaborative planning, logistical

services, financial services, order management, vendor-managed inventory, and other supply

chain management Skjott-Larsen et al., (2003) – related activity among supply chain partners.

This describes that e-procurement will facilitate the integration within supply chain system.

2.4.2 Information Sharing and Partner Relationship

As Bako (1991) said, inter-organizational information systems can play an important role in

supporting the resulting bilateral relationship. Liker & Choi (2004) also concluded that Toyota

and Honda have built great supplier relationships by following six distinct steps: understanding

how your suppliers work, turning supplier rivalry into opportunity, supervising your suppliers,

developing supplier’s technical capabilities, sharing information intensively but selectively, and

conducting joint improvement activities. The fifth step is information sharing intensively but

selectively. This shows that some evidence for information sharing will impact partner

relationship. Ellram (1995) also, in her study, found five key factors for establishing successful

partnerships. These five key factors are: two-way information sharing, top management support,

shared goals, early communication to suppliers and supplier adds distinctive value. We can see

that information sharing can establish a successful partnership. Therefore, it can be expected that

if firms enhance its information sharing ability, they are likely to strengthen their partner

relationship.

2.4.3 Information Sharing and Supply Chain Integration

In the study of Presutti (2003), the real-time exchange of information in the e-design stage is

crucial because of shrinking product life cycles and the competitive advantage that comes from

reduced time-to-market. E-design facilitates real-time collaboration among all internal members

of the firm’s cross-functional buying team, as well as with suppliers. As mentioned before, the

efficiency of information transfer, the timeliness of information availability, the openness and

transparency of relevant influence supply chain performance.

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2.5 Supply Chain Performance

There are a lot of arguments about performance measurement, and it has no consistent opinion

until now. The most notable perceived benefit from participating in the e-marketplace is lower

unit cost of procurement (Eng, 2004). But there are more contributions when firms delivered e-

procurement in supply chain. Tan et al., (2002) believed that short and reliable order cycles, and

the ability to fill entire orders are critical elements to customer service. And they measured

business performance with senior management’s perceptions of a firm’s performance in

comparison to that of major competitors. And a total of six dimensions of performance were

considered in their study, including market share, return on assets, average selling price, overall

product quality, overall competitive position, and overall customer service levels.

From the SCM practices of Tan et al., (2002) time-based issues such as on-time deliveries and

reducing response time received the highest mean score. They also found that price/cost may not

be a primary factor in selecting supplies for firms and quality, and service levels, on-time

delivery, quick response and volume flexibility are critical factors in selecting suppliers and its

influence on supply chain performance. However, more scholars have other more comprehensive

thoughts regarding supply chain performance. Eng (2004) considered the perceived contributions

of e-marketplace to SCM are examined in three dimensions which include: unit cost reduction,

increased efficiency and streamlined operations. Croon & Johnson (2003) identified three areas of

internal service performance. They are cost efficiency, process conformance and internal

satisfaction. In cost conformance we use the economic value added also called EVA (explained in

section 2.5.3 below).

2.5.1 Performance

The literature on performance measurements and metrics in SCM is reviewed in this sub-section.

The metrics and measures are discussed in the context of the following supply chain activities or

processes and they include: planning, sourcing, making/assembling and delivering goods or

services to customers (Stewart, 1995; Gunasekaran et al., 2001). In the order entry method which

is part of planning, it determines the way and extent to which customer specifications are

converted into information exchanged along the supply chain. Order lead-time is the order cycle

sourcing time also called order to delivery cycle time which refers to the time elapsed in between

the receipt of customer order until the delivery of finished goods to the customer is made. The

reduction in order cycle time leads to reduction in supply chain response time and as such is an

important performance measure and source of competitive advantage (Christopher, 1992) and on

the opinion of the researcher, this can only be enhanced by an integrated supply chain function

which has electronic procurement as an element and it directly interacts with customer service

in determining competitiveness. Traditionally supplier performance measures were based on

price variation which is outdated and rejects on receipt and on time delivery. For many years, the

selection of suppliers and product choice were mainly based on price competition with less

attention afforded to other criteria like quality and reliability. More recently, the whole approach

to evaluating suppliers has undergone drastic change and this has been enhanced through the use

of Carters 7Cs model discussed in section 2.6. The evaluation of suppliers in the context of the

supply chain (efficiency, flow, integration, responsiveness and customer satisfaction) involves

measures important at the strategic, operational and tactical level. Strategic level measures

include lead time against whole industry operations, quality level, cost saving initiatives and

supplier pricing against market. Tactical level measures include the efficiency of purchase order

cycle time at departmental levels, booking in procedures, cash flow, quality assurance

methodology and capacity flexibility. Operational level measures include ability in day to day

technical representation, adherence to developed schedule, ability to avoid complaints and

achievement of defect free deliveries.

