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Effect of Buyer Supplier Development on Performance of Contract Management Unit in Uasin Gishu County Government

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Buyer supplier development is important to organizations in management of contracts by minimizing operation costs in order to increase firm performance. However, the increasing number of complaints regarding failed attempts to deliver goods and
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  International Journal of Strategic Management and Procurement IJSMP) ISSN:   2664-049x   1 (3) 46-58 , October, 2019 www.oircjournals.org   Otieno and Kibet 2019) www.oircjournals.org  Effect of Buyer Supplier Development on Performance of Contract Management Unit in Uasin Gishu County Government   1 Otieno Janet Akinyi  2   Yusuf Kibet    1 Degree of Master of Science Procurement and Contract Management) 2 Lecturer, Jomo Kenyatta University of Agriculture and Technology Type of the Paper: Research Paper.  Type of Review: Peer Reviewed. Indexed in: worldwide web. Google Scholar Citation:  IJSMP  International Journal of Strategic Management and Procurement (IJSMP)  A Refereed International Journal of OIRC JOURNALS. © OIRC JOURNALS. This work is licensed under a Creative Commons Attribution-Non Commercial 4.0 International License subject to proper citation to the publication source of the work. Disclaimer :   The scholarly papers as reviewed and published by the OIRC JOURNALS, are the views and opinions of their respective authors and are not the views or opinions of the OIRC JOURNALS. The OIRC JOURNALS disclaims of any harm or loss caused due to the published content to any party. How to Cite this Paper : Otieno, J. A. and Kibet Y. W. (2019). “ Effect of Buyer Supplier Development on Performance of Contract Management Unit in Uasin Gishu County Government ” . International Journal of Research in Education and Social Sciences (IJRESS), 1(3) 46-58.    International Journal of Strategic Management and Procurement IJSMP) ISSN:   2664-049x   1 (3) 46-58 , October, 2019 www.oircjournals.org   47 | Page  Otieno and Kibet 2019) www.oircjournals.org  Effect of Buyer Supplier Development on Performance of Contract Management Unit in Uasin Gishu County Government   1 Otieno Janet Akinyi  2   Yusuf Kibet    1 Degree of Master of Science Procurement and Contract Management) 2 Lecturer, Jomo Kenyatta University of Agriculture and Technology ABSTRACT  Buyer supplier development is important to organizations in management of contracts by minimizing operation costs in order to increase  firm performance. However, the increasing number of complaints regarding failed attempts to deliver goods and services at the right time has made it impossible for some governmental projects to be completed at the stipulated time. Therefore, the study sought to assess the effect of supplier buyer development on performance of contract management unit in Uasin Gishu County Government. Social exchange theory was used in conducting the study. This study was conducted through descriptive research design. Respondents targeted by the study were county finance department staff, chief officers, department directors, ICT department staff, county revenue staff, supply chain staff and relevant stakeholders to contract management unit. The study involved 360 respondents from the County Government.  Data was collected by use of questionnaire. Reliability of research instruments was tested using Cronbach alpha 0.7. Stratified random sampling and simple random sampling was used to select the sample size of 85 respondents. The data was collected and analyzed by descriptive statistics simple frequencies and percentages and inferential statistics using multiple regression model and correlation. The study used Pearson correlation model to determine the existing relationship between the study variables. The study findings revealed that study variable buyer  supplier development β=0.162, p<0.05 positively and significantly affect the performance of contract management unit. The study concludes that supplier development effects performance of procurement function. The study recommends that contract management unit of Uasin Gishu County Government should incorporate buyer supplier development practices to improve their performances. Policy makers in public and private sector involved in partnership projects will benefit from this research finding in benchmarking their policies, assist in assessing the BSR framework of a given economy and help to understand the cycle of BSR . Introduction Performance is the measure of financial and non-financial indicators. An important factor determines the effectiveness of a sound contract management unit of an organization. The major benefit is creation of value for money and achievement of goals. To achieve this, there is need for a clear buyer supplier development plan. Organizations that implement these strategies perform much better than those that do not (Cruz & Marques, 2013). Buyer-supplier relationships refer to commercial transactions between organizations for the purchase and supply of goods or services (Mysen, 2012). A buyer-supplier development is an agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organizations but pursue mutual benefits (Khan, Liang &, Shahzad 2015). (Ferro, Padin, Svensson, & Payan, 2016) stated that there are five relationship variables (commitment, conflict, economic & non-economic satisfaction, and trust) used in developing and maintaining good buyer supplier developments. In this case, the parties that join devote towards providing resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property. The buyer-supplier development often involves transfer of knowledge and expertise, economic specialization, shared expenses and shared risk (Cruz & Marques, 2013). In relation to public sectors, the main aim of buyer-supplier relationships RTICLE INFO Received 1 st  October 2019 Received in Revised Form 11 th  October 2019 Accepted 12 th  October 2019 Published online 13 th  October 2019 Key Words buyer, supplier, development, contract, management.  