CODING SYSTEM ON PROCUREMENT PERFORMANCE IN THE KENYAN SERVICE SECTOR: A CASE STUDY OF KENYA AIRWAYS
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A RESEARCH PROPOSAL SUBMITTED TO MANAGEMENT UNIVERSITY OF AFRICA IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF MASTERS DEGREE.
AUGUST 2023
This proposal is my original work and has not been presented for a degree in any other University.
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DEDICATION
This work is dedicated to my mother who stood by me during the whole course. Her support is invaluable and I shall remain indebted always.
May the Lord bless you.
ACKNOWLEDGEMENTS
I want to sincerely thank my family for giving me the chance to pursue a higher education and for providing me with complete financial support throughout my studies. My supervisor deserves special recognition because she started the process of helping me write my research project with her and continued to do so until the task was completed. The success of this endeavour would not have been feasible without her knowledge and assistance. He taught me things that will help me in the future as a person to make strong research proposals that will improve the reputation of the organization I will work for. I want to express my gratitude to the students and all the advisers that helped and encouraged me along the way. I appreciate being a part of such a worthwhile programme. Thank you and God bless you.
ABSTRACT
An increasingly important component of supply chain management, particularly in the service sector, is the automated procurement coding system. This is due to the fierce competition in the service sector and the pressure that customers are putting on businesses in terms of demand fluctuation, shortened lead times, and the desire for customized goods and services. Because of this, businesses in the service sector must now compete not only on price but also on how effectively they can source their goods and services. This study aimed to determine how Kenya Airways’ procurement performance was impacted by coding systems. A descriptive design will be used to conduct this study. The Kenya Airways employees in Nairobi, Kenya, will be the study’s target demographic. To analyse data, the researcher will mostly employ descriptive statistics. Tables of frequency distributions, mean, and standard deviation were supplied.
TABLE OF CONTENS
1.1 Background of the Study Error! Bookmark not defined.
1.1.1 Procurement Error! Bookmark not defined.
1.1.2 Automated Procurement Coding Systems. Error! Bookmark not defined.
1.1.3 Kenya Airways Procurement Performance. 6
1.2 Statement of the Problem.. Error! Bookmark not defined.
1.5 Significance of the Study 10
LIST OF USED ABBREVIATIONS
AIS – Automatic-Identification Systems
DPS – Desktop-Purchasing System
EDE – Electronic Data Exchange
ERP – Enterprise Resource Planning
ICT – Information and Communication Technology
ITEs – Independent Trade Exchange
KISM – Kenya Institute of Supplies Management
POS – Point of Sale
RFID – Radio Frequency Identification
SCM -Supply Chain Management
UPC -Universal Product Code
.
1.1 Background of the Study
Every community must interact with its neighbours in order to function. Communities used to trade what they had in excess for what they lacked, even during bartering.
Since there was no standard unit for measuring their stocks, it took time to tell who held valuable goods, leading to imbalances. As a result, items and services regarded as more important than others had greater financial worth and were, therefore, more likely to be lost. However, finding the best approach to effectively control the primary and most distinctive approach to inventory loss distinctively has always been a struggle. According to Lyons and Farrington (2020), procurement refers to any technique used to acquire goods and services, including borrowing, leasing, coercion, and looting.
Most businesses try to reduce expenses as much as possible to increase returns. This is accomplished through procurement, which is finding the most outstanding products and services from vendors at the ideal price, quality, quantity, and timing for delivery (Baily, Jessop, and Jones, 2018). Information and communication technology (ICT) has aided organisations in implementing coding systems, improving the efficiency and effectiveness of inventory management. The concept of coding, which results from inventories’ diversity, is bridged through ICT adoption, primarily through internet technologies. Because of this, businesses everywhere can now manage their inventories effectively and efficiently, regardless of where they are physically located. This concept might be fundamental in procurement because it would assist businesses in expanding their market strategies and fostering competitiveness. According to Omak (2019), procurement is a complex set of operations, risk management, ICT, safety, business, and legal processes that help organisations meet their needs.
Public procurement refers to acquiring works, services, and goods by public bodies from the private sector. According to Owego and Caligula (2016), public procurement is defined as Buying done either for or on behalf of departments and ministries of the national government, regional government entities, and state corporations.
Qatar Airways adopted and put into use coding methods all around the world. At Qatar Airways, the impact of the coding system has improved communication between the user and procurement departments. Using a completion coding system, the user department can improve its relationships with the procurement department regarding information sharing and reliance on technology. The departments’ partner relationships influence financial and procurement success, demonstrating the need for excellent partnerships that create a stable SCM working environment.
Using automated coding systems by Air Rwanda for procurement and delivery in Africa resulted in significant cost savings over manual systems, including decreased administrative expenses and quicker procurement and fulfilment periods. It boosts employee efficiency, and Joshi (2019) notes that tracking inventory data to obtain vendor settlements result in considerable financial savings. Additionally, automated coding system lowers maintenance costs of stocks by enabling Air Rwanda’s procurement personnel to find more favoured suppliers and expand the pool of potential vendors.
In Kenya, government procurement reforms were launched with an Act of Parliament that created the Public Procurement and Disposal Act 2005 (PPDA (2005), h. In Kenya, Kenya Airways is an organ of government that plays a substantial role in the GDP of Kenya’s economics as one of the service industries; as a result, its procurement activities constitute public procurement, which is stipulated in the public procurement and disposal bill 2014 by Kenya constitution, Omak (2011).
