Asian Research Journal of Business Management

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1 Asian Research Journal of Business Management Factors affecting supplier performance in Small and Medium Enterprises (SMEs) in Kirinyaga County, Kenya Lawrence Kabuthi Kabinga Jomo Kenyatta University of agriculture and technology, School of human resource development, Entrepreneurship and procurement department, Nairobi, Kenya. Received: 31 Jan 2014; Revised: 9 Feb 2014; Accepted: 5 Mar 2014 Abstract: This study focused on the factors affecting supplier performance in Small and Medium Enterprises (SMEs) in Kirinyaga County, Kenya. The factors affecting supplier performance included supplier selection, supplier relationship and supplier evaluation. Literature review was well constructed to bring a good understanding of the study by use of available literature materials. The researcher used descriptive research design which primarily shows the state of affairs as it exists at the present and stratified random sampling to group the businesses into homogeneous entities. A random sample was then drawn from the each group. Questionnaire with both open and closed items were used to obtain data. Data were analysed using the Statistical Package for Social Sciences software (SPSS). To ensure reliability and validity, questionnaires were pre tested on seven respondents in the (MSEs) not in the study area. To establish the reliability of the study; Cronbach s alpha was computed and yielded an alpha of The results of the pilot study revealed that the research instrument was reliable and possess both content and face validity. Multiple regression model was used analyse the data collected by use of mean, Standard deviation, variance, R Square, Adjusted R2, Standard Error (SE), P value and t-statistic to ascertain the relationship between factors affecting supplier performance and supplier performance in (SMEs). The findings from the study confirmed the relationship between factors affecting supplier performance and supplier performance yielding moderate regression coefficient (Supplier selection practices at 5 percent significance level was 0.134, supplier performance criteria was 0.53, supplier relationship was 0.39 and supplier evaluation was 0.61, indicating a moderately positive correlation between the variables. Therefore the study established the existence of a strong positive relationship between supplier selection, supplier performance criteria, supplier relationship, and supplier evaluation and supplier performance. Finally the researcher made several practical, social, political and research recommendations which will help improve supplier performance and overall organization performance thus gaining competitive advantage. Keywords: Supplier performance, Supply chain management, Small and Medium Enterprises, Kirinyaga County Government and Supplier relationship spectrum. 1

2 INTRODUCTION The best performing suppliers are those who offer products or services that match or exceed the needs of the buying organizations 13. This however is interfered by several gaps of performance, which if realized in time and corrected would foster an excellent performance. Interest in having the best performing supplier has grown rapidly over past several years, and continues to grow. A number of forces have led to this trend. First, in recent years it has become clear that companies have been able to boost supplier motivation to performance as much as practically possible. Many of these companies are discovering the magnitude of competitiveness that can be achieved by ensuring the best performance from the suppliers more effectively and efficiently. 2 In addition, many organizations have adopted the supplier performance management practice for this competitiveness. They use this to measure, analyze, and manage the performance of a supplier s performance in an effort to cut costs, alleviate risks, and drive continuous improvement. The ultimate intent being to identify potential issues and their root causes so that they can be resolved to everyone s benefit as early as possible 3. However this cannot be realized unless the organization has learnt the gaps existing in the supplier performance as well as the causative factors. 18 Suppliers should be selected based on the company s core process requirements and standardized selection criteria. A buyer company should desires to work with supplier companies that have strong management processes and effective methods of developing their workforce to continuously improve. Supplier selection is based upon criteria that are vital to a particular process and indicative of future success of both the buyer and the supplier. The criteria should be weighted and some attributes made more important for one process team than another. For example, technical support may be more important for a surveillance process team than field service and support capabilities and thus be weighted accordingly. Each criterion should have detailed descriptions that define the requirements that are important to the buyer company as shown by the procurement cycle figure below; Fig. 1 Procurement cycle model A buyer s fundamental selection criteria should include; Health, Safety and Environment (strong safety processes and culture) Economics (financially sound, competitive pricing, internal cost systems, term, etc.) 2

