Journal of Economics, Management Sciences and Procurement Volume I, Issue I, 2021

pp. 19-31

Effect of Early Supplier Involvement on Supply Chain Performance in Moi

Teaching and Referral Hospital in Kenya

Article history: Revised format: 4th March 2021, Available online: 15th April 2021

Lydia Jepkemei Kurgat1, Dr. Fredrick Onyango Aila2

Abstract:
Purpose: The main aim of this study was to investigate the effects the of early supplier
involvement on supply chain performance in Moi Teaching and Referral Hospital in
Kenya.
Material/method: This study adopted a correlational research design. It targeted 100
employees who include Chief Procurement officer, Assistant Chief Procurement officer,
Accountant, Procurement officers and storekeepers. A census technique was employed.
The instruments for data collection were questionnaires. Cronbach’s Alpha coefficient
was used determine the reliability of the research instrument and results ranged from
0.945 -0.747 was above recommended 0.7. The collected data were coded and analysed
using descriptive and inferential statistics.
Conclusion: The regression results indicated that earlier supplier involvement had
significant and positive effect on supply chain performance. Thus, increasing supplier
involvement has an incremental effect on supply chain performance.
Recommendations: The study recommended that the hospital needs to involve
suppliers early before contract award, raise awareness among suppliers on the quality
of items to be supplied and to co-design activity on the product with their suppliers.
Keywords: Early Supplier Involvement, Hospital, Supply Chain Performance

Paper Type: Research Article

Recommended citation: Kurgat, L. J., & Aila, F. O. (2021). Effect of Early Supplier
Involvement on Supply Chain Performance in Moi Teaching and Referral Hospital in
Kenya. Journal of Economics, Management Sciences and Procurement, I(I), 19-31.

1
Department of Management Science, School of Business and Economics, Maseno University, PO
BOX Private Bag 40105-Maseno Kenya, Email: lymemei@yahoo.com; ORCID ID:
https://orcid.org/0000-0001-5474-0408 Mobile: +254 728 880017
2
Department of Business Administration, School of Business and Economics, Maseno University, PO
BOX Private Bag 40105-Maseno Kenya, Email: faila@maseno.ac.ke ; Mobile: +254 722 314765
 20
Lydia Jepkemei Kurgat, Dr. Fredrick Onyango Aila

1. Introduction

Due to changed market conditions, worldwide companies are driven to first prioritize
on cost and cycle-time reduction, quality improvement and focus on core activities (van
Weele, 2010). In order to remain competitive in a competitive business environment,
many companies in the world have resorted to cost-cutting, lay-offs, restructuring, and
increased productivity measures to manage expenses and to increase profits. Senior
executives in many organizations have realized that on average, 50% or more of an
organization’s operating budget is spent on purchased goods and services (Pattni,
2006). Therefore, the decisions made by purchasing professionals can help to
determine the financial viability of the organization (Ball, 2005). Strategies exist in
different levels in an organization and are the direction and scope of an organization
over the long-term, which achieves advantages in a dynamic environment through its
configuration of resources and competences with the aim of fulfilling stakeholder
expectations (Johnson et al., 2008). The competitive market conditions have led to a
shift in companies’ strategy thinking. As such, Strategic sourcing is key for successful
global supply chain management. As the core challenge of supply chain management
is the removal of barriers between the organization and its suppliers and customers in
order to maintain customer service excellence, financial position improvement, and
operational costs optimization, strategic sourcing emerges as an important factor to
support and integrate the suppliers into the supply chain intelligently. It promotes cross-
functional, intra-organisational and inter-organizational integration (Chen et al., 2014)
considering short- and long-term orientation. Precisely, a purchasing team needs to
ensure proper use of funds and resources while defining the correct supply source of
the business to achieve forecasted results. Additionally, it is expected that purchasing
executives will assimilate market innovations, extend market communication and
ensure supplier reliability.