The Public Procurement & Disposal Act 2005 (PPDA) created rules for public bodies to use when purchasing and disposing of surplus or obsolete goods, property, and equipment. It outlined the Act’s primary goals, the tendering methods, general procurement regulations, and debarment procedures, among other things. At least 80% of the cases the Kenya Anticorruption Authority handled included a procurement component, according to a report from the 2014–2015 fiscal year. Corruption in procurement drives up the costs of running a business and produces inferior products, services, and labour, which results in inefficiency. Research by Akoth M. (2015) to examine the connection between coding systems and the procurement work of NGOs in Nairobi, Kenya, found that adopting and implementing coding systems practises had improved the effective control of the organisations’ assets and inventories. Future research will aim to determine the role of coding systems in ensuring that procurement is cost-effective.
1.1.1 Procurement
Controlling assets, information, money; as they move from the supplier to producer through wholesalers and retailers down to customer is a common definition of supply chain management (SCM). Inventory reduction is one of the main objectives of SCM. The products should only be made available for consumption when necessary. According to Ram and Harrison (2021), the procurement process is a crucial link in the supply chain.
Other supply chain activities include the conversion of raw materials into intermediate and finished goods as well as the delivery of finished goods to the customer. The supply chain was separated into four processes by Fleischmann et al. (2018): production, distribution, sales, and procurement. Therefore, a significant SCM sub-branch is procurement. Bailey (2014) described procurement as getting the materials required by operations. A basic definition of procurement is purchasing products and services from suppliers by paying on the spot or negotiating for discounts. The main goal of procurement is to increase cost savings on purchased stocks.
As a result, strategies and plans must be implemented to guarantee that the inventories acquired through the procurement process are effectively controlled and managed. According to Hawking et al. (2014), the procurement system’s increased reliance on manual processes is to blame for the historically slow inventory control management processes.
Novack and Simco (2010) established that procurement processes are intricate and require the completion of several tasks that cross both functional and organisational boundaries (inter-firm), such as acquiring various types of inputs, vetting new suppliers, and monitoring supplier performance. Organisations often thrive on interpersonal interactions; therefore, identifying crucial success elements on which they outperform rivals is the key to success.
The Kenya Institute of Supplies Management (KISM) seeks to advance best practices in procurement and supply chain management. It has issued a code of ethics to promote professionalism and guarantee that only qualified suppliers take part in public procurement procedures. According to Simco (2020), training forums are held by KISM to keep professionals up to date on innovations in supply chain management. These forums also enable procurement personnel and professionals to acquire knowledge and skills.
These training forums have ruled in favour of ICT adoption by businesses for inventory control. The store and warehouse departments should adopt and use coding systems to manage their inventories. Bottom line: Coding systems in procurement systems will be most effective at helping businesses, especially those who successfully adapt their labour and purchasing practises (Stevenson (2017)), control inventories. Regardless of the method that the company finds to be most effective, procurement, whether used alone or as a component of a Supplier Resource Management system, can help the company save money, reduce time and administrative costs, and improve the efficiency of purchasing, according to Crump (2019).
Today, many countries recognise the crucial role that ICT plays. Since the development of the internet, governments have been able to offer several essential traditional processes online. Maniam, Halimah, and Hazman (2019) contend that governments have improved service delivery by encouraging information exchange. For instance, all government ministries in Kenya use IFMIS, which has made it possible to track and implement all procurement activities online. According to Maniam et al., certain governments have tried to leverage ICT to improve the public sector’s procurement process while effectively managing inventories. The crucial procedures include requirement identification, payment processing, and contract management.
For the user departments that rely on Kenya Airways’ procurement operation, timely and dependable inventory availability is essential Adams, 2009. Coding systems make sure that this crucial duty is fulfilled and that information access is also guaranteed in a way that is both cost-effective and location-independent. The user department can obtain the necessary inventory, making the final customer happy. This clause strengthens the bidding process and encourages the procurement values of accountability, transparency, and integrity, which Transparency International supports. According to Novack and Simco (2020), accurate data must be gathered for the procurement process to be successful, and customer happiness should be the priority. ICT has accelerated the development of coding systems, making processes dynamic and customisable to fit particular user wants and requirements. ICT can be essential in procurement because of its quick capacity to handle and analyse large amounts of inventory.
1.1.2 Automated Systems for Procurement Coding
The definition of the term “automated coding system” has been explored from various authors’ points of view. According to Waters (2018), a computerised coding system is often a computerised system created to manage and monitor stocks within a company that were acquired through an open procurement procedure. The two main categories of coded procurement systems, automated procurement and standard procurement, are listed by Jacobs (2019). Both systems are frequently found in enterprise resource planning (ERP) or accounting software products and are widely accessible. King (2010) notes that despite the variation in the software offered, a typical procurement coding system application comprises the processing of purchase orders, buying requisitions, goods receipts, and invoices. The majority of systems contain a variety of reporting the level of inventories in addition to these fundamental needs, according to King (2010).
More oversized items typically come with integrated approval procedures, checks, and levels of stock management systems as standard equipment. According to King (2010), an automated procurement coding system is software that enables stock control staff to manage and regulate the number of stocks by issuing and approving stock invoices. The user department chooses the materials, specifies the accounts to be charged for the item, and then uses the codes associated with all inventories in the accounting system to construct a requisition note.
It is a system focused on the buyer and helps big buyers streamline the purchasing process while negotiating good deals with providers. Automated coding procurement systems only sometimes increase supply chain efficiency, according to Lyson and Farrington (2011). Despite the variations in automated coding procurement systems, for the system deployment to be genuinely successful, a company should pick those who work for the industry and willing to assist in making its procurement more efficient (Jacobs, 2011).
