QUALITY MANAGEMENT PRACTICES AND SUPPLY CHAIN …

Verah Bonareri Nyachwaya, Dr. James Ongwae Gichana

QUALITY MANAGEMENT PRACTICES

AND SUPPLY CHAIN PERFORMANCE

OF FOOD AND BEVERAGE FIRMS IN

NAIROBI CITY COUNTY IN KENYA

2021

12

Journal of Supply Chain Management

ISSN:2314-2896

Volume 2, Issue 2, pg. 12-22, 2021:https://grandmarkpublishers.com/

QUALITY MANAGEMENT PRACTICES AND SUPPLY CHAIN PERFORMANCE

OF FOOD AND BEVERAGE FIRMS IN NAIROBI CITY COUNTY IN KENYA

1Verah Bonareri Nyachwaya,

2Dr. James Ongwae Gichana

1Master Student (Procurement and Contract Management), Jomo Kenyatta University of

Agriculture and Technology 2Lecturer, Jomo Kenyatta University of Agriculture and Technology

Accepted: March 10, 2021

ABSTRACT

This study explored the relationship between quality management practices and supply chain

performance of food and beverage firms in Nairobi City County in Kenya. The study was

guided by two objectives: customer focus and supplier evaluation. The theoretical review of

the study was based on the theory of constraints and the Grey Systems theory. The study used

descriptive research design where the unit of analysis was 94 firms, from a total sample

framework of 123 through simple random sampling, which was obtained from a list of food

and beverage firms registered by KAM as of 2018. The supply chain managers of the

respective firms were the units of observation. SPSS version 21 was used to analyze

descriptive and inferential statistics. Multiple regression analysis was used to show the

relationship between dependent and independent variables whereas ANOVA tested the

significance level of the independent variables on the dependent. The regression model

results established an adjusted (R2)

of 0.674 at 95% confidence level implying that 67.4% of

changes in SCP were accounted for by the independent variables in the study. With a

correlation coefficient value of 0.875, the study established the presence of a positive and

significant relationship between quality management practices and supply chain performance

of food and beverage firms in Nairobi City County in Kenya.

Key words: customer focus, supplier evaluation, quality management, supply chain

INTRODUCTION

The 21st century has seen major shifts in supply chain practices where organizational

performance is largely dependent on the quality offering, drawing attention on the strategic

importance and criticality that SC plays, making it a strategic professional function that

progressively identifies the prominence of procurement quality controls (Munyimi, 2019).

Quality is a critical success factor because it determines customer satisfaction and offers the

ultimate source of competitive advantage. The ability to differentiate products in the market

is anchored on a business’ total offering on quality as it is able to continuously and

exceedingly satisfy, delight and retain its customers, leading to increased profitability (CIPS,

2012).

Firms are advised to keep an eye on internal efficiencies while at the same time adequately

manage their chains in a bid to improve performance and gain competitive advantage over

their opponents. Not only is quality management about finding and correcting manufacturing

defects, central to it is that quality must involve everyone in the internal and external supply

chains. Supply chain management stands to be a key driver of organizational performance

through creation of an avenue to meet customer needs and uphold the supplier-buyer

relationship (Wee, Thoo, Sulaiman & Muharam, 2016).

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Quality management refers to various online and offline processes used to ensure that the

right quality inputs and outputs are secured, products are fit for purpose and continuous

quality improvements are obtained overtime (CIPS, 2012). Traditionally, QM focused on

internal controls excluding the supply chain network thus yielding limited results that require

a shared focus (Chibba, 2017). This common focus according to Huy et al. (2016) involves

delivering the best-in-class quality products via cross-functional collaboration.

According to Hafeez (2019), SCM often exceeds its annual goals for cost saving. However,

costs increase due to reworks in production and poor-quality products delivered due to

negotiations that focus primarily on price rather than quality. As such, factors that impact on

increment of such costs should be taken into consideration. These factors include rejects that

need to be replaced, returned, scrapped or fixed; delays in re-works and replacements that

have negative impact on production schedule; product failure during testing at different levels

and; customer dissatisfaction after product is delivered and warranty costs (Hafeez, 2019)

There is limited knowledge pertaining SC quality performance (Hong, Zhang and Shi (2017).

The metrics of performance measurement for quality are not well understood. Most metrics

tend to be financial and qualitative. Some, such as order fulfilment and lead-time are

associated with logistics (Chibba, 2017). Quality management includes a quality planning

requirement along with policies, objectives and quantifiable targets and without this, the firm

may narrowly focus on costs as the main parameter for measurement.

