E-PROCUREMENT IMPLEMENTATION AND SUPPLY

CHAIN INTEGRATION AMONG LARGE SCALE

MANUFACTURING FIRMS IN NAIROBI,

KENYA

BY

EVANGELINE KINYA RATANYA

A RESEARCH PROJECT REPORT SUBMITTED IN PARTIAL

FULFILLMENT OF THE REQUIREMENT FOR AWARD OF

MASTER OF BUSINESS ADMINISTRATION DEGREE,

UNIVERSITY OF NAIROBI

OCTOBER 2013

ii

DECLARATION

I declare that this research project is my original work and has not been submitted to any

other university for award of a degree.

Signed…………………………………………………………Date……….……………

Evangeline Kinya Ratanya

D61/60079/2011

This research project was submitted for assessment with my authority as the university

supervisor

Signed…………………………………………………Date………………………………

Michael K. Chirchir

Lecturer

School of Business, University of Nairobi

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DEDICATION

I dedicate this project to my husband Benjamin Langat, my children Ednah

Cherop and Adriel Chebet. There is no doubt in my mind that without their support,

tolerance and enthusiasm, I could not have completed this process.

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ACKNOWLEDGEMENT

I acknowledge the guidance I received from my supervisors Mr. Michael Chirchir

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

accomplishment and I am grateful to you all.

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.

Finally special thanks to my dear husband (Benjamin Langat) and my daughters

(Cherop and Chebet) for your endless love and support .You always inspire me.

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LIST OF TABLES

Table 3.1: Sampling Design .......................................................................................................... 24

Table 4.1: Duration of operation ................................................................................................... 26

Table 4.2: Number of employees .................................................................................................. 27

Table 4.3: Extent of E-procurement Implementation ................................................................... 28

Table 4.4 Communalities .............................................................................................................. 30

Table 4.5: Total Variance Explained ............................................................................................ 31

Table 4.6: Component Matrix ....................................................................................................... 33

Table 4.7: Independent Variables ................................................................................................. 34

Table 4.8: Anova ........................................................................................................................... 35

Table 4.9: Full Model ................................................................................................................... 35

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LIST OF FIGURES

Figure 2.1: Conceptual Framework .............................................................................................. 21

Figure 4.1: Number of employees ................................................................................................ 27

Figure 4.2: Scree plot .................................................................................................................... 32

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TABLE OF CONTENTS

DECLARATION ............................................................................................................................. ii

DEDICATION ................................................................................................................................ iii

ACKNOWLEDGEMENT .............................................................................................................. iv

LIST OF TABLES ........................................................................................................................... v

LIST OF FIGURES ........................................................................................................................ vi

ABSTRACT ..................................................................................................................................... x

CHAPTER ONE .............................................................................................................................. 1

INTRODUCTION ........................................................................................................................... 1

1.1. Background of the Study .......................................................................................................... 1

1.1.1 E-Procurement Implementation .............................................................................................. 2

1.1.2 Supply Chain Integration ........................................................................................................ 4

1.1.3 Large scale Manufacturing Firms in Kenya ............................................................................ 6

1.2 Statement of the problem ........................................................................................................... 7

1.3 Research Objectives ................................................................................................................... 9

1.4 Value of the Study ................................................................................................................... 10

CHAPTER TWO ........................................................................................................................... 11

LITERATURE REVIEW .............................................................................................................. 11

2.1 E-Procurement ......................................................................................................................... 11

2. 2 Barriers of E-procurement Implementation ............................................................................ 14

2.3 Supply Chain Integration ......................................................................................................... 16

2.3.1 Levels of Supply Chain Integration ...................................................................................... 18

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2.3.1.1 Internal Supply Chain Integration ...................................................................................... 18

2.3.1.2 External Supply Chain Integration ..................................................................................... 19

2.4 Conceptual Framework ............................................................................................................ 21

CHAPTER THREE ....................................................................................................................... 22

METHODOLOGY ........................................................................................................................ 22

3.1 Introduction .............................................................................................................................. 22

3.2 Research Design....................................................................................................................... 22

3.3 Target Population ..................................................................................................................... 22

3.4 Sampling Design ...................................................................................................................... 23

Table 3.1: Sampling Design ...........................................................................................24

3.5 Data collection ......................................................................................................................... 24

3.6 Data Analysis ........................................................................................................................... 25

CHAPTER FOUR .......................................................................................................................... 26

DATA ANALYSIS AND INTERPRETATION ........................................................................... 26

4.1 Introduction .............................................................................................................................. 26

4.2 Organizational profile .............................................................................................................. 26

Table 4.1: Duration of operation ....................................................................................26

Table 4.2: Number of employees ...................................................................................27

4.3 Extent of E-procurement Implementation ................................................................................ 28

Table 4.3: Extent of E-procurement Implementation ....................................................28

4.4 Barriers in the Implementation of E-Procurement ................................................................... 29

Table 4.4 Communalities ...............................................................................................30

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Table 4.5: Total Variance Explained .............................................................................31

Table 4.6: Component Matrix ........................................................................................33

4.5 Impact of E-procurement Implementation on SC Integration.................................................. 34

Table 4.7: Independent Variables ..................................................................................34

Table 4.8: Anova ............................................................................................................35

Table 4.9: Full Model ....................................................................................................35

CHAPTER FIVE ........................................................................................................................... 36

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS .................................................. 36

5.1 Introduction .............................................................................................................................. 36

5.2 Summary of Findings ............................................................................................................... 36

5.3 Conclusions .............................................................................................................................. 37

5.4 Recommendations .................................................................................................................... 38

5.5 Limitations of the Study ........................................................................................................... 38

5.6 Suggestions for Further Research ............................................................................................ 39

