Académique Documents
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KENYA
BY
UNIVERSITY OF NAIROBI
OCTOBER 2013
DECLARATION
I declare that this research project is my original work and has not been submitted to any
Signed…………………………………………………………Date……….……………
D61/60079/2011
This research project was submitted for assessment with my authority as the university
supervisor
Signed…………………………………………………Date………………………………
Michael K. Chirchir
Lecturer
ii
DEDICATION
Cherop and Adriel Chebet. There is no doubt in my mind that without their support,
iii
ACKNOWLEDGEMENT
and Mr. Peterson Magutu as I conducted this study. I also appreciate the support from my
friends Mercy Muthoni, Fred, Wilfred Mwigio and Rachael Githii for their ideas,
feedback, advice and assistance. To my respondents your input was very instrumental for
the success of this study. Special thanks to the University of Nairobi for offering me an
opportunity to undertake this research and for your well equipped modern library. To the
whole Walter Reed Fraternity you played a role in one way or another towards this
To my dear parents and siblings, thank you for your endless support, love and
encouragement without which this journey would not be complete. To Pauline Kangai
and Judy Gacheri, thank you for your support during this period.
(Cherop and Chebet) for your endless love and support .You always inspire me.
iv
LIST OF TABLES
v
LIST OF FIGURES
vi
TABLE OF CONTENTS
DECLARATION ............................................................................................................................. ii
ACKNOWLEDGEMENT .............................................................................................................. iv
ABSTRACT..................................................................................................................................... x
INTRODUCTION ........................................................................................................................... 1
vii
2.3.1.1 Internal Supply Chain Integration ...................................................................................... 18
METHODOLOGY ........................................................................................................................ 22
CHAPTER FOUR.......................................................................................................................... 26
viii
Table 4.5: Total Variance Explained .............................................................................31
REFERENCES .............................................................................................................................. 40
APPENDICES ............................................................................................................................... 43
Introduction .................................................................................................................................... 43
ix
ABSTRACT
Nairobi. In order to fill this gap the study sought answers to the following three important
among large manufacturing firms in Nairobi? And what is the impact of e-procurement
Nairobi? This study took the form of a descriptive research design and data was
collected through a structured questionnaire from supply chain managers of large scale
regression analysis were used to analyse the data. It was revealed that the firms share
aspects have not been implemented by these firms. Five barriers to e-procurement
implementation were revealed and they include: getting users to accept the system; lack
other stakeholders and lack of enough finances to support the system implementation.
large scale manufacturing firms in Nairobi. The study recommends that large scale
manufacturers in Nairobi should link their suppliers. It will also be important to conduct a
x
CHAPTER ONE
INTRODUCTION
1.1. Background of the Study
The invention of the internet has completely transformed the way most business
organizations operate. Initially the internet was used only as a scientific network but in
the contemporary world, it has relevant and very important applications in most business
electronic systems of handling transactions have left most modern organizations with few
alternatives other than implementing them if they have to remain in business. Electronic
applications of internet and information technology that has transformed the scope and
speed of business transactions in many organizations across the globe. E-commerce has
also enabled many organizations to carry out specific supply chain functions such as
most important and critical subsets of supply chain management. It has transformed the
are now transacting large volumes of procurement transactions through the internet and
this is viewed as a strategic advantage to the organizations that have already embraced
the practice (Kauffmann and Mohtad, 2002). Information technology is very essential in
1
solutions aimed at simplifying commercial transactions within and between organizations
and information technology solutions for ordering, logistics and handling systems as well
developments in the purchasing process ( Neef 2001). E-Procurement is now able to offer
benefits to organizations through purchase process efficiency gains and price reductions;
internal service and statutes of the purchasing function (Croom & Johnston, 2003).
services and managing their inflow into an organization toward the end user. It includes
obtaining manufacturing supplies for an assembly line as well as obtaining paper and
pencils for a bank (Zenz and Thompson 1994). Procurement is one of the most important
internal customers in need of material to fulfill their tasks and external suppliers
providing goods and services. The main purpose of this function is to bridge multiple
balance participants' different goals and objectives. Procurement provides a chance for
organizations to exercise the best control over the cost and quality of purchased goods
2
Electronic procurement is the utilization of information technologies to facilitate
business-to-business (B2B) purchase transactions for materials and services (Wu et al.;
2007). Electronic procurement has been made possible by the development of such
platforms like the internet and the worldwide web that have made it possible to
communicate and share information between various stakeholders in both the upstream
and downstream sides of the supply chain. For organizations to reap the benefits of e-
as the importance of leveraging the capabilities of the Internet for procurement activities.
Among the most attractive features of B2B procurement transactions on the Internet is
the fact that buyers do not need to make costly long-term commitments to dedicated and
hard-wired procurement systems associated with electronic data interchange (Dai and
Kauffman, 2002).
feature of proprietary EDI systems that may keep firms from switching to the open B2B
supply chain and procurement platforms, these delays may be reinforced by the supply
risks and uncertainties that are associated with this new generation of Internet-based
systems support. An important aspect of the value that a buyer might place upon Internet-
3
based procurement can be tied to the extent to which procurement activities occur on a
regular or irregular basis, involving the same or different trade partners, for supply items
whose prices are relatively stable or tend to float in a wide enough band so as to create
financial risk in procurement. In addition, other concerns relate to the potential for
Internet security breaches, supply discontinuities due to the bankruptcy of a smaller on-
line supplier, and procedural difficulties in financial settlement (Kauffmann and Mohtad,
2002).
