BINDURA UNIVERSITY OF SCIENCE EDUCATION

FACULTY OF COMMERCE

EVALUATION OF THE EFFECTIVENESS OF SUPPLIER DEVELOPMENT TOWARDS

REVITILISATION OF PROCUREMENT PERFORMANCE. CASE OF ETHICAL LEAF
TOBACCO COMPANY

MAGWAGWA OBERT

B1748006

A PROPOSAL SUBMITTED TO BINDURA UNIVERSITY OF SCIENCE EDUCATION

IN PARTIAL FULFILMENT OF THE REQUIREMENT OF A BACHELOR OF
COMMERCE HONOURS DEGREE IN PURCHASING AND SUPPLY MANAGEMENT
 CHAPTER 1
1.0 INTRODUCTION

The term ‘supplier development’ refers to the processes used to improve performance of a
supplier and to increase the capabilities of the supply base to ensure improvement on the
selection criteria of the goods and services supplied by these suppliers (Krause et al., 1998).
This may include goal setting, supplier evaluation, performance measurement, supplier
training, and other related activities, Krause et al., (2007). The purpose of this, is to align the
supplier very closely and on a long-term basis with the buying organisation in a strategic
alliance or joint venture, CIPS (2013). The research proposal will seek to make an evaluation
on the effectiveness of supplier development towards revitalisation of procurement
performance. Case of Ethical leaf tobacco.

This same chapter will further highlight on the background of the study. To sum up, the
researcher will formulate objectives and other content which may include limitations of the
study, research assumptions, statement of the problem, significance of the study and
definition of terms.

1.1 BACKGROUND OF THE STUDY

The procurement function has undergone significant changes over the decades, moving from
a reactive activity to a strategic one, in order to keep pace with the expansion of procurement
activities and enhance procurement performance, Dimitriades and Maroudas, (2007). With
this view this has allowed procurement functions to come up with innovative strategies such
as supplier development programs aiming to alleviate performance of its supply base or key
suppliers in a bid to achieve cost savings and reductions.

The motor industry particularly Toyota in Japan firstly adopted supplier development practice
in the late 1940s, Wagner et al., (2006). It joined the supplier associations in order to assist
some of its supply chain partners to improve their performance and productivity. Its objective
was aimed at improving quality, supply chain and relationship management issues, Kannan
and Noorul, (2010). After realising the gains made by Toyota and other automotive firms, the
Western continents in the 1990s went ahead and adopted supplier development practices in
order to improve their supply chain and organisation operations, Wagner (2006). In the
2000s, the motor industries went ahead with supplier development practices and align it as
part of their strategic tool to enhance their procurement performance, Gibson Sibanda (2016).
As benefits of supplier development continued to unfold, many global organisations came on
board to implement it as a strategic tool and these are HP, Motorola, Boeing and McDonald,
Gibson Sibanda (2016).

In Africa supplier development has begun to get increased attention by organisations in

different sectors and is being considered as a key strategy to enhance capabilities of suppliers
and as well procurement performance. Studies conducted on supplier development in the
motor industry in South Africa revealed that Toyota was the leader and involved in
implementing the practice Bayne, (2010). The underlying structural supplier development
practices in the South African industry is part of fulfilment of the Black Economic
Empowerment policy, Amber (2018). Studies also showed that supplier development
improves procurement performance, supplier performance, enhances collaboration and
overall supply chain performance, Krause et al., (2007)

1.1.1 Supplier development practice by organisations

According to CIPS (2013), before selecting suppliers for development, the procurement
function must first have identified a good reason and an understanding of why supplier
development should be undertaken and what it involves. Thus, the overall objective of the
supplier selection process for development is to reduce risk and maximize overall value to the
procurement function, Mwikali and Kavale, (2012). More so, Jabbour and Jabbour (2009)
was of the view that, suppliers have played a significant role in the procuring organisation
and they tend to increase a competitive gain thereby having a positive influence on the
organisational performance.

