SUPPLIER RELATIONSHIP MANAGEMENT PRACTICES AND PROCUREMENT PERFORMANCE OF TEA PROCESSING FIRMS IN NANDI COUNTY, KENYA

Abstract

Tea processing firms in Kenya face unique challenges; with supplier management being the most critical. Better supplier relationship management practices enable the procurement function reduce costs in setting up deals with suppliers, foster innovation, improve quality, communication, and reduce problems related to delivery delays. Despite the implementation of supplier relationship management practices, there are still complex and strained relationships between green leaf suppliers and tea processing firms in Nandi County. Williamson Tea Limited in Nandi County has incurred annual losses of approximately 15 million as a result of engaging in business with a large number of suppliers, resulting in lapses in managing long-term relationships with suppliers, which has ultimately led in delayed deliveries, inconsistent leaf count, insufficient stock, and poor quality products due to a lack of a comprehensive approach for managing interactions with suppliers. The purpose of the study was to analyze the effect of supplier relationship management practices on the procurement performance of tea processing firms in Nandi County, Kenya. Specific objectives were to; determine the effect of supplier evaluation, examine the effect of supplier segmentation, establish the effect of supplier development, and assess the effect of supplier training on procurement performance of tea processing firms in Nandi County, Kenya. This study used resource dependence theory, networking theory, and Payne’s five forces model. A cross sectional research design was adopted on a target population of 96 respondents where census sampling technique was used and data collected from the entire sample using questionnaires. The study used positivism research philosophy. Reliability of research instruments was measured through Cronbach’s Alpha while construct validity tested through Kaiser Mayer Olkin and Barttlet’s tests. Data was analyzed using inferential and descriptive statistics and presented in form of frequency tables and percentages. Correlation results indicated that supplier evaluation, segmentation and training had a significant correlation with procurement performance given variable coefficient r; - 0.680, 0.538 and 0.378 respectively, while supplier development recorded an insignificant positive correlation with a variable coefficient - 0.471 and p- value 0.083 which is greater than 0.05. Findings indicated that supplier evaluation, supplier segmentation and supplier training had significant effect on procurement performance given coefficients -0.185, 0.063 and 0.236 respectively with p-values < 0.05 while supplier development had insignificant effect on procurement performance given p-value > 0.05. It was concluded that supplier relationship management practices affect procurement performance. It was recommended that tea processing firms in Kenya to embrace supplier evaluation, segmentation, development and training as the coefficient of determination (0.618) was an indication that approximately 62% of variations in the procurement performance measured through cost level is explained by changes in the SRM practices.