approach that develops seamless linkages between the various actors, levels, and
functions within a supply chain to optimize customer service. The objectives of supply
chain integration are to improve efficiency and reduce redundancy while also enhancing
product availability. Supply chain integration strives to better connect demand with
supply, which can both improve customer service and lower costs. However, it is not
always possible to simultaneously achieve all these various objectives; a designer may
need to make tradeoffs and balance competing priorities while working toward the
product or service to a customer. These relationships have always involved some degree
of collaboration to solve bottlenecks in the supply chain and overcome bumps in demand
meetings to facilitate supply chain activities in traditional organizations. The speed with
4
which information travelled limited the utility of that information (Westbrook, 2002). As
communication and Information Technology (IT) solutions became more common and
user-friendly from the 1960’s to the present, the FAX machine and computer enabled
companies to extend the reach of information at faster speeds. Coupling this with more
efficient means of transportation, goods were able to move greater distances at higher
rates of speed. Increased reach and speed of information and the physical flow of goods
shortened inventory cycle times, as well as time to market. The supply chain was
becoming more fluid, but was far from being integrated. Today, the Internet has allowed
that typically do business with each other come together via the connectivity of the
Internet. Companies can collaborate and communicate with each other through a single
Internet interface. When all the participants in the supply chain become connected
electronically, allowing the unfettered flow of information, the supply chain becomes
chains in a system-to-system manner, minimizing the need for human contact, human
data entry or any sort of human involvement. Moreover, data can move in real-time and
disparities in size of companies are becoming less critical as software providers come up
with solutions that allow small companies to connect with large customers through the
Web. While the applications to connect companies with their trading partners are far from
(VAN) that charges a per-transaction fee for data transmission. E-Commerce is driving a
5
revolution of the supply chain, as we have known it. With processes that once took days
or week now taking minutes to perform, the potential for cost savings through improved
efficiency is greater than ever. Fortuitously, e-Commerce solution providers have come
forward with new tools that enable supply chain participants the opportunity to connect
and collaborate via web-based networks. While analysts, consultants, solutions providers
and enterprises continue to debate how companies ultimately will integrate those new
tools into their operations and the shape of the supply chain of the future, there is a
consensus forming around one vision for the next-generation supply chain. The
Kenya has a large manufacturing sector serving both the local market and exports
to the East African region. The manufacturing sector which is dominated by subsidiaries
manufacturing methods and supply chain management in order to handle the changes that
are brought by the dynamic business environment. Manufacturing firms also need
strategies that can enhance supply chain integration for the sole purpose of managing
efficient flow of goods from the point of production to the end user. Firms in the
Parker and Torres (1994) manufacturing firms in Kenya can be classified based on the
6
quality of service or production, the size of the work force, and the numbers of facilities.
Awino and Gituro (2011) also indicate that manufacturing firms in Kenya can be
classified on the basis of the number of employees they have engaged. They further assert
that large scale manufacturing firms have more than 100 workers; medium firms have
from 51 to 100 workers while small scale manufacturing firms have between 11 to 50
workers.
2011). Most contemporary organizations are faced with a lot of competition and there is
need for them to reduce costs and increase their profitability. E-procurement has not only
the ability to reduce the costs and increase profitability but also to enhance integration
both within the firm and across the entire supply chain (Pearcy, Parker and Giunipero,
2008).
Manufacturing firms play a very significant role of serving the entire East African
region. With such a wide market, there is need for these companies to have in place an
efficient and effective procurement system that can enhance their production activities.
Manufacturing companies in Kenya need to source for cheaper raw materials from any
market and this can only be made possible if the firms embrace the concept of e-
procurement. Collaboration with other firms who part of their supply chain is also very
7
essential since it leads to integration of the supply chain. Implementation of e-
manufacturing firms.
There are a number of studies that have been conducted on e-procurement both
locally and globally. For instance Giner (2011) confirmed that a properly implemented e-
procurement system can connect companies and their business processes directly with
suppliers while managing all interactions between them. A good e-procurement system
helps a firm organize its interactions with its most crucial suppliers. It is evident that
although this study focuses on e-procurement, it fails to address the role played by the
Another study carried out by Mauti (2012) found out that there are five main
acceptance of e-procurement systems and top management support. The study also
procurement approval by company board, existence of old IT equipment among the firms
that need overhaul and lack of managerial support affect e-procurement implementation
by large scale manufacturing firms in Nairobi. This study however did not indicate how
e-procurement can assist in both internal and external integration of the supply chain.
8
Kabuga (2012) also in his study revealed that the methodologies adopted by large
management and the control movement of materials using the Kanban system and the
in all procurement cycles, reduce lead time, reduce inventory, reduce cost, improved
customer satisfaction and improved demand management. The major focus of this study
was on lean procurement hence falls short of substantial literature on e-procurement and
have focused on the extent of e-procurement implementation and its impact on supply
chain integration. This is a gap that needed to be filled hence this study sought to seal the
existing gap by seeking answers to the following three important questions: what is the
Nairobi?
9
iii. To establish the impact of e-procurement implementation on SC
The findings of this study will be beneficial to a number of people. For instance,
those who have academic interest in e-procurement and supply chain integration will be
able to get access to the study as part of the existing literature in the field. The study will
The findings will also be important to other manufacturing firms in Kenya. They
will use the findings as a benchmark for best practice in procurement practices. For those
intending to implement e-procurement, the report will assist them in understanding the
Large scale manufacturing companies in Nairobi will also be able to get a better
enable them to come up with effective policies on e-procurement in order to unlock its
10
CHAPTER TWO
LITERATURE REVIEW
2.1 E-Procurement
and sale of supplies, work and services through the Internet as well as other information
and networking systems, such as Electronic Data Interchange and Enterprise Resource
Planning (Baily, 2008). The essence of e-procurement Web sites is to allow qualified and
registered users to look for buyers or sellers of goods and services. It enables buyers or
sellers to specify costs or invite bids for the various products they have on offer.