Supplier development can take several forms ranging from direct, indirect, reactive,
proactive, structured or unstructured dimensions, Direct forms involve assisting the supplier
either financially or through human capital needs, Krause (1998). The procurement function
engages suppliers based on the supplier’s evaluation results, when there is underperformance
from set criteria and based on these the procuring firm chips in to ensure supplier meets
current or even future needs of the focal firm, Krause (1998). However, this type of supplier
development practice may be time consuming and costly but benefits both the buyer and the
supplier, Krause (1998). Indirect supplier development is most applied by many buying firms
where there is constant communication regarding supplier performance against set
deliverables, and is done on agreed timelines in a year, Krause (1998).
1.1.2 Procurement performance

Procurement performance is a critical success factor in every business and it serves as a link
between the procuring organisation and its customer. This is evidenced through product
innovation, material quality, timely deliveries by suppliers and also competitive pricing. Li et
al., (2012) add on to say, procurement performance is fundamental to the establishment and
sustaining of the organisational competitive advantage.

Ethical leaf tobacco is a Zimbabwean company which is found in a private sector of the
economy operating under tobacco industry. The company began its operations in 2016 to
date. The co-founders were inspired by the need to take a lead in the economic empowerment
of small holder farmers through conducting tobacco business in an ethical and sustainable
manner. It runs a tobacco out-grower scheme as the core business whereby, it funds tobacco
farmers with inputs such as agro- chemicals, fertilizer and farming equipment so as to
produce quality tobacco, which it then buy through the off-taker and earn a commission
income from gross sales of the green tobacco. It also provides services to farmers,
mobilization of farmers for targeted production, farmer. It is also known for provision of
advisory and technical services. It also disseminates agricultural and market related
information to farmers and promotes adoption of new technologies.

Agriculture is the back bone of Zimbabwean economy in the sense that, it provides
livelihoods to 80% of the population and it accounts for 23% of formal employment Ministry
of Agriculture, (2014). The sector contributes 5% to the GDP and approximately 33% of
foreign earnings Ministry of agriculture, (2014).

Ethical leaf tobacco is facing challenges in enhancing the quality of its goods and services.
The agronomical operations undertaken requires the procurement department to be effective
in their performance when dealing with their suppliers in order to fulfil its mandate of
providing technical technology, information and product support for enhancing crop
production in Zimbabwe. For this reason, the procurement and supply professionals need to
come up with development strategies which can enhance their supplier capabilities in order to
support the organisational goals and objectives.

1.2 STATEMENT OF PROBLEM

Procurement is still seen as a major contributor to cost-cutting initiatives in organisation
either public, private and supply chains. This view is reflected in a way companies tend to
manage their suppliers through programs such as supplier development. The major problem
is that developing countries like Zimbabwe has not yet recognised supplier development and
allowed the implementation of it by procurement department as a strategy. This has effects
such as poor-quality products, delay in delivery, lack of order completion, and threats of legal
action due to late payments of the delivered products. Effectiveness of procurement
department is affected and disruption in organisational operations in its quest to provide
quality services to its customers.

The progress of tobacco companies in Zimbabwe is affected due to accumulation of

operational costs as a result of these poor supplies. Funds might have used for developing
supplier activities like agronomic support and training farmers to improve the productivity.
Therefore, need for procurement professionals to put in place strategies to develop and equip
suppliers with prerequisite skills to ensure quality products are being supplied. More so, this
prove to provide ways of managing suppliers which in the long run promote collaboration
relationships and continuous improvement in their performance. Due to the problems
identified at Ethical leaf tobacco, the research is being conducted to give an evaluation of the
effectiveness of supplier development towards revitalisation of procurement performance.

1.3 RESEARCH OBJECTIVES

The researcher will therefore seek to address the objectives listed below.

 To assess the effectiveness of supplier development towards procurement

performance
 To investigate supplier development practise being applied at Ethical leaf tobacco.
 To analyse challenges being faced in implementing supplier development that affect
the performance of procurement.

1.4 RESEARCH QUESTIONS

The research will seek to answer the following questions below.

 How effective is supplier development towards procurement performance?

 What are the supplier development practice being applied at Ethical leaf tobacco?
 Which challenges are being faced in implementing supplier development that affect
the performance of procurement?
1.5 ASSUMPTIONS

 The information that will be provided by respondents will be true and accurate
 The sample population will be representative of the purchasing, finance, operations
and management personnel.
 Both primary and secondary data collection methods will be used.

1.6 SIGNIFICANCE OF THE STUDY

1.6.1 To the company (Ethical Leaf Tobacco)

The research findings will benefit the company under study with supplier development
strategies and policies which can allow the procurement and supply professionals to employ
and initiate in their operations so as to improve their performances in order to achieve the set
objectives and organisational goals.