International Journal of Strategic Management and Procurement IJSMP) ISSN:   2664-049x   1 (3) 46-58 , October, 2019 www.oircjournals.org   48 | Page  Otieno and Kibet 2019) www.oircjournals.org  is to reduce stiff competition and increase public service delivery (Villena, Revilla, & Choi, 2011). In this study, the measures of buyer supplier development will involve buyer-supplier development. Globally, buyer-supplier relationships have made improvements and stiffened competition by gaining greater performance of the supply chain management unit and reducing any public institution risk (Leonidou et. al. , 2011). The reasons behind involvement of public sectors on buyer-supplier relationships include revenue enhancement and cost reduction in government business operations by minimizing corruption. Khan, Liang and Shahzd (2015) examined the effect of buyer-supplier partnership and information integration on supply chain performance of Chinese manufacturing industry where the revealed that buyer-supplier development significantly affects trust and guanxi, which subsequently effects two elements of information integration, namely, quality information and real-time information and trust and guanxi play vital role in sustaining better relationship between supplier and business for long run and growth. In United States, firms have resolved to engage in buyer supplier relationships to reduce logistics costs (Coyle, et. al.,  2016). Logistics costs represent such a significant proportion of the total costs that it is possible to make major cost reductions through fundamental engineering logistics processes. The same case has also necessitated firms in Europe and Asia to consider logistics as a key point of focus for simultaneously increasing shareholder and customer value. Because of this, better supplier relations enhance supply chain performance and add to competitiveness of suppliers in the market. Improved logistics means giving the services that customers want at the lowest possible cost since it is generally accepted that the need to understand and meet customer requirements is a prerequisite for survival in a competitive environment for goods and services. In South Africa, collaboration has been related to low cost, predictable buyer supplier development and assurance of high-quality products and services in a supply chain (Staritz, 2010). Therefore, firms have resolved to integrating logistics and supply chain management to provide multiple ways of increasing efficiency and productivity in a supply chain. A privilege resulting from this has been significant reduction in unit cost thus improving organizational performance. Improved logistics means giving the services that customers want at the lowest possible cost. In summary, the need to understand and meet customer requirements is a prerequisite for survival in a competitive environment for goods and services. Firms in Kenya enhance supply chain management to achieve linkage and co-ordination between the process of other entities in the pipeline, such as suppliers, customers, and the business entity itself (Rushton, Croucher, & Baker, 2014). Buyer supplier developments including logistics support and supply chain concepts can further be enhanced through integrated systems. National and county governments through the integrated Financial Management Systems (IFMIS) ensure delivery of quality products and services in the supply chain. It facilitates planning and coordinating the materials flow from source to customer seamlessly rather than managing the goods flow as a series of independent activities (Hendriks, 2013). Statement of the Problem Contract management unit performance is measured by reduced number of complaints regarding failed attempts to deliver goods and services at the right time (Handfield, Cousins, Lawson, & Petersen, 2015). This has made it impossible for some governmental projects to be completed at the stipulated time. Moreover, public institutions have failed to purchase high quality goods and services at a considerate price. Project rate completion has been reported to be low in public institution. For instance, quite often operations of public universities have come to a halt due to delay of supplies of critical items or worse still failure by suppliers to supply critical items required for day to day operations (Njoroge, & Gathungu, 2013). Most of the public sectors are still lagging behind in terms of supply chain unit performance. Leonidou Palihawadana, Chari and Leonidou (2011) asserts that public sectors are faced with challenges of maintaining