The use of barcode data collection technology can help businesses increase their profits and overcome the daily obstacles of competition, according to Darlington (2019). Barcodes offer a quick, precise, and effective way to gather, develop, convey, document, and manage the data in a range of industries if used in conjunction with data collection technologies and other the procurement system. Bar coding is a type of machine-readable identification that can be used in a number of industries, including retail, package distribution, storage and shipping, and point-of-service applications (King, 2010).
Other internal activities, such as licencing, product receipt, or accounting control, are supported by desktop buying systems (DPS), which expand the support for the concrete purchase process offered by catalogue systems and online marketplaces Stevenson (2017). These employee-facing suites allow staff members to complete administrative activities like time and attendance logs, personnel and benefits forms, cost and forecasting reports, and more using the same interface used for purchasing.
Online marketplace auctioning in both forward and backward, is also made simpler by automated coding procurement systems. Vendors list the goods and facilities they want to sell in a forward auction, and potential buyers enter their bids. In a reverse auction, potential customers post requests for estimates on the products they want to buy, and numerous vendors respond with offers. Lyson and Farrington (2014).
Submarian and Shaw (2014) state that a coding system is a server application that replaces the human coding process. Coding systems refer to the assignment of inventories to specific codes. The three main elements of procurement covered are stock-making, inventory management, and procurement transactions. Shaw & Subramanian (2014)
1.1.3 Kenya Airways Procurement Performance
Organizational performance usually combines practices like statistical quality control at the operational or individual employee level. Automated procumbent coding solutions offer significant cost advantages over manual systems by reducing inventory costs and shortening the procurement and fulfilment cycles. For instance, eliminating manual processes boosts employee efficiency. Joshi (2019) further notes that checking inventory levels to obtain vendor rebates can result in considerable financial investments. Automated technique for coding purchases improves operational accuracy. Clerical errors are significantly reduced since staff is no longer required to re-enter data from paper documents.
According to Lyson and Farrington (2016), ordering errors are also reduced. Automated coding systems can connect usage to demand, enabling businesses to keep real-time inventory counts. Information technology today offers paperless methods of conducting business. Information may be transmitted and saved without paper papers or files (Walker, 2010). Kenya Airways rapidly embraces paperless business practices such as EDI, electronic mail (E-mail), and digital photography.
Automatic procurement coding schemes save significant processing, research, and other time.
Provides the opportunity to fix mistakes made during manual requisition efforts. The company saves money effectively and significantly as a result. Numerous mock-ups have been created to capture the complexity of the organisational efficiency hypothesis, according to Lyson and Farrington (2016). The system model, while not discounting the significance of endpoints, emphasises the means necessary to achieve particular ends regarding inputs, resource acquisition, and processes, according to Yuchtman and Seashore (2017).
The foundation of the organisation’s design is the open scheme approach, which views inputs, the renovation procedure, and outputs as entire components rather than separate entities. According to Goodman et al. (2010), the goal conventional model is predicated on the idea that the organisation is a logical collection of arrangements geared toward achieving goals. , achieving results is used to gauge effectiveness, according to Etzioni (2017). The achievement of goals, objectives, and targets is the exclusive focus.
1.2 Statement of the problem
Coding procurement systems are particularly prevalent in large companies where procurement contracts are in place to oversee spending activities. The time personnel save on processing invoices is a great return on investment for small businesses. One of the simplest ways to increase operational efficiency is to deploy automated code procurement systems, according to Lyson and Farrington (2016). The sourcing and purchasing procedure of an organisation is made simpler by e-procurement. Numerous studies on coding procurement systems have been done. Study on the adoption of inventory coding by businesses from the west was done by Batenburg (2011).
The study found that there are national differences in the adoption of coding systems, with firms from nations with low uncertainty avoidance, like Germany and the UK, being the early adopters of this strategy, while nations with lower levels of change resistance, like Spain and France, have lower adoption rates.
Joshi (2009) found that the goal of procurement has drastically evolved from improving the performance of a single function to reorganizing the entire process to maximize shareholder value throughout the organization. Price Waterhouse Coopers revealed that of the organizations using coding system, 70% saved money, 25% claimed to have better focus on core business, in a survey of America’s fastest-growing corporations done in 2010.
The methodologies employed by large-scale companies in the implementation of coding systems in procurement are advantageous to an association in numerous ways, including the elimination of waste in all procurement cycles, the reduction of lead times, the reduction of inventory, the reduction of costs, the improvement of customer satisfaction, and the improvement of demand management due to inventory control and management. One study on coding systems in procurement in Kenya is Kenya (2013). The study’s main area of interest was the coding system’s influence on procurement performance. Most supermarkets in Nairobi, Kenya, have adopted a coding system in procurement with practices like control of inventories in warehouses and stores, according to a study by Mongolia (2014), to determine the effect of coding system acceptance on procurement performance amongst supermarkets in the Nairobi area.
Research by Akoth M. (2015) to examine the association between coding systems and procurement performance of NGO’s in Nairobi, found that adopting and implementing coding systems practices had improved the efficient control of organisations’ assets and inventories. Orori (2011), Njoroge (2016), Kipyego (2015), and Kambua (2013) are a few other research that have been carried out. All of this research has focused on how coding system adoption and implementation in various industries influences the effectiveness of procurement.
Although research on automated coding systems has been successful, there needs to be more data on how well these systems operate in procuring service companies like Kenya Airways. The study set out to address the following issues to close this gap: What impact do coding systems have on Kenya Airways’ procurement performance? What difficulties does Kenya Airways have in adapting coding systems as a service industry? How much has the industry used the coding system to handle its procurement functions to finish?
The study specific objective is coding systems on procurement performance in Service sector with a case study of Kenya Airways.