3 3 Alliance Qualities (alliance experience, team skills, facilitation capabilities or skills, etc.) Technical Support Capabilities Field Service and Support Capabilities Customer References Performance (continuous improvement) Quality (ISO 9002; consistent and improving quality) Electronic Commerce Capabilities 13 Getting a universally acceptable definition of MSE has been challenging 9. However, some features have been used variously to define these entities. These characteristics are the number of employees, the amount of initial capital investment, the value of assets, the size of the business premises and annual turnover. According to association of enterprise opportunity (AEO), a microenterprise is a type of small business with less than 5 employees and a seed capital of less than us $ Another study on Management of business challenges among SME in Nairobi- Kenya found out that, various journals report that for developed countries, micro and small enterprises (MSES) are those business entities with no more than 100 employees 4. It further reports that United States adopted micro and small enterprises from the developing countries with a view to attaining social justice for the marginalized. Currently MSES represent the smallest business entities in the developed nations 11. In the research Revisiting the micro and small enterprise sector in Kenya found out that in Kenya, although micro and small enterprises existed before, they gained prominence in the 1990s largely because the World Bank and the International Monetary Fund advocated for structural adjustment programs (SAPs) 10. The programs encouraged liberalization and privatization of the country s economy; consequently, massive job losses. The terminal benefits were invested in informal businesses which proved a big success in job and wealth creation. In the paper Microenterprise SCM in developing countries says that the 1999 Kenya National Micro and Small Enterprises Baseline Survey established that MSEs contributed about 18.4% of the country s Gross Domestic Product (GDP) because 74.2% of jobs were in the MSE subsector 16. Kenya (1999) defined micro, small and medium enterprises (SMEs) as those in any business in the private sector which employ not more than 50 employees. Micro, Small and Medium Enterprises Act [MSME], 2013 adopts two metrics to define non manufacturing and production MSEs: the number of employees and the annual sales volume. In another article titled Ghanaian and Kenyan entrepreneurs: A comparative analysis of their motivations, success characteristics and problems states that those enterprises with an annual turnover of less than US $ and employees not exceeding 50 can be described as micro and small enterprises 5. Hatten 9, in his book Principles of small business management says that although a universal working definition of MSE has not been achieved, these businesses show the following universal characteristics: a) Micro and small businesses; b) Are often owner- managed with few employees,

4 c) Are labour intensive because of low absorption of technology, d) Have unpredictable cash flows and uncontrolled costs, e) Are flexible, and f) May advance to more sustainable businesses. 9 Fred, Ongisa. Nyang au. 6, in his study Challenges Facing Micro and Small Enterprises in Inventory Management in Kisii Town, Kenya, says that it is worth noting that since the initiation of Millennium Development Goals, commonly known as MDGs, and the Kenya Vision 2030, the government has attempted to support MSEs through various pieces of legislation such as Investment Promotion Act, 2004; Public Procurement and Disposal Act, 2006 and Micro, Small and Medium Enterprises Bill, Towards this end, MSEs are expected to continue playing vital economic role especially in new job and wealth creation. According to Kenya Economic Survey 2011, MSEs contributed 80.6% of new jobs and accounted for 18% of the Gross Domestic Product (GDP). The successful implementation of the Economic Recovery Strategy for Wealth and Employment Creation which saw the country grow economically from 0.6% in 2002 to 6.1% GDP in 2006 hinged on MSEs (Kenya, 2005). This was because the government emphasized on poverty reduction through its Sessional Paper No. 2 of 2005 on Development of Micro and Small Enterprises for Wealth and Employment Creation for Poverty Reduction. Evidence suggest that Kenya s economy consists of about MSEs in diverse fields such as mining, manufacturing, production services, distribution and retailing 5. Of these 50% are in retail and commerce while 30% participate in manufacturing and production service. Mbithi and Mainga 14 indicated that the number of MSEs has over the years risen because of the availability of relatively cheap loans courtesy of Youth Development Fund, Women Enterprise Fund, microfinance institutions, faith-based organizations and other non-governmental organizations (NGOs). Research objectives General objective 1. To examine the factors affecting supplier performance in (SMEs). Specific objectives a) To study the effects of supplier selection on supplier performance b) To study the effect of supplier relationship on supplier performance c) To study the effect of supplier evaluation on supplier performance Research questions The study sought to answer the following questions i. How does supplier selection affect supplier performance? ii. How do supplier relationships affect supplier performance? iii. How does supplier evaluation affect supplier performance? Scope of the study The scope of the study was mainly to find out the factors affecting supplier performance in SME S in Kirinyaga County. The study was within Kirinyaga County, which is located in 4