Statement of the Problem

Thirty percent of supply chain problems are caused by the deficiencies on suppliers’ end due

to lack of supplier appraisal mechanisms that have seen a surge in poor quality deliveries,

long lead times and high product costs (Mutiso & Kiarie, 2016; Mutehia & Kihara, 2018).

Failure to conduct regular supplier audits, high rates of employee turnover and limited

finances are among the challenges hindering successful adoption of QM practices (Maundu,

2018). Despite knowledge of this, majority of suppliers are selected on the basis of lowest

price quoted while quality, time and other important aspects are regarded of little to no

importance (Hafeez, 2019). According to Mwende and Bula (2019), attempts to implement

QM strategies often fail because of lack of commitment by top management, who often times

delegate and pay lip service. Additionally, most employees in SC are not properly trained and

lack necessary skills (Aketch & Ngugi, 2013).

Hong et al. (2017) note that despite attracting considerable attentions to the concept of quality

and SCM, there is limited knowledge pertaining SCP and quality. Questions have been raised

regarding the quality aspects of SC. How the integration of customers and suppliers affect

quality and therefore influence performance results is not told. Neither are the parameters to

be used properly defined nor well understood (Chibba, 2017). Siongok and Noor (2016) also

note that existence of limited information on the role of QM practices has dented SCP. The

vastness and importance of this topic required conducting concentrated research on the

quality aspects of SC. It was against this background information that this study set forth to

unravel the relationship between QM practices and SCP while focusing on food and beverage

firms in Nairobi City County in Kenya.

Specific Objectives

i. To examine the relationship between customer focus and supply chain performance of

food and beverage firms in Nairobi City County in Kenya.

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ii. To find out the relationship between supplier evaluation and supply chain

performance of food and beverage firms in Nairobi City County in Kenya.

LITERATURE REVIEW

Theoretical Review

Theory of constraints

Developed by Dr. Eliyahu M. Goldratt, TOC is a management philosophy that seeks to

identify the most important limiting factor i.e. constraint, standing in the way of improving

performance (Lagat & Kihara, 2017). The constraint is referred to as the bottleneck. The total

throughput of the process can only be improved through the improvement of the constraint

(Puche, Costas, Pino & De la Fuente, 2016). TOC is of the precept that a chain is only as

strong as the weakest link and seeks to elevate and manage the constraint as necessary since

the constraint governs the output (Lagat & Kihara, 2017). According to Puche et al. (2016),

any improvements not directed to the bottleneck is a waste. Thus, all breakthrough

improvements must be focused on the constraint. The theory is comprised of three main

areas: logical thinking, performance measurement, and operations.

According to Landau (2018), TOC is based on three steps: identifying the system constraint;

manipulating the constraint to obtain maximum capabilities and; subjecting non-constraint

components to enable the constraint operate at maximum effectiveness. The process is

repeated over again once another constraint is identified. Should 2nd

and 3rd

steps fail, Rattner

(2006) notes that BPR is inevitable at this point. TOC can be applicable in this study where

customer focus is viewed as a constraint. Some of the bottlenecks according to Sang and

Kihara (2016) include long lead times, absence of customer engagement, wrong material

order and absence of control related to priority orders causing resource schedule conflicts

among others. Customers are the ultimate definers of value and the ultimate drivers for

delivering quality. Recognizing customers as the definers of value, discovering and satisfying

their needs underpins quality thinking (CIPS, 2012).

Conceptual Framework

Figure 1: Conceptual Framework

Customer Focus

Product specification

Feedback mechanism

Demand pull

Supplier Evaluation

Accreditation with

quality standards

Quality controls

Financial position

Supply Chain Performance

Speed

Cost

Dependability

Independent Variables Dependent Variable

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Empirical Review

Reimann, Lunemann and Chase (2008) studied the relationship between customer focus and

performance of firms in American service firms. The study used in-depth field interviews and

a large-scale, cross-industry survey. Customer focus dimensions such as communication,

customer focus technology, and interaction and customer focus orientation were embraced by

most service firms. The results revealed that customer focus did not affect firm performance

directly however; it led to improved sales growth and reduction of cost.

Coltman, Devinney and Midgley (2011) studied the link between CRM and firm performance

of services firms in Europe. The study adopted a cross-sectional survey of 100 banks.