1.3.2 Specific Objectives
i. To establish the role of coding systems on procurement performance at Kenya Airways .
ii. To determine the challenges of adaptation of coding systems in Kenya Airways as a service industry.
iii. To find out to what extent have the industry use the coding system in tackling its procurement functions
- What is the role of coding systems on procurement performance of Kenya Airways.
- What are the challenges of adoption of coding system in Kenya Airways?
- To which extend have Kenya Airways used coding system in tackling its procurement functions?
The government and lawmakers can evaluate the value of the reforms that have been started. As a result, problems that need fixing can be fixed. The study will also offer advice on how to solve problems that persist even when ICT is used in procurement.
As a government organisation, Kenya Airways will profit from the study. International donors are very concerned about public procurement because, if handled effectively, it will lead to economic growth.
There will be a chance for academics and researchers to evaluate the study. By doing this, the foundation for additional research will be laid, and the study will be built on already accepted theories and practices, adding to the body of knowledge.
1.6 Scope of the Study
This investigation will be limited to Kenya Airways based in Embakasi. The goal of the study is to determine how coding systems affect the effectiveness of procurement. The primary data for the research proposal will come from questionnaires.
1.7 Chapter Summary
The realisation of organisational procurement performance depends on the coding system. The chapter went in-depth on comprehending coding systems and how they affect procurement performance, as well as the problem, study objectives, research questions, study scope, and importance of the research to the service sector.
CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Introduction
The theoretical underpinnings of the adoption of coding systems, the empirical analysis of automated coding systems and procurement performance, the difficulties associated with automated procurement systems, and the conceptual underpinnings for a more in-depth exploration and comprehension of the role of coding systems on procurement performance and its impact on Kenya Airways are all covered in this chapter.
2.2 Theoretical Framework on the Adoption of Automated Coding Procurement
Systems
The growth of the corporate procurement purpose in terms of efficient administration and monetary performance has been influenced by several theories, many of which are still relevant today. Several theories can be used to analyse the buying management concept (PMC) in an organisation, which aids in understanding how the organisation’s coded procurement system and procedures improve inventory control levels at various levels. Several theories, some of which are listed below, have influenced how strategic procurement policies are thought about. Strategic Inventory Control, according to Chen, Paulraj, and Lado (2019), is a crucial link at a functional supply chain mechanism. They imply that tight control of a company’s procurement processes through strategic inventory control management might provide a company with a competitive edge. To achieve cost-saving improvements, encourage accountability among the store chain partners and cultivate a long-term strategic partnership perspective. According to Chen et al. (2019), strategic procurement will result in efficient communication regarding inventory control between the security department and warehouse workers. The links are essential, as Chen et al. (2019) demonstrated. Strategic purchasing agreements, according to this theory, can be a significant supply chain link that enhances internal user department satisfaction and a company’s overall financial performance.
According to Axelsson and League-Hellmann (2021), setting goals and assessing progress towards those goals are appropriate ways to oversee effective procurement.
Indications of performance. The concept categorises the KPTs into the following groups: activity-related, quality-related, delivery-related, savings-related, and related to inventory. Van Woole (2017) identifies procurement effectiveness and efficiency as two metrics for measuring performance. According to the notion, procurement effectiveness measures what has been achieved, whereas procurement efficiency measures the resources needed to do so. Based on the four scopes of product/quality, cost/price, transportation, and organisation proposed by Van Wools (2017).
According to Amit and Zott (2021), a transaction happens whenever a good or service is traded via a technically detachable interface. The end of one stage of meting out or gathering action signals the start of another. Transaction costs are involved in planning, adapting, carrying out, and monitoring task accomplishment. Transaction efficiency is a crucial source of value according to transaction cost economics since it lowers expenses. It implies value can be created by reducing complexity, uncertainty, information asymmetry, and small-number bargaining situations. Moreover, the price of unusual transfers between enterprises can be reduced thanks to reputation, trust, and transactional expertise.
The reduction in transaction costs that comes with doing business online or in any vastly networked setting is one of the critical effects. Business costs comprise the time spent by managers and staff looking for clients and traders, discussing the specifics of transactions with counterparts in other businesses, paying for travel and meeting space, processing paper documents, and paying for production and inventory management.
In conclusion, Van Woole’s (2019) theory is the one that applies to this study the most. This idea explains critical elements of an organisation’s successful procurement. Effectiveness and efficiency are these. This hypothesis can be used to capitalise on improving performance through coding systems, which is the goal this study seeks to achieve.
2.3 Conceptual Framework
Figure 2.1 Conceptual Framework
Challenges of adopting Coding systems PROCUREMENT PERFORMANCE Effects of coding system on procurement Inventory Coding System Independent variables Dependent variable
Desktop Purchasing System- Leads to increased conformity to the procurement strategies and procedures.
Automated Identification Barcode: Ensures precision and adherence to established policies and procedures.
Inventory Coding Systems -Leads to increasing accuracy of transactions
2.3.1 Organizational Performance
Organizational performance is the output or results of an organization as compared to intended outputs (or goals and objectives). Financial performance profits, return on assets, and return on investment are three distinct dimensions of company results that make up organizational performance, according to Richard et al. (2019). A product’s market performance can be measured by sales, market share, and shareholder return (total shareholder return, economic value added). Organizational performance is one of the most ill-defined and vague concepts, despite being perhaps the dependent variable used in organizational research the most frequently nowadays. The biggest danger to an organization’s performance comes from the outside environment. Each organization operates inside a specific external environment. The external environment may cause problems in politics, economics, socioculture, the environment, and technology (Snider and Rendon, 2020).