5 Central Kenya region, along the Nairobi-Meru highway and Nairobi-Nyeri highway, neighboring the following county s Embu, Muranga and Nyeri. Limitations i. Inadequate finances ii. Lack of enough data and the risk of false data Literature review The schematic Diagram shows the relationship between the independent and dependant variables Fig. 2 Conceptual frame work Supplier Selection Supplier relationships Supplier performance Supplier evaluation (Independent variable) (Dependent variable) THEORETICAL LITERATURE REVIEW 1. Supplier Selection There are a number of key characteristics that a buyer should look for when identifying and short listing possible or performing suppliers. Good suppliers should be able to demonstrate that they can offer you the following benefits 20 : Reliability-Remember - if they let the buyer down, then in turn the buyer may let his customer down; Quality-The quality of supplies needs to be consistent - your customers associate poor quality with you, not your suppliers; Value for money-the lowest price is not always the best value for money. If the buyer wants reliability and quality from suppliers, he'll have to decide how much he s willing to pay for the supplies and the balance he wants to strike between cost, reliability, quality and service; Strong service and clear communication-the buyer needs his suppliers to deliver on time, or to be honest and give plenty of warning if they can't. The best suppliers will want to talk with the buyer regularly to find out what needs he has now and how they can serve him better in the future; financial security-it's always worth making sure your supplier has sufficiently strong cash flow to deliver what you want, when you need it. A credit check will help reassure you 5

6 that they won't go out of business when you need them most. Many researchers reported that alternative selection criteria are not always independent and may influence each other. The interdependencies among the criteria may have an effect in the decision making process of selecting suppliers for a company. 7 With regard to the supplier performance measures on each sub-criterion, the final priority of each supplier could be identified. Obviously the higher the priority value is, the more desirable that supplier would be 19. This study presented a voting procedure to verify that the interdependencies exist among the criteria of supplier selection, and this caused the hierarchy of the problem to transform to a network structure and therefore change the overall ranking of suppliers. This approach can be incorporated with Analytic Hierarchy (AHP) and Network Process (ANP), to attain efficient supplier selection processes 21. This is well illustrated by the table below; 6

7 Table 1.Supplier selection/ performance criteria Rank criteria Net Price Operational Control Close Relationships Desire for Business Production Facilities and capacity Quality Technological capabilities and innovation Geographical location Delivery Technical Capability Vendor s industry position Repair Service Flexibility in changes Management commitment Clear communication paths Warranties and claim policies Procedural compliance Impression by vendors Attitude Packaging Importance 2. Supplier Evaluations In supply chain management, buyer-supplier relationships are critical to the success of the strategic goals of a company. In order for a buyer to keep track of these relationships and assess supplier performance an evaluation process must be in place. According to Sherry Gordon 22, Supplier evaluation processes can be informal or formal, as you may have seen from past studies done in supply management. Formal supplier performance evaluations can provide both objective and subjective rating of the buyer-supplier relationship. These evaluations can come in a variety of formats. If used correctly, these supplier evaluation matrices can become an important tool in determining a good supplier performance in the long- 7

8 term success of a company 3. Goods made to purchaser s specification require more careful assessment of supplier capability than standard goods available off the shelf from several satisfactory sources. Task variable which determine the choice of supplier are traditionally stated as; quality, quantity, timing, service and price 7. Service includes before sales service for some products, and after sales service for others. Prompt and accurate quotations, reliable delivery times, ease of contact with persons in authority, technical advice and service, availability of test facilities, willingness to hold stocks there are just some of the varied things that make the package known as service. Good serve by the supplier reduces the buyer s workload, increases the usefulness or availability of the product, and diminishes the uncertainty associated with making the buying decision 20. Buyers prefer suppliers to be reasonably profitable because they are interested in continuity and on time delivery as shown below; 8

9 Table 2 Dickson s Supplier evaluation criteria Rank Criteria Importance Quality Delivery Performance History Warranties and claim policies Production facilities Net Price Technical capability Financial position Procedural compliance Communication system Reputation and position in the industry Desire to do business Management organization Operating controls Repair services Attitude Impression and Packaging ability Labor relations record Geographical location Amount of past business Training aid 23 Reciprocal arrangements Extreme importance Considerable importance Average importance Slight importance 3. Supplier Relationships The idea of working closely to supplier is not new lord Nuffield in his pioneering days of motor car production in the United Kingdom worked very closely with his suppliers. He offered help in planning and organizing production, and contributed to the development of 9

