Supply chain management practices and Performance of commercial banks in Kenya

Abstract

Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement. It includes coordination and collaboration with channel partners such as suppliers, intermediaries, third-party service providers and customers. In essence, SCM integrates supply and demand management within and across companies. Organizations adopt numerous business improvement methodologies to improve their performance. As competition intensifies, so do the challenges associated with getting a product or service to the right place at the right time at the lowest delivered total cost. Service industry has begun to realize the potential benefits and importance of strategic and cooperative buyer-supplier relationships. With the purpose of managing the supply chain actions for realizing improvement in enterprise performance, it is necessary to improve the planning and management of activities such as materials planning, inventory management, capacity planning, and logistics. SCM practices in the banking industry have been unable to display consistency and stability in performance. They have frequently experienced costly discontinuities in the current dynamic markets and vastly changing technological environments. They are also inflexible and susceptible to disruption since they are unable to swiftly and suitably respond to emerging international protocols, certification requirements, and to governmental and regulatory changes. The study looked at supply chain management practices and performance of commercial banks in Kenya. Specific objectives were to: establish supply chain management practices used in the banking industry in Kenya; establish the impact of SCM to performance of the banks; and establish the challenges of supply chain management practices faced by the banking industry in Kenya. The study adopted descriptive research design in order to investigate and understand the application of supply chain management in the service industry. The population of the study was all the 43 commercial banks operating in Kenya. A semi structured questionnaire was used to collect primary data. The study used descriptive statistics to analyze objectives one and three while inferential statistics was conducted on objective two. The study found that three variables out of the six, namely Supplier Relationships, Reverse logistics, and Outsourcing were found to have strong statistically significant relationships with performance. The other three variables, namely Information Technology, Green supply chain practices and Lean Suppliers were found to have weak relationships which were not statistically significant. The study concluded that Uncertainty in terms of demand, Political interference in SCM, Bulky materials to be transported, Uncertainty in terms of supplies, Lack of financial resources and inefficient tender handling are challenges facing commercial banks in Kenya. The study recommended that commercial banks be encouraged to enhance adoption of SCM practices since they have the potential of improving their performance.