Supplier Development and Procurement Performance of Steel Manufacturing Firms in Nairobi City County, Kenya

Purpose: This study examined the effect of supplier development on procurement performance of steel manufacturing firms within Nairobi City County, Kenya. Methodology: Mixed method research design was adopted. A census with a population of 360 employees within the 10 steel firms was conducted. Questionnaires were used to collect primary data. SPSS V.26.0 and SmartPLS 4.0 programs were used to analyze the data and test for both direct and joint effects of the variables. Results: Results showed that supplier selection (β=0.50, t=8.309, p<0.05), supplier partnership (β=0.136, t=2.872, p<0.05), and supplier evaluation (β=0.127, t=2.884, p<0.05) have a posit ive significant effect on the procurement performance. Supplier training (β= - 0.086, t=1.683, p>0.05) had an insignificant effect on procurement performance therefore its implications for refining procurement strategies warrant further exploration. Unique contribution to policy, theory and practice: This study enriches both policy and practice by illuminating key strategies that steel manufacturing firms in Nairobi City County, Kenya can adopt to enhance their procurement performance. The implications are far-reaching, offering practitioners valuable insights into the pivotal role of supplier selection, collaborative partnerships, and robust evaluation mechanisms. Moreover, the study opens avenues for further exploration, encouraging deeper research into the nuanced dynamics of supplier training and its potential to contribute to procurement optimization.


Introduction
Supplier development is any effort by a procuring entity to enhance the performance and capabilities of its suppliers (Kinyua, 2017).This can be realized by collaborating with suppliers to increase their capabilities.The buyer organization and suppliers collaborate to expand the supplier's capabilities in either the following areas: delivery lead time, cost, technological advancement, quality, safety, environmental responsibility, financial viability, and managerial capability (Glock et al., 2017).However, supplier faces a number of challenges that inhibit the achievement of the desired goals.These may include lack of supplier commitment, inadequate financial resources, lack of technical capability, and resistance to change, among other factors (Changalima et al., 2021).
According to Hanlin & Hanlin (2012), to tackle these obstacles, the buyer organization should employ a range of strategies, which include identifying, evaluating, and choosing suppliers to reduce the supplier base.Additionally, they should select key suppliers to be considered for process and product development enhancements and investments, while also fostering advanced buyer-supplier collaborative relationships.

Problem Statement
According to Ngechi (2017), the Kenyan steel industry forms 13% of the country's manufacturing sector, which significantly impacts GDP growth.This was illustrated in the Kenya Association of Manufacturers (KAM) (2018) report, which contends that steel industries are the backbone of economic activities due to the demand for steel products.According to Kamer (2022); KPMG (2020), steel manufacturing companies' production capacity in Kenya has declined to 42 percent in the last two years.The 2019 Kenyan economic survey indicates that the country spent Shs.97.7 billion on the import of iron ore and steel and exported finished steel and iron products valued at only Shs. 16.3 billion (Kariuki, 2019).The researcher contends that these inefficiencies could be due to ineffective supplier development strategies.Several studies have been conducted on how selected supplier development strategies impact the overall firm performance of manufacturers in Kenya (Waluke, 2018;Mwale, 2018;Kivite, 2015).Despite these researchers contributing significant knowledge on the concept, the fundamental question as to whether supplier development translates into a competitive advantage for steel manufacturers in improving their procurement performance remains pending.This gave the impetus to undertake an empirical study to determine the effect of supplier development on procurement performance of steel manufacturing firms in Nairobi City County, Kenya.

Objective of the Study
The general objective of the study was to investigate the effects of supplier development on the procurement performance of steel manufacturing firms in Nairobi City County, Kenya.

Hypotheses of the Study
H01: Supplier selection has no significant effect on the procurement performance of steel manufacturing firms in Nairobi City County, Kenya.H02: Supplier partnership has no significant effect on the procurement performance of steel manufacturing firms in Nairobi City County, Kenya.H03: Supplier training has no significant effect on the procurement performance of steel manufacturing firms in Nairobi City County, Kenya.H04: Supplier evaluation has no significant effect on the procurement performance of steel manufacturing firms in Nairobi City County, Kenya.