10 components from point of view of ease of assembly into final product, as well as the final function. Marks and Spencer have for many years worked closely with suppliers, and other major concerns in the retailing business have established traditions in this respect. 7, 8 Many organizations see supplier relationship management as a process focused on monitoring the performance of their suppliers rather than as a collaborative, two-way relationship that can deliver value for both parties, according to a study released earlier by supply chain consultancy. A good relationship is all about engaging proactively with your most strategic suppliers to capture innovation, jointly develop new products and services, improve the efficiency of your operations and speed up your time to market requires a much broader and more relationship based approach. Supplier relationship management tends to be an add-on to the day job of buyers and category managers, rather than a core role. When you compare this with the highly trained, well-informed and full-time key account managers on the sales side, there is a danger of a real imbalance in the relationship 1. This then means a good performance of suppliers. A culture of collaboration must be fostered across the supply chain, and suppliers viewed as a source of competitive advantage, rather than cost. Properly managed supplier relationships can contribute to enterprise innovation and growth, while a poorly managed supply base will drive up costs and slow new product initiatives 7. Good supplier relationship then represents an opportunity to improve the accuracy and speed of buyer-supplier transactions, while improving collaborative working practices to the benefit of parties, driving continuous improvement and lowering total cost of ownership 20 as shown below; Fig. 3 Supplier relationship spectrum Performance Categories 1. Preferred Suppliers that sustain composite performance levels of 94% to 100% should receive preference for new and follow-on business. Business consideration should be based on the composite score, the Supplier Price Index ranking among all preferred suppliers and the Q Factor the SPI ranking compared with similar suppliers Certified Suppliers that sustain composite performance levels of 90% to 93.9% should be awarded business based on the supplier s ability to provide products, materials or services in accordance with the Supplier Certification Control plan. Business consideration should be based on composite score, SPI Acceptable performance rank and Q Factor rank relative to the commodity specific control plan

11 3. Acceptable Suppliers that sustain composite performance levels of 75% to 89.9% should be awarded business before those in lesser performance categories. Business consideration is based on composite score, SPI acceptable performance rank and Q Factor rank Marginal Suppliers that sustain composite performance levels of 65% to 74.9% should be awarded business that has not already gone to preferred and acceptable suppliers. Business consideration should be based on composite score, SPI marginal performance rank and Q Factor rank 15. METHODOLOGY The researcher used descriptive research design which primarily shows the state of affairs as it exists at the present 12. To constitute a structured sample, the researcher used stratified method since population to be sampled is heterogynous. In gathering out data the researcher depended on two complementary sources of data i.e. primary and secondary data. Mugenda and Mugenda 17 confirm that the main purpose of content analysis is to study existing information in order to determine factors that explain specific phenomenon. Data were analysed using the Statistical Package for Social Sciences software (SPSS). Before the actual data was collected, the researcher conducted a pilot study in Embu County among seven SMES firms who would not be included in the final study population. To establish the reliability of the study; Cronbach s alpha was computed and yielded an alpha of According to Joseph (2003) Cronbach s alpha is a test reliability technique that requires only a single test administration to provide a unique estimate of the reliability for a given test. Cronbach s alpha is the average value of the reliability coefficients one would obtained for all possible combinations of items when split into two half-tests. Cronbach s alpha reliability coefficient normally ranges between 0 and 1. However, there is actually no lower limit to the coefficient. The closer Cronbach s alpha coefficient is to 1.0 the greater the internal consistency of the items in the scale. Based upon the formula _ = rk / [1 + (k -1) r] where k is the number of items considered and r is the mean of the inter-item correlations the size of alpha is determined by both the number of items in the scale and the mean inter-item correlations. George and Mallery (2003) provide the following rules of thumb: _ >.9 Excellent, _ >.8 Good, _ >.7 Acceptable, _ >.6 Questionable, _ >.5 Poor, and_ <.5 Unacceptable (p. 231). The results of the pilot study revealed that the research instrument was reliable and possess both content and face validity. Data analysis was done at two levels, using descriptive statistics and inferential statistics. In descriptive statistics measures of central tendency, frequency tables and percentages were used. Inferential statistics involved the use of correlation, simple and multiple regression analyses. The research was guided by the works of 17 who suggested that researchers need to assure their respondents of confidentiality and also the need to be truthful in their reporting without letting one s opinion misled the respondent which would be a key source of biasness in any given research. Debriefing before research was also observed to avoid any confusion especially on the purpose of the research. 11