The primary goals of organizational performance are to increase organizational effectiveness and efficiency in order to enhance the organization’s ability to supply goods and services. Organizational efficacy, which includes forming organizational goals and objectives in a continuous cycle, is another component of performance that occasionally stresses ongoing development. Organizational performance usually combines practices like statistical quality control at the operational or individual employee level. In order to collect qualitative performance data from the viewpoints of customers, performance evaluations at the organizational level frequently include softer measures like customer satisfaction surveys (Kaplan & Norton, 2011).
2.3.2 The Performance of Automated Coding Systems in Procurement
Paperless methods of conducting business are offered by modern, automated information technology. Commercial organisations and supermarkets increasingly use paperless methods like EDI, email and digital photography to do business. Information can be transferred and maintained without papes or files, Walker, (2021).
The impact of these technological developments on Kenya Airways’ procurement has yet to be discovered. They will alter the efficiency of the stores, the way the offices are set up, and the way the warehouses are organised, but most importantly, they will reinvent the rules and procedures governing procurement Walker (2021). By providing automatic e-mail bids, budget tracking, electronic invoicing, business intelligence tools, and the ability to transmit buy requisitions for approval by e-mail, modern coding systems elevate procurement to a whole new level.
Automated coding systems offer significant cost advantages over manual systems by reducing administrative costs and shortening the procurement and fulfilment cycles. For instance, eliminating manual processes boosts employee productivity, and Joshi (2019) notes that maintaining inventory data to obtain vendor rebates can result in considerable financial savings. The inventory maintenance cost is further reduced via an automated coding system that enables Kenya Airways procurement employees to find more potential vendors and prioritise their favourite suppliers. An automated inventory and procurement solution helps maximize purchasing power in large firms whose buying responsibilities regularly change across different departments or locations by combining orders, which typically decreases the cost per transaction and results in larger volume discounts. Crump, (2019).
Time is saved by improving stock control with an automated procurement coding system solution. With just a few mouse clicks, tasks that traditionally required hours or even days can be completed. Hum and Marciano (2010) report that employees no longer waste time attempting to match up receipts and deliveries, deciphering unnecessarily complicated invoices, or entering redundant data into inventories. Additionally, Kenya Airways will experience a decrease in administrative duties related to vendor management, such as contract creation and bid solicitation. The emphasis of the procurement department may instead be on the strategic components of the work. In a similar vein, Joshi (2009) forecasts that purchasing managers will devote more effort to analysing expenditure patterns and negotiating favourable terms with suppliers and less time to handling administrative details. An automated procurement system, according to Joshi (2009), enhances business models by removing needless and time-wasting procedures and increasing profitability.
Automating procurement makes sense in a sector where limits are thin and various sections often demand things several times a day. Both major multi-property chains and tiny specialty supermarkets fall within this category, according to Atkinson (2010). Businesses can lower the cost of their inventory, save time, increase accuracy, improve supplier negotiations, and guarantee compliance by using an automated coding solution. The outcome is more efficient operations, wiser purchasing choices, and improved supply chain control.
Kenya Airways is deferring technology acquisitions until the economy picks up, but it is more crucial than ever to have answers that result in competitive edge. In addition to maximising already available resources and avoiding wasteful spending, an automated coding system puts Kenya Airways in a position to succeed both now and in the future Joshi (2019).
Even though implementing a coding system in procurement can have considerable advantages, there.
On both the internal and external fronts, are there risks and challenges connected with implementing this strategy? According to research by Smart (2010), it has long been difficult to calculate the return on IT investments and make a case for using IT in general. For this reason, organisations must have a thorough plan in place before implementing coding systems. In a study conducted by Angeles and Nath (2007), three main barriers to the adoption of coding systems were identified: a lack of system integration and standardisation issues, the immaturity of e-procurement-based market services and end-user resistance, maverick purchasing, and the challenge of integrating e-procurement with other systems.
Because procurement is still a relatively young business application, there are sometimes not enough benchmarkable reference models, which contributes to the lack of system integration and standardisation challenges. Another area for improvement is the unavailability of certain essential functionality in software, such as invoicing, payment reconciliation, or inventory management. Additionally, businesses must be aware of any potential unintentional holding costs associated with inventory management solutions, such as system integration, content aggregation and rationalisation, catalogue and search engine upkeep, supplier enablement, end-user training, and re-engineering the procurement process. These expenses could cost five to 10 times as much as software licencing and maintenance, according to Angeles and Nath (2007).
The other challenges are the need for supplier preparation, the immaturity of e-procurement service providers, and end users’ opposition to the solutions. Regarding more complex or advanced coding systems in procurement implementation projects, immature service providers might only sometimes be able to offer a full range of services. Another issue for many organisations is the inexperience and lack of preparation on the part of their suppliers. After all, according to Angeles and Nath (2007), suppliers must learn how to utilise invoicing systems, process electronic purchase orders, and generate catalogues.
According to Davila et al. (2003), the network effect, which will be more successful if more participants utilise the same technology, determines how effective e-procurement solutions are. It’s important to include companies’ preferred suppliers. The end-user’s resistance to implementing the procurement coding system solution is the second problem in this situation. According to Angeles and Nath (2007), businesses should encourage the adoption of new procurement technologies through thorough training and instructional sessions with end users.
2.4 Empirical Literature Review
Both practitioners and researchers have argued in favour of the benefits of a coding system for procurement performance. A study on the effect of coding system procurement on organisational procurement performance was undertaken by Jau-Jeng et al. in 2019. The fact that better coordination between the user and procurement departments can result from installing a coding system is an important finding. Using a completion coding system, the user department can improve its relationships with the procurement department regarding information sharing and reliance on technology. The departments’ partner relationships affect financial and procurement performance, demonstrating that solid partnerships lay the foundation for a stable SCM operating environment.