Literature Review Resource-Based View Theory
According to Olukundun (2014), Resource-based view (RBV) theory is a managerial concept employed to identify the strategic resources that a company can leverage to gain a sustainable competitive edge over other firms in the same industry.According to Deming (2020), the theory was originally proposed by Birger Werner felt in the paper "The Resource-Based View of the Firm," the theory was later refined and developed by Jay Barney in the paper "Firm Resources and Sustained Competitive advantage" in 1991.RBV is the main theory of this study covering all the supplier development strategies investigated namely; supplier selection, supplier partnership, supplier training, supplier evaluation, and supplier integration.

Conceptual Framework
The purpose of using a conceptual framework is to give a clear image of the correlation between the variables of the study.Supplier development was the independent variable and procurement performance being the dependent variable.

Empirical Review Supplier Selection
According to Taherdoost & Brard (2019), supplier selection is a procedure through which suppliers undergo inspection, assessment, and finaly selected to become part of the organization's supply chain players.The selection process encompasses a myriad of activities used to appraise the capabilities of suppliers and select them to configure the procuring entities' chain for long-term competitive advantage (Kariuki et al., 2018).According to Rodriguez (2019) the choice of suppliers can affect the quality, pricing, availability of an organization's products, and delivery reliability.Selection of suppliers is characteristically viewed to play an important role in organizational performance.

Supplier Partnership
Supplier partnership is the relationship commitment over an extended time between the procuring firm and supplier to collaborate for the mutual benefit of both entities.It encompasses exchange of relevant information, acknowledgment of risks, rewarding the relationship, contractor training, and non-adversarial alliances with suppliers (Kwamboka, 2019).These undertakings positively impact the procuring entities' overall performance through improvement of supplier capabilities and performance.Partnering with suppliers has

Supplier Evaluation
Procurement Performance numerous benefits, which include an augmented procurement process due to sharing of ideas that improves operations (Sedyaningrum, Prasetya, & Mawardi, 2019).

Supplier Training
Training is the process of enhancing a person's abilities, know-how, and comprehension for carrying out a specific task.Training of suppliers is intended to build the capacity and capabilities of suppliers to support growth and improve competitiveness (Kibwana & Kavale, 2019).According to Modi and Mabert (2017) supplier training on just-in-time delivery, quality improvement techniques, and other essential performance areas warrants that suppliers understand what is expected of them by the procuring firm.Additionally, supplier training ensures consistency, efficiency, and effectiveness which improve procurement performance.

Supplier Evaluation
Evaluation of suppliers is a deliberate strategy or procedure designed to determine the importance of or the impact made by the supplier in meeting the expectations of the buying organization.It may similarly be significant in determining the importance of the supplier to the firm's supply base structure (Baily et al., 2014).One of the fundamental objectives of supplier evaluation is to monitor and measure the performance of the suppliers to ensure continuous performance improvement, minimize costs as well as reduce risks.Yun (2018) discusses 5 key criteria for supplier evaluation.These are long-term relationship, supplier quality commitment, financial stability, total quality performance and supplier competence.

Procurement Performance
According to Hussein (2014) Procurement performance is a metric used to gauge the procurement function's ability to achieve its objectives and goals while minimizing costs.Procurement performance can be reviewed in two major facets; efficiency and effectiveness.According to Nawi & Halipah (2017), effectiveness focusses on the level to which the outlined objectives and goals are being met.Procurement effectiveness denotes the interrelationship between the planned and actual performance.Procurement efficiency on the other hand refers to the relationship between planned and available resources aimed at achieving established objectives and associated activities, encompassing actual and projected costs.

Methodology Design and Data Collection
A mixed-method research design was adopted in this study.A census was conducted since the desired data analysis technique of partial least squares grounded structural equation model necessitates a sample size greater than 100 respondents (Byrne, 2010).Both primary and secondary data were collected during the study.A questionnaire was used to collect the primary data whereas published sources such as industry reports and journals were used to collect secondary data.

Population and Sample
The focus of the study was at the organization level with the unit of analysis being the steel manufacturing firms in Nairobi City County, Kenya.Focus was on 10 firms picked from the Kenya (2021) list of steel manufacturing firms.All 360 employees drawn from procurement, finance, warehousing and stores, dispatch &logistics as well as sales departments formed the unit of observation.

Data Analysis
Data analysis was conducted by the aid of statistical package for social science (SPSS V26.0) to for descriptive statistics.SmartPLS 4.0 was used to measure the latent variables using a set of indicators that were selected using results from factor analysis.