Questionnaires were used to collect data which was and results from the findings concluded

that customer focus led to an increase in customers which resulted into increased sales and

performance. Hyung–Su (2012) studied the impact of customer focus as a strategy on

performance of service firms in Shanghai, China. The study adopted a cross-sectional

research design. Questionnaires and interviews were used to collect primary data. The results

revealed that customer focus technology and knowledge management were popular customer

focus strategies used by service firms. Further, it was revealed that customer focus as strategy

improved efficiency and reduction in marketing costs which contributed positively towards

improved organizational performance.

There is a positive association between procurement performance and supplier appraisal and

supplier performance evaluation (Oriri & Bichanga, 2015). Therefore, procuring entities

should transparently appraise prospective suppliers to enhance procurement performance and

as an assurance to get value for money. Mutiso and Kiarie (2016) agree that lack of supplier

appraisal leads to poor procurement performance, which is attributed to poor quality

products, long lead times and high cost products. In yet another study, it was found that

supplier evaluation is critical in SCP and that the process is also a strategy to evaluate and

give feedback on supplier improvement. Supplier certification, supplier quality control

capability and overall supplier performance are key areas to be evaluated (Njoroge &

Mwangangi, 2018). Philip and Kihara (2017) affirm that a supplier’s financial status and

quality of goods has significant influence on procurement performance. However, Kitheka

and Mulwa (2013) note that buyers are not keen on supplier quality management issues

particularly where it requires investing considerable resources to assist the supplier.

Another study by Maundu (2018) on supplier quality management concluded that commonly

applied SQM practices by cement manufacturing firms are performance measurement and

monitoring, competitive supplier selection, supplier development, supplier audit and supplier

integration, used to enhance quality and speed of delivery. However, it was noted that failure

to conduct regular supplier audits, high rates of employee turnover and limited finances are

among the challenges hindering successful adoption of SQM practices.

RESEARCH METHODOLOGY

This study employed descriptive research design. The target population in this study was food

and beverage firms in Nairobi City County that were registered with KAM. There were 123

food and beverage firms registered under KAM within Nairobi City County as of 2018

(KAM, 2018). The sampling frame used was drawn from a list of food and beverage firms

that are registered with KAM. As of 2018, there were 123 firms registered (KAM, 2018).

Multiple regression analysis was used to predict the correlation between QM practices and

SCP. The study used the analysis of variance (ANOVA) to test the independence of variables

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on the dependent variable at 95% confidence level and 0.05 significance level.The data was

tabulated and quantitatively analyzed into percentages, frequency tables and pie charts

accordingly. Conclusions and recommendations were drawn from qualitative data that was be

presented in narration form.

RESEARCH FINDINGS

Out of the 94 questionnaires, 78 were returned representing 83% response rate. According to

Mugenda & Mugenda (2012), a response rate of 70% and above is considered acceptable for

research purposes.

Descriptive Analysis

Customer focus

The respondents were asked to indicate the extent to which surveys on customer needs,

customer involvement in specification development, feedback information on quality of

products, firm’s management action on customer complaints, customer-initiated orders before

production or processing and production based on demand forecasting were used to improve

customer focus in their organizations. The results showed a mean of 3.07 for surveys, 3.64

for specification development, and 3.77 for feedback information sharing, 3.86 for the firms’

perception of customer complaints, 3.95 for customer-initiated orders and 4.02 for production

based on demand forecasting. According to the results, the respondents agreed that their firms

focused on their customers to improve their SCP. Further, a standard deviation of 0.709,

0.945, 0.869, 0.954, 0.869, 0.896 and 0.917 showed that the respondents did not differ

significantly in their views. The findings are in tandem with Macharia and Mwangagi (2016)

who revealed that customer focus is the most overriding feature in TQM that influenced

procurement performance in terms of cost, time, dependability and flexibility. Hence, the

overarching goal of any firm should be to identify customers’ needs then plan how to meet

them.

Table 1: Mean and Standard Deviation on Customer Focus

Statement N Mean Std.

Deviation

We frequently conduct surveys on customer needs 78 3.07 .709

Customers are actively involved in product specification development. 78 3.64 .945

Feedback information regarding the quality of products e.g. defects is

shared throughout the firm.

78 3.77 .869

The firm management perceives customer complaints as opportunities

to enable the firm to improve on quality service delivery.

78

3.86 .954

Customers initiate orders before production or processing. 78 3.95 .896

Production is done based on the demand forecast. 78 4.02 .917

Supplier Evaluation

The respondents were asked to indicate the extent of supplier accreditation to quality

standards, certification of suppliers versus quality techniques needed, guidelines and

procedures to control the quality of suppliers in the firm, testing of supplies to compare with

sample and specifications given to suppliers, keenness to evaluate the financial capability of

the supplier before awarding contracts and selection of supplier with lower price over the one

with quality were used to evaluate suppliers in their organizations.