There was massive corruption in public procurement among developing countries and
more specifically African countries (Rudolf & Carter, 2013). Kwong (2012) shows that
the biggest avenue for corruption in African transactions were through procurement.
This was mostly in terms of bribes to win tenders, kickbacks, cost inflations, single
sourcing, nepotism, tribalism and many more vices in the procurement process. Based
on this, it was resolved that these countries adopt transparency and accountability in
their public procurement procedures. This could only be possible with the adoption of
public procurement legal frameworks (World Bank, 2012). In Kenya, all public
procurements must follow a standard sequence of actions as specified in the Public
Procurement and Asset Disposal Act, 2015. Non-adherence to standardized
procurement processes leads to wastage of resources, ultimately impacting the service
delivery capacity of the institution and wasting public resources (Ngunyi, 2014).

However, the challenge of demand for quality service and upcoming competitions for
most of the firms has realized the need for quality service delivery and efficiency. Past
investigations done around this area recognized poor condition of health care services
in the greater part of public health care institutions including majority of the health
facilities in Kenya due to poor supply chain performance. While there has been an
endeavour to enhance the circumstance, it appears very little has been accomplished in
raising the supply chain performance in public health facilities and this is intensified by
restricted data on the components that distress the supply chain performance in the
public health sector in Kenya. These difficulties distressing public hospitals have
prompted question amongst administration and operations staff. Early supplier
21
Effect of Early Supplier Involvement on Supply Chain Performance in Moi Teaching and
Referral Hospital in Kenya

involvement of health facilities is a standout amongst the most basic variables for their
prosperity. Early supplier involvement plays a key role in ensuring that this is achieved,
therefore there is a need for firms to ensure that they don’t only source but source
strategically. Previous studies of early supplier involvement in various organizations
have identified several benefits of early supplier involvement like outsourcing enables
the company to concentrate its key resources and capacity on building and expanding
its core competencies, internal integration and information sharing, supplier evaluation,
sourcing flexibility and trust in supply chain members. Furthermore, through supplier
development and relationship management, there will be an overall reduction on the
organizational cost hence better performance. This study has been done in other sectors
of the economy and state corporations; however, none has been done in a hospital set
up in Kenya, therefore in light of this, this study sought to investigate the influence of
early supplier involvement on supply chain performance in Moi Teaching and Referral
Hospital in Kenya. Thus, the study hypothesized that;

H1: Early supplier involvement increases supply chain performance in Moi Teaching
and Referral Hospital in Kenya

2. Literature and Theoretical Review

The study was anchored on Resource dependence theory. Resource dependence theory
(RDT) promoted by Pfeffer and Salancikin (1978), is the study of how the exterior
resources of organizations affects the performance of the organization. Resource-based
theory argues that the strategy of an organization needs to be based on the resources it
owns for it to have a better position in the competitive market. It offers a vital
framework to gain sustainable competitive advantage through developing and obtaining
strategic resources that meet criteria rareness, valuable, non-imitable and non-
substitutable.

The resource-dependency theory has been used to explain how purchasing and supplier
involvement enhances a firm’s unique capabilities and thus positively affects firm
performance (Carr and Pearson, 2002), and how technologies can be an inimitable
resource that has a significant impact on manufacturing, information flow, and
performance (Tan et al., 2010). Kim (2009) used this theory to examine the causal
linkages among supply chain management practices, competition capability, the level
of supply chain integration, and firm performance. Dobrzykowski et al. (2010)
explained a firm’s successful sourcing decisions by resource-based view which
provides an internal view of the firm considering its core competencies. Lao et al.
(2010) developed the concept of supply flexibility by recognizing the role of resources
in supply flexibility. On the other had network theory also helps to explain why firms
lacking certain competitive capabilities will seek and promote collaborative
relationships with supply chain partners to secure those capabilities (Oh and Rhee,
2008).

