EFFECT OF SUPPLY CHAIN RISK AVOIDANCE STRATEGIES ON THE FINANCIAL PERFORMANCE OF MANUFACTURING FIRMS: AN EMPIRICAL ANALYSIS IN NAKURU COUNTY
Abstract
Purpose of Study: Therefore, the study sought to determine the effect of supply chain risk avoidance strategy on financial performance of manufacturing firms in Nakuru County.
Problem Statement: Manufacturing firms are faced with challenges associated with high production costs, including expenses related to raw materials, labor, energy, and maintenance. These costs can erode profit margins and affect overall financial performance. The study was guided transaction cost economics theory.
Methodology: The study adopted descriptive research design. The unit of analysis was 52 manufacturing firms in Nakuru County. The unit of observation was 52 supply chain managers and 52 finance managers from 52 manufacturing companies in Nakuru County. Since the study population is manageable the researcher adopted census to include all the 104 targeted respondents. The main data collection instrument for this study was structured questionnaire. Quantitative data was analyzed by utilization of Statistical Package for Social Sciences Descriptive and inferential statistics was employed in the study. Descriptive statistics involved the use of percentages, frequencies, measures of central tendencies (mean) and measures of dispersion (standard deviation). Inferential statistics involved the use of regression analysis to establish the relationship between supply chain risk avoidance strategy and financial performance. The study however used correlation analysis to test for the nature and the strength of the association between these variables.
Result: The findings revealed a strong positive and statistically significant correlation between supply chain risk avoidance and financial performance.
Conclusion: The study also concluded that dual sourcing provides access to a wider range of suppliers. Moreover, the study concluded that strategic alliance allows for the sharing of resources, and capabilities.
Recommendation: From the findings the study recommended that firms should focus on proactively avoiding high-risk scenarios in their supply chains. This could involve careful vetting of suppliers, avoiding over-reliance on single suppliers or regions prone to instability, and selecting supply chain partners with strong financial and operational track records.
Keywords: Supply Chain Risk Avoidance, Financial Performance, Manufacturing Firms, Empirical Analysis, Nakuru County
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