Effect of Supply Chain Risk Management on Operational Performance of Oil Marketing Companies in Kenya

Abstract

Supply chain risk management is the implementation of strategies for managing risks along the supply chain together with continuous risk assessment with the aim of reducing exposure and vulnerability thereby ensuring continuity of the enterprises. Managing risks in the supply chain is becoming an important avenue for harnessing competitiveness due to the increasing vulnerability of the supply chains. The main objective of the study was to determine the effect of supply chain risk management on operational performance of oil marketing companies in Kenya. The study was anchored using the resource based theory and the agency theory which support the fact that information on and the planning of supply risk management can improve the company’s competitive position. The research adopted a correlational survey research design. Data was collected using a questionnaire which was administered to the supervisors or the heads of department. The population of this study comprised of all Eighty Five (85) Oil Marketing Companies in Kenya and a total of fifty four (54) questionnaires were completed satisfactorily and returned. From the findings it was deduced that oil marketing firms have some mechanism for risk management in their supply chain. The regression analysis indicates that operational performance is present to some extent without the risk management element. The regression model developed was Y1=0.661 + 0.198X1 + 0.0738X2 - 0.153X3 + 0.09X4 + 0.199.The resulting equation shows there is a linear relationship between variables X1 (Supply Risk Management), X2 (Demand Risk management) and X4 (Political Risk Management) and the operational performance of oil marketing companies however there’s a negative relationship between Operational Risk management(X3) with operational performance of oil marketing firms. The researcher concluded that management of risk in the supply chain is an important tool for the improvement of operational performance of a company as the consumers will be served better if risks were mitigated to avoid supply chain disruptions. The study recommends that managers should have an understanding of the risks in the supply chain as this is important for survival in the marketplace. Another recommendation from the researcher is that companies should have a risk mitigation plan, this will help organization to manage and close the gaps within their supply chain.