effective distributing of goods and services to the relevant functions that they are mandated with. It is a common practice seen in public sectors where majority of suppliers are underpaid and thus resulting into lack of motivation towards achieving targets set by public sectors (Leonidou et. al. , 2011). In an ideal situation, the task of a supply chain management unit is to increase effective flow of goods and services to an institution (Fredendall, & Hill, 2016). However, in low-income countries, most public institutions have not been able to advance their communication strategies. There is less communication between buyers and suppliers, given that information and communication technology related facilities have not been put into consideration in most public sector partnership. As such Lotfi, Mukhtar, Sahran, & Zadeh, 2013) did a study on information sharing in supply chain  International Journal of Strategic Management and Procurement IJSMP) ISSN:   2664-049x   1 (3) 46-58 , October, 2019 www.oircjournals.org   49 | Page  Otieno and Kibet 2019) www.oircjournals.org  management in manufacturing sector. Rashed Abdullahil and Zaheed (2010) did another study on effect of information and knowledge sharing on supply chain performance in Bangladeshi readymade garments industry. (Khan, Liang, & Shahzad, 2015) did a study on the effect of buyer-supplier partnership and information integration among Chinese manufacturing industry. There are fewer studies based on buyer supplier development in public sectors of middle-income countries including Kenya thus creating a huge knowledge gap. This study therefore seeks to establish the effect of buyer-supplier development on the performance of contract management unit in Uasin Gishu County Government, Kenya.   Objective of the Study The objective of the study was to assess the effect of buyer supplier development and performance of contract management unit in Uasin Gishu County Government. Research Hypothesis H 01:    Buyer supplier development has no  significant on the performance of contract  management unit in Uasin Gishu County Government.   Theoretical Review This study was guided by social exchange theory. Social Exchange Theory The study was guided by Social exchange theory developed by Homans in 1983. The theory is a concept based on the notion that a relationship between two people (buyer and supplier) is created through a process of cost-benefit analysis. The theory is designed to determine the effort poured in by an individual in a person-to-person relationship. The measurement of the pluses and minuses of a relationship may produce transaction that can determine if either buyer or supplier is putting too much effort into a relationship. The theory is unique in the sense that it doesn’t necessarily measure  relationships on emotional metrics (Albert & Tullis, 2013). Rather, its systematic processes rely on mathematics and logic to determine balance within supplier-buyer relationship. While the theory can be used to measure supplier buyer relationships, it can also be applied to determine the balance within their development (Igarashi, Boer, & Fet, 2013). The foundation of social exchange theory rests on several core assumptions regarding human nature and the nature of relationships. The first assumption is that humans tend to seek out rewards and avoid punishments. Another tenet is the assumption that a person begins an interaction to gain maximum profit with minimal cost. A third assumption is that individuals tend to calculate the profit and cost before engaging. Finally, the theory assumes that  people know that this “payoff” will vary from person to person, as well as with the same person over time (Priporas, Stylos, Rahimi & Vedanthachari, 2017). These levels of expectation can often work in conjunction with another core concept of the theory’s functionality: costs vs. benefits. This is  perhaps the theory’s most known commodity, as it establishes a “give and take” metric that can be analyzed to determine how much effort one party may be putting into the relationship. The relevant of this theory to the study is that the costs component in the theory are things that a buyer or supplier may see as a negative in a relationship. Benefits component of the theory are traits that buyer or supplier may see as positive attributes. The partner who’s always willing to lend an ear in times of trouble may offer plenty of benefits. A worthwhile relationship will be as far away from the cost category as possible. Even if there are a few costs involved in the relationship and human behavior dictates there probably will be if enough positive traits outweigh the negative traits, then the costs hold no value. The criticism of social exchange theory is that it lacks sufficient theoretical precision, and thus has limited utility (Cropanzano, Anthony, Daniels & Hall, 2017). Scholars who apply social exchange theory are able to explain many social phenomena in post hoc manner but are severely limited in their ability to make useful a priori predictions regarding workplace behavior (Sheer, 2015). Empirical Review This section presents past studies done on buyer supplier development. Supplier Evaluation and Service Delivery Kadir, Tam and Hassan (2011) made a case study in Malaysian automotive industry on Patterns of Supplier Learning. The study used a case