Purchasing and supply management must analyze on a periodic basis their supplier abilities to

meet the firm’s long-term needs. The areas that need particular attention include the supplier’s

general growth plans, future design capability in relevant areas, role of purchasing and supply

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management in the supplier’s strategic planning, potential for future production capacity and

financial ability to support such growth (Fisher, 1997). Supply chain partnership is a

collaborative relationship between a buyer and seller which recognizes some degree of

interdependence and cooperation on a specific project or for a specific purchase agreement

(Ellram, 1991; van Hoek, 2001). Such a partnership emphasizes direct, long-term association,

encouraging mutual planning and problem solving efforts (Maloni and Benton, 1997). Supplier

partnerships have attracted the attention of practitioners and researchers (Macbeth and Ferguson,

1994; Ellram, 1991; Graham et al., 1994). All have contended that partnership formation is an

important supply chain concept in operations and as such for efficient and effective sourcing.

Partnership maintenance is no less important. Performance evaluation of buyers or suppliers is

simply not enough—relationships must be evaluated. The parameters that need to be considered

in the evaluation of partnerships are the ones that promote and strengthen them. For example, the

level of assistance in mutual problem solving is indicative of the strength of supplier

partnerships. Partnership evaluation based on such criteria will result in win–win partnerships

leading to more efficient and more thoroughly integrated supply chains especially through

electronic means. After the order is planned and goods sourced, the next step in to

make/assemble products. This is the activity carried out by organizations that own production

sites, and their performance has a major impact on product cost, quality, speed of delivery and

delivery reliability, and flexibility (Mapes et al., 1997; Slack et al., 1995). As it is quite an

important part of the supply chain, procurement needs to be measured and continuously

improved. Suitable metrics for the procurement level improvement are as follows: Reduction in

paper work, less legal cases, space utilization especially through effectiveness of scheduling

techniques, supply chain and logistics cost reduction and less information processing cost

through an integrated electronic means of communication.

2.5.2 Partner Relationship and Supply Chain Performance

Evans & Wurster (2001) claimed that the low infrastructure and transaction costs of internet-

based systems allow organizations to exploit the increased opportunities for complex information

exchange with multiple partners, but also recognized the value to be gained through closer

relationships between trading partners. Amit & Zott (2001) proposed the importance of close

relationships among trading partners as a key source of advantage to both buyer and seller.

Inter-organizational relationships would arguably lead to enhanced supply chain performance and

greater potential benefits for all parties in the supply chain Lee et al., (1997). Sink & Langley

(1997) argued that many companies may not have core competencies in the operational logistics

area but profit from their ability to manage relationships with firms that do excel in logistics.

Business are increasingly relying on their suppliers relations to reduce costs, improve quality, and

develop new process and products faster than their rivals’ vendors can (Liker & Choi, 2004). For

example, some corporations set up efficient EDI connections with preferred buyers and sellers to

sign just-in-time agreements and preferred pricing Albrecht et al., (2005). Manufacturers thus

included strategic suppliers in their product design process to render more cost-effective design

choices, develop alternative conceptual solutions, select the best components and technologies

and help in design assessment (Burt & Soukup, 1985).

It is possible for organizations to work together with different partners and customers

simultaneously to reduce the time and cost of developing and introducing new products (Eng,

2004). Through relationship learning, both parties in customer-supplier relationship identified

ways to reduce or remove redundant costs, to improve quality and reliability and to increase speed

and flexibility (Selnes & Sallis, 2003). In the study of Panayides & So (2005), relationship

orientation in logistic service provider-client relationships has a positive influence on supply

chain effectiveness and indirect positive influence via supply chain effectiveness on supply chain

performance. They conceptualized effectiveness as an operational measure of competitive success

factors, such as quality, timeliness, customer service and flexibility and defined performance in

terms of cost and finance. The discussions above were encompassed in the researcher’s

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performance definition. These theories provided the evidence that if firms increased their partner

relationship in the supply chain, they are likely to improve their supply chain performance.

2.5.3 Information Sharing and Supply Chain Performance

Information sharing is about the information flow, the timeliness of information availability, and

the openness and transparency. It will affect performance apparently. For instance, the e-

marketplace provides a mechanism for companies to control, coordinate, and economize on

transaction costs, as it improves information flows and helps reduce uncertainty (Eng, 2004). The

use of IT enables far greater information to be more widely distributed, and in terms of the ability

to offer access to large catalogues of suppliers, the range of products and services available to

employees is reported to have provided far greater range flexibility (Evans & Wruster, 2001).