12 RESULTS AND DISCUSSION Table 3 Response rate Target Achieved Response rate sample sample (%) Fig. 4 Number of years in business Table 4 Comparative Analysis of Independent Variables Factors Variable Mean Standard deviation Variance Supplier selection documented procedures Challenges in supplier selection Performance of selected suppliers Relationship systems with suppliers Ranking of relationship systems Number of suppliers Supplier selection criteria Rank of criteria Frequency of supplier evaluation Criteria in supplier evaluation Challenges in supplier evaluation

13 These means, standard deviations and variances are based on the data captured through a six point likert type scale running from 0 to 5, representing no effect at all and effect to very large extent respectively as a result of factors affecting supplier performance. Response rate A total of 30 staff in Micro and Small Enterprises (MSEs) in Kirinyaga County, were target and questionnaires issued to them. Feedback was obtained from a total of 27 staff, giving a response rate of 90%, as shown in table 3. Demographic characteristics Majority of the respondents (66%) had been in business for years. On the other hand (13%) respondents had been in business for less than 5 five years and years. Whereas (8%) of the respondents had been in business for 5-10 years. Research questions The variable which was outstanding in the supplier selection section included: Supplier selection documented procedures with a mean (M) of 4.78, a standard deviation of 1.65 and a variance (σ) of 0.69, challenges in supplier selection with a mean (M) of 3.81, a standard deviation of 1.34 and a variance (σ) of 1.77 and finally performance of selected suppliers with a mean (M) of 2.73, a standard deviation of 0.23 and a variance (σ) of The study found out supplier performance is affected by supplier selection. The use of realistic, economical and well planned procedures leads to getting a good and well performing supplier. These procedures if used over a long period need to be reviewed to enhance performance. The in selecting the supplier many activities are involved and according to researches done before, it is seen that the way the supplier will perform is one way or the other influenced by the activities involved in selecting him. A supplier selected using the preferred and the most accurate processes will definitely perform well in the course of their contract 3. The variable which was outstanding in the supplier relationship section included: relationship systems with suppliers with a mean (M) of 4.65, a standard deviation of 0.54 and a variance (σ) of 1.89, ranking of relationship systems with a mean (M) of 3.59, a standard deviation of 1.47 and a variance (σ) of 0.74 and number of suppliers with a mean (M) of 2.43, a standard deviation of 0.98 and a variance (σ) of It was established that majority of the respondents stated that too many suppliers may lead to the company having a burden in creating a good relationship. Moderate and manageable number of supplier will mean a better relationship with them. Thus the researcher through the qualitative analyses, the opinions of the respondents, the researcher deduced supplier relationship is a factor affecting supplier performance. The better the relationship bond, the better the performance. If the bond between the supplier and the buyer is a strong bong of a very good relationship, the supplier will be motivated to perform better. If there s no good bond between the two, then the result is obvious the supplier may not give his best or even additional performance over the excepted one; the bigger the bond the better the care, and vice versa 7. The variable which was outstanding in the supplier performance criteria section included: supplier selection criteria with a mean (M) of 3.87, a standard deviation of 1.34 and a variance 13