Transactions can be initiated and completed using the electronic media. Ongoing
purchases may qualify customers for volume discounts or special offers. E-procurement
software may make it possible to automate some buying and selling. Companies
expected to be integrated into the wider Purchase-to-pay (P2P) value chain with the trend
application that includes features for supplier management and complex auctions (Baily,
2008).
adopt any option of e-procurement depending on the needs of the company. There are
11
seven main types of e-procurement options that companies can choose from: The first
option is a Web-based Enterprise Resource Planning (ERP) system that can be used in
creating and approving purchasing requisitions, placing purchase orders and receiving
goods and services by using a software system based on Internet technology; the other
type is e- Maintenance, Repair and Overhaul (MRO) which also serves as a web-based
ERP only that the goods and services ordered are non-product related MRO supplies;
There is also e-sourcing which involves identifying new suppliers for a specific category
procurement option that entails sending requests for information and prices to suppliers
and receiving the responses of suppliers using internet technology; e-reverse auctioning
that uses internet technology to buy goods and services from a number of known or
purchasing information both from and to internal and external parties using Internet
technology and e-market sites which expands on Web-based ERP to open up value
value chain is involved in the preparation of tenders and it usually optional, with
works and goods differ slightly in that in works procurement, administrative approval and
technical sanction are obtained in electronic format whereas in goods procurement, indent
12
generation activity is done online. E-procurement has almost similar elements like the
manual procurement process. It contains request for information, request for proposal and
request for quotation. Podlogar (2007) further argues that, the main elements in the e-
procurement are buyers, suppliers and Internet access system. Through this system, the
buyer can input their needs using the e-catalog included in the e-procurement program,
these needs are the request for procurement. The entire process is totally automated
through the electronic interchange. The approval is accomplished online, helping cutting
deliberate effort made by keen e-procurement performers who have long-term, well-
thought-out strategies for the implementation process. Many e-procurement systems are
implemented in phases, with each new phase building off the successes and lesson
learned for subsequent phases. The AberdeenGroup, Inc. (2005) indicates that best
practices in e-Procurement have many things in common which include: Soliciting top
management support to help drive system compliance and ensure sufficient funding and
resources are made available; focusing on ease of use to improve end users’ acceptance
solutions and having in place a clear definition and reinforcement metrics for measuring
13
2. 2 Barriers of E-procurement Implementation
business environment they must manage the integration of business, technology, people,
and processes both within and outside the enterprise. One of the ways through which this
integration can be achieved is through Supply Chain Management (SCM) system which
business partners. Supply chain integration can bring benefits and competitive advantage
organizations. There are key elements of supply chain integration that must be adopted
such as process integration and redesign if integration has to succeed (Awad and Nassar,
2010). Supply chain integration may also involve installation of Enterprise Resource
Planning (ERP) systems and ensuring they communicate or interface with legacy
systems, but it also involves integrating ERP and SCM systems with Customer
procurement and e-marketplaces, as well as making them available over the Web to foster
cooperation and collaboration across the entire value chain. Organizations implementing
that during the early days of e-procurement, buying enterprises and solution providers
underestimated the time, effort, and resources required to enable suppliers to transact
14
business electronically but they realized later how paramount it is. Organizations that
approaches. Though tremendous progress has been made in supplier enablement, all
involved parties such as end users, suppliers, and solution providers – continue to work to
The other challenge mentioned by the AberdeenGroup, Inc. (2005) is that of user
adoption. Individual end users and entire business units will naturally resist any change in
business processes that takes away buying power and buying flexibility. Over the past
few years, user adoption has increased at essentially the same pace as the increase in
suppliers enabled. With more products and suppliers on the e-procurement system, users
have less reason to try to circumvent the system. However, there are several factors that
bases by site or region, and a lack of executive mandates or policies to drive adoption and
system compliance. AberdeenGroup, Inc. (2005) further argue that most leading
organizations have worked on user adoption for years thus becoming benchmarks of e-
The issue of budget and policy is also of paramount importance and can be a great
challenge for most organizations since most organizations do not understand the benefits
15
According to Awad and Nassar (2010) organizations implementing supply chain
integration may face a myriad of technical related barriers. For instance supply chain
adopt ERP systems that in most cases fail to integrate all the functions as required. This
makes it difficult to integrate the business functions with the e-procurement system.
According to Flynn, Huo and Zhao (2010) supply chain integration is defined as
“the degree to which a manufacturer strategically collaborates with its supply chain
achieve effective and efficient flows of product and services, information, money and
decisions to provide maximum value to the customer”. Another definition of supply chain
supply chain partners for building and maintaining a seamless conduit for the precise and
timely flow of information materials and finished goods. Therefore, supply chain
integration entails collaboration and coordination either in the company between different
departments or functions or with supply chain partners. Supply chain integration has
attracted several researchers in the last one decade but the theoretical foundation of
supply chain integration lies in Porter’s Value Chain Model (Porter, 1985), where he
The supply chain linkages exist in two major forms: There are inter-firm linkages
and also intra-firm linkages. The former type of collaboration and coordination draws the
16
concept of internal integration, which will be out of the scope of this paper, while the
integration, they fail to determine the depth of these relations. The term depth in this case
is an indicator, demonstrating how strong the inter-dependencies between two parties are.
A good example for different kind of relationships could be given from the procurement
literature, where the relationships with suppliers that provide non-crucial goods, which
can be readily found in the market from another supplier, are not as deep and important
as with a supplier, who provides a strategic good to the company. Hansen et al. (2009)
length and the strongest is joint venture. Emmelheinz and Gardner (1996). Some
researchers also believe that supply chain integration can be explained in form of
processes such as supply chain process integration. A business process can be defined as
structured and measured set of activities with specified business outcomes for customers.
The SCOR model (Supply chain council, 2003) divides supply chain management into
several main business processes and further even more sub-processes. While it
accentuates on the process view of the supply chain, this model also presents supplier and
customers connections to illustrate the whole chain. That is the reason to include SCOR
17
2.3.1 Levels of Supply Chain Integration
Supply chain integration can occur at two main levels. The first level of supply
chain integration happen within the organization and is called internal supply chain
integration while the second form of supply chain integration occurs outside the
organization and it is called external supply chain integration. These two levels of
The internal supply chain integration involves the function to function integration
within the organization. This is usually the primary step of integrating the supply chain
integration. High internal integration can reach a level of collaborative internal operation,
with which the whole firm works like an integrated system that results in better
order-to delivery lead times (Harrison et al, 2008). Moreover, high internal integration is
also the foundation of high external integration. Gimenez (2006) confirms that the
highest levels of external supply chain integration are achieved by firms which have
already achieved the highest levels of internal integration between logistics, production
and marketing.