Results and Discussions4.1 Response Rate
The researcher issued 360 questionnaires of which 288 were returned.Explanations given included complicated organizational policies and coldshouldering by respondents to fill the dropped questionnaires.

Factor Analysis
Factor Analysis (FA) was utilized to explore how the variables are interconnected in relation to their shared underlying dimensions.According to Bollen (1989); Mueller & Hancock (2015), Factor Analysis, as a theory-based sub-method of Structural Equation Modeling (SEM), enables the evaluation of the degree to which observed data align with theoretically established constructs.To extract factors, the Principal Component Analysis (PCA) method was employed and the correlation matrix adopted as input.According to Hair et al., (2010), the number of factors extracted is decided by identifying factors whose Eigen values are greater than 0.5.The results of a varimax with Kaiser Normalization of the solution are shown in Tables , 2, 3, 4 and 5.When loadings less than 0.5 were excluded, the analysis yielded factor solutions with a simple structure (factor loadings => 0.5).

Structural Equation Model Analysis
In order to answer the research hypothesis, the study fitted two sets of partial least squares structural equation models to assist in determining how the latent variables influence the performance of procurement.The results of the fitted model were as illustrated in Fig. 2.

Model Diagnostics
The study diagnosed the model to assess if it was indeed a valid SEM model.The study looked into indicator reliability, internal consistency reliability, convergent validity, discriminant validity of the model and Multi-collinearity.The results of the diagnostics were as discussed below;

Indicator Reliability
Factor loadings also referred to as validity coefficients can be used to show how much of the observed variable score variance is valid (Schumacker & Lomax, 2016).Item validity in this study is shown by the factor loadings in Fig. 2. PLS-SEM model indicators are considered to be valid when the loading of the model is 0.7 and above.From the results presented in Table 8, all the indicator loadings were determined to be above 0.7, this shows that all the indicators were reliable in signifying the respective latent variables and is in agreement with Hulland, (1999) who stated that loadings of 0.4 is acceptable but 0.70 or higher are preferred for exploratory research.The indicator loadings for the variables are presented in Table 7.

Internal Consistency Reliability
The internal consistency reliability of the latent variables which were measured by more than 1 indicator (Supplier Selection and Procurement Performance) was measured by the composite reliability statistic.Composite reliability is estimated based on the factor loading analysis (Lerdpornkulrat et al., 2017).Composite reliability should be 0.7 or higher (Bagozzi & Yi, 1988;Tentama & Anindita, 2020).The results of construct validity and reliability are shown in Table 8.

Convergent Validity
The recommended value to attain this validity needs to be equal to or larger than 0.5 (Bagozzi et al, 1988;Ahmad, 2016).Convergent validity of the latent variables which were measured by more than 1 indicator (Supplier Selection and Procurement Performance) was measured by Average Variance Extract (AVE) statistic.The results of the AVE statistic are shown in Table 9.

Discriminant Validity
Discriminant validity of the latent variables was measured using the Fornell and Larcker (1981) criterion which suggests that discriminant validity can be established by comparing the square root of the Average Variance Extracted (AVE) in each latent variable with the correlation values among the latent variables.When the square root of AVE is greater than the other

Hypothesis Testing
Using the PLS-SEM model in Fig. 2, the study tested for the effects of the supplier development on procurement performance.The test of hypotheses results based on the Hotelling's t-test was as illustrated in Table 12.

Effect of Supplier Selection on Procurement Performance
The first hypothesis of the study was stated as; H01: supplier selection has no significant effect on the procurement performance of steel manufacturing firms in Nairobi City County, Kenya.
The results indicate that there was sufficient evidence to reject the H01 (β=0.50, t=8.309, p<0.05).Therefore, it implies that supplier selection had a significant positive effect on procurement performance.These findings concur with Manyega and Okibo (2015) that supplier selection is critical in enhancing the procuring entities' capabilities, improving the quality of their product, and enhancing their performance.This implies that supplier selection is a strong indicator of procurement performance of steel manufacturing firms in Nairobi City County, Kenya.