14 (σ) of 0.99, and rank of criteria a mean (M) of 2.76, a standard deviation of 0.67 and a variance (σ) of The study established that in addition many organizations have adopted the supplier performance management practice for this competitiveness. They use this to measure, analyze, and manage the performance of a supplier s performance in an effort to cut costs, alleviate risks, and drive continuous improvement. The ultimate intent being to identify potential issues and their root causes so that they can be resolved to everyone s benefit as early as possible (Peter Baily et al, 1998). However this cannot be realized unless the organization has learnt the gaps existing in the supplier performance as well as the causative factors. Performance is therefore subject to measurement for it to be managed. You can t manage what you don t measure. If you measure suppliers, they will improve. Measuring performance uncovers and removes hidden waste and cost drivers in the supply chain. Exams will gauge the level of one s performance and compare with the expected and even pull up for better performance 10. The variable which was outstanding in the supplier evaluation section included: Frequency of supplier evaluation with a mean (M) of 4.59, a standard deviation of 1.67 and a variance (σ) of 0.79, criteria in supplier evaluation with a mean (M) of 3.98, a standard deviation of 1.56 and a variance (σ) of 1.32 and challenges in supplier evaluation with a mean (M) of 2.11, a standard deviation of 0.67 and a variance (σ) of According to the study companies under consideration as potential suppliers should be evaluated in a process using the following criteria: Quality ; Technology; Productivity; Process Control; World-wide Cost Competitiveness; Innovation/New Ideas; Financial Stability; Delivery Predictability/Reliability; Service; Management Philosophy and training Programs. Many stated that evaluation criterion is a major factor affecting supplier performance. The evaluation criteria used by the buyer measure the performance of the supplier also matters and influences the actual performance level of the supplier. Shallow evaluation criteria will mean that critical performance is conclusively measured unlike when using deep evaluation criteria. Once a shallow evaluation criteria is used, this will signal for instance good performance and continue maintaining that performance, which in reality is not complete thus underperformance. On the other hand deep evaluation criteria will offer the true colors of the supplier performance and will be able to know the exact point of improvement 1. Table 5 Regression Analysis Variables Values R Square Adjusted R Standard Error (SE) P value The regression had a correlation coefficient (R2) of and an adjusted R2 of This means that supplier selection, supplier performance, supplier relationship and supplier evaluation contributes 58 percent of the variations in the performance of suppliers. The P-value of indicates that performance of suppliers in the study is significant at five 14

15 percent level of significance, P values of less than 0.05 which is the predetermined significance level implying that the results are statistically significant 12. By the way, the "adjusted R²" is intended to "control for" overestimates of the population R² resulting from small samples, high co linearity or small subject/variable ratios. The perceived utility varies greatly across research areas and time. Also, the "Std. Error of the Estimate" is the standard deviation of the residuals (gpa - gpa'). The larger the R² the smaller this will be relative to the standard deviation of the criterion. Table 6 Multiple Regression analysis Variable Coefficient t-statistic P Value Supplier selection Supplier performance criteria Supplier relationship Supplier evaluation The study used the Pearson s Product Moment Method to determine the strength of the relationship. According to multiple regression equation established, taking all factors constant at zero, performance as result of supplier selection practices at 5 percent significance level was Further, taking all other innovation types at zero, a unit increase in supplier performance criteria will result to 0.53 increases in supplier performance. A unit increase in supplier relationship will lead to 0.39 supplier performance while a unit increase in supplier evaluation will lead to 0.61 increases in supplier performance. This infers that supplier evaluation contributed more to the supplier performance. CONCLUSIONS The general objective of the study was to evaluate the factors affecting supplier performance in Small and Medium Enterprises (SMEs) in Kirinyaga County, Kenya. The results obtained strongly suggest that there is a strong relationship among the four variables. According to the obtained results supplier performance is dependent on how they are selected, the criteria used, the relationship created with them and evaluations done on their performance. There is therefore a strong positive relationship between the four variables and supplier performance in Micro and Small Enterprises in Kirinyaga County, Kenya. The findings from the study confirmed the relationship between factors affecting supplier performance and supplier performance yielding moderate regression coefficient (Supplier selection practices at 5 percent significance level was 0.134, supplier performance criteria was 0.53, supplier relationship was 0.39 and supplier evaluation was 0.61, indicating a moderately positive correlation between the variables. RECOMMENDATION From the findings and conclusions of the study, the researchers came up with the following recommendations: First and foremost the managers of Small and Medium Enterprises (SMEs) in Kirinyaga County, Kenya must put in place policies and structures for improving supplier selection processes. This can be done by increasing understanding of this objective by 15