Integrating the internal supply chain mainly focuses on the processes of the
reengineering (BPR) that enables the firm to build a borderless flat organization
18
combined with ICT-based advanced production modes, such as manufacturing resources
planning (MRPII) ERP (enterprise resources planning), lean production and agile
of performance such as reduction in cost, enhanced quality, better service, and speed
outcomes instead of tasks; having those who use the output of the process perform the
process; subsuming information-processing work into the real work that produces the
linking parallel activities instead of integrating their results; putting the decision point
where the work is performed, and build control into the process and capturing the
cross-border operational integration in the supply chain which can place customer and
integration is a relative new concept, which integrates a firm’s logistics with external
logistics of suppliers and customers by the excellent collaboration between the partners.
High external integration has some features like: increased logistics transactions with
suppliers and customers; increased logistics collaboration between the focal firm with
their customers and suppliers; more indistinct organizational boundary between partners
in logistics collaboration. External integration makes the supply chain operate like a real
19
physical entity to gain more powerful competitive advantage (Huo, Jiang, Jia and Li,
2008).
High external integration can be divided into supply chain operation and
collaborative supply chain operation based on the internal integration level of each firms.
The former one is high external integration with low internal external integration which
rarely exists. The latter one is a real high integration type based on high internal
integration and high external integration and it is the most common form of external
organization, which is like a physical entity with high competency. External integration
can be divided into three basic types according to the partner along the material flow -
supplier integration, distributor integration and customer integration (Huo et al., 2008).
20
2.4 Conceptual Framework
Sharing information
Linking suppliers
Customer relationship
management Supply Chain
Integration
Advertising tenders online
Electronic internal
procurement
Networking of branches
Source: Author
From the conceptual framework above, it is clear that there are a number of e-
online and electronic internal procurement. All these functions are independent variables
21
CHAPTER THREE
METHODOLOGY
3.1 Introduction
This chapter presents the methodology that was adopted in this study. Among the
elements discussed in this section are the research methodology the researcher employed
in carrying out the study; the target population from which the sample size was selected;
the sample size and the techniques that were used to select the same; the type of data that
was collected and the instruments that were used to collect the data as well as the
techniques that were applied in analyzing the data that was collected.
This study adopted a descriptive research design. Burns and Grove indicate that a
descriptive research design is important when trying to give a picture of a situation the
way it is without any manipulation of existing variables. Descriptive study was chosen
for this study since it enabled the researcher to involve both qualitative and quantitative
This study targeted all the large scale manufacturing firms in Nairobi. The Kenya
Association of manufacturers (2013) indicates that there are approximately 455 large
scale manufacturing companies in Nairobi. This implies that the population of this study
was therefore 455 large scale manufacturing firms that are based in Nairobi. Large scale
manufacturing firms were chosen due to the complexity in the nature of demand and
22
supply needs of large manufacturing firms, they stood a very high chance to benefit from
the results of e-procurement implementation and supply chain integration which can
enhance their competitive edge in both the local and global market.
manufacturing companies in Nairobi are divided into a total of 12 sectors. This study
adopted stratified sampling in selecting the firms that were included in the study. In order
to select the sample size, the study adopted Cooper and Schindler (2006) formula which
was also used by Mauti (2012) in identifying a sample size from the large scale
Sample size
455
This implies that the study involved 46 large scale manufacturing firms that were
selected through stratified sampling as indicated in table 3.1. In order to improve on the
23
Table 3.1: Sampling Design
Sector No. of Firms Percentage in Sector Respondents
Building 6 1.3 1
Food, Beverages 100 22 10
Chemical 62 13.6 6
Energy 42 9.2 4
Plastics 54 11.9 5
Textile 38 8.4 4
Wood Products 22 4.8 2
Pharmaceutical 20 4.4 2
Metal and Allied 38 8.4 4
Leather 8 1.8 1
Motor 17 3.7 2
Paper 48 10.5 5
Total 455 100 46
This study made use of both qualitative and quantitative data. The data was
assistants. The questionnaire was in form of Likert scale. It had four sets of questions that
were presented in form of sections. Section A contained questions on the general profile
scale manufacturing firms. The questionnaires were administered using both drop and
24
3.6 Data Analysis
Since the data collected was in qualitative and quantitative form, the study
adopted both qualitative and quantitative methods of data analysis. In order to determine
frequencies and percentages were used. The study also utilized factor analysis to establish
large scale manufacturing firms in Nairobi. The findings were presented in form of tables
and graphs. The following regression model was used to establish the impact of e-
25
CHAPTER FOUR
implementation and supply chain integration among large scale manufacturing firms in
Nairobi. The study had three objectives to achieve: to determine the extent of e-
among large scale manufacturing firms in Nairobi. Data was successfully collected from
that the study was able to achieve a 100% response rate since the sample size was 46
large scale manufacturing firms. The findings from the study are presented next.
scale manufacturing firms they worked for. The aim of this information was to assist the
26
It is evident from the findings as illustrated in Table 4.1 that 58.7% of the large
scale manufacturing firms in Nairobi have been in operation for more than 15 years;
19.6% have been in operation for between 11-15 years; 17.4% of the large scale
manufacturing firms have been in operation for between 6-10 years whereas 4.3% have
been in operation for less than five years. The results confirm that most of the large scale
manufacturing firms have been in operation for a long period and have relatively
27
The findings from the study as illustrated in the bar chart above confirm that
approximately 60% of the large scale manufacturing firms have between 201 to 300
employees; 26% of the large scale manufacturing firms have more than 300 employees;
11% of the large scale manufacturing firms have between 101 to 200 employees while
2.2% have less than 100 employees. The results therefore reveal that majority of the large
scale manufacturing firms have more than 200 employees and hence are large enough to
respondents were provided with a set of seven questions that were meant to establish the
extent of implementation. The results from their responses are discussed below.