Malone et al., (1987) argued that this kind of electronic communication along with supply chain

allows the reduction of both the costs of coordinating economic transactions and the costs of

coordinating production. Barratt & Rosdahl (2002) claimed that ease of search and transparency

acts as an advantage to the buyer. Procurement costs are reduced through economies of supplier

search and e-marketplace to SCM are examined in three dimensions: unit cost reduction,

increased efficiency, and streamlined operations. Croom & Johnson (2003) identified three main

elements of internal service performance, namely: cost (efficiency and expenditure), process

conformance and internal customer satisfaction.

EVA =operating profit after taxes -cost of capital.

The advantage that EVA has over other measures of financial performance is that it emphasizes

and isolates activities that help to drive value creation. Those activities may be generally

categorized as revenue (e.g. new products, speed to market), cost (e.g. purchase cost, transaction

cost) and assets (e.g. inventory turns, and cycle time reduction).

This study synthesized the arguments above to develop the questionnaire. From the statements of

scholars in supply chain performance, supply chain performance was defined and included

tangible (e.g. cost) and intangible (e.g. time) factors. Through improving these factors, the supply

chain can be performed more effectively and efficiently.

2.5.4 Supply Chain Integration and Supply Chain Performance

Firms that intend to reap the strategic advantage of their participation in e-marketplaces should be

aware that their interaction with other firms requires an integration of various functional areas

within an organization and coordination with external participant organizations (Eng, 2004). As

Croom (2000) & De Boer et al., (2002) mentioned that internal process efficiencies and

automation are seen to be key drivers for increasing process efficiency. Tan et al., (2002)

supported that supply chain integration influence majorly in product quality and customer service

levels. Narasimhan & Das (2001) and Narasimhan & Kim (2002) definitely pointed that improved

integration improves the performance of both the buyer and supplier. All of these indicated that

firms which improve their supply chain integration are likely to increase their supply chain

performance.

2.6. Supplier Appraisal and Supply Chain Performance

Suppliers need to be evaluated before they are awarded tenders. The process of evaluation is

called appraisal. In the process of supplier appraisal, we use Carter’s 1995 7 Cs model which has

undergone modifications and CIPS (2011) does it effectively by incorporating other 3 Cs, the

summed up 10 Cs can be stated as: Competency of the supplier, Capacity in terms of physical,

intellectual and financial resources, Commitment like data available to control quality, control

which touches on information systems, cash which look at both financial and current assets, cost,

consistency in contract performance, culture, clean which entails even environmental policies

and communications which is integrated with information system.

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According to Lysons, (2002) supplier appraisal is essential when suppliers are not ISO certified

and the purchase involves either strategic high risk or high spend capital items. Also, it is

essential do it when we are entering into IT systems, when sourcing globally, entering into TQM

relations, negotiating outsourcing contracts and even service level agreements. Supplier appraisal

is usually situational. To appraise properly, the purchaser must look at his or her requirements.

Kaplan & Norton (1996), proposes a balanced scorecard which provides a holistic approach and

they said that the following aspects should not be ignored: Finances, production capacity and

facilities, human resources, quality, performance, environmental and ethical considerations, IT

especially on telecommunications and organizational structure. Lysons, (2002) added to Kaplan

& Norton’s proposal by adding aspects like falling profit margins, adverse press reports (if any)

supplier risk and increased stocks or slower stock turnover. Well managed appraisals leads to

efficient and effective performances (UN, 2006). CIPS, 2011 proposes that it is important to

have third party involvement in the appraisal exercise to reduce biasness. Everything must be

recorded to provide an audit trail whenever it is received via internet.

2.6.1 Supplier Appraisal and E-procurement

Van Weele’s (2005) procurement process framework coupled expending with evaluating

suppliers, demonstrating the strong link between performance and actual delivery. In many

manufacturing organizations expediting is related only to the physical delivery of products. By

combining expediting with supplier management and post contract award management, the

framework by Van Weele takes a wider view. In this wider view of expediting, procurement’s

role is assessing the achievement of purchasing objectives. It has not been established if e-

procurement can do supplier evaluation using Carters’ 7 Cs.

Post contract management of suppliers raised a further issue (McCue et al., 2007), as it reflects a

tension between audit and performance, that is, is it enough that procurement outcomes were

satisfactory or should superlative supply chain performance be the goal? Thus, for effective and

efficient supply chain performance, non biased supplier appraisal should be done. All this is

possible using Caters 7 Cs model.

2.7 Conceptual Framework

Independent Variables Dependent Variable

RESEARCH METHODOLOGY

3.1 Introduction.

According to Kothari (2003) research methodology involves details in approaches and

procedures used in carrying out studies. It includes the techniques, methods and procedures

adopted in the research. This chapter discussed the research design, target population, sample

Information Sharing

Partner Relationship

Supply Chain Integration

Supplier Appraisal

Supply Chain Performance

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and sampling procedures, research instruments, validity and reliability, data collection procedure

and data analysis techniques.