Nepelski (2019) did a study to determine how coding schemes affect how financial transactions are organised. It looked for proof that changes in how businesses structure their operations were caused by the coding system and investigated whether more competitive and open marketplaces resulted from the system. Testing the impact of coding systems in procurement on sourcing strategy and procurement costs showed that coding systems in procurement increase market transactions. This led to the conclusion that electronic procurement defies predictions that coding systems will favour organisational forms resembling networks and place a greater emphasis on hybrid methods of structuring economic transactions by improving supply chain management, increasing market transparency, lowering search and supplier switching costs, and improving market efficiency.
In an investigation by Akoth M. (2019) on the relationship between ICT usage in procurement and the organisational performance of NGOs in Nairobi, Kenya, it was discovered that accountability has been promoted, there is competitive bidding and sourcing, and there has been an improvement in information flow. On the other side, challenges to the execution of procurement included poor information quality, a lack of management support, supplier engagement, insufficient staff training, and a failure to adhere to best practises.
The study concluded that inventory coding increased effectiveness, ensured transparency, promoted accountability, and enhanced the effective management of inventories. Only the NGOs in Nairobi may directly use the study’s findings. It only concentrated on NGOs in Nairobi implementing e-procurement and supply chain integration.
Mose et al. (2020) found that most large Nairobi, Kenya, manufacturers have adopted inventory coding systems with the following procurement practises: receiving online submissions of proposals for tenders and inventory control levels. A sample size of 46 answerers from a list of 455 big manufacturing businesses were used to get their results. Management and employee commitment to the adoption’s success, supplier performance and IT reliability, performance monitoring of the procurement systems, user acceptance of e-procurement systems, and top management support were the five important success factors.
The issues identified are employee reluctance to change, lack of board clearance for purchases, outdated IT equipment among businesses that require renovation, and a lack of managerial assistance.
The research advises significant producers in Nairobi to implement procurement coding systems that include all e-procurement activities. They are also advised to find ways to encourage staff members to use these systems and to address the factors crucial to the success of procurement. According to Amen’s (2019) study on organisational performance and electronic procurement among moneymaking state companies, although commercial state corporations in Kenya have implemented e-procurement, some tasks are still carried out manually. These comprise the supplier shortlisting, request for suggestions, and tendering procedures. It was also proven that e-procurement has reduced costs and enhanced accountability, among other things. The outcomes also demonstrate that Kenya’s state-owned companies now have the ability to react immediately to customer and market input. It was also discovered that the e-procurement system has helped a number of the commercial state bodies speed up their procurement processes.
Njoroge (2015), Orori (2021), Ratanya (2017), Kipyego (2020), Kambua (2018), Kyalo (2020), Mburu (2011), and Mwongela (2014) are some further pertinent works in the field of procurement coding systems. The acceptance and application of coding in procurement across many industries and its effects have been the subject of all this research.
Numerous other studies that examine various elements of automated procurement coding have been conducted.
Systems and effectiveness. However, the majority of them have a restricted focus and a limited viewpoint. They must fully address all features and components of automated procurement coding systems, particularly in the service industry. Another area for improvement in previous research is that almost none has addressed how automated procurement coding systems affect procurement performance, which is why this study is necessary.
2.5 Critiques of Existing Literature
2.5 Summary from Previous Studies and Knowledge Gaps
| Scholar(s) | Focus of the study | Major Findings | Major Contribution | Knowledge and Gap |
| Jau-jeng et al., (2018) | To ascertain how the purchase of a coding system will affect organisational performance | The use of a procurement code system may result in improved collaborations across various company departments. | The study places a strong emphasis on the role that coding systems play in procurement in terms of both supplier and buyer performance. | There is a need for research to examine how procurement collaboration in a value-trusted network may be impacted. |
| Mose et al.,(2019) | To determine the Coding systems practices adopted by manufacturing firms. | The majority of large-scale firms has utilised purchase coding system | The study explains the Procurement coding practices adopted by firms. | The study focuses only on manufacturing companies in Nairobi. The important success variables for coding systems to procurement performance must be studied. |
2.5.1 Automated Coding Systems and Procurement Performance
Paperless methods of conducting business are offered by modern, automated information technology. Information can be transmitted and stored without the use of paper files or documents (Walker, 2019). Commercial companies and supermarkets increasingly conduct business using paperless methods, including EDI, electronic mail (E-mail), and digital photography.
The impact of these technological developments on Kenya Airways’ procurement has yet to be discovered. They will alter the efficiency of the stores, the way that offices are run, and the way that warehousing is organised, but most importantly, they will redefine the rules that apply to procurement (Walker, (2019). By providing automatic e-mail bids, budget tracking, electronic invoicing, business intelligence tools, and the ability to transmit buy requisitions for approval by e-mail, modern coding systems elevate procurement to a whole new level.
Automated coding systems offer significant cost advantages over manual systems by reducing administrative costs and shortening the procurement and fulfilment cycles. For instance, eliminating manual processes boosts employee productivity, and Joshi (2019) notes that maintaining inventory data to obtain vendor rebates can result in considerable financial savings. The inventory maintenance cost is further reduced via an automated coding system that enables Kenya Airways procurement employees to find more potential vendors and prioritise their favourite suppliers. An automated inventory and procurement system can boost purchasing power in large firms where purchasing duties are commonly dispersed across several departments or locations by combining orders. This often results in deeper volume savings and a decrease in the cost per transaction. Crump, (2018).