The researcher sought to find out whether large scale manufacturing firms in
Nairobi have a technology in place that allows the various departments within the
organization to share information. The findings tabulated in Table 4.3 confirm that
electronic internal procurement has a mean of 1.472 an indication that it is largely done
28
among the large scale manufacturing firms. Sharing of information among departments
had a mean of 2.314; centralization of procurement activities had a mean of 2.168 and
use of EDI to link other customers a mean of 2.368. This implies that the respondents
agreed that these three practices are common among large scale manufacturing firms.
procurement. The respondents were provided with a set of ten challenges to respond to
using a scale of 1-5 where 1 represented strongly agree and 5 represented strongly
disagree. The responses were subjected to factor analysis in order to establish the
challenges that have a lot of impact on the implementation of e-procurement among large
scale manufacturing firms in Nairobi. The findings are discussed and illustrated next.
29
Table 4.4 Communalities
Communalities
Initial Extraction
challenges in linking all
1.000 .881
suppliers
Getting users to accept the
1.000 .898
system is a huddle
Lack of enough finances to
support the system 1.000 .886
implementation
Top management not
1.000 .235
supporting the system
Lack of internal integration of
1.000 .586
functions
Resistance from employees 1.000 .840
ERP systems that do not meet
1.000 .615
all company requirements
Lack of willingness from other
1.000 .854
stakeholders
Resistance from suppliers 1.000 .678
Lack of capacity to integrate by
1.000 .728
other companies
Table 4.4 indicates the total number of challenges that were subjected to factor
analysis with the aim of establishing the ones that have more weight based on the
responses that were provided by the respondents. The ten challenges are: challenges in
linking all suppliers; Getting users to accept the system is a huddle; Lack of enough
finances to support the system implementation; Top management not supporting the
systems that do not meet all company requirements; Lack of willingness from other
30
companies. All these challenges before being subjected to factor analysis are assumed to
have equal weights in form of eigenvalues hence each has one eigenvalue.
The results illustrated in Table 4.5 confirms that after subjecting the ten
challenges to factor analysis, those challenges with more than 1 eigenvalue were
procurement among large scale manufacturing firms in Nairobi. The first challenge
challenge explains 16.158% of the variance; the third challenge explains 13..328% of the
variance; the fourth challenge explains 12.214% of the variance while the fifth challenge
manufacturing firms in Nairobi. In total the five challenges that were extracted explain
31
more than 70% of the variance on implementation of e-procurement among large scale
From Figure 4.5 above, it is evident that among the ten challenges that were
subjected to factor analysis, only five were extracted up to component number five where
the steep slope ends. Figure 4.2 is a graphical representation of the weights of each of the
ten challenges.
32
Table 4.6: Component Matrix
a
Component Matrix
Component
1 2 3 4 5
It is evident from the results illustrated on table 4.6 that getting users to accept the
system is the greatest challenge; in the second column lack of internal integration of
functions has the highest weight of 0.676; in the third column resistance from suppliers
has the highest weight of 0.653; in the fourth column lack of willingness from other
stakeholders has the highest weight of 0.662 whereas in the fifth column lack of enough
finances to support the system implementation has the highest weight of 0.701. It is
33
therefore clear from the study that the five major challenges to e-procurement
implementation among large scale manufacturing firms in Nairobi are: getting users to
accept the system; lack of internal integration of functions; resistance from suppliers; lack
of willingness from other stakeholders and lack of enough finances to support the system
implementation.
customer
relationship .295 .197 .326 1.499 .143
management
online
.033 .224 .033 .148 .883
advertisements
Table 4.7 gives results for the independent variables. Sharing information has a
positive value of 0.762; linking suppliers has a positive value of 0.863; customer
0.461 and internal e-procurement has a positive coefficient of 1.044. The model that can
34
0.461 X5 +1.044X6 +0.308. This model is capable of explaining 57% of the variance on
supply chain integration among large scale manufacturing firms in Nairobi. The slopes of
the independent variables were all positive except one. This is an indication that there is a
direct relationship between the variables and business integration. The negative slope
Table 4.8 indicates that the test of significance of the regression model in Table
4.7 is 0.004. This is an indication that the regression results are significant enough to be
chain functions.
It can be revealed from the model above that the six independent variables, that is;
variance of 43% that is not explained by the six variables but is attributed to other
and supply chain integration among large scale manufacturing firms in Nairobi. In this
chapter a summary of findings from the study is provided. The chapter also presents
among the large scale manufacturing firms in Nairobi. For instance it was established that
most of the large scale manufacturing firms have in place an information system that
enables their departments to share information. This sharing of information is one of the
preliminary foundations upon which e-procurement is founded. It is also evident from the
study that most of the firms have a centralized procurement system that is made possible
through information technology. The results further confirm that most of the firms
practice online internal procurement. This implies that internal procurement activities are
However, the study also reveals that there are some aspects of e-procurement that
are yet to be implemented by most of the large scale manufacturing firms in Nairobi. One
of these aspects is the linking of suppliers. The results indicated that a large number of
firms have not linked their suppliers with appropriate information technology that can
enhance or facilitate e-procurement. This was established even though it was clear from
36
the findings that most of the large scale manufacturing firms in Nairobi make use of
Electronic Data Interchange in sharing vital information with other organizations who are
not necessarily their suppliers. It was also clear from the study that most of the firms have
not linked their branches since most of them are one branch firms.
The results from factor analysis reveal that there are five main barriers to e-
barriers are: getting users to accept the system; lack of internal integration of functions;
resistance from suppliers; lack of willingness from other stakeholders and lack of enough
finances to support the system implementation. These are the barriers that the firms need
from the study further indicate that the six independent variables: sharing information,
procurement and linking of branches explain 57% of the variance in integration of supply
chain functions. This implies that 43% of the variance can be attributed to some other
5.3 Conclusions
Large scale manufacturing firms in Nairobi have achieved a given degree of e-
procurement implementation. This is evident from the fact that most of the firms are able
e-procurements aspects have also not been implemented by these firms. They include
linking of suppliers and linking of branches. The firms also face five main barriers to e-
procurement implementation. They include getting users to accept the system; lack of
37
internal integration of functions; resistance from suppliers; lack of willingness from other
stakeholders and lack of enough finances to support the system implementation. Finally,
5.4 Recommendations
The study has revealed that most of the large scale manufacturing firms in Nairobi
have not linked their suppliers with appropriate information technology that can enhance
supply chain integration. It will be important for the firms to pursue ways of linking their
The study also confirms that most of the large scale manufacturing firms in
Nairobi do not advertise requests for proposals online. It will be prudent for these firms to
lay the necessary foundation for online advertisement of requests for proposals.
among large scale manufacturing firms in Nairobi. The firms should look for ways of
implementation.