Early supplier involvement refers to a form of vertical collaboration between supply

chain partners in which the manufacturer involves the supplier at an early stage of the
product development process (Mikkola and Skjott-Larsen, 2006; Van Weele, 2010).
Many purchasing organizations view coordination with critical suppliers through ESI
as an important contributor to product, process and supply chain structure development
and a cost reduction measure (Millson & Wilemon, 2002). Also, adopting ESI practices
may offer additional benefits to the organization such as management of supply risk in
 22
Lydia Jepkemei Kurgat, Dr. Fredrick Onyango Aila

new product development and the upstream supply chain (Zsidisin and Smith, 2005).
For a supplier, participation may be embedded in the existing partnership or alliance
with the manufacturer, or a way of securing business (Leenders et al, 2002).

Early supplier involvement (ESI) is believed to be of high importance because decisions

that are made in the design phase have a major effect on product quality, cycle time,
and costs. It is thus vital for organizations to bring the right expertise in the design phase
and leverage the skills of suppliers to reduce development costs. According to literature,
there are several reasons to involve suppliers early; suppliers can identify potential
problems early on in the process involving suppliers at an early stage can improve the
communication between the supplier and the buyer (McIvor & Humphreys, 2004;
Petersen, Handfield, & Ragatz, 2003), early involvement will increase suppliers
perceived contribution and when facing technology uncertainty (Ragatz, Handfield, &
Petersen, 2002), buyers can benefit from suppliers’ information and expertise (Petersen
et al., 2003).

For achievement of effective organizational positioning through early supplier

involvement, the organization should ensure that supplier visits are often undertaken by
a cross-functional team that include a senior member of purchasing and experts on
quality and production engineering. Each member of the team is able to evaluate the
supplier from a specialist point of view thus ensuring shared responsibility for a
decision to approve, improve or reject a supplier (Lysons & Farrington, 2006). Also,
specification development through consultation with users to determine their needs and
also use of open and generic specification especially when there is trademarks or brand
names.

This enables the supplier to understand the exact requirements needed for the final
product without defects thus ensuring that it fulfils the expectations of the target
customer (Souquieres, 2003). By this, the final product is more acceptable in the
marketplace hence a better competitive position of the organization. Supplier
integration can, therefore, help tyre manufacturing firms to achieve product
performance improvements, which eventually contribute to a competitive advantage
and better positioning to an organization due to increased acceptability of their tyre
products by customers.

3. Materials and Methodology

The correlation research design was applied in the study. The design was appropriate
because the research attempted to find a causal effect relationship between early
supplier involvement and supply chain performance. The target population were 100
respondents comprising of finance, procurement and stores departments. The
respondents comprised of chief procurement officer, assistant chief procurement
officer, accountant, procurement officers and storekeepers. The study employed a
census sampling method where all the units under investigation are covered. A total of
79 questionnaires out of the 100 were returned, which gives a response rate of
approximately 79 percent. This response rate is above average. Even though the
percentage rate of response was above average, the number of distributed
questionnaires may have implications on the validity of the statistical analysis. The
writer did however decide to continue with the analysis because the theoretical part of
the project was already done. Data was collected from the MTRH employees through
structured questionnaires. The questionnaires contained close-ended questions with the
23
Effect of Early Supplier Involvement on Supply Chain Performance in Moi Teaching and
Referral Hospital in Kenya

quantitative section of the instrument utilizing both a nominal and a Likert-type scale
format.

4. Findings and Discussion

4.1. Reliability and Validity Tests

Cronbach’s Coefficient Alpha was used to determine the reliability of the research
instrument using SPSS V. 23 program. A reliability coefficient of 0.7 and above was
assumed to reflect the internal reliability of the instruments (Fraenkel & Wallen, 2000).
The study results illustrates that the scales were reliable as their reliability values
exceeded the prescribed threshold of 0.7. Factor analysis was employed to the
constructs of supply chain development practices and supply chain performance. The
results were compared with Kaiser-Meyer-Olkin measure of 0.5 which is considered to
be the threshold (Hair et al., 2010).