3.2 Research Design

The research design employed in this study was a mixed research design with an illustration of a

survey. According to Kothari (2003) a mixed research design uses both descriptive research

design which is qualitative and quantitative to describe the state of affairs as it exists at the

present. A descriptive research design was appropriate as the study involved fact finding to

describe e-procurement on supply chain performance and document the findings.

3.3 Target Population

Mugenda & Mugenda (1999), define population as an entire group of individuals, events or

objects having common observable characteristics. According to Sekaran, (2010) a target

population refers to all the members of a real or hypothetical set of people, events or objects to

which the researcher wishes to generalize the results of the research. The target population for

this study were the employees of Nyankoba, Kiamokama, Rianyamwamu, Nyamache, Itumbe,

Tendere and Eberege tea factories since all their functions are centralized especially those who

are directly involved with procurement. The target population comprised of employees in the

following sections.

Table 3-3 Target Population

Department Number

1 Procurement 28

2 Finance 21

3 Administration 28

4 Technical (stores) 63

Total 140

3.4 Sample and Sampling Techniques

According to Kothari (2003) sampling is the process by which a relatively small number of

individuals, objects or events is selected in order to find out something about the entire

population from which it was selected. Stratified random sampling was used in this study.

Stratified random sampling technique was suitable as it gave each respondent in every

department a chance of being selected and also ensured that all departments were represented

that deal with procurement. According to Kothari (2003) an optimum sample is the one that

fulfills the requirements of efficiency, representativeness, reliability and flexibility. This sample

should range between 10% and 30%. A sample size of 10% of the target population was

therefore involved. This gave five respondents spread throughout all the four departments.

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Table 3-4 Sample and Sampling Techniques Sample and Sampling Techniques

Department Population Sample ratio sample percentage

Procurement 28 0.1 2.8 20

Finance 21 0.1 2.1 15

Administration 28 0.1 2.8 20

Technical (stores) 63 0.1 6.3 45

Total 140 0.1 1.4 100

3.5 Data Collection Instrument

Primary data was obtained using a questionnaire. The questionnaire consisted of both open ended

and closed ended questions covering issues related to e-procurement on supply chain

performance. Open ended questions allowed free responses from the respondents and the closed

ended questions allowed responses from the respondents from limited stated alternatives where a

Likert scale was adopted. According to Mugenda & Mugenda (1999), the open ended or

unstructured questions permit greater depth of response from the respondents while the closed or

structured questions are usually easier to analyze. The Questionnaire was chosen because it was

easier for the researcher to collect a lot of information over a short period of time.

3.5.1 Validity and Reliability of Instruments

Mugenda & Mugenda (1999), defines validity as the accuracy and meaningfulness of the

inferences which are based on the research results. The questionnaire was piloted to determine its

validity. Two employees of the procurement department were given the questionnaire to fill. Test

retest method was used to attest the reliability of the instrument (Chen, 1999).

3.6 Data Collection Procedures

A brief introduction was made to the respondents before administering the questionnaire with the

aim of explaining the questionnaire. Confidentiality was assured to the respondents through the

letter of transmittal that accompanied the questionnaire.

3.7 Data Analysis Techniques

Data analysis was based on the research questions designed at the beginning of the research. The

quantitative data from the questionnaire was analyzed using the Statistical Package for the Social

Sciences (SPSS) version 17. SPSS version 17 package was used because it is a comprehensive

system for analyzing data and can take data from many types of files and use them to generate

descriptive statistics, complex statistical analysis, tabulated reports, distributions and trends. The

descriptive statistics format was also used to summarize and organize the data in order to

generalize and infer relationships.

RESULTS AND DISCUSSIONS

4.1 Rate of Respondents

The researcher prepared 140 copies of questionnaire for this study that were issued to 140

respondents. The response rate was 92.86 percent which is a good response rate that one can

depend on to make conclusions and recommendations and the non response rate was 7.14

percent. Tables showing frequencies and percentages were generated from the questionnaire

issued to various respondents in Kisii-Kenya Tea factories.

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Table 4-1 Rate of Respondents

Response Frequency Percentage (%)

Actual Response 130 92.86%

Non response 10 7.14%

Total 140 100%

4.1.1 Factory Background Information

In order to achieve the study objectives as discussed from section 4.3, the researcher found it

necessary to find out Factory history to establish awareness of the procurement processes in the

Factory. It was found out that Nyankoba Tea Factory had three hundred and forty eight

employees, Kiamokama had two hundred and ninety employees, Rianyamwamu had one

hundred and ten and this was attributed to fact of its newness, Tendere had three hundred and

thirty nine, Itumbe had two hundred and forty eight, Nyamache had three hundred and twenty

eight and Eberege had one hundred and thirty five. Overly, all Factories had four functional

departments. The number of years that have elapsed since the introduction of electronic

procurement can be summarized in the table below. In general, the procurement function had the

least employees in all the Tea Factories and the electronic procurement has not been in use for

quite a long period of time.