study approach and used interviews as the main collection tool and questionnaire as the supplementary tool. The study sample 8 respondents to provide the needed information. The study found that buyer-supplier agreement programs support the development of a supplier's capabilities usually with the assistance of a buyer. Buyer-supplier development also depends on supplier’s interest and how they explore them self to increase their capabilities. The study used a case study approach with a small sample size and therefore the data collected cannot necessarily be generalized to the wider population. Lukhoba and Muturi (2015) conducted study on the effect of buyer-supplier agreement on supplier performance: a survey of food manufacturing  International Journal of Strategic Management and Procurement IJSMP) ISSN:   2664-049x   1 (3) 46-58 , October, 2019 www.oircjournals.org   50 | Page  Otieno and Kibet 2019) www.oircjournals.org  companies in Kisumu County. The study used descriptive survey and the study population of was 30. However, some qualitative data were collected from the open-ended questions. Secondary data was involved in the collection and analysis of published material and information from other sources such as annual reports, published data. The study concluded that early supplier involvement, financial support, supplier training and supplier incentives have a positive effect on supplier performance. The study established that the benefits that accrue from buyer-supplier agreement programs include improved delivery performance, reduced lead-time, getting materials of the right quality with minimum defects and lowering the costs. This study only focused on only the supplier as the dependent variable other than supply chain units. Wachiuri, Waiganjo and Oballah (2015) focused on the role of buyer-supplier agreement on organizational performance of manufacturing industry in Kenya. A descriptive case study design was used. Statistical analysis was carried out using SPSS. The target population was the manufacturing industry in Kenya. The sampling technique used in this study was stratified random technique. Out of target population of 150 a sample size of 50 respondents were selected. Open and closed questionnaire were used as research instrument for this study. The study concludes that indeed buyer-supplier agreement is crucial in improving the supplier performance and the organization performance. The study established a significant positive relationship between three elements of buyer-supplier agreement namely financial support, rewards and firm involvement and organization performance; therefore, firms in manufacturing industry ought to engage more in activities that help improve the operations of their suppliers. However, this study used a cases study research design, which has its limitation. Data obtained from a case study cannot necessarily be generalized to the wider population. Also, data was collected only from the manufacturing industry. Other sectors may give different opinions. Makokha Nambuswa, Namusonge and Nambuswa (2017) did a study on the effect of buyer-supplier agreement on procurement performance in Bungoma County. Descriptive research design through a case study on Nzoia Sugar Company in Bungoma County was used to undertake the study. Data was collected from a 96 out of the initial target of 116 respondents. Descriptive statistics like means, frequencies and percentages were used. In addition, Pearson correlation was used to show the correlation between the variables which revealed a positive and significant results between supplier incentive and procurement performance (p<0.01, r = 0.716). Findings of the study revealed that buyer-supplier agreement positively effects performance. This study is limited to Kakamega County only. Conceptual Framework Conceptual framework displays the relationship between buyer supplier development and performance of contract management units. The independent variable is hypothesized to affect the dependent variable, which was performance of contract management units. Independent Variables Dependent Variable Figure 1 Conceptual Framework Research Methodology Research Design The study adopted descriptive research design in conducting the study. According to Kothari & Garg (2014), descriptive design involves fact finding enquires of kinds, where the researcher has no control of the variables and can only report what has happened or what is happening. The design was appropriate for this study because it enabled description of the situation and establishment of the relationship between the variables. The study utilized both quantitative and qualitative research approaches that are ideal in collection of data questionnaire. Quantitative research approach was relevant to the study as it enhanced the collection of numeric data from a large number of respondents. Target Population Target population refers to all members of a hypothetical set of people, events of subjects to which a researcher wishes to generalize the result of the study (Ngechu, 2017). The target population was Buyer Supplier Development    Supplier involvement    Supplier training    Supplier incentives Performance of Contract Management Unit    No. of Deliveries    Quality of Services/Goods    Timely Delivery    Cost reduction
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