Table 1: Reliability and Validity Tests

KMO (Bartlett's
Loadings Test) CV
Supply Chain Performance (α=0.89 0.911(χ2=26.06**) 50.471
Our suppliers present high quality levels 0.63
Our suppliers present high service levels 0.61
Our suppliers deliver product/service on-
time 0.59
Our suppliers respond quickly to our
petition 0.57
Our suppliers have low price/cost of
products/services 0.57
Our suppliers have enough flexibility to
respond to unexpected demand changes 0.52
Our suppliers deliver the correct quantity of
products 0.85
Our suppliers are willing to adjust
products/services to meet changing need 0.78
The hospital has short order to deliver cycle
time 0.73
early Supplier Involvement (α=0.747) 0.86(χ2=46.36**) 49.11
Our hospital involves suppliers early before
contract award 0.8
During the product development stage,
there is a high level of involvement from
our suppliers 0.88
We have regular Sites visits to the
supplier’s premises 0.55
Our hospital conducts ESI for those
suppliers who supply strategic items 0.57
We involve suppliers in Quality of items to
be supplied 0.69
We involve supplier in product design. 0.64
Our suppliers have an active role in product
design specifications 0.76
Co-design activity on our product with our
suppliers is a major priority for us. 0.68
Source: Research Data (2021)
 24
Lydia Jepkemei Kurgat, Dr. Fredrick Onyango Aila

4.2. Sample Characteristic

The demographic characteristics sought from the respondents included; the gender, age,
education and the experience of the respondents in supply chain. The demographic
information or characteristics concerning the unit under investigation gives the
researcher a glimpse into other factors other than the main factors which are or might
be acting as confounders in a given phenomenon and which might determine the
direction of the relationship between the main factors under investigation. The findings
on the demographic characteristics were presented in Table 2. The findings show that
96% of the workforce in MTRH is below 40 years of age. These findings show that
MTRH has employed staff with diverse education and professional qualification levels
and chances of conflict due to misinterpretation of information and of directives were
unavoidable. Cumulatively, over 89% of the employees have worked for less than 9
years which is comparable with the age of majority of the employees, aged below 40
years. On the other hand, there is diversity in terms of employment hence the
expectation is that there are different levels of understanding of the subject matter.

Table 2: Demographic Information

Frequency Percent
Gender Male 45 57
Female 34 43
Total 79 100
Age Below 30 53 67.1
31-40 23 29.1
41-50 3 3.8
Total 79 100
Education Phd 3 3.8
Masters 13 16.5
Bachelor 34 43
Diploma 29 36.7
Total 79 100
Experience in Supply Chain Less than 3yrs 19 24.1
Between 4-6yrs 29 36.7
Between 7-9yrs 23 29.1
10yrs and above 8 10.1
Total 79 100
Source: Research Data (2021)

4.3. Univariate analysis

The study used means, standard deviation and Pearson Correlation for univariate
analysis. Findings showed that the mean response regarding supply chain performance
was 4.02 (SD = 0.780) indicating considerable level of supply chain performance at
MTRH. Despite suppliers delivering the correct quantity of goods, willingness to adjust
products/services to meet changing needs and short order to deliver cycle time, there
are gaps identified in terms of quality and service levels, delivery time, prices/ cost and
flexibility of the suppliers. Further, the mean response was 3.65 (SD = 1.013).
Generally, the mean response was 3.65 (SD = 0.637) for supplier involvement indicting
a moderate involvement of suppliers in MTRH. Consequently, a correlation analysis of
25
Effect of Early Supplier Involvement on Supply Chain Performance in Moi Teaching and
Referral Hospital in Kenya

the independent factors and the dependent factor (competitive advantage) was
conducted and the findings were summarized and presented in Table 3.