REFERENCES .............................................................................................................................. 40

APPENDICES ............................................................................................................................... 43

Appendix I: Research Questionnaire ............................................................................................. 43

Introduction .................................................................................................................................... 43

Section A: General Information ..................................................................................................... 43

Appendix II: List of Large Scale Manufacturing Firms in Nairobi ............................................... 47

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ABSTRACT

The purpose of this study was to establish the effect of e-procurement

implementation and business integration among large scale manufacturing firms in

Nairobi. In order to fill this gap the study sought answers to the following three important

questions: what is the extent of e-procurement implementation among large scale

manufacturing firms in Nairobi? What are the barriers of e- procurement implementation

among large manufacturing firms in Nairobi? And what is the impact of e-procurement

implementation on supply chain integration among large scale manufacturing firms in

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

manufacturing firms in Nairobi. Frequencies and percentages, factor analysis and

regression analysis were used to analyse the data. It was revealed that the firms share

information among departments and centralization of procurement activities is also

evident among them. However, it is clear that a number of important e-procurement

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

of internal integration of functions; resistance from suppliers; lack of willingness from

other stakeholders and lack of enough finances to support the system implementation.

Finally, e-procurement implementation explains 57% of supply chain integration among

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

comparative study to establish the similarities and differences.

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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

aspects. Other innovations in information technology have also necessitated the

development of electronic ways or systems of carrying out various transactions. These

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

commerce or E-commerce as it is commonly known is one of the most prominent

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

procurement online (Essig and Ulli, 2001).

In today’s competitive business environment, procurement is seen as one of the

most important and critical subsets of supply chain management. It has transformed the

fundamental business process through improved information technology. Organizations

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

the implementation of e-procurement since it includes web technology-based purchasing

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solutions aimed at simplifying commercial transactions within and between organizations

and information technology solutions for ordering, logistics and handling systems as well

as for payment systems (van Weele, 2010).

Introduction of E-procurement systems is a reflection of the important

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;

enhanced collaborative relationships and significant opportunity for improving the

internal service and statutes of the purchasing function (Croom & Johnston, 2003).

1.1.1 E-Procurement Implementation

Procurement encompasses all activities involved in obtaining material and

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

functions of supply chain management that is positioned between an organization's

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

gaps in order to simultaneously manage external and internal relationships, and to

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

through operating integrated systems of procurement (Neef, 2001).

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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-

procurement implementation, they must meet the critical success factors of e-

procurement such as employees and management commitment to success of adoption;

reliability of information technology and supplier performance (Mauti, 2012).

Organizations that have embraced e-procurement enjoy a number of benefits such

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).

As much as the proponents of e-procurement argue that it is very significant in

business, it is also clear that even though buyer-supplier coordination is an attractive

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-

4

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).

1.1.2 Supply Chain Integration

According to Snow (2011) Supply chain integration is a performance-improving

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

ultimate goal of better serving customers.

Supply chain therefore entails cooperation among organizations in order to avail a

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

or supply. The relationships however took the form of primarily human-to-human

meetings to facilitate supply chain activities in traditional organizations. The speed with

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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

companies to move these functions to web-based networks where clusters of businesses

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

fully integrated (Westbrook, 2002).

Utilizing web-based technologies, companies are starting to integrate their supply

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

free, the Internet is a relatively inexpensive medium, unlike a value-added network

(VAN) that charges a per-transaction fee for data transmission. E-Commerce is driving a

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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

underlying theme is connectivity (Westbrook, 2002).

1.1.3 Large scale Manufacturing Firms in Kenya

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

of multi-national corporations, contributes an average of 15% towards the Gross

Domestic Product (GDP) of Kenya (PricewaterhouseCoopers, 2006).

The contemporary business environment has forced many large scale

manufacturing firms in Kenya to focus on becoming efficient and flexible in their

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

manufacturing sector in Kenya can be classified using different methods. According to

Parker and Torres (1994) manufacturing firms in Kenya can be classified based on the

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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.

1.2 Statement of the problem

E-Procurement is more than just a system for making purchases online. It

provides an organized way to keep an open line of communication with potential

suppliers during a business process. E-Procurement helps with the decision-making

process by keeping relevant information neatly organized and time-stamped (Ginner,

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

8

essential since it leads to integration of the supply chain. Implementation of e-

procurement is therefore the only remedy towards supply chain integration by

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

web based technologies in supply chain integration.

Another study carried out by Mauti (2012) found out that there are five main

factors that determine the success of e-procurement implementation: employees and

management commitment to success of adoption; reliability of information technology

and supplier performance; monitoring the performance of e-procurement systems; user

acceptance of e-procurement systems and top management support. The study also

confirmed that challenges such as resistance to change from employees, lack of e-

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.

9

Kabuga (2012) also in his study revealed that the methodologies adopted by large

scale firms included lean thinking, e-procurement, good supplier relationship

management and the control movement of materials using the Kanban system and the

benefits of implementing lean procurement methodologies also include eliminating waste

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

supply chain integration.

Despite the numerous studies on e-procurement, none of the reviewed studies

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

extent of e-procurement Implementation among large scale manufacturing firms in

Nairobi? What are the barriers of e- procurement Implementation among large

manufacturing firms in Nairobi? And what is the impact of e-procurement

Implementation on supply chain Integration among large scale Manufacturing Firms in

Nairobi?

1.3 Research Objectives

i. To determine the extent of e-procurement implementation among

large scale manufacturing Firms

ii. To establish the barriers in the implementation of E-Procurement

among large manufacturing firms in Nairobi.

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iii. To establish the impact of e-procurement implementation on SC

integration among large scale manufacturing firms in Nairobi.