Time is saved by improving stock control with an automated procurement coding system solution. With just a few mouse clicks, tasks that traditionally require hours or even days can be completed. Hum and Marciano (2019) report that employees no longer waste time attempting to match up receipts and deliveries, deciphering unnecessarily complicated invoices, or entering redundant data into inventories. Additionally, Kenya Airways will experience a decrease in the administrative duties related to vendor management, such as contract creation and bid solicitation. Instead, the job’s strategic aspects can be the procurement staff’s emphasis. Likewise, Joshi (2019) predicts purchasing managers will devote less effort to managing administrative procedures and more to researching spending trends and negotiating advantageous terms with suppliers. An automated procurement system produces a more effective company model, which reduces pointless and time-consuming tasks and boosts profitability Joshi (2019).
Automating procurement makes sense in a sector where margins are thin and various departments often requisition things several times daily. Both major multi-property chains and tiny speciality supermarkets fall within this category, according to Atkinson (2010). Businesses can lower the cost of their inventory, save time, increase accuracy, improve supplier negotiations, and guarantee compliance by using an automated coding solution. The result is more efficient operations, wiser purchasing choices, and improved supply chain control.
Kenya Airways is deferring technology acquisitions until the economy picks up, but it is more crucial than ever to have solutions that give them a competitive edge. In addition to maximising already available resources and avoiding wasteful spending, an automated coding system puts Kenya Airways in a position to succeed both now and in the future Joshi (2019).
2.5.2 Organizational Performance
Organisational performance is the output or results of an organisation as compared to expected outputs (or goals and objectives). Financial performance profits, return on assets, and return on investment are three main aspects of company results that make up organisational performance, according to Richard et al. (2021). A product’s market success can be measured by sales, market share, and shareholder return (total shareholder return, economic value added). Organisational performance is one of the most ill-defined and confusing concepts, despite the fact that it is perhaps the dependent variable used in organisational research the most frequently nowadays. The largest danger to an organization’s success comes from the outside environment. Each organisation operates inside a certain external environment. The external environment may cause problems in politics, economics, society, the environment, and technology (Snider and Rendon, 2018).
The primary goals of organisational performance are to increase organisational effectiveness and efficiency in order to enhance the organization’s ability to supply goods and services. Another aspect of performance that occasionally emphasises continual development is organisational effectiveness, which includes formulating organisational goals and objectives in a continuous cycle. Organisational performance typically comprises practises like statistical quality control at the operational or individual employee level. In order to acquire qualitative performance data from the viewpoints of consumers, performance at the organisational level is often monitored using softer metrics such customer satisfaction surveys (Kaplan & Norton, 2019).
2.6 Summary of Literature Review
Even though implementing a coding system in procurement can have considerable advantages, there.
Are certain risks and obstacles associated with this strategy’s adoption on the internal and external fronts? According to a study by Smart (2018), there has been a persistent issue with determining the return on IT investments and building a case for adopting IT in general. For this reason, businesses must have a detailed plan before deploying coding systems. Three major obstacles to the implementation of coding systems were identified in a study by Angeles and Nath (2007): a lack of system integration and standardisation issues, the immaturity of e-procurement-based market services and end-user resistance, maverick purchasing, and the difficulty of integrating e-procurement with other systems.
Because procurement is still a relatively young business application, there are sometimes not enough benchmarkable reference models, which contributes to the lack of system integration and standardisation challenges. Another area for improvement is the unavailability of certain essential functionality in software, such as invoicing, payment reconciliation, or inventory management. Additionally, businesses must be aware of any potential unintentional holding costs associated with inventory management solutions, such as system integration, content aggregation and rationalisation, catalogue and search engine upkeep, supplier enablement, end-user training, and procurement process re-engineering. These expenses could cost five to 10 times as much as software licencing and maintenance, according to Angeles and Nath (2017).
The lack of supplier readiness, the inexperience of e-procurement service providers, and end users’ resistance to the solutions are the other difficulties. The less experienced service providers could require assistance in some circumstances, particularly for more complex or advanced coding systems in procurement implementation projects, in order to deliver the entire range of services. Another issue for many organisations is the inexperience and lack of preparation on the part of their suppliers. After all, according to Angeles and Nath (2018), suppliers must learn how to utilise invoicing systems, manage electronic purchase orders, and generate catalogues.
The effectiveness of e-procurement solutions depends on the network effect, which will be more successful if more players use the same technology, claim Davila et al. (2019). The chosen suppliers of the organisation are also quite important in this regard. The end-user’s resistance to the procurement coding system solution is the second problem. According to Angeles and Nath (2019), businesses could prevent this by promoting new procurement technologies through thorough training and instructional sessions with end users.
CHAPTER THREE:
3.0 RESEARCH METHODOLOGY
3.1 Introduction
The study design, target people, data gathering procedures and instruments, and data analysis will all be discussed in this chapter, which will focus on the strategies used to accomplish the results.
3.2 Research Design
The study will utilize a descriptive approach to investigate how the coding system affects Kenya Airways Nairobi’s procurement performance. Given that it is challenging to examine every member of the population, this study design is ideal because it involves a large number of people. As a result, sampling is required in order to draw generalizations and inferences about the entire population. This approach was successfully used by Ratanya (2019) in his analysis of large-scale manufacturing operations in Nairobi, Kenya.
3.3 Target Population
The target population of this study will be Kenya Airways in Nairobi, Kenya. The research would target the procurement and stores departments of Kenya Airways since the study was primarily concerned with procurement performance.
3.3.1 Study Sample Frame
| Category | No. of employees (f) | Percentage |
| MD | 1 | 1 |
| Purchasing and Supplies manager | 1 | 1 |
| Inventory manager | 1 | 1 |
| Stores Staff | 10 | 61 |
| IT Clerks | 2 | |
| Total | 15 | 100 |
.
