African Journal of Operations and Management Science

Is There a Relationship Between Inflation Volatility and Exchange Rate Fluctuation? The Extent to Which the Purchasing Power Parity Theory Holds in the Kenya Context

Musalia Patrick Ilahuya — 2024-11-20

Foreign exchange rate is one of the main macroeconomic variables that affect the economy of a country. Exchange rate affects the level of investment in a country, price stability and the balance of trade. Various macroeconomic factors have been identified by various authors as contributing to fluctuation in exchange rate. This includes among others relative inflation, interest rates, income levels, government interventions and market expectations. The aim of this study was to investigate the relationship between inflation volatility and exchange rate fluctuation in Kenya. The study relied on the hypothesis of purchasing power parity theory of existence of a negative relationship between inflation and exchange rate movement. The research aimed at establishing the extent to which the Purchasing Power Parity (PPP) theory holds in Kenya. The research
was for a period of nine years from January 2005 up to December 2013.Secondary data for exchange rate movement were obtained from the Central Bank of Kenya while data for inflation was obtained from the Kenya National Bureau of Statistics. This two are government institutions and therefore the credibility of data was assured. Regression analysis was applied to analyze the data in order to establish the relationship that exists between the two variables. The result from data analysis indicates the existence of a moderate negative relationship between movement in inflation and exchange rate volatility. This finding therefore supports the existence of PPP concept in Kenya during the period of study. The finding also indicates other factors also greatly influence movement in exchange rate and therefore inflation cannot be relied up on as the sole factor determining exchange rate.

Is There a Link Between Supply Chain Risk Management Practices and Power Supply Disruptions Control? Evidence from Kenya

Erick Omondi Adem — 2024-11-20

The study sought to explore the supply chain risk management practices adopted by the power sector firms in Kenya and their effectiveness in disruptions control within the value chain. In order to satisfy the objectives of the study, a survey was conducted in the three power sector firms in Kenya. Focus being on the key electric power sector value chain players from generation, transmission up to the distribution. The research instrument used was Excel and SAS, descriptive statistics was used by way of mean and the standard deviation to summarize the data and inferential statistics (regression analysis) used to derive the relationship between the practices and disruptions control. The findings revealed that the power sector firms have implemented the supply chain risk management practices albeit to a varying extent. In particular supply contingency planning by way of having in place a backup supply in the critical yet disruption prone categories, adoption of capacity reservation contracts and suppliers’ disruption historical background checks had not been afforded due regard. In addition, it was established that the power sector firms have suffered supply chain disruptions, the major once being those associated with stock outages. On a moderate scale, catastrophic disruptions such as fire outbreak, IT systems breakdown and environmental disruptions have been experienced. Finally, the study affirmed that there exist a statistically significant relationship between loss of critical stock and supply chain risk management practices adopted by the organization. The study is presented in five chapters each with various sections through which the researcher has tried to discuss the above issues. The findings of this study should be appreciated and evaluated in light of the limitations of the study. The study is specifically of value to power sector firms but due to the growing vulnerability of the modern day supply chain, the study finds a place in all organizations that have the desire to instill resilience, robustness and responsiveness in their supply chain. The study therefore recommends that all the power sector firms should endeavour to appreciate their supplier chain risks, determine all the robust supply chain risk management practices that can be embedded into the day to day supply chain operations to ensure proactive control of disruptions or to minimize the effect of any incident disruption.

Logistics Outsourcing Drivers, Practice and Challenges Among Tea Processing Firms in Kenya (Perspectives from Kericho County)

Felix M. Maghanga — 2024-11-20

Logistics outsourcing is today viewed as a globally accepted best business practice. Through outsourced logistics organizations can improve; customer services, cut down costs, minimize risk, increase competitive advantage and improve shareholder returns. The study sought to determine logistics outsourcing drivers, practice and challenges among tea processing firms in Kenya. The study surveyed the tea processing firms in Kericho County (Kenya) by collecting primary data through self-administered questionnaire. Data was analyzed using descriptive statistics. The study found out that there is a strong drive towards the use of outsourcing as a strategy to reduce costs, to pursue core business activities, reduce risks, and gain competitive advantage. According to the study findings, logistics outsourcing among the tea firms was most prevalent in operations such as warehousing, fleet management, fleet operations, transport and distribution. The survey also established that some of the challenges faced by the firms as they moved to outsource their business activities included loss of control of the activities, loss of employee loyalty, industrial unrests, switching costs, loss of information to competitors and resistance to change by the stakeholders.