1.6.2 To the university (BUSE)

The research will benefit the university staff and students. Also, may be useful in terms of
learning purpose by other student even from different universities who may want to explore
and research on evaluating the effectiveness of supplier development towards revitalisation of
procurement performance.

1.6.3 To the researcher

This research will allow the researcher to gain knowledge and come up with methods to
tackle different challenges which may be beneficial in the future. More so, this will help the
researcher to appreciate the great opportunity and build strong relationship from professional
supervision by academic supervisors.

1.7 DELIMITATION OF THE STUDY

The research will focus on the performance of procurement and supply professionals at
Ethical Leaf Tobacco in Harare. The time frame to conduct the study is restricted to 1 year.

1.8 LIMITATION OF THE STUDY

 Respondents may fail to submit the questionnaires in time of the study. The researcher
may need to make follow ups to check if the respondents have finished to answer the
questionnaires.
  Some low-level employees may not feel free to provide certain information that may
be viewed as confidential by the management. The approved introductory letter from
the university will serve as an evidence to show that this research will be conducted
and used only for scholarly purposes and their views and opinion will be treated
confidentially.

1.9 DEFINATION OF TERMS

1.9.1 Supplier development- is any activity that a buyer can undertake in order to improve its
supplier performance or capabilities to meet the buyer’s short- term or long- term supply
needs, Lysons and Farrington (2006).

1.9.2 Procurement- is a business management function that ensures the identification,

sourcing, access and management of the external resources that an organisation needs or may
need to fulfil its strategic objectives, lyson and farrington (2016).

1.9.3 Procurement performance- is the extent to which the purchasing function is able to
realise its predetermined goals and objectives at the sacrifice of a minimum of the company’s
resource, Van weels (2010).

1.9.4 Supplier selection- is defined as a process of selecting possible suppliers as to reduce

risk, maximize value and also build a long-term relationship between buyer and the supplier,
Monczka et al., (1998).

1.10 CHAPTER SUMMARY

This chapter firstly looked at the introduction of the research topic of the study to be
conducted and furthermore, purpose of the study also gave an overview for the background of
the study, outlined the statement of problem, delimitations, limitations, research objectives,
research questions and definition of terms. The general objective of this study is to make
evaluation of the effectiveness of supplier development towards revitalisation of procurement
performance. The next chapter will look at literature review that is both the theoretical and
empirical literature.
 CHAPTER 2

2.0 LITERATURE REVIEW

2.1 Introduction

This chapter will introduce the theoretical and empirical literature of the research topic which
is about supplier development and its effectiveness towards revitalisation of procurement
performance. literature review was defined by Taylor (2011) as an account of what has been
already published on a certain topic by accredited scholars and researchers. In addition,
Cooper (1998) went on to say, it is a paramount examination of the research that has been
conducted on a particular field of study.

2.2 Theoretical Framework

This is a structure that holds or support a theory of a research study. It also introduces and
describe the theory which explains why the research problem under study exists, Trochim and
William (2006).

2.2.1 Concept of procurement performance

According to Scannell et al., (2000) Procurement performance is the ability of the buying
firm to leverage its social capital through acquiring better quality of products, competitive
pricing from their suppliers, reduced lead time, increased product safety and increased sales
which culminates in firms’ high profitability. According to Amaratunga and Baldry (2002)
suggested that procurement performance is a key driver to improving superiority of services
while its absence or use of inappropriate means can act as an obstruction to change and may
lead to decline of the procurement function. Additionally, Van Weele (2002) noted that there
are two main aspects of the procurement performance that is effectiveness and efficiency.
Procurement effectiveness according to Van Weele (2002) is the relationship between actual
and planned performance of any human activity. More so, he explains that procurement
efficiency is the relationship between planned and actual resources required to realize the
established goals and objectives and their related activities, referring to the planned and
actual costs.