16 promoting public private partnerships between Kirinyaga University College and the local business community in the county. The university can provide training and development programmes through seminars, conferences and short courses which will help improve the management capability of workers at Small and Medium Enterprises (SMEs) in Kirinyaga County; Secondly all Small and Medium Enterprises (SMEs) in Kirinyaga County should encourage good supplier evaluation criteria without bias to improve their performance. A good evaluation criterion will ensure that there is room for continuous quality improvement after the weak areas are identified. This can be best achieved by promoting award of contracts and tenders to local Small and Medium Enterprises (SMEs) suppliers and general merchants in Kirinyaga County which will promote development of local industries thus enhancing productivity; Finally Small and Medium Enterprises (SMEs) in Kirinyaga County should work to build good relationships with their supplies to enhance their performance in the long-term. Research has indicated that good partnership relationships between suppliers and the organization promote performance of both parties. The County Government of Kirinyaga should hold investor forums and conferences to attract key players in the economic prosperity of local Small and Medium Enterprises (SMEs) in Kirinyaga County. Similar conferences like the ones held in Machakos County and Nairobi County in the year 2013 have given opportunities to Small and Medium Enterprises (SMEs) to learn from the industry players by adopting best practices in supplier performance management, consultancy and making use of available research findings from other organizations. REFERENCES 1. P. Baily, Purchasing systems and records, Gower, Aldershot, 3 rd edition, 1991, pp P. Baily et al., Purchasing principles and management, Pearsons Education Limited London. 8 th edition, 1998, pp M. Bowen, M. Morara and S. Mureithi, Management of business challenges among SME in Nairobi- Kenya, KCA Journal of Business Management, 2009, Vol.2 (Issue 1), pp H. Chu, B. Cynthia and C. McGee, Ghanaian and Kenyan entrepreneurs: A comparative analysis of their motivations, success characteristics and problems, Journal of Developmental Entrepreneurship, 2007, Vol. 12 (Issue3), pp F. O. Nyan au, Challenges Facing Micro and Small Enterprises in Inventory Management in Kisii Town, Kenya IOSR Journal of Business and Management, 2013, Vol. 13 (Issue 5), pp B. Gartner, Hand book on Purchasing and supplies management Pearsons Education Limited. London, 3rd edition, 2002, pp D. George and P. Mallery, SPSS for Windows step by step: A simple guide and reference Boston: Allyn & Bacon, 4th edition, 2003, pp S. Hamisi, Challenges and opportunities of Tanzania s SMEs in adapting supply chain management, African Journal of Business Management, 2010, Vol. 5 (Issue 4), pp T. S. Hatten, Principles of small business management, New York: South-Western Cengage, 5th edition, 2012, pp

17 10. B. House, Revisiting the micro and small enterprise sector in Kenya, Indiana University, 2009, Vol. 7 (Issue 6), pp J. A. Stimson, Supplier Selection (The purchasing excellence series), P T Pubns. 1 st edition, 1998, pp C. R. Kothari, Research methodology, New Delhi: new Age International (P) Limited Publishers. 2nd edition. 2004, pp Kumar, Research Methodology: A Step by Step Guide for Beginners, Sage Publication, New Delhi, India, 2nd Edition, 2005, pp K. Lysons et al., Purchasing and supply chain management, Prentice hall. London. 7th edition. 2006, pp M. Longhi, Supplier performance measurement, Quorum. New York and Londo, 1 st edition, 2001, pp M. Mbithi and J. Mainga, Doing business in Kenya: Procedures and regulation, opportunities, sources of finance and incentives, Nairobi: United Nations Development Programme. 2006, pp O. M. Mugenda et al, A. G. (Eds), Research methods, quantitative and qualitative approaches, African center for technological studies. Nairobi. Edition, 1999, pp S. Prasad and J. Tata, Microenterprise SCM in developing countries, Journal of Advances in Management Research, 2010, Vol.7 (Issue 1), pp S. Prasad, J. Tata and M. Madan, Build to order supply chains in developed and developing countries, Journal of Operation Management, 2005, Vol.23 (Issue 5), pp R. Fleming, Successful supplier relationship management, Oracle Middle East, edition, 2007, pp R. M. Yusuff et al., Determining interdependencies among supplier selection criteria, Euro Journals Publishing, Inc. Serdang, 2009, pp S. Gordon, Seven Steps to Measure Supplier Performance, Hype publishers, San Diego, edition, 2005, pp Corresponding Author: Lawrence Kabuthi Kabinga, Jomo Kenyatta University of agriculture and technology, School of human resource development, Entrepreneurship and procurement department, Nairobi, Kenya 17