Table 4-1-1 Factory Background Information

Years Frequency Percentage (%)

0-5 20 15.4%

5-10 100 76.9%

Over 10 10 7.7%

Total 130 100%

4.1.2 Threshold Responses Required to Conduct Electronic Procurement

No Factory can conduct an electronic procurement exercise with less than three bidders in

response to a competitive tendering process. Twenty respondents cited 4-5 bidders as a

requirement for some Tea Factories which translates to 15.4 percent. One hundred and ten

responses said that they require six to eight bidders which is 84.6 percent. No Factory cited over

9 responses. It was found out that on average all Factories had one hundred and ten vendors in

their Chaipro ERP system. Of these 86.07 percent uses the Chaipro ERP system which

translated to an average of ninety five vendors.

4.1.3 Relevance of Electronic Procurement on Supply Chain Performance

Table 4-1-3 show that most respondents said that electronic procurement is very relevant in

Supply Chain Performance. 1.5 percent of the respondents said that it is not relevant, 3.9 percent

said that it is weakly relevant, 11.5 percent said that it is quite relevant, 29.2 percent said it is

relevant and 53.8 said that it is very relevant.

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Table 4-1-3 Relevance of Electronic Procurement on Supply Chain Performance

Grid Frequency Percentage (%)

NR 2 1.5%

WR 5 3.9%

QR 15 11.5%

R

VR

38

70

29.3%

53.4%

Total 130 100%

NT-Not Relevant WR-Weakly Relevant QR- Quite Relevant R-Relevant

VR-Very Relevant

4.2 Partner Relationship and the Performance of the Supply Chain Function

The study sought to establish whether partner relationship enhances supply chain performance

and this was consistent with research objective one. The first question was if electronic

procurement enables Tea Factories build relationships with suppliers and the responses indicated

that electronic procurement enables Tea Factories build relationships with their suppliers. 62.3

percent strongly agreed, 24.6 percent agreed, 5.4 percent were neutral, 4.6 percent disagreed and

3.1 strongly disagreed. There was a question which sought to establish if the relationships leads

to the benefits in cost, time quality and source and the responses were 56.9 percent strongly

agreed, 30 percent agreed, 4.6 percent were neutral, 4.6 disagreed and 3.9 percent strongly

disagreed. On relationship, there was a question that asked about trust in the line of business, the

responses were as follows: 10.7 percent strongly agreed, 30.8 percent agreed, 50 percent were

neutral, 4.6 percent disagreed and 3.9 percent strongly disagreed. There was a question which

asked if the Tea Factories show discontent with their vendors when using electronic

procurement, the responses were as follows: 11.5 percent strongly agreed, 30 percent agreed,

50.7 percent were neutral 3.9 percent disagreed and 3.9 percent strongly disagreed. A question

on debriefing suppliers after evaluations was asked, the responses were as follows, 82.5 percent

strongly agreed, 9.2 percent agreed, 6.2 percent were neutral, 2.3 percent disagreed, and 0.8

percent strongly disagreed. Lastly a question was asked if Tea Factories have partner

relationship with suppliers who use electronic procurement, the responses were as follows: 10.8

percent strongly agreed, 70.7 percent agreed, 10.8 neutral, 5.4 disagreed and 2.3 percent strongly

disagreed.

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Table 4-2 Partner Relationship and the Performance of the Supply Chain Function

SD D N A SA

F % F % F % F % F %

Build relationship 4 3.1% 6 4.6% 7 5.4% 32 24.6% 81 62.3%

Benefits in cost and time 5 3.9% 6 4.6% 6 4.6% 39 30% 74 56.9%

Trust 5 3.9% 6 4.6% 65 50% 40 30.8% 14 10.7%

Discontent 5 3.9% 5 3.9% 66 50.7% 39 30% 15 11.5%

Debrief 1 0.8% 3 2.3% 8 6.2% 12 9.2% 106 81.5%

Partner relationship 3 2.3% 7 5.4% 14 10.8% 92 70.7% 14 10.8%

SD-Strongly Disagree D-Disagree N-Neutral A-Agree SA-Strongly Agree

4.3 Information Sharing and the Performance of the Supply Chain Function

The study sought to establish whether information sharing enhances the performance of the

supply chain function and this was in connection with study objective two. A question was

asked whether Tea Factories provide some information to their suppliers on forecasted demand

for their products, the responses were as follows: 1.5 percent said they provide no information,