1.4 Value of the Study

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

also assist in confirming the theoretical assumptions on the impact of e-procurement on

supply chain integration.

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

impact of e-procurement in integrating their supply chain. It will therefore act as a

motivation towards e-procurement implementation.

Large scale manufacturing companies in Nairobi will also be able to get a better

understanding of the impact of e-procurement on supply chain integration. This will

enable them to come up with effective policies on e-procurement in order to unlock its

full potential in their companies.

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CHAPTER TWO

LITERATURE REVIEW

2.1 E-Procurement

Electronic procurement is also referred to as supplier exchange and can be defined

as the business-to-business or business-to-consumer or Business-to-government purchase

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

participating expect to be able to control parts inventories more effectively, reduce

purchasing agent overhead, and improve manufacturing cycles. E-procurement is

expected to be integrated into the wider Purchase-to-pay (P2P) value chain with the trend

toward computerized supply chain management. E-procurement is done with a software

application that includes features for supplier management and complex auctions (Baily,

2008).

According to the AberdeenGroup, Inc. (2005) there is a new generation of E-

Procurement which is basically on-demand or a software-as-a-service. Organizations can

adopt any option of e-procurement depending on the needs of the company. There are

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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

of purchasing requirements using Internet technology; e-tendering is another e-

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

unknown suppliers; e-informing is also an important option of gathering and distributing

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

chains (Baily, 2008).

Podlogar (2007) asserts that e-procurement value chain consists of indent

Management, e-tendering, e-auctioning, vendor Management, catalogue Management,

and Contract Management. The independent management section of the e-procurement

value chain is involved in the preparation of tenders and it usually optional, with

individual procuring departments defining their indenting process. The procurement of

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

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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

the cycle time.

Success in e-procurement implementation does not just happen but it is a

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

of the system; avoiding underestimating change management; having sufficient focus on

change management; ensuring processes are efficient before applying automated

solutions and having in place a clear definition and reinforcement metrics for measuring

costs, process efficiency, and performance of e-procurement technologies and processes.

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2. 2 Barriers of E-procurement Implementation

For organizations to gain competitive advantage and succeed in the contemporary

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

facilitates inter-enterprise cooperation and collaboration with suppliers, customers, and

business partners. Supply chain integration can bring benefits and competitive advantage

to an organization but its management and implementation pose significant challenges to

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

Relationship Management (CRM), Product Lifecycle Management (PLM), e-

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

e-procurement may face a number of challenges such as supplier enablement; user

adoption and budgetary support (Awad and Nassar, 2010).

According to the AberdeenGroup, Inc. (2005) there are sometimes significant

challenges to successful e-procurement implementation. For instance the issue of supplier

enablement is a big challenge in e-procurement implementation. The reason for this is

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

15

business electronically but they realized later how paramount it is. Organizations that

embrace best practices in e-procurement use a combination of supplier-enablement

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

make enablement as simple and cost effective as possible.

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

continue to hold back user adoption such as inadequate representation of spending

categories within the system, inconsistent purchase requirements, procedures, supply

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-

procurement system to end users.

The issue of budget and policy is also of paramount importance and can be a great

obstacle. Securing budget/policy support for e-procurement initiatives is usually a big

challenge for most organizations since most organizations do not understand the benefits

of e-procurement. There is need for organizations to receive top management support in

their efforts to implement e-procurement systems (Baily, 2008).

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According to Awad and Nassar (2010) organizations implementing supply chain

integration may face a myriad of technical related barriers. For instance supply chain

integration requires that the functions of an organization must first be integrated if e-

procurement has to succeed. Integrating the functions of an organization forces firms to

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.

2.3 Supply Chain Integration

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

partners and collaboratively manages intra- and inter-organizational processes in order to

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

integration by Vijayasarathy (2010) indicates that it is the adoption and use of

collaborative and coordinating structures processes technologies and practices among

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

explored the notion of linkages.

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

17

concept of internal integration, which will be out of the scope of this paper, while the

latter delineates external integration. As the above mentioned definitions clearly

emphasize on how important is the management of inter-company relations to achieve

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)

argues that inter-organizational relationships range from short-term, contract-driven

obligations to long-term, trust-based partnerships.

The weakest form of relationship in supply chain integration is said to be arm’s

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

model in the second dimension of my theoretical construct.

18

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

integration are discussed next.

2.3.1.1 Internal Supply Chain Integration

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

operations of an organization and it forms the basis to success of 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

performance and better interdepartmental effectiveness, such as cycle time reduction,

better in-stock performance, increased product availability levels, and improvement in

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

organization. What is therefore important in internal integration is business process

reengineering (BPR) that enables the firm to build a borderless flat organization

19

combined with ICT-based advanced production modes, such as manufacturing resources

planning (MRPII) ERP (enterprise resources planning), lean production and agile

manufacturing. It therefore involves the fundamental rethinking and radical redesign of

business processes to achieve dramatic improvements in critical contemporary measures

of performance such as reduction in cost, enhanced quality, better service, and speed

delivery (Hammer, 1990). Successful implementation of BPR requires organizing around

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

information; treating geographically dispersed resources as though they were centralized;

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

information once and at the source (Hammer, 1990).

2.3.1.2 External Supply Chain Integration

External Supply Chain integration, or intercompany integration, refers to the

cross-border operational integration in the supply chain which can place customer and

supplier processes closer together. Compared with internal integration, external

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

20

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

supply chain integration. High-integration supply chain operates in a form of a virtual

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).

21

2.4 Conceptual Framework Figure 2.1: Conceptual Framework

Source: Author From the conceptual framework above, it is clear that there are a number of e-

procurement related functions that need to be performed for an organization to attain

supply chain integration. These functions include sharing of information; linking

suppliers with the organization; customer relationship management; advertising tenders

online and electronic internal procurement. All these functions are independent variables

that lead to supply chain integration.