The findings in Table 3 show that supplier development has a positive and significant
relationship with supply chain performance, r= 0.712, p=0.000. This means that there
is a probability of 0.712 that supply chain performance would increase given an
increase in supplier development. Furthermore, the findings show that Supplier
Relationship Management has a positive and significant relationship with supply chain
performance, r= 0.621, p=0.000 meaning that there is a 0.621 probability that supply
chain performance will increase with increase in Supplier Relationship Management
between the suppliers and MTRH. In addition, contract management has a positive and
significant relationship with supply chain performance, r= 0.771, p=0.000 indicating
that there is a probability of 0.771 that supply chain performance would increase with
increase in contract management. Finally, Supplier Involvement has a positive and
significant relationship with supply chain performance, r= 0.693, p=0.000 showing that
there is a 0.693 probability that supply chain performance would be enhanced with
increase in Supplier Involvement in the supply chain processes of MTRH. There are
also significant inter-factor relationships that point to the fact that they are mutually
dependent. These findings show that the various strategic sourcing elements
complement each other for the benefit of increasing the level of supply chain
performance at MTRH.

Table 3: Univariate analysis

Earlier
Supply chain Supplier
Mean SD performance Involvement
Supply chain performance R 4.02 0.78 1
Earlier Supplier Involvement R 3.65 0.637 .693** 1
** Correlation is significant at the 0.01 level (2-tailed).
r is the Pearson’s Product Moment Correlation Coefficient
4.4. Analytic model

The study was analysed using both descriptive and inferential statistics. Descriptive
statistics included frequencies, measures of central tendencies (mean, median or mode)
and measures of dispersion (standard deviation, range and variance). Further, both
Pearson’s correlations and regression analyses as forms of inferential statistics were
used. Correlations were used to test for significant relationship between variables and
multiple regression to check the extent to which the dependent variables were predicted
by the independent variables and this helped to test the hypotheses. The multiple
regression models were used to estimate the causal relationships between stock beta
and other chosen variables is as indicated below:
Yi= β0+β1X1i+Ԑi
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Lydia Jepkemei Kurgat, Dr. Fredrick Onyango Aila

Where:
Yi= Supply chain performance (dependent variable)
β1= are regression coefficients
X1i= Early Supplier Involvement
Ԑi = error term

4.5. Multivariate analysis (hypothesis Testing)

The study regression analysis in to assess the effect of the independent variables on the
dependent factor (supply chain performance) and test the underlying research
hypothesis. First the model summary and the analysis of variance which is used in
assessing model fit were assessed and findings were presented in Table 4. The findings
in Table 4 on the model summary show that all the predictors explain 68.2% of the
variation in supply chain performance (R = 0.826, R-squared = 0.682, Adjusted R-
squared = 0.664). The coefficient of determination explains the extent to which changes
in the response variable can be explained by the change in the explanatory variables or
the percentage of variation in the dependent variable that is explained by all the
independent variable. ANOVA results in Table 4 show that the model fit was good as
illustrated by overall test of significance with F (4, 74) value of 39.607 with p < 0.001.
Thus, the model was fit to predict supply chain performance based on earlier supplier
involvement factors.

Table 4: Regression Model

Unstandardized
Coefficients Standardized Coefficients
B Std. Error Beta t Sig.
(Constant) 0.639 0.263 2.43 0.018
Supplier Involvement 0.205 0.088 0.226 2.334 0.022
Model Summary statistics
R 0.826
R Square 0.682
Adjusted R Square 0.664
Good of fit statistics
ANOVA (F stat) 39.607
ANOAV (F prob) 0.000
Dependent Variable: Supply Chain Performance