Effect of Supplier Partnership on Procurement Performance
The second hypothesis of the study was stated as; H02: supplier partnership has no significant effect on the procurement performance of steel manufacturing firms in Nairobi City County, Kenya.The results showed that there was sufficient evidence to reject H02 (β=0.136,t=2.872, p<0.05).The result meant that supplier partnership had a positive significant effect on procurement performance of steel manufacturing firms in Kenya.The finding underscores the positive and significant effect of supplier partnership on procurement performance and is consistent with previous studies including Mawardi et al., 2019 that primarily; information sharing has several effects on procurement performance including optimized processes that improve operations and procurement performance.

Effect of Supplier Training on Procurement Performance
The third hypothesis of the study was stated as H03: supplier training has no significant effect on the procurement performance of steel manufacturing firms in Nairobi City County, Kenya.The results indicate that there is evidence to accept H03 (β= -0.086, t=1.683, p>0.05).The findings imply that supplier training did not have any significant effect on procurement performance of steel manufacturing firms in Nairobi City County, Kenya.It therefore means that supplier training activities do not really improve the procurement performance of steel manufacturing firms in Nairobi City County, Kenya.This implies that investing resources in supplier training programs may not lead to measurable improvements in procurement outcomes for the steel manufacturing firms.These results are contrary to those of Nasiche et al (2020) who aver that there is a strong positive correlation between supplier assisted as well as quality management training and the performance of sugarcane processing firms.

Effect of Supplier Evaluation on Procurement Performance
The fourth hypothesis stated that: H04; supplier partnership has no significant effect on the procurement performance of steel manufacturing firms in Nairobi City County, Kenya.The results showed that there was sufficient evidence to reject H04 (β=0.127,t=2.884, p<0.05).The findings imply that supplier evaluation had a positive significant effect on procurement performance of steel manufacturing firms in Nairobi City County, Kenya.The finding is consistent with Ouko and Juma (2020); Yun (2018) and Mutai and Okello (2016) that supplier quality commitment, financial stability, and competence have a significant effect on procurement performance.Steel manufacturing firms therefore need to put in place proper evaluation metrics that align with their specific procurement goals and objectives.

Conclusions and Recommendations
Based on the findings of the study, it can be inferred that steel manufacturing firms would have efficient and effective procurement functions if they adopt proper supplier development strategies.Steel manufacturing firms need to highlight the importance of robust supplier selection processes, effective communication and collaboration with suppliers, and ongoing performance monitoring and risk management to enhance procurement performance.It is important for steel manufacturing firms to understand the importance of supplier partnership in enhancing procurement performance particularly in terms of cost savings, quality improvement and supply chain resilience.Supplier training in this case was found not to improve the procurement performance of steel manufacturing firms in Nairobi City County, Kenya.It would however be in the best interest of the steel manufacturing firms to embrace supplier training by reviewing some of the best supplier training practices from other sectors including methods and topics covered, as well as the duration and frequency of the trainings.Since supplier evaluation influences procurement performance steel manufacturing firms in Nairobi City County, Kenya should invest in robust supplier evaluation processes to take into account various factors such as supplier quality, pricing, and customer service and delivery performance.

Implications of the Study
The findings and conclusions of this study hold significant implications for the procurement practices and strategic considerations of steel manufacturing firms operating within Nairobi City County, Kenya.The insights gleaned from the research shed light on key areas where these firms can enhance their procurement functions and overall operational efficiency.The study underscores the paramount importance of adopting robust supplier development strategies as a cornerstone of efficient and effective procurement functions.Steel manufacturing firms that proactively engage in supplier development are poised to benefit from improved procurement outcomes.By prioritizing aspects such as supplier selection, communication, collaboration, and performance monitoring, these firms can elevate their procurement performance and strengthen their competitive positioning in the market.While the immediate impact of supplier training on procurement performance was not statistically significant in the context of Nairobi City County, the study recommends that steel manufacturing firms consider a more comprehensive approach to supplier training.Drawing inspiration from successful supplier training practices across various sectors, these firms can refine their training programs by examining methodologies, topics covered, duration, and frequency.By doing so, they can potentially unlock the latent benefits of supplier training and contribute to long-term procurement excellence.

Figure 2 :
Figure 2: PLS-SEM Path Model Showing the Relationship between Supplier Development and Procurement Performance.

Table 2
Rotated Component Matrix for Supplier Selection

Table 7
Outer Loadings of Latent Constructs

Table 8
Construct Reliability and Validity