Independent Variables Dependent Variable

Sharing information

Advertising tenders online

Electronic internal procurement

Linking suppliers

Customer relationship management

Supply Chain Integration

Networking of branches

22

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.

3.2 Research Design

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

techniques of data analysis.

3.3 Target Population

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

23

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.

3.4 Sampling Design

The Kenya Association of manufacturers confirms that the large scale

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

manufacturing firms in Nairobi. Taking a nonzero probability of selection of 0.101 the

sample size was:

Sample size

0.101= this gave a sample size of 46 respondents.

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

response rate, the researcher distributed 60 questionnaires instead of the 46 indicated in

the sample size.

24

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

Source: KAM List (2013)

3.5 Data collection

This study made use of both qualitative and quantitative data. The data was

collected through a structured questionnaire from supply chain managers or their

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

of the manufacturing firms; section B contained questions on the extent of e-procurement

implementation among large scale manufacturing firms; section C carried questions on

the challenges in the implementation of E-Procurement while section D contained

questions on the impact of e-procurement implementation on SC integration among large

scale manufacturing firms. The questionnaires were administered using both drop and

pick later method as well as through email.

25

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

the level of e-procurement Implementation among large scale manufacturing firms,

frequencies and percentages were used. The study also utilized factor analysis to establish

the main challenges of E-Procurement implementation, while regression analysis was

applied to establish the impact of e-procurement Implementation in SC integration among

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-

procurement Implementation in SC integration among large scale manufacturing firms in

Nairobi: Y= a+ b1X1 +b2X2 + b3X3 +b4X4+ b5X5 +b6X6 +e

Where Y represented supply chain integration; a is the constant; X1 is sharing

information; X2 is linking suppliers; X3 is customer relationship management; X4 is

online advertisements; X5 is internal e-procurement; X6 is linking of branches; b1 to b6

are the coefficients of the respective independent variables.

26

CHAPTER FOUR

DATA ANALYSIS AND INTERPRETATION

4.1 Introduction The purpose of this study was to establish the effect of e-procurement

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-

procurement Implementation among large scale manufacturing firms; to establish the

barriers in the Implementation of E-Procurement among large manufacturing firms in

Nairobi and to establish the impact of e-procurement Implementation on SC integration

among large scale manufacturing firms in Nairobi. Data was successfully collected from

46 supply chain managers of large manufacturing firms in Nairobi. This is an indication

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.

4.2 Organizational profile The study sought to obtain from the respondents information regarding the large

scale manufacturing firms they worked for. The aim of this information was to assist the

researcher connect a few characteristics of the organization to e-procurement

implementation. The findings from the study are discussed next.

4.2.1 Duration of operation Table 4.1: Duration of operation

Duration of operation Frequency Percent Valid Percent Cumulative

Percent

0-5 years 2 4.3 4.3 4.3 6-10 years 8 17.4 17.4 21.7 11-15 years 9 19.6 19.6 41.3 More than 15 years 27 58.7 58.7 100.0

Total 46 100.0 100.0

27

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

experienced e-procurement issues.

4.2.2 Number of Employees The study sought to establish the number of employees in each of the large scale

manufacturing firms in Nairobi.

Table 4.2: Number of employees Number of Employees

Frequency Percent Valid Percent Cumulative Percent

Less than 100 2 4.3 4.3 4.3 100-200 5 10.0 17.4 21.7 201-300 28 60.0 19.6 41.3 More than 300 11 23.0 58.7 100.0

Total 46 100.0 100.0

Figure 4.1: Number of employees

28

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

embrace the use of e-procurement technology in their supply chain functions.

4.3 Extent of E-procurement Implementation One of the specific objectives of this study was to establish the extent to which

large scale manufacturing firms in Nairobi have implemented e-procurement. The

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.

Table 4.3: Extent of E-procurement Implementation N Minimum Maximum Mean 1 All departments share same

information 46 1 5 2.314

2 Procurement functions are centralized

46 1 5 2.168

3 All branches of the firm are linked and can share information

46 1 5 4.216

4 All internal procurement activities are done electronically

46 1 5 1.472

5 Request for proposals are done online

46 1 5 4.657

6 All the suppliers are linked to the organization

46 1 5 4.561

7 The company uses EDI to link with major customers

46 1 5 2.368

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

29

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.

4.4 Barriers in the Implementation of E-Procurement

The study sought to establish the challenges that hinder the implementation of e-

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.

30

Table 4.4 Communalities Communalities

Initial Extraction

challenges in linking all

suppliers 1.000 .881

Getting users to accept the

system is a huddle 1.000 .898

Lack of enough finances to

support the system

implementation

1.000 .886

Top management not

supporting the system 1.000 .235

Lack of internal integration of

functions 1.000 .586

Resistance from employees 1.000 .840

ERP systems that do not meet

all company requirements 1.000 .615

Lack of willingness from other

stakeholders 1.000 .854

Resistance from suppliers 1.000 .678

Lack of capacity to integrate by

other companies 1.000 .728

Extraction Method: Principal Component Analysis.

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

system; Lack of internal integration of functions; Resistance from employees; ERP

systems that do not meet all company requirements; Lack of willingness from other

stakeholders; Resistance from suppliers and Lack of capacity to integrate by other

31

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.