5.4 percent said they provide little information, 5.4 percent said they provide some information,

41.5 percent said they provide substantial information and 46.1 percent said they provide

detailed information. A question was asked if Tea Factories provide information to some of their

suppliers on inventory levels of products’ raw materials purchased from them and the responses

were as follows: 1.5 percent said that they provide no information, 4.6 percent said that they

provide little information, 1.5 percent said that they provide some information 44.6 percent said

that they provide substantial information and 47.7 percent said that they provide detailed

information. A question was asked about providing information to some of the Tea Factory

suppliers on product compositions and the respondents gave the following information with

regard to the question: 2.3 percent said that they give no information, 5.4 percent said that they

give little information, 4.6 percent said they do give some information, 46.1 percent do give

substantial information and 41.6 percent said that they give detailed information. A question was

asked whether Tea Factories provide information to some of their suppliers on their Research

and Development, the responses were as follows: 3.6 percent said they provide no information,

5.4 percent said that they provide little information, 4.6 percent said they provide some

information, 47 percent said they provide substantial information and 40 percent said that they

provide detailed information. There was a question which asked if Tea Factories provide

information to their suppliers on electronic procurement perceptions, the respondents tally

showed the following results: 1.5 percent said that they provide no information, 5.4 percent said

that they provide little information, 4.6 percent said that they provide some information, 41.6

said that they provide substantial information and 46.1 percent said that they provide detailed

information. The last question that was asked was on whether suppliers share information with

regard to the issues affecting tea factory business when using electronic procurement. The

responses to the question were as follows: 2.3 percent said they give no information, 4.6 percent

said they give little information, 4.6 percent also said that they give some information, 53.9

percent said that they give substantial information and 34.6 percent said that they share detailed

information.

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Table 4-3 Information Sharing and the Performance of the Supply Chain Function

NI LF SI SUI DI

F % F % F % F % F %

Forecasted Demand 2 1.5% 7 5.4% 7 5.4% 54 41.5% 60 46.1%

Inventory Levels 2 1.5% 6 4.6% 2 1.5% 58 44.6% 62 47.7%

Product Compositions 3 2.3% 7 5.4% 6 4.6% 60 46.1% 54 41.6%

R & D 4 3.0% 7 5.4% 6 4.6% 61 47% 52 40%

Procurement perceptions 2 1.5% 7 5.4% 6 4.6% 54 41.6% 60 46%

Issues affecting business 3 2.3% 6 4.6% 6 4.6% 70 53.9% 45 34.6%

NI-No Information LI-Little Information SM-Some Information SUB-Substantial Information

DI-Detailed Information

4.4 Electronic Procurement, Supply Chain Integration and their Effects on Supply Chain

Performance

According to research objective three, the questions sought to establish if electronic procurement

and supply chain integration have positive effects on supply chain performance. The first

question asked if partner relationships give positive effects on Tea Factories’ supply chain

performance and the responses were as follows: 1.5 percent said that it is to a very small extent,

5.4 percent said that it is to a small extent, 11.5 percent of the respondents said that it is to a

moderate extent, 51.5 percent said that it is to a large extent and 30 percent said that to a very

large extent. On supply chain integration a question was asked if information sharing gives

positive effects on Tea Factories’ supply chain performance and the responses were as follows:

1.5 percent said to a very small extent, 4.6 percent said to a small extent, 10.8 percent said that it

is to a moderate extent, 55.4 percent said to a large extent and 27.7 percent said to a very large

extent. A question was asked if supply chain integration is enhanced through electronic

procurement and the responses were as follows: 2.3 percent said to a very small extent, 5.4

percent said to a small extent, 10.8 percent was to a moderate extent, 70.7 percent said it was to a

large extent and 10.8 percent said that it is to a very large extent. The last question was asked if

the Tea Factories have an integrated software which enhances supply chain performance and the

responses were as follows: 0.8 said to a very small extent, 2.3 percent said to a small extent, 5.4

percent said to a moderate extent, 86.1 percent said to a large extent and 5.4 percent said to a

very large extent.