The findings of this study are only directly applicable to the large scale
38
The time duration was not adequate to conduct a survey of all the manufacturing
companies in Nairobi. This is the reason why the study chose to sample a few large scale
manufacturing firms.
integration among large scale manufacturing firms in Nairobi. This same study should be
extended to other industries or even small scale manufacturing firms so that similarities
It will also be advisable to replicate this same study after some years have elapsed
in order to establish the changes that have taken place since supply chain integration
39
REFERENCES
Awad, H. and Nassar, M. (2010) A Broader view of the Supply Chain Integration
Vol. 1, No. 1.
Bailey, K., Francis, M., (2008). Managing information flows for improved value chain
1,
of Electronic Commerce.
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Chain Through Web Technologies: The HYDRAApproach, Supply Chain
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approach, Journal of Business and Industrial Marketing, vol. 24 (3/4), pp. 227-236
Huo,Y. Jiang, X. Jia, F. and Li, B. (2008) A Framework and Key Techniques for Supply
Accessed on 20/7/2013
Information System.
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Podlogar, M. (2007). Chapter III e-Procurement Success Factors: Challenges and
Economies Theory and Cases, Editors Pani and Agrahari. IDEA Group
Publishing.
Snow, J. (2012) Supply Chain Integration: Seamlessly Linking the Pieces. United States
Publications, Washington.
Zenz, G. and Thompson, G. (1994) Purchasing and the Management of Materials, 7th ed.,
42
APPENDICES
Introduction
supply chain integration among large scale manufacturing companies in Nairobi. This is
an academic research and the data collected will specifically be used for academic
purposes only. No information will be divulged from these questionnaires since it will be
confidential.
a) 0-5 years
b) 6-10 years
c) 11-15 years
b) 101-200
c) 201-300
43
Section B: Extent of e-procurement Implementation
Kindly indicate the extent to which you agree with the following statements
3 All branches of the firm are linked and can share information
44
Section C: Barriers to e-procurement implementation
Kindly indicate the extent to which you agree with the following statements in
45
Section D: Impact of E-procurement on supply chain integration
Kindly state the extent to which e-procurement impacts on the following supply chain
integration functions
Use the scale of: 1= Very Large extent 2= Large extent 3= Moderate extent 4= Small
No. Impact 1 2 3 4 5
5 Sharing of information
online
46
Appendix II: List of Large Scale Manufacturing Firms in Nairobi
Energy Sector
A.I Records (Kenya) Modulec Kenwestfal Works
Ltd Engineering Ltd
Systems Ltd
Amedo Centre Mustek East Africa Kenya Power &
Kenya Ltd Lighting Co. Ltd
Assa Abloy East Nationwide Kenya Scale Co.
Africa Ltd Electrical Industries Ltd/ Avery Kenya
Ltd
Aucma Digital Nationwide Kenya Shell Ltd
Technology Africa Electrical Industries
Ltd Ltd
Avery (East Africa) Optimum Libya Oil Kenya
Ltd Lubricants Ltd Limited
Baumann PCTL Automation Power Technics Ltd
Engineering Limited Ltd
Centurion Systems Pentagon Agencies Reliable Electricals
Limited Engineers Ltd
Digitech East Africa Power Engineering Sanyo Armo
Limited International Ltd (Kenya) Ltd
Manufacturers & Eveready East Socabelec East
Suppliers (K) Ltd Africa Limited Africa
Marshall Fowler Frigorex East Africa Sollatek Electronics
(Engineers) Ltd Ltd (Kenya) Limited
Mecer East Africa Holman Brothers Specialised Power
Ltd (E.A.) Ltd Systems Ltd
Metlex Industries IberaAfrica Power Synergy-Pro
Ltd (EA) Ltd
Metsec Ltd International Energy Tea Vac Machinery
Technik Ltd Limited
East African Cables Kenwest Cables Virtual City Ltd
Ltd Ltd
Chemical Sector
Anffi Kenya Ltd Maroo Polymers Ltd Imaging Solutions
(K) Ltd
Basco Product (K) Match Masters Ltd Interconsumer
Ltd Products Ltd
Bayer East Africa United Chemical Odex Chemicals Ltd
Ltd Industries Ltd
Continental Oasis Ltd Osho Chemicals
Products Ltd Industries Ltd
Cooper K- Brands Rumorth EA Ltd PolyChem East
Ltd Africa Ltd
Cooper Kenya Rumorth East Africa Procter & Gamble
47
Limited Ltd East Africa Ltd
Beiersdorf East Sadolin Paints PZ Cussons Ltd
Africa td (E.A.) Ltd
Blue Ring Products Sara Lee Kenya Rayal Trading Co.