Table 4.5: Total Variance Explained

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

extracted as the challenges with the greatest influence on the implementation of e-

procurement among large scale manufacturing firms in Nairobi. The first challenge

explains 20.316% of the variance on implementation of e-procurement; the second

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

explains 10.036% of the variance on implementation of e-procurement among large scale

manufacturing firms in Nairobi. In total the five challenges that were extracted explain

Total Variance Explained

Component Initial Eigenvalues Extraction Sums of Squared

Loadings

Total % of Variance Cumulative % Total % of

Variance

Cumulative

%

1 2.032 20.316 20.316 2.032 20.316 20.316

2 1.616 16.158 36.473 1.616 16.158 36.473

3 1.328 13.276 49.750 1.328 13.276 49.750

4 1.221 12.214 61.964 1.221 12.214 61.964

5 1.004 10.036 72.000 1.004 10.036 72.000

6 .923 9.230 81.230

7 .731 7.314 88.544

8 .543 5.426 93.969

9 .479 4.785 98.755

10 .125 1.245 100.000

Extraction Method: Principal Component Analysis.

32

more than 70% of the variance on implementation of e-procurement among large scale

manufacturing firms in Nairobi.

Figure 4.2: Scree plot

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.

33

Table 4.6: Component Matrix Component Matrixa

Component

1 2 3 4 5

challenges in linking all

suppliers .910 .037 .183 .114 -.071

Getting users to accept the

system is a huddle .929 .110 .134 -.070 .026

Lack of enough finances to

support the system

implementation

.113 -.123 -.579 -.177 .701

Top management not

supporting the system -.444 -.138 .071 -.078 .085

Lack of internal integration of

functions -.094 .676 -.167 -.300 -.041

Resistance from employees -.076 .109 -.473 .656 -.410

ERP systems that do not meet

all company requirements -.154 .559 .443 -.279 .073

Lack of willingness from other

stakeholders .051 .352 .071 .662 .533

Resistance from suppliers -.296 .002 .653 .360 .186

Lack of capacity to integrate by

other companies -.052 .814 -.237 .030 -.072

Extraction Method: Principal Component Analysis.

a. 5 components extracted.

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

34

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.

4.5 Impact of E-procurement Implementation on SC Integration Table 4.7: Independent Variables

Coefficientsa

Model Unstandardized Coefficients Standardized

Coefficients

t Sig.

B Std. Error Beta

(Constant) .942 .308 3.056 .004

sharing information .762 .223 .743 3.382 .002

linking suppliers .863 .246 .865 3.509 .001

customer

relationship

management

.295 .197 .326 1.499 .143

online

advertisements .033 .224 .033 .148 .883

linking of branches -.461 .285 -.555 -1.620 .114

internal e-

procurement 1.044 .461 1.123 2.264 .030

a. Dependent Variable: Integration of supply chain functions

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

relationship management has a positive value of 0.295; online advertisements has a

positive value of 0.033; linking of branches of branches has a negative coefficient of -

0.461 and internal e-procurement has a positive coefficient of 1.044. The model that can

be developed from table 4.7 is Y= 0.942+ 0.762X1 +0.863X2 + 0.295X3 +0.033X4-

35

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

indicates an inverse relationship between the variable and business integration.

Table 4.8: Anova

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1

Regression 4.959 9 .551 2.347 .004

Residual 8.454 36 .235

Total 13.413 45

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

used in explaining the effect of e-procurement implementation integration of supply

chain functions.

Table 4.9: Full Model Model Summary

Model R R Square Adjusted R

Square

Std. Error of the

Estimate

1 .759a .570 .521 .185

It can be revealed from the model above that the six independent variables, that is;

sharing information, linking suppliers, customer relationship management, online

advertisements, internal e-procurement and linking of branches explain 57% of the

variance in integration of supply chain functions. This is an indication that there is a

variance of 43% that is not explained by the six variables but is attributed to other

variables that are not included in this study.

36

CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction The aim of this study was to evaluate the effect of e-procurement implementation

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

conclusions and recommendations made upon careful consideration of the findings. It

also provides suggestions on areas where further research is required.

5.2 Summary of Findings

The study reveals that there is some level of e-procurement implementation

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

made possible due to e-procurement implementation.

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

37

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-

procurement implementation among large scale manufacturing firms in Nairobi. These

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

to address in order to achieve success in e-procurement implementation. The findings

from the study further indicate that the six independent variables: sharing information,

linking suppliers, customer relationship management, online advertisements, internal e-

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

variables not included in this study.

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

to do online internal procurement; share information among departments and

centralization of procurement activities. However, it is clear that a number of important

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

38

internal integration of functions; resistance from suppliers; lack of willingness from other

stakeholders and lack of enough finances to support the system implementation. Finally,

e-procurement implementation explains 57% of supply chain integration among large

scale manufacturing firms in Nairobi.

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

suppliers since this is very essential in supply chain integration.

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.

There are also five major barriers to successful e-procurement implementation

among large scale manufacturing firms in Nairobi. The firms should look for ways of

overcoming these barriers in order to achieve high levels of success in e-procurement

implementation.

5.5 Limitations of the Study

The findings of this study are only directly applicable to the large scale

manufacturing companies in Nairobi.

39

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.

5.6 Suggestions for Further Research

This study has only focused on e-procurement implementation and supply chain

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

and differences may be drawn.

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

highly depends on technology which is subject to change.

40

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43

APPENDICES

Appendix I: Research Questionnaire

Introduction

This is a questionnaire for collection of data on the impact of e-procurement on

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.

Section A: General Information

1. How many years has your organization been in operation?

a) 0-5 years

b) 6-10 years

c) 11-15 years

d) More than 15 years

2. How many employees do you have?

a) Less than 100

b) 101-200

c) 201-300

d) More than 300

44

Section B: Extent of e-procurement Implementation

Kindly indicate the extent to which you agree with the following statements

concerning the extent of e-procurement implementation in your organization.