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The results show a mean of 4.37 for supplier accreditation to quality standards, 3.95 for

certification of suppliers versus quality techniques needed; 4.41 for guidelines and procedures

to control quality of suppliers in the firm; 4.34 for testing of supplies to compare with sample

and specifications given to suppliers; 3.86 for keenness to evaluate the financial capability of

the supplier before awarding contracts; and 4.30 for selection of supplier with lower price

over the one with quality. According to the results, the respondents agreed that supplier

evaluation related to their firm’s SCP. Further, a standard deviation of 0.899, 0.896, 0.798,

0.607, 0.954 and 0.755 showed that the respondents did not differ significantly in their views.

It was thus established that supplier evaluation was applied by the firms. Table 4.8 presents

the results. The findings are consistent with those of Katheo and Mwangagi (2018) who

revealed the importance of subjecting suppliers to quality management assessment in order to

curb/reduce delivery of poor-quality supplies. It was duly noted that the rate of rejects from

suppliers is a clear reflection of supplier’s QM and control systems. The findings are further

echoed by Mwikali and Kavale (2012) who found out that quality management assessment of

suppliers helps reduce procurement costs associated with non-conformance.

Table 2: Mean and Standard Deviation on Supplier Evaluation

Statement N Mean Std.

Deviation

We ensure that suppliers selected are accredited with quality standards 78 4.37 .899

We believe certification does not necessarily imply suppliers do

actually possess quality techniques needed

78 3.95 .896

There are guidelines and procedures to control the quality of the

suppliers in our firm

78 4.41 .798

There is strong emphasis on testing supplies to ensure they compare

with the sample and specifications given to the suppliers.

78 4.34 .607

The firm is keen to evaluate the financial capability of the supplier

before awarding contracts

78 3.86 .954

We select supplier with lower price suppliers over the one with quality. 78 4.30 .755

Inferential Statistics

Correlation

The study conducted correlation analysis to unravel the relationship between QM practices

and SCP. To code, enter and compute the Pearson correlation coefficient (r), the Statistical

Package for Social Scientists (SPSS) version 21 was used. The Pearson correlation

coefficient measures the strength of a linear relationship between two or more variables

whose value ranges from -1 (in the presence of a perfect negative correlation) to +1 (when

there is a perfect positive correlation). The closer the value to zero the smaller is the degree of

linear association (Boslaugh, 2012).

Results shown in Table 4.14 found a positive and significant relationship between customer

focus and SCP as indicated by a positive Pearson correlation (r=.367, P=0.002<0.05),

implying that if customer focus increases, SCP also increases. These findings are in tandem

with Macharia and Mwangagi (2016) who revealed that customer focus influenced

procurement performance in terms of cost, time and customer satisfaction.

A positive and significant relationship was also unravelled between supplier evaluation and

SCP (r=.367, P=0.005<0.05), implying that if supplier evaluation increases, SCP increases as

well. The findings concur with Mutethia and Kihara (2018) who observed that supplier

evaluation improved the productivity and hence performance.

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Table 7: Correlation

Supply Chain

Performance

Customer

Focus

Supplier

Evaluation

Supply Chain

Performance

Pearson Correlation 1

Sig. (2-tailed)

N 78

Customer

Focus

Pearson Correlation .367** 1

Sig. (2-tailed) .000

N 78 78

Supplier

Evaluation Pearson Correlation .367** .498** 1

Sig. (2-tailed) .000 .000

N 78 78 78

Regression Analysis

Multiple linear regression analysis was used to determine the relationship between

independent (customer focus, supplier evaluation) and dependent (SCP) variables. The

coefficient of determination R square (R2) was used to measure the proportion of variance in

the dependent variable (SCP) that could be explained by the four independent variables as

accounted for by the regression model and then adjusted to measure the proportion of

variation that could only be explained by those independent variables that really helped in

explaining the dependent variable. Table 4.15 shows the results.

Table 8: Regression Model Summary

Model R R2 Adjusted R

2 Std. Error of the Estimate

.825 .680 .674 .021

a. Predictors: (Constant), customer focus, supplier evaluation, IMP, QIM.

The coefficient of determination R2

was 0.680 indicating that 68% of SCP can be attributed to

customer focus, supplier evaluation, inventory management practices and quality

implementation measures. This implies that the remaining 32% of SCP is accounted for by

other factors not captured in this research.

