Supply Chain Risk Management Strategies and Financial Performance of Manufacturing Firms in Nakuru County

Abstract

The manufacturing sector in Nakuru County has faced significant financial performance challenges in recent years, with several key players either reducing operations or shutting down completely. These financial performance issues have been exacerbated by weak supply chain risk management strategies, which have left these firms vulnerable to disruptions such as fluctuating input costs, unreliable suppliers, and logistical challenges. Therefore, the study sought to assess the effect of supply chain risk management strategies on financial performance of manufacturing firms in Nakuru County. Specifically, the study sought to assess the effect of supply chain risk mitigation strategy, supply chain risk monitoring strategy, supply chain risk avoidance strategy and supply chain risk transfer strategy on financial performance of manufacturing firms in Nakuru County. The study was guided by the Agency Theory, Six C's Model and Transaction Cost Economics Theory. 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 was manageable, the study did a census study of the 52 manufacturing firms. The main data collection instrument for this study was structured questionnaire. The study's content validity was improved by consulting experts, especially managers. Internal consistency was used to assess the reliability of the study and Cronbach's Alpha values of 0.7 or more was acceptable. Quantitative data was analyzed by utilization of Statistical Package for Social Sciences. Descriptive and inferential statistics were employed in the study. After analysis, quantitative data was presented in form of tables. From the correlation analysis, the study concluded that there was a moderate positive and statistically significant correlation between supply chain risk mitigation and financial performance of manufacturing firms in Nakuru County (r=0.473; p<0.05). The study also concluded that there was a strong positive and statistically significant correlation between supply chain risk monitoring and financial performance (r=0.541; p<0.05). Further, the study concluded that there was a strong positive and statistically significant correlation between supply chain risk avoidance and financial performance (r=0.641; p<0.05). Moreover, the study concluded that there was a strong positive and statistically significant correlation between supply chain risk transfer and financial performance (r=0.741; p<0.05). From the findings, the study recommended that manufacturing firms in Nakuru County should develop contingency plans and regularly assess potential risks in the supply chain which are also crucial to ensure financial stability and performance. In addition, the study recommended that manufacturing firms should implement robust supply chain risk monitoring mechanisms. The study also recommended that firms should focus on proactively avoiding high-risk scenarios in their supply chains. The study suggested that further study should be conducted on the impact of supply chain risk management strategies on operational efficiency.