Effect of Strategic Procurement Practices on Performance of Commercial Banks in Kenya: A Case of KCB

Abstract

The objective of the research was to establish the effect of strategic procurement practices on the performance of commercial banks in Kenya, a case of KCB. The specific objectives were to establish the effect of supplier relationship management on the performance of the KCB; to evaluate the effect of procurement information systems in performance of KCB and to explore the effect of strategic sourcing on performance of KCB. The study adopted a descriptive research design. The target population was limited to 184 formal employees at KCB head office and stratified random sampling technique was used to obtain 130 employees from the bank. The study used closed ended questions to gather primary data. The researcher selected a pilot group of 13 employees to test for the validity of the research instrument. Analysis was done quantitatively by use of descriptive and inferential statistics and analyzed using the t-test method. It was noted that supplier relationship management led to the improvement of quality of goods procured and there was proper evaluation of supplier’s abilities before undertaking a decision to source products or services SRM within the bank has led to waste reduction. SRM contributed to the improvement of internal customer satisfaction, most of the banks had good alignment of the strategic orientation process and when supplier relationship management is well done, it will result in the development and connecting of the customers. Finally, SRM improved the competitive advantage of the bank and that the bank considers SRM a strategic policy within the organization. Procurement information systems helped companies better understand a potential supplier’s culture by improving transparency, procurement information systems provide easy and real time information sharing to and from the market. Further system integration of various departments e.g. finance, user departments had been achieved due to the use of information systems information systems used in procurement that led to increased transparency and accountability in procurement. Information systems used in procurement led to improved workflow, and that information systems used in procurement improved accuracy of orders. Finally, the findings showed that information systems used in procurement led to higher internal customer satisfaction. The study established that the bank considers strategic sourcing a strategic tool towards achieving growth and strategic sourcing led to improved workflow. Strategic sourcingincreased efficiency within the organization strategic sourcing and led to the compliance with environmental and industry regulations and laws. Strategic sourcing led to an increase in the quality of goods procured and that strategic sourcing led to waste reduction within the organization. Further the study revealed that strategic sourcing enabled the bank achieve strategic advantage and strategic sourcing increased the competitive advantage of the bank. Strategic sourcing increased internal customer satisfaction, led to cost reduction for the organization and led to higher profits. The study concluded that SRM had contributed to the improvement of internal customer satisfaction most of banks. The bank had a good alignment of the strategic orientation process, SRM has led to economic value addition to investment. The study concluded that procurement information systems enhanced procurement efficiencies at KCB group, information systems used in procurement led to improved workflow and information systems used in procurement had increases transparency and accountability in procurement. The study concluded that strategic sourcing led to an increase in the quality of goods procured and that they led to waste reduction within the organization. The study recommend that banks needs to continually build on supplier relationship. This will help create positive buyer-supplier relationships and determines which activities to engage in with each supplier. Financial institution needs to have in placed strong procurement information systems. Through adoption of e-procurement systems, costs incurred by the banks will be reduced by leveraging volume. Banks needs to continually build on strategic sourcing as this was found to be positively related with organizational performance measured through reduce procurement costs, streamlining of procurement operations, strengthening of trustworthy on relationships with existing and new vendors.