Use the scale of:

1. Strongly agree 2. Agree 3. Not sure 4. Disagree 5. Strongly disagree

No. E-procurement Implementation 1 2 3 4 5

1 All departments share same information

2 Procurement functions are centralized

3 All branches of the firm are linked and can share information

4 All internal procurement activities are done electronically

5 Request for proposals are done online

6 All the suppliers are linked to the organization

7 The company uses EDI to link with major customers

45

Section C: Barriers to e-procurement implementation

Kindly indicate the extent to which you agree with the following statements in

regard to barriers in implementing e-procurement.

Use the scale of:

1. Strongly agree 2.Agree 3 .Not sure 4 .Disagree 5.Strongly disagree

No. Barriers of e-procurement implementation 1 2 3 4 5

1 There are challenges in linking all suppliers

2 Getting users to accept the system is a huddle

3 Lack of enough finances to support the system implementation

4 Top management not supporting the system

5 Lack of internal integration of functions

6 Resistance from employees

7 ERP systems that do not meet all company requirements

8 Lack of willingness from other stakeholders

9 Resistance from suppliers

10 Lack of capacity to integrate by other companies

46

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

extent 5= No extent at all

No. Impact 1 2 3 4 5

1 Reduction in supply chain costs

2 Assists to link suppliers

3 Assists to link Customers through EDI

4 Advertising of tenders online

5 Sharing of information

6 Integration of supply chain functions

7 Request for proposals done online

8 Linking of branches of the firm

9 Prequalification of suppliers done

online

10 Transaction processing is real time

47

Appendix II: List of Large Scale Manufacturing Firms in Nairobi Energy Sector

A.I Records (Kenya) Ltd

Modulec Engineering Systems Ltd

Kenwestfal Works Ltd

Amedo Centre Kenya Ltd

Mustek East Africa Kenya Power & Lighting Co. Ltd

Assa Abloy East Africa Ltd

Nationwide Electrical Industries

Kenya Scale Co. Ltd/ Avery Kenya Ltd

Aucma Digital Technology Africa Ltd

Nationwide Electrical Industries Ltd

Kenya Shell Ltd

Avery (East Africa) Ltd

Optimum Lubricants Ltd

Libya Oil Kenya Limited

Baumann Engineering Limited

PCTL Automation Ltd

Power Technics Ltd

Centurion Systems Limited

Pentagon Agencies Reliable Electricals Engineers Ltd

Digitech East Africa Limited

Power Engineering International Ltd

Sanyo Armo (Kenya) Ltd

Manufacturers & Suppliers (K) Ltd

Eveready East Africa Limited

Socabelec East Africa

Marshall Fowler (Engineers) Ltd

Frigorex East Africa Ltd

Sollatek Electronics (Kenya) Limited

Mecer East Africa Ltd

Holman Brothers (E.A.) Ltd

Specialised Power Systems Ltd

Metlex Industries Ltd

IberaAfrica Power (EA) Ltd

Synergy-Pro

Metsec Ltd International Energy Technik Ltd

Tea Vac Machinery Limited

East African Cables Ltd

Kenwest Cables Ltd

Virtual City Ltd

Chemical Sector Anffi Kenya Ltd Maroo Polymers Ltd Imaging Solutions

(K) Ltd Basco Product (K) Ltd

Match Masters Ltd Interconsumer Products Ltd

Bayer East Africa Ltd

United Chemical Industries Ltd

Odex Chemicals Ltd

Continental Products Ltd

Oasis Ltd Osho Chemicals Industries Ltd

Cooper K- Brands Ltd

Rumorth EA Ltd PolyChem East Africa Ltd

Cooper Kenya Rumorth East Africa Procter & Gamble

48

Limited Ltd East Africa Ltd Beiersdorf East Africa td

Sadolin Paints (E.A.) Ltd

PZ Cussons Ltd

Blue Ring Products Ltd

Sara Lee Kenya Limited

Rayal Trading Co. Ltd

BOC Kenya Limited Saroc Ltd Reckitt Benckiser (E.A) Ltd

Buyline Industries Limited

Super Foam Ltd Revolution Stores Co. Ltd

Carbacid (CO2) Limited

Crown Berger Kenya Ltd

Soilex Chemical Ltd

Chemicals & Solvents E.A. Ltd

Crown Gases Ltd Strategic Industries Limited

Chemicals and Solvents E.A. Ltd

Decase Chemical (Ltd)