Purchasing Practices and Procurement Performance of State Corporations in Kenya

Lucy Kanyua Mugo — 2024-11-20

Millions of dollars get wasted due to inefficient and ineffective procurement structures, policies and procedures as well as failure to impose sanctions for violation of procurement rules thus resulting in poor service delivery. Purchasing practices are strategies that may be followed when making company purchasing decisions. Implementing procurement practices may therefore significantly improve the effectiveness of purchasing decisions. The most significant purchasing practices may be improving the relationship between the buyers and suppliers. Procurement department, like all other departments in a company, is an element of the overall organization, which must contribute to the achievement of the corporate goals. The Constitution of Kenya (2010), which makes it very clear that the procurement must support national development objective, in pursuit of the necessary task, it requires that proper policies, procedures be implemented. The study sought to answer the question: what state corporations use purchasing practices in Kenya? Is there a relationship between purchasing practices and procurement performance of state companies in Kenya? The following objectives guided this study: To determine the purchasing practices and to establish the relationship between purchasing practices and procurement performance of state corporations in Kenya. The study used descriptive research design. The target population for this study was all heads and senior procurement officers in 253 parastatal in Kenya where 45 parastatals from a total of 253 parastatals in Kenya were randomly selected. Primary data was used in this study; it was collected using a self-administered questionnaire. The study used descriptive statistical package for social sciences to analyze the data. The study established application of the following purchasing practices by state corporations: planning, monitoring and evaluation, ICT adoption, ethics, training and professionalism, management support, legislative, internal control, outsourcing, contract management. The independent variables in the regression model with positive coefficient have a direct relationship with the dependent variable. Therefore, procurement performance in State Corporation in Kenya varies directly with purchasing all the variables had positive coefficients practices. Purchasing practices (planning, monitoring and evaluation, ICT adoption, ethics, training and professionalism, management support, legislative, internal control, outsourcing, contract management) explains 84.3% of observed change in the procurement performance in state corporation in Kenya. The study concludes that procurement performance of state corporations in Kenya is influenced by purchasing practices that include. The study recommends that State Corporation can enhance procurement performance by ensuring that all stakeholders are committed to procurement and support at the earliest possible stage of the purchasing process. The study recommends that state corporations can improve procurement by ensuring that the supplier selections go deeper to examine the capabilities of suppliers and establishment of long-term relations. A positive relationship with suppliers is a critical factor in sustaining a competitive advantage.

The Effect of Logistics Outsourcing Practices on the Performance of Large Manufacturing Firms in Nairobi, Kenya

Peterson Obara Magutu — 2024-11-20

Outsourcing of services has become a common practice among large manufacturing firms worldwide and this is due to the various benefits that accrue to a firm as a result of outsourcing. Contracting out production of goods and services to a firm with competitive advantages in terms of reliability, quality and cost was found out to be the main driver of outsourcing. However, the various studies covered have not extensively delved into logistics outsourcing practices in relation to the performance of large scale manufacturing firms. As a result, this study explored outsourcing practices viz a viz the performance of large manufacturing firms Nairobi, Kenya. The population of the study in this research was all the large scale manufacturing companies that are based in Nairobi. Stratified random sampling method was applied to come up with the sample size, since the population in different large manufacturing firms is considered heterogeneous, implying that a simple random sample would have been unrepresentative. The response rate was 83%. The results established that the firms were outsourcing transportation management, warehouse management and material handling management. The firms opted to outsource their services due to its advantages and its possible influence on organizational performance, as it enables the firms to focus on its core competencies. The outsourcing practices adopted by the large manufacturing firms will in the long run determine their survival as they would seek to reduce operating costs, improved customer satisfaction and timely delivery of services to clients which in turn increase productivity and reduce lead time and improved profits. The study confined itself to large manufacturing firms in Nairobi and the findings may not be applicable in other sectors as a result of uniqueness of the manufacturing firms. It is therefore recommended that the study is replicated in other service sectors to establish the logistics outsourcing services and performance.

Is There a Link Between Voluntary Disclosure on The Value of the Firm as Well as on The Cost of Capital of Commercial Banks in Kenya?

Naomi Mugo — 2024-11-20

This study had set out to evaluate if there are any positive or negative effects of voluntary disclosure on the financial performance of commercial banks in Kenya. Secondly, this study to establish whether voluntary disclosure has any effect on the value of the firm as well as on the cost of capital. Hence provide evidence on the effects of voluntary disclosure on the financial performance of commercial banks in Kenya. This study used a descriptive research design based on secondary data obtained from published statements of accounts of commercial banks in Kenya and CBK. The population of this study used 42 commercial banks registered by the Central Bank of Kenya and operating in Kenya. The study was based on secondary data collection since they provide a more realistic conclusion to meet the objectives of the study. Data was mainly collected from the publicly available information that was the published annual reports of a sample of 20 from 44 commercial banks in Kenya. The study was carried out for a period of 6 years from 2008 to 2013. The variables used in the study consisted of a dependent and four independent variables. The dependent variable was return on equity which is a proxy for measuring financial performance. The determinants of voluntary disclosure were used as a proxy to measure voluntary disclosure. The study developed a disclosure index based on the explanatory variables based on a multiple regression model. The study concludes that firms should lean towards disclosure of financial and social and board disclosure to increase their performance. The study conforms to the studies reviewed in terms of a positive relationship between financial disclosure and financial performance and a positive relationship between company size and financial performance. It can be concluded that over the years, corporate governance has been gaining awareness from the public and investors and there is a satisfactory level of voluntary disclosure practised by commercial banks in Kenya especially financial data disclosure and social and board disclosure. Therefore disclosure practises and requirements should apply across board no matter the size of the bank in order to provide as much information to all interested stakeholders.

Service Quality and Customer Experience for Mobile Service Providers in Nairobi, Kenya

Caroline K. Bosire — 2024-11-20

As services account for a huge proportion of the economies of countries especially in developing countries, it has been contended that goods are becoming commoditized and that service is able to provide for differentiation. It is therefore imperative to provide customer experience that is unforgettable in order to remain or acquire competitive grounds. The greatest changes in customer experience did not occur until mobile phone became common elements of life. This has caused an increase in demand for high quality services by buyers. Mobile service providers have come to a realization that for them to survive in the competitive environment they are in, they must deliver quality products and services.