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Table 4-4 Electronic Procurement, Supply Chain Integration and their Effects on Supply

Chain Performance

VSE SE ME LE VLE

F % F % F % F % F %

Partner Relationship 2 1.5% 7 5.4% 15 11.5% 67 51.5% 39 30%

Information Sharing 2 1.5% 6 4.6% 14 10.8% 72 54.4% 94 27.7%

Supply Chain Integration 3 2.3% 7 5.4% 14 10.8% 92 70.7% 14 10.8%

Integrated Software 1 0.8% 3 2.3% 7 5.4% 112 86.1% 7 5.4%

VSE-Very Small Extent SE-Small Extent ME-Moderate Extent LE-Large Extent VRE-Very

Large Extent

4.5 Electronic Supplier Appraisal and the Performance of the Supply Chain Function in

Tea Factories

The questions sought to establish whether they were in agreement with the statement that if

electronic supplier appraisal was possible and this was in line with study objective four. The first

question asked if Tea Factories uses Electronic procurement in supplier appraisal, 100 percent of

the respondents agreed that they use electronic procurement to conduct supplier appraisal. The

second part of the question sought to ask if Carters 7Cs Model can be used in electronic supplier

appraisal and the following are the responses on each of the 7Cs: On capacity 70 percent

strongly agreed, 23.1 percent agreed, 4.6 percent were indifferent, 1.5 percent disagreed and 0.8

percent strongly disagreed. On competency the respondents gave the following: 65.4 percent

strongly agreed, 27.7 percent agreed, 4.6 percent were indifferent, 0.8 percent disagreed and 1.5

percent strongly disagreed. Electronic Supplier evaluations on control, the following were the

results: 62.3 percent strongly agreed, 24.4 percent agreed, 5.4 percent were indifferent, 4.6

percent disagreed and 3.1 percent strongly disagreed. On supplier communication, the following

was the respondents tally: 73.8 percent strongly agreed, 20.0 percent agreed, 3.1 percent were

indifferent, 1.5 percent disagreed and another 1.5 percent strongly disagreed. The question on

consistency asked if Electronic procurement can be used to evaluate supplier consistency and the

following were the results: 49.2 percent strongly agreed, 42.3 percent agreed, 5.4 percent were

indifferent, 2.3 percent disagreed and 0.8 percent strongly disagreed. The second last question

asked if Electronic procurement can be used to evaluate the supplier commitment and the tally

was as follows: 50.8 percent of the respondents strongly agreed, 33.8 percent agreed, 7.7 percent

were indifferent, 4.6 percent disagreed and 3.1 percent strongly disagreed. The last question

asked if electronic procurement can be used to evaluate the supplier costs and the tally was as

follows: 50 percent strongly agreed, 32.3 percent agreed with the question, 9.2 percent were

indifferent, 5.4 percent disagreed and 3.1 percent strongly disagreed.

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Table 4-5 Electronic Supplier Appraisal and the Performance of the Supply Chain

Function in Tea Factories

SA A I D SD

F % F % F % F % F %

Supplier Capacity 91 70% 30 23.1% 6 4.6% 2 1.5% 1 0.8%

Supplier Competency 85 65.4% 36 27.7% 6 4.6% 1 0.8% 2 1.5%

Supplier Control 81 62.3% 32 24.6% 7 5.4% 6 4.6% 4 3.1%

Supplier Communication 96 73.8% 26 20% 4 3.1% 2 1.5% 2 1.5%

Supplier Consistency 64 49.2% 55 42.3% 7 5.4% 3 2.3% 1 0.8%

Supplier Commitment 66 50.8% 44 33.8% 10 7.7% 6 4.6% 4 3.1%

Supplier costs 65 50% 42 32.3% 12 9.2% 7 5.4% 4 3.1%

SA-Strongly Agree A-Agree I-Indifferent D-Disagree SD-Strongly Disagree

4.6 Supply Chain Performance within the Supply Chain Function

The questions sought to establish the benefits accrued from using electronic procurement within

the supply chain function. The respondents said that electronic procurement leads to the

reduction in procurement costs, increased Factory efficiency, increased Factory profits and

increased competitiveness. Electronic procurement leads to the reduction in cost and the tally

from the respondents were as follows: 3.1 percent of the respondents strongly disagreed, 4.6

percent disagreed, 9.2 percent were neutral and 10.8 percent agreed and a majority of 72.3

percent strongly agreed. Electronic procurement leads to the increased Factory profits, the

respondents showed the following results: 2.3 percent strongly disagreed, 6.2 percent disagreed,

8.5 percent were neutral, 9.2 percent agreed and 63.8 percent strongly agreed. Electronic

procurement leads to increased Factory efficiency and the tally was as follows: 3.1 percent

strongly disagreed, 4.6 percent disagreed, 6.9 percent were neutral 13.1 percent agreed and 72.3

percent strongly agreed. Lastly, Electronic procurement leads to increased competitiveness

among suppliers and the responses were as follows: 0.8 percent strongly disagreed, 2.3 percent

disagreed, 6.2 percent were neutral, 9.2 percent agreed and 81.5 percent strongly agreed.