The findings in Table 4 show that supplier involvement has a positive and significant
effect on supply chain performance, β4= 0.226, p = 0.022. This means that with each
unit increase in supplier involvement in supply chain processes, supply chain
performance would increase by 0.226 units. Hence hypothesis 1 was accepted. Based
on the result MTRH involved its suppliers which improved the hospital supply chain
performance. Hence supply involvement in before contract award, during the product
development stage, Quality of items to be supplied and product design improves
hospital supply chain performance. Also practicing supply involvement activities such
regular sites visits to the supplier’s premises, conducting ESI for those suppliers who
supply strategic items, having an active role in product design specifications and Co-
designing activity on hospital product with our suppliers is a major priority for us will
likely improve supply chain performance. In line with these findings, Millson &
Wilemon, (2002), view supplier involvement as an important contributor to product,
process and supply chain structure development and the reduction of costs. Similarly,
Zsidisin and Smith, (2005) alluded that supplier involvement offers additional benefits
27
Effect of Early Supplier Involvement on Supply Chain Performance in Moi Teaching and
Referral Hospital in Kenya

to organizations in the management of supply risk in new product development and

improving the overall supply chain performance.

5. Conclusion and Recommendations

The findings show that increasing supplier involvement has an incremental effect on
supply chain performance. The reason for this is that site visits are made to the
supplier’s premises. Besides that, it is the hospital’s top priority to co-design activity
on the product with their suppliers. Consequently, potential problems can be identified
early on in the process thereby improving communication between the hospital and its
suppliers. The challenge however is there is no optimal involvement of suppliers in
quality of items to be supplied, product design specifications and the involvement of
suppliers before contract award. However, there are gaps in terms of whether MTRH
involves suppliers early before contract award, if during the product development stage,
there is a high level of involvement from their suppliers, if the hospital conducts ESI
for those suppliers who supply strategic, whether there is involvement of suppliers in
quality of items to be supplied, suppliers involvement in product design, if suppliers
are actively involved in product design specifications and whether it is the major
priority of MTRH to co-design activity on the product with their suppliers.

Based on the findings of the study, the hospitals should ensure that supplier visits are
often undertaken by a cross-functional team that include a senior member of purchasing
and experts on quality and production. Each member of the team is able to evaluate the
supplier from a specialist point of view thus ensuring shared responsibility for a
decision to approve, improve or reject a supplier (Lysons & Farrington, 2006).
Moreover, the hospital needs to involve suppliers early before contract award, raise
awareness among suppliers on the quality of items to be supplied and to co-design
activity on the product with their suppliers.

This study focuses on Moi Teaching and Referral Hospital in Eldoret only. However,
there is need to increase the scope to cover other referral hospitals in Kenya so as to
confirm the findings of this study and also to add more knowledge.

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Effect of Early Supplier Involvement on Supply Chain Performance in Moi Teaching and
Referral Hospital in Kenya

APPENDICES
APPENDIX I: QUESTIONNAIRE
Instructions
Please tick (√) or fill in the blanks and respond to all items.
Section A: Early Supplier Involvement
Please tick the number that best describes your opinion about Early Supplier
Involvement. The numbers represent the following responses strongly agree (5); Agree
(4); Disagree (3); Strongly Disagree (2); not at all (1)
SA A D SD
Our institution involves suppliers early before contract award
During the product development stage, there is a high level of
involvement from our suppliers
We have regular Sites visits to the supplier’s premises
Our institution conducts ESI for those suppliers who supply
strategic items
We involve suppliers in Quality of items to be supplied
We involve supplier in product design.
Our suppliers have an active role in product design
specifications
Co-design activity on our product with our suppliers is a
major priority for us.

Section B: Supply Chain performance

The following are the statements on supply chain performance. Please tick the response
that matches your opinion. Key: 5= (SA) Strongly Agree, 4= (A) Agree, 2 = (D)
Disagree, 1= (SD) Strongly Disagree.

SA A N D SD
Our suppliers present high quality levels
Our suppliers present high service levels
Our suppliers deliver product/service on-time
Our suppliers respond quickly to our petition
Our suppliers have low price/cost of product/service
Our suppliers have enough flexibility to respond to
unexpected demand changes
Our suppliers deliver the correct quantity of product
Our suppliers are willing to adjust product /services to
meet changing need
The hospital has short order to deliver cycle time
Thank you