If the independent variables of this study could have changed, the study results could have

varied by 32.6% as indicated by the adjusted R2

value of 0.674 at 95% confidence level,

implying that the results are 67.4% valid. Conversely, results of the correlation coefficient R,

showing the relationship between the study variables stood at 0.825 indicating the existence

of a strong positive relationship between QM practices and SCP.

Analysis of Variance (ANOVA)

ANOVA was used to determine whether the overall multiple regression model was fit in

establishing the relationship between QM practices and SCP. The ANOVA Test or F-test

results indicated a high degree of fit as reflected by the calculated F value of 44.324 which is

greater than F Critical (4.544) at 5% significance level.

Since the significance level (0.000) is less than 0.05 (0.000< 0.05), it was concluded that the

model was statistically significant and hence fit in predicting how the four independent

variables influenced SCP (Y-dependent variable). Table 4.16 presents the ANOVA results.

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Table 9: ANOVA results

Model Sum of Squares d.f Mean Square F Sig.

Regression 39.398 4 9.850 44.324 .000

Residual 18.483 74 .250

Total 57.881 78

F-Critical Value = 4.544

Regression Model Coefficients

Table 10: Coefficient Results

Model Unstandardized

Coefficients

Standardized

Coefficients

t Sig.

Β Std. Error β

(Constant) 7.890 2.952 2.673 .000

Customer focus .876 .143 .522 6.123 .002

Supplier evaluation .832 .187 .458 4.449 .005

The coefficient results obtained on table 10, determined the regression equation to be:

Supply chain performance = 7.890 + 0.876 (customer focus) + 0.832 (supplier evaluation)

From the regression equation results, holding customer focus, supplier evaluation, inventory

management practices and quality implementation measures at a constant zero, the SCP of

the respective food and beverage firms in Nairobi City County is 7.890 units.

The study results also revealed that holding all other factors constant, a unit increase in

customer focus resulted in 0.876 (β =0.876) increase in SCP. Since the p-value 0.002<0.05,

the relationship was statistically significant. It was established that a unit increase in supplier

evaluation resulted in 0.832 (β =0.832) increase in SCP and since p-value 0.005<0.05, the

relationship was deemed statistically significant as well.

Conclusion

Customer Focus

The study revealed that defining value, and hence quality in the eye of the customer improved

SCP. Respondents affirmed that the customer focus strategies employed led to improved

product specification development since customers were the definers of value, customer

feedback provided a mechanism by which firms were able to identify loopholes in quality

service delivery and that more firms opted for demand-push as opposed to those that adopted

a demand-pull strategy. Further, regression analysis test of correlation revealed the existence

of a close association between customer focus and SCP. This implied that customer focus

plays a significant role in improving SCP and hence, the presence of a significant relationship

between customer focus and SCP.

Supplier evaluation

Supplier appraisal or evaluation was widely practiced in an effort to enhance the quality

offering of prospective suppliers and vendors. Results indicated that accreditation with

quality standards was an important criterion to appraise although it did not necessarily imply

that the supplier actually possessed the quality techniques needed hence the need for further

subjection to other assessment parameters. There was also emphasis on testing of supplies to

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ensure they conformed to specifications. Majority indicated that they would select a supplier

with lower price over quality. The firms were also keen to evaluate the financial capability of

suppliers before awarding contracts. Further, it was revealed that supplier evaluation

statistically and positively impacted SCP as evidenced by the regression analysis test and

correlation results. This implies that supplier evaluation plays a significant role towards SCP.

The study therefore affirms of the presence of a significant relationship between supplier

evaluation and SCP.

Recommendations

The study recommends that food and beverage firms should always seek to define quality

from the customer’s perspective then plan around on methods and strategies that will satisfy

or even exceed customer’s expectations. One of the most useful tools that can be used is the

QFD that uses the VoC to define value. There is also need to ensure regular surveys are done

on customer needs since tastes and preferences tend to change over time. In order to

maximize on returns, quality should be designed and built into the product right from the start

in order to escape cost of non-conformance. Strategies should be tailored around quality

needs in terms of supplier evaluation, inventory management practices and quality

implementation measures. Further, the study recommends that each firm should come up with

a clear QMS that is spearheaded by the top management to facilitate inspiration and buy-in

by employees. Regular training on quality should be done to ensure that employees upgrade

their skills and knowledge to meet the fast-changing needs of customers and best practices.

Efforts must be made to implement QM practices that are not effectively practiced in the

study are such as the JIT strategy in order to improve SCP.

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