Table 4-6 Supply Chain Performance within the Supply Chain Function

SD D N A SA

F % F % F % F % F %

Reduction in Costs 4 3.1% 6 4.6% 12 9.2% 14 10.8% 94 72.3%

Increased factory Profits 3 2.3% 8 6.2% 11 8.5% 25 9.2% 83 63.8%

Increased factory efficiency 4 3.1% 6 4.6% 9 6.9% 17 13.1% 94 72.3%

Increased competitiveness 1 0.8% 3 2.3% 8 6.2% 12 9.2% 106 81.5%

SD-Strongly Disagree D-Disagree N-Neutral A-Agree SA-Strongly Agree

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SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Summary

The general research objective was to establish the determinants of e-procurement on supply

chain performance in Tea Factories in Kisii County-Kenya. Those that responded to the study

were 130 out of 140 selected respondents and that was the actual number that was used for the

analysis.

Research objective one was to find out if partner relationship enhances the performance of supply

chain function in Tea Factories. The tally from the data collected showed that partner relationship

enhances the performance of the supply chain function. Most of the respondents strongly agreed

with this.

On research objective two, it was to establish if information sharing enhances the performance of

the supply chain function in Tea Factories. Although there is weak ICT infrastructure due to the

set up of Kisii Tea Factories, The responds agreed that Tea factories shares substantial and

detailed information. This makes electronic supplier Appraisal possible.

Research objective three was to establish if electronic procurement and supply chain integration

have positive effects on supply chain performance in Tea Factories. The response showed that

electronic procurement and supply chain integration have positive effects on supply chain

performance. The response to a very large extent showed this. They confirmed that they have

innovative software that integrates their supply chain function.

Lastly, research objective four was to determine if electronic supplier appraisal is possible to

enhance the performance of the supply chain function in Tea Factories. It was confirmed that it is

possible to do electronic supplier appraisal especially by the use of Carters 7Cs model. The tally

strongly agreed from the statistical analysis of the respondents’ information.

5.2 Conclusion The researcher drew the conclusions based on the research questions which had been formulated

and they are as follows:

Does partner relationship enhance supply chain performance in Tea Factories? Partner

relationship enhances the performance of the supply chain function and this corresponds with a

62.3 percent response of who strongly agreed with this. These relationships enhance the benefits

in cost and time as 56.9 percent of the respondents said. This was in line with Johnson & Klassen

(2005) argument. This was about research question one.

Has the need for information sharing enhanced the performance of the supply chain function in

Tea Factories? Since most of the respondents to a large extent agreed that there is sharing of

information with regard to procurement perceptions, research and development, product

compositions, forecasted demand, inventory levels and issues affecting business. This can

confirm that the need to share information enhances the performance of the supply chain

function and this confirms Croom & Johnson (2003) who said that through improving these

factors, the supply chain can be performed more effectively and efficiently. This was consistent

with research question two.

Has the need to have e-procurement and supply chain integration affected supply chain

performance positively in Tea Factories? The presence of an ERP system in tea factories in

Kenya where a majority of 86.1% of the respondents agreed to its presence enhances the

performance of the supply chain function. The ERP system enhances electronic supplier

appraisal and this removes any doubt that it is not possible to use Carters 7Cs model in electronic

supplier appraisal. Thus Van Weele’s (2005) procurement process framework coupled

expending with evaluating suppliers thus demonstrating the strong link between performance and

actual delivery can be confirmed, also, Cagiano et al., (2003) argument can confirmed that those

companies that use the internet throughout their supply chain, both exchange information to a

high extent and closely integrate their systems with their partners. This was about research

question three.

Is electronic supplier appraisal possible to enhance the performance of the supply chain function

in Tea Factories? This question four was closely related to question three above as it was to seek

which of Carters 7Cs model can/cannot be used to conduct supplier evaluation electronically. It

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was only confirmed that Costs evaluation proves to be a major challenge where half of the

sample strongly agreed. But overly it is possible to conduct supplier evaluation using 7Cs which

forms the basis of all procurement evaluations.

5.3 Recommendations

This section was informed from the research questions that asked possible recommendations that

should be given to improve the procurement process in each of the four research questions.

From the study, the following are the recommendations as established by the research: There is

need to improve the current ERP Chaipro software so that it can bring on board a Purchase to

Pay (P2P) process for low value purchases. Also, there is need to modify the system to take care

of security concerns and this can enhance trust between the tea factories and its suppliers as this

will even make them move to a co-destiny relationship within the relationship spectrum.

5.4 Areas for Further Research

i. Further research should be undertaken on the following areas: The state of professional

procurement in tea factories need to be established as the supply chain function globally

is becoming complex due to advancing technology.

ii. How electronic market places affects the performance of the supply chain function and

security concerns on electronic procurement.

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