Supa Brite Ltd

Coates Brothers (E.A.) Limited

Deluxe Inks Ltd Unilever Kenya Ltd

Coil Products (K) Limited

Desbro Kenya Limited

Murphy Chemical E.A Ltd

Colgate Palmolive (E.A) Ltd

E. Africa Heavy Chemicals (1999) Ltd

Syngenta East Africa Ltd

Johnson Diversity East Africa Limited

Elex Products Ltd Synresins Ltd

Kel Chemicals Limited

European Perfumes & Cosmetics Ltd

Tri-Clover Industries (K) Ltd

Kemia International Ltd

Galaxy Paints & Coating Co. Ltd

Twiga Chemical Industries Limited

Ken Nat Ink & Chemical Ltd

Grand Paints Ltd Vitafoam Products Limited

Magadi Soda Company Ltd

Henkel Kenya Ltd

Food Sector Africa Spirits Ltd Annum Trading

Company Limited Premier Flour Mills Ltd

Agriner Agricultural Development Limited

Aquamist Ltd Premier Food Industries Limited

Belfast Millers Ltd Brookside Dairy Ltd Proctor & Allan (E.A.) Ltd

Bidco Oil Refineries Ltd

Candy Kenya Ltd Promasidor (Kenya) Ltd

Bio Foods Products Limited

Capwelll Industries Ltd

Trufoods Ltd

Breakfast Cereal Carlton Products UDV Kenya Ltd

49

Company(K) Ltd (EA) Ltd British American Tobacco Kenya Ltd

Chirag Kenya Limited

Unga Group Ltd

Broadway Bakery Ltd

E & A Industries Ltd

Usafi Services Ltd

C. Czarnikow Sugar (EA) Ltd

Kakuzi Ltd Uzuri foods Ltd

Cadbury Kenya Ltd Erdemann Co. (K) Ltd

ValuePak Foods Ltd

Centrofood Industries Ltd

Excel Chemical Ltd W.E. Tilley (Muthaiga) Ltd

Coca cola East Africa Ltd

Kenya Wine Agency Limited

Kevian Kenya Ltd

Confec Industries (E.A) Ltd

Highlands Canner Ltd

Koba Waters Ltd

Corn Products Kenya Ltd

Super Bakery Ltd Kwality Candies & Sweets Ltd

Crown Foods Ltd Sunny Processor Ltd Lari Dairies Alliance Ltd

Cut Tobacco (K) Ltd

Spin Knit Dairy Ltd London Distillers (K) Ltd

Deepa Industries Ltd

Highlands Mineral Water Co. Ltd

Mafuko Industries Ltd

Del Monte Kenya Ltd

Homeoil Manji Food Industries Ltd

East African Breweries Ltd

Insta Products (EPZ) Ltd

Melvin Marsh International

East African Sea Food Ltd

Jambo Biscuits (K) Ltd

Kenya Tea Development Agency

Eastern Produce Kenya Ltd

Jetlak Foods Ltd Mini Bakeries (Nbi) Ltd

Farmers Choice Ltd Karirana Estate Ltd Miritini Kenya Ltd Frigoken Ltd Kenafric Industries

Limited Mount Kenya Bottlers Ltd

Giloil Company Limited

Kenblest Limited Nairobi Bottlers Ltd

Glacier Products Ltd Kenya Breweries Ltd

Nairobi Flour Mills Ltd

Global Allied Industries Ltd

Kenya Nut Company Ltd

NAS Airport Services Ltd

Global Beverages Ltd

Kenya Sweets Ltd Rafiki Millers Ltd

Global Fresh Ltd Nestle Kenya Ltd Razco Ltd Gonas Best Ltd Nicola Farms Ltd Re-Suns Spices

Limited

50

Hail & Cotton Distillers Ltd

Palmhouse Dairies Ltd

Smash Industries Ltd

Al-Mahra Industries Ltd

Patco Industries Limited

Softa Bottling Co. Ltd

Alliance One Tobacco Kenya Ltd

Pearl Industries Ltd Spice World Ltd

Alpha Fine Foods Ltd

Pembe Flour Mills Ltd

Wrigley Company (E.A.) Ltd

Alpine Coolers Ltd Plastics and Rubber

Betatrad (K) Ltd Prestige Packaging Ltd

Haco Industries Kenya Ltd

Blowplast Ltd Prosel Ltd Hi-Plast Ltd Bobmil Industries Ltd

Qplast Industries Jamlam Industries Ltd

Complast Industries Limited

Sumaria Industries Ltd

Kamba Manufacturing (1986) Ltd

Kenpoly Manufacturers Ltd

Super Manufacturers Ltd

Keci Rubber Industries

Kentainers Ltd Techpak Industries Ltd

Nairobi Plastics Industries

King Plastic Industries Ltd

Treadsetters Tyres Ltd

Nav Plastics Limited

Kingway Tyres & Automart Ltd

Uni-Plastcis Ltd Ombi Rubber

L.G. Harris & Co. Ltd

Wonderpac Industries Ltd

Packaging Masters Limited

Laneeb Plastics Industries Ltd

ACME Containers Ltd

Plastic Electricons

Metro Plastics Kenya Limited

Afro Plastics (K) Ltd

Raffia Bags (K) Ltd

Ombi Rubber Rollers Ltd

Alankar Industries Ltd

Rubber Products Ltd

Packaging Industries Ltd

Dune Packaging Ltd Safepak Limited

Plastics & Rubber Industries Ltd

Elgitread (Kenya) Ltd

Sameer Africa Ltd

Polyblend Limited Elgon Kenya Ltd Sanpac Africa Ltd Polyflex Industries Ltd

Eslon Plastics of Kenya Ltd

Silpack Industries Limited

Polythene Industries Ltd

Five Star Industries Ltd

Solvochem East Africa Ltd

Premier Industries Ltd

General Plastics Limited

Springbox Kenya Ltd

Building sector

51

Central Glass Industries Ltd

Kenbro Industries Ltd Manson Hart Kenya Ltd

Karsan Murji & Company Limited

Kenya Builders & Concrete Ltd

Mombasa Cement Ltd

Paper Sector Ajit Clothing Factory Ltd

Paper House of Kenya Ltd

General Printers Limited

Associated Papers & Stationery Ltd

Paperbags Limited Graphics & Allied Ltd

Autolitho Ltd Primex Printers Ltd Guaca Stationers Ltd Bag and Envelope Converters Ltd