Ltd Limited Ltd
BOC Kenya Limited Saroc Ltd Reckitt Benckiser
(E.A) Ltd
Buyline Industries Super Foam Ltd Revolution Stores
Limited Co. Ltd
Carbacid (CO2) Crown Berger Soilex Chemical Ltd
Limited Kenya Ltd
Chemicals & Crown Gases Ltd Strategic Industries
Solvents E.A. Ltd Limited
Chemicals and Decase Chemical Supa Brite Ltd
Solvents E.A. Ltd (Ltd)
Coates Brothers Deluxe Inks Ltd Unilever Kenya Ltd
(E.A.) Limited
Coil Products (K) Desbro Kenya Murphy Chemical
Limited Limited E.A Ltd
Colgate Palmolive E. Africa Heavy Syngenta East
(E.A) Ltd Chemicals (1999) Africa Ltd
Ltd
Johnson Diversity Elex Products Ltd Synresins Ltd
East Africa Limited
Kel Chemicals European Perfumes Tri-Clover Industries
Limited & Cosmetics Ltd (K) Ltd
Kemia International Galaxy Paints & Twiga Chemical
Ltd Coating Co. Ltd Industries Limited
Ken Nat Ink & Grand Paints Ltd Vitafoam Products
Chemical Ltd Limited
Magadi Soda Henkel Kenya Ltd
Company Ltd
Food Sector
Africa Spirits Ltd Annum Trading Premier Flour Mills
Company Limited Ltd
Agriner Agricultural Aquamist Ltd Premier Food
Development Industries Limited
Limited
Belfast Millers Ltd Brookside Dairy Ltd Proctor & Allan
(E.A.) Ltd
Bidco Oil Refineries Candy Kenya Ltd Promasidor (Kenya)
Ltd Ltd
Bio Foods Products Capwelll Industries Trufoods Ltd
Limited Ltd
Breakfast Cereal Carlton Products UDV Kenya Ltd
48
Company(K) Ltd (EA) Ltd
British American Chirag Kenya Unga Group Ltd
Tobacco Kenya Ltd Limited
Broadway Bakery E & A Industries Usafi Services Ltd
Ltd Ltd
C. Czarnikow Sugar Kakuzi Ltd Uzuri foods Ltd
(EA) Ltd
Cadbury Kenya Ltd Erdemann Co. (K) ValuePak Foods Ltd
Ltd
Centrofood Excel Chemical Ltd W.E. Tilley
Industries Ltd (Muthaiga) Ltd
Coca cola East Kenya Wine Kevian Kenya Ltd
Africa Ltd Agency Limited
Confec Industries Highlands Canner Koba Waters Ltd
(E.A) Ltd Ltd
Corn Products Super Bakery Ltd Kwality Candies &
Kenya Ltd Sweets Ltd
Crown Foods Ltd Sunny Processor Ltd Lari Dairies Alliance
Ltd
Cut Tobacco (K) Spin Knit Dairy Ltd London Distillers
Ltd (K) Ltd
Deepa Industries Highlands Mineral Mafuko Industries
Ltd Water Co. Ltd Ltd
Del Monte Kenya Homeoil Manji Food
Ltd Industries Ltd
East African Insta Products Melvin Marsh
Breweries Ltd (EPZ) Ltd International
East African Sea Jambo Biscuits (K) Kenya Tea
Food Ltd Ltd Development
Agency
Eastern Produce Jetlak Foods Ltd Mini Bakeries (Nbi)
Kenya Ltd Ltd
Farmers Choice Ltd Karirana Estate Ltd Miritini Kenya Ltd
Frigoken Ltd Kenafric Industries Mount Kenya
Limited Bottlers Ltd
Giloil Company Kenblest Limited Nairobi Bottlers Ltd
Limited
Glacier Products Ltd Kenya Breweries Nairobi Flour Mills
Ltd Ltd
Global Allied Kenya Nut NAS Airport
Industries Ltd Company Ltd Services Ltd
Global Beverages Kenya Sweets Ltd Rafiki Millers Ltd
Ltd
Global Fresh Ltd Nestle Kenya Ltd Razco Ltd
Gonas Best Ltd Nicola Farms Ltd Re-Suns Spices
Limited
49
Hail & Cotton Palmhouse Dairies Smash Industries
Distillers Ltd Ltd Ltd
Al-Mahra Industries Patco Industries Softa Bottling Co.
Ltd Limited Ltd
Alliance One Pearl Industries Ltd Spice World Ltd
Tobacco Kenya Ltd
Alpha Fine Foods Pembe Flour Mills Wrigley Company
Ltd Ltd (E.A.) Ltd
Alpine Coolers Ltd
Plastics and Rubber
Betatrad (K) Ltd Prestige Packaging Haco Industries
Ltd Kenya Ltd
Blowplast Ltd Prosel Ltd Hi-Plast Ltd
Bobmil Industries Qplast Industries Jamlam Industries
Ltd Ltd
Complast Industries Sumaria Industries Kamba
Limited Ltd Manufacturing
(1986) Ltd
Kenpoly Super Keci Rubber
Manufacturers Ltd Manufacturers Ltd Industries
Kentainers Ltd Techpak Industries Nairobi Plastics
Ltd Industries
King Plastic Treadsetters Tyres Nav Plastics Limited
Industries Ltd Ltd
Kingway Tyres & Uni-Plastcis Ltd Ombi Rubber
Automart Ltd
L.G. Harris & Co. Wonderpac Packaging Masters
Ltd Industries Ltd Limited
Laneeb Plastics ACME Containers Plastic Electricons
Industries Ltd Ltd
Metro Plastics Afro Plastics (K) Raffia Bags (K) Ltd
Kenya Limited Ltd
Ombi Rubber Alankar Industries Rubber Products Ltd
Rollers Ltd Ltd
Packaging Dune Packaging Ltd Safepak Limited
Industries Ltd
Plastics & Rubber Elgitread (Kenya) Sameer Africa Ltd
Industries Ltd Ltd
Polyblend Limited Elgon Kenya Ltd Sanpac Africa Ltd
Polyflex Industries Eslon Plastics of Silpack Industries
Ltd Kenya Ltd Limited
Polythene Industries Five Star Industries Solvochem East
Ltd Ltd Africa Ltd
Premier Industries General Plastics Springbox Kenya
Ltd Limited Ltd
Building sector
50
Central Glass Kenbro Industries Ltd Manson Hart Kenya
Industries Ltd Ltd
Karsan Murji & Kenya Builders & Concrete Mombasa Cement
Company Limited Ltd Ltd
Paper Sector
Ajit Clothing Paper House of General Printers
Factory Ltd Kenya Ltd Limited
Associated Papers & Paperbags Limited Graphics & Allied
Stationery Ltd Ltd
Autolitho Ltd Primex Printers Ltd Guaca Stationers Ltd
Bag and Envelope Print Exchange Ltd Icons Printers Ltd
Converters Ltd
Bags & Balers Printpak Multi Interlabels Africa
Manufacturers (K) Packaging Ltd Ltd
Ltd
Brand Printers Printwell Industries Jomo Kenyatta
Ltd Foundation
Business Forms & Prudential Printers Kartasi Industries
Systems Ltd Ltd Ltd
Carton Punchlines Ltd Kenafric Diaries
Manufacturers Ltd Manufacturers Ltd
Cempack Ltd Conventual Kitabu Industries
Franciscan Friers- Ltd
Kolbe Press
Chandaria Industries Creative Print Kul Graphics Ltd
Limited House
Colour Labels Ltd D.L. Patel Press Label Converters
(Kenya) Limited
Colour Packaging Dodhia Packaging Modern
Ltd Limited Lithographic (K) Ltd
Colour Print Ltd East Africa Pan African Paper
Packaging Mills (EA) Limited
Industries Ltd
Kenya Stationers Elite Offset Ltd Ramco Printing
Ltd Works Ltd
Kim-Fay East Ellams Products Ltd Regal Press Kenya
Africa Ltd Ltd
Paper Converters English Press SIG Combibloc
(Kenya) Ltd Limited Obeikan Kenya
Textile Sector
Africa Apparels Kenya Trading EPZ Spinners & Spinners
EPZ Ltd Ltd Ltd
Fulchand Manek & Kikoy Co. Ltd Storm Apparel
Bros Ltd Manufacturers Co.