3.4 Data Collection Instruments
A semi-structured questionnaire employing the seven-point Likert scale will be used to collect primary data because it offers a wide range of options. There will be four sections to the questionnaire. The general information about the participant and the organization will be covered in Section 1. Information about the automatic coding systems used by Kenya Airways in Nairobi will be gathered in section two. Kenya Airways’ procurement performance is the subject of Section 3’s inquiry into the implications of automated coding systems, and Section 4’s discussion of associated challenges. The answers to the questions will be given by the procurement officers or managers and the ICT managers or their equivalents.
3.5 Data Collection Procedure
The surveys will be dropped and picked up later. The questionnaire will be piloted to aid the researcher in discovering any problematic or unclear questions.
3.5.1 Pilot Testing
The researcher undertook a pilot study at Kenya Airways on the sampled population to assess the validity and Reliability of the instruments to produce the required data in the correct way possible so that items that are discovered to be inappropriate in answering the research questions and in the achievement of the goals were to be modified to improve the quality and the appropriateness of the data that was collected.
3.5.2 Validity of the Research Instrument
The researcher will offer an official study by writing a questionnaire based on the research questions and presenting it to personnel working for Kenya Airways Procurement department to read through and fill in so that they can help identify any unnecessary questions. This will allow the researcher to evaluate whether the questionnaire and it’s instruments were well expressed and understood by the respondents in the way the researcher would want them to be interpreted. The researcher, therefore, will study the findings to establish any influence of the independent variable on the dependent one and, hence, assess the validity of the data.
3.5.2 Reliability
According to Kerlinge (2003), Reliability refers to an instrument’s consistency when employed repeatedly in similar settings. The researcher
To determine whether there is a significant difference in the outcomes when the study instruments are used repeatedly, use the test-retest technique. In order to determine reliability, data from the pilot study and the final study can be compared. Before doing the analysis and subsequent presentation, the researcher is going to confirm the validity of the study instrument.
3.6 Data Analysis and Presentations
The completed questionnaires will be reviewed for accuracy and uniformity prior to processing the responses. The responses will then be categorized into various groups using the data. Descriptive statistics are frequently used by the researcher to analyse the data. Tables showing frequency distributions, the mean, and the standard deviation were included. The applications SPSS and Microsoft Excel were used to produce the outputs.
Correlation and regression analysis will be used to examine Kenya Airways’ procurement outcomes. Regression analysis will be used to determine the impact of the coding system on Kenya Airways’ procurement performance. The formula for regression shown below will be used:
Y = β0 + β1X1 + β2X2 + β3X3 + β4X4+ ε
Whereby Y = Performance of Kenya Airways
X1 = Automated barcode Identification
X2 = Electronic/online catalogue
X3= Desktop Purchasing System
X4=Inventory Auctioning
ε = Error term β0 is the intercept
The method of analysis according to the study’s variables is provided in the subsequent table.
3.6 Data analysis matrix
| Objectives | Questions | Data Analysis Method |
| Background Details | Section A | Descriptive |
| Automated coding Systems Adopted by Kenya Airways | Section B | Descriptive |
| Effects of Automated coding Systems on procurement Performance | Section C | Correlation and regression |
| Challenges of Implementing Automated coding Systems | Section D | Descriptive |
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.
QUESTIONNAIRE
SECTION A – GENERAL INFORMATION
The purpose of the questionnaire is to determine how automated coding systems affect procurement performance at Kenya Airways in Nairobi, Kenya. Three sections make up the questionnaire. The given information will be handled with the utmost discretion.
SECTION A: BACKGROUND INFORMATION
1. What is the name of the procurement system at your company?
2. What position do you hold at Kenya Airways? Procurement Manager, Chief Procurement Officer, Supply Chain Analyst, and Other Procurement Positions [Specify]…………………………
3. Tell me about yourself. [Male] [Female]
4. How long have you been employed by your company? less than five years 5 to 10 years old [] Over 15 years [] and between 10 and 15 years []
The automated procurement coding systems adopted by Kenya Airways, KENYA, are described in Section B.
5. Please rate how often you use each of the following sentences. (√)
Where 1. Completely 2. To a very great extent
SECTION B: THE COMPUTERIZED PROCUREMENT CODING SYSTEMS
ADOPTED BY Kenya Airways, KENYA
5. Using the following sentences, please indicate how much you utilise each one. (√)
Where 1. Don’t utilize 2. Extremely big extent
| AUTOMATED CODING SYSTEMS | 1 | 2 |
| Computerized Identification barcode | ||
| Electronic List | ||
| Online Marketplace | ||
| Computer Purchasing system |
SECTIONC: EFFECTS OF CODING SYSTEM ON PROCUREMENT
PERFORMANCE OF KENYA AIRWAYS NAIROBI, KENYA
Please describe the potential relationship between automated procurement systems and performance effects in your supermarket. 1. Not at all, 2. Very big
| CODING SYSTEM EFFECTS TO PROCUREMENT PERFORMANCE | 1 | 2 |
| Monetary Savings | ||
| Time Saving | ||
| Improved negotiating and power of purchase | ||
| Acquire a competitive edge |
SECTION D: CHALLENGES OF EXECUTING AUTOMATED CODING
SYSTEMS
Please check () to indicate your level of agreement with the following statements occurring in your company: 1. Highly Agree, 2. Highly Disagree.
| CHALLENGES OF IMPLEMENTING CODING SYSTEMS | 1 | 2 |
| the slow adoption of fresh data systems by users | ||
| Insufficient management backing | ||
| insufficient system software capabilities | ||
| high installation costs for the system |