Print Exchange Ltd Icons Printers Ltd

Bags & Balers Manufacturers (K) Ltd

Printpak Multi Packaging Ltd

Interlabels Africa Ltd

Brand Printers Printwell Industries Ltd

Jomo Kenyatta Foundation

Business Forms & Systems Ltd

Prudential Printers Ltd

Kartasi Industries Ltd

Carton Manufacturers Ltd

Punchlines Ltd Kenafric Diaries Manufacturers Ltd

Cempack Ltd Conventual Franciscan Friers-Kolbe Press

Kitabu Industries Ltd

Chandaria Industries Limited

Creative Print House

Kul Graphics Ltd

Colour Labels Ltd D.L. Patel Press (Kenya) Limited

Label Converters

Colour Packaging Ltd

Dodhia Packaging Limited

Modern Lithographic (K) Ltd

Colour Print Ltd East Africa Packaging Industries Ltd

Pan African Paper Mills (EA) Limited

Kenya Stationers Ltd

Elite Offset Ltd Ramco Printing Works Ltd

Kim-Fay East Africa Ltd

Ellams Products Ltd Regal Press Kenya Ltd

Paper Converters (Kenya) Ltd

English Press Limited

SIG Combibloc Obeikan Kenya

Textile Sector Africa Apparels EPZ Ltd

Kenya Trading EPZ Ltd

Spinners & Spinners Ltd

Fulchand Manek & Bros Ltd

Kikoy Co. Ltd Storm Apparel Manufacturers Co. Ltd

Image Apparels Ltd Le-Stud Limited Straightline

52

Enterprises Ltd Alltex EPZ Ltd Metro Impex Ltd Sunflag Textile &

Knitwear Mills Ltd Alpha Knits Limited Midco Textiles (EA)

Ltd Tarpo Industries Limited

Apex Appaels (EPZ) Ltd

Mirage Fashionwear EPZ Ltd

Teita Estate Ltd

Baraka Apparels (EPZ) Ltd

MRC Nairobi (EPZ) Ltd

Thika Cloth Mills Ltd

Bhupco Textile Mills Limited

Ngecha Industries Ltd

United Aryan (EPZ) Ltd

Blue Plus Limited Premier Knitwear Ltd

Upan Wasana (EPZ) Ltd

Bogani Industries Ltd

Protex Kenya (EPZ) Ltd

Vaja Manufacturers Limited

Brother Shirts Factory Ltd

Riziki Manufacturers Ltd

Yoohan Kenya EPZ Company Ltd

Embalishments Ltd Rolex Garments EPZ Ltd

YU-UN Kenya EPZ Company Ltd

J.A.R Kenya (EPZ) Ltd

Silver Star Manufacturers Ltd

Timber Sector Economic Housing Group Ltd

Transpaper Kenya Ltd

Wood Makers Kenya Ltd

Eldema (Kenya) Limited

Twiga Stationers & Printers Ltd

Woodtex Kenya Ltd

Fine Wood Works Ltd

Uchumi Quick Suppliers Ltd

United Bags Manufacturers Ltd

Furniture International Limited

Rosewood Office Systems Ltd

Statpack Industries Ltd

Hwan Sung Industries (K) Ltd

Shah Timber Mart Ltd

Taws Limited

Kenya Wood Ltd Shamco Industries Ltd

Tetra Pak Ltd

Newline Ltd Slumberland Kenya Limited

PG Bison Ltd Timsales Ltd Motor Vehicle Assembly and Accessories

Auto Ancillaries Ltd General Motor East Africa Limited

Megh Cushion industries Ltd

Varsani Brakelining Ltd

Impala Glass Industries Ltd

Mutsimoto Motor Company Ltd

Bhachu Industries Ltd

Kenya Grange Vehicle Industries Ltd

Pipe Manufacturers Ltd

53

Chui Auto Spring Industries Ltd

Kenya Vehicle Manufacturers Limited

Sohansons Ltd

Toyota East Africa Ltd

Labh Singh Harnam Singh Ltd

Theevan Enterprises Ltd

Unifilters Kenya Ltd Mann Manufacturing Co. Ltd

Metal and Allied Allied Metal Services Ltd

Morris & Co. Limited

Khetshi Dharamshi & Co. Ltd

Alloy Street Castings Ltd

Nails & Steel Products Ltd

Nampak Kenya Ltd

Apex Street Ltd Rolling Mill Division

Orbit Engineering Ltd

Napro Industries Limited

ASL Ltd Rolmil Kenya Ltd Specialized Engineer Co. (EA) Ltd

ASP Company Ltd Sandvik Kenya Ltd Steel Structures Limited

East Africa Foundry Works (K) Ltd

Sheffield Steel Systems Ltd

Steelmakers Ltd

Elite Tools Ltd Booth Extrusions Limited

Steelwool (Africa) Ltd

Friendship Container Manufacturers

City Engineering Works Ltd

Tononoka Steel Ltd

General Aluminum Fabricators Ltd

Crystal Industries Ltd

Welding Alloys Ltd

Gopitech (Kenya) Ltd

Davis & Shirtliff Ltd

Wire Products Limited

Heavy Engineering Ltd

Devki Steel Mills Ltd

Viking Industries Ltd

Insteel Limited East Africa Spectre Limited

Warren Enterprises Ltd

Metal Crown Limited

Kens Metal Industries Ltd

Pharmaceutical and Medical Equipment Alpha Medical Manufacturers Ltd

Madivet Products Ltd

KAM Industries Ltd

Beta Healthcare International Limited

Novelty Manufacturing Ltd

KAM Pharmacy Limited

Biodeal Laboratories Ltd

Oss. Chemie (K) Pharmaceutical Manufacturing Co.

Bulks Medical Ltd Dawa Limited Regals

54

Pharmaceuticals Cosmos Limited Elys Chemical

Industries Universal Corporation Limited

Laboratory & Allied Limited

Gesto Pharmaceutical Ltd

Pharm Access Africa Ltd

Manhar Brothers (K) Ltd

Glaxo Smithkline Kenya Ltd

Leather Products and Footwear Alpharama Ltd C & P Shoe

Industries Ltd East Africa Tanners (K) Ltd

Bata Shoe Co. (K) Ltd

CP Shoes Leather Industries of Kenya Limited

New Market Leather Factory Ltd

Dogbones Ltd

Source: Kenya Association of Manufacturers (KAM) Directory. July, 2013