Ltd
Image Apparels Ltd Le-Stud Limited Straightline
51
Enterprises Ltd
Alltex EPZ Ltd Metro Impex Ltd Sunflag Textile &
Knitwear Mills Ltd
Alpha Knits Limited Midco Textiles (EA) Tarpo Industries
Ltd Limited
Apex Appaels Mirage Fashionwear Teita Estate Ltd
(EPZ) Ltd EPZ Ltd
Baraka Apparels MRC Nairobi (EPZ) Thika Cloth Mills
(EPZ) Ltd Ltd Ltd
Bhupco Textile Ngecha Industries United Aryan (EPZ)
Mills Limited Ltd Ltd
Blue Plus Limited Premier Knitwear Upan Wasana (EPZ)
Ltd Ltd
Bogani Industries Protex Kenya (EPZ) Vaja Manufacturers
Ltd Ltd Limited
Brother Shirts Riziki Yoohan Kenya EPZ
Factory Ltd Manufacturers Ltd Company Ltd
Embalishments Ltd Rolex Garments YU-UN Kenya EPZ
EPZ Ltd Company Ltd
J.A.R Kenya (EPZ) Silver Star
Ltd Manufacturers Ltd
Timber Sector
Economic Housing Transpaper Kenya Wood Makers
Group Ltd Ltd Kenya Ltd
Eldema (Kenya) Twiga Stationers & Woodtex Kenya Ltd
Limited Printers Ltd
Fine Wood Works Uchumi Quick United Bags
Ltd Suppliers Ltd Manufacturers Ltd
Furniture Rosewood Office Statpack Industries
International Systems Ltd Ltd
Limited
Hwan Sung Shah Timber Mart Taws Limited
Industries (K) Ltd Ltd
Kenya Wood Ltd Shamco Industries Tetra Pak Ltd
Ltd
Newline Ltd Slumberland Kenya
Limited
PG Bison Ltd Timsales Ltd
Motor Vehicle Assembly and Accessories
Auto Ancillaries Ltd General Motor East Megh Cushion
Africa Limited industries Ltd
Varsani Brakelining Impala Glass Mutsimoto Motor
Ltd Industries Ltd Company Ltd
Bhachu Industries Kenya Grange Pipe Manufacturers
Ltd Vehicle Industries Ltd
Ltd
52
Chui Auto Spring Kenya Vehicle Sohansons Ltd
Industries Ltd Manufacturers
Limited
Toyota East Africa Labh Singh Harnam Theevan Enterprises
Ltd Singh Ltd Ltd
Unifilters Kenya Ltd Mann
Manufacturing Co.
Ltd
Metal and Allied
Allied Metal Morris & Co. Khetshi Dharamshi
Services Ltd Limited & Co. Ltd
Alloy Street Nails & Steel Nampak Kenya Ltd
Castings Ltd Products Ltd
Apex Street Ltd Orbit Engineering Napro Industries
Rolling Mill Ltd Limited
Division
ASL Ltd Rolmil Kenya Ltd Specialized Engineer
Co. (EA) Ltd
ASP Company Ltd Sandvik Kenya Ltd Steel Structures
Limited
East Africa Foundry Sheffield Steel Steelmakers Ltd
Works (K) Ltd Systems Ltd
Elite Tools Ltd Booth Extrusions Steelwool (Africa)
Limited Ltd
Friendship City Engineering Tononoka Steel Ltd
Container Works Ltd
Manufacturers
General Aluminum Crystal Industries Welding Alloys Ltd
Fabricators Ltd Ltd
Gopitech (Kenya) Davis & Shirtliff Wire Products
Ltd Ltd Limited
Heavy Engineering Devki Steel Mills Viking Industries
Ltd Ltd Ltd
Insteel Limited East Africa Spectre Warren Enterprises
Limited Ltd
Metal Crown Kens Metal
Limited Industries Ltd
Pharmaceutical and Medical Equipment
Alpha Medical Madivet Products KAM Industries Ltd
Manufacturers Ltd Ltd
Beta Healthcare Novelty KAM Pharmacy
International Manufacturing Ltd Limited
Limited
Biodeal Oss. Chemie (K) Pharmaceutical
Laboratories Ltd Manufacturing Co.
Bulks Medical Ltd Dawa Limited Regals
53
Pharmaceuticals
Cosmos Limited Elys Chemical Universal
Industries Corporation Limited
Laboratory & Allied Gesto Pharm Access
Limited Pharmaceutical Ltd Africa Ltd
Manhar Brothers Glaxo Smithkline
(K) Ltd Kenya Ltd
Leather Products and Footwear
Alpharama Ltd C & P Shoe East Africa Tanners
Industries Ltd (K) Ltd
Bata Shoe Co. (K) CP Shoes Leather Industries of
Ltd Kenya Limited
New Market Leather Dogbones Ltd
Factory Ltd
Source: Kenya Association of Manufacturers (KAM) Directory. July, 2013
54