Krause (1999) adds on to say in order to improve procurement performance on a specific

investment the procuring organisation may take a variety of efforts in order to leverage their
suppliers’ performance and capabilities through investing in human or physical assets which
are dedicated to a particular supplier. Thai (2004) suggested that high procurement
performance is muchly based on if the procuring organisation have the best suppliers in their
supply base, delivery reliability, low administration cost, right quality and right quantity as
well.
2.2.2 Concept of supplier development

The idea of supplier development was firstly introduced by Leenders (1966) in a bid to
describe the willpower of organisations in manufacturing industries as to enhancing the
number of suppliers for the purpose of improving their performance Khuram et al., (2016).
According to Watts and Hahn (1993), supplier development tends to be a long-term
cooperative effort that is between the procuring firm and its suppliers in order to upgrade
supplier's technical, quality, delivery and cost capabilities and thereby fostering an ongoing
improvement. Krause (1999) defined supplier development as any effort by a procuring firm
to improve a supplier's performance or capabilities in order to meet the buying firm's short
term and long-term supply needs. Also, CIPS (2013), defined supplier development as the
process of working with certain suppliers through one on one basis as to improve their
performance and capabilities for the benefit of the procuring organisation. In addition, CIPS
(2013) explained that supplier development practice may include those activities which are
aimed at improving the capabilities of suppliers which are supplier auditing, prepayments,
training, supplier certification, supplier recognition and effective communication.

According to Wagner (2006) for a procuring organisation to become competitive in the

market place they need to have a supply base of capable and competent suppliers. Supplier
development is normally undertaken with existing suppliers that are willing and can agree to
being improved by the procuring organisation. This view is supported by CIPS (2013) in the
sense that some suppliers may be resistant to being developed this may be because of their
position in the marketplace and also the way in which they perceive and view the position the
procuring organisation. Adedokum, et al (2017), points out that the important purpose of
supplier development is a long-term contract with mutual benefits and as well improving
supplier performance and capabilities that can meet the procuring firm’s requirement even in
the future. Most businesses view this practice as the most important effort they undertake not
only to gain competitive advantage but also to develop their supply base for long term
collaboration and relationship enhancement Rajendra et al., (2012)
2.3 Empirical Evidence

This is regarded as the information which may be gathered by means of observations or

experiments. It shows how these researches relates or differ with this current study being
conduct. According to Saunders (2009) It is a critical part of a research project which helps
the researcher to assess their study against other researcher’s findings, thus identifying the
research gap.

According to a study done by Mwesigwa and Nondi (2018) which focus on the effects of
supplier development on procurement performance of world food programme in Kenya. They
gave a view that supplier development is significant to organisations and it can create a
positive relationship between supplier’s performance and procurement performance.
Therefore, supplier financial assistance is the driver which has the highest effect on
procurement performance. There findings of the study established that supplier development
was operating under a highly competitive environment and it showed a recommendation that
procuring organisations should continually carry out supplier development in order to
encourage good governance among the suppliers and continuous training should be
prioritised to key suppliers since it proves to be a strategic tool that can help both the supplier
and procurement professionals to cut down costs on products and services and enhances
availability of quality products.

More so, another research done by Cheboss et al., (2017), they conducted a study on the
effects of supplier development on procurement performance in Bungoma country. Case
study of Nzoia Sugar company in Kenya. Their research gave an overview that supplier
development practice in terms of offering suppliers with incentives such as certificates,
awards, preferred supplier status and financial support may have a positive effect on the
supply base performance, in the sense that financial support will enable continuous supply of
quality materials and this will as well affect the performance of procurement. In addition,
Cheboss et al., (2017), in their report they conclude that supplier development improves
timeliness of deliveries and quality of materials and services which will in turn improve the
procuring organisation’s business practises and quality of service to its final customers.

Both studies prove to be in line with Heide and John (1990), which states that financial
support provides the procuring firm with increased supplier competition in the global market
and potentially reduces transportation and other logistical costs of suppliers. The
effectiveness of procurement agents can attribute their achievement to their valuable
relationship that is obtainable through procurement professions initiative in order to support
their suppliers through technical support, financial support and through supplier training as to
achieve superior performance and mutual gain for both the procurer and supplier. Carr &
Pearson, (1999) gave an overview that this will lead to the supply of quality products by
suppliers which can enhance the effectiveness of procurement performance.

2.4 Conceptional Framework

Independent Variables Dependent Variable

Supplier financial
support Procurement
Performance

Supplier’s Technical
support
Supplier
Development

Supplier Audits

Supplier Involvement

Source; Designed by the researcher (2020)

To evaluate the effectiveness of supplier development towards revitalisation of procurement
performance, supplier development is measured by supplier training, financial support,
supplier involvement, supplier audit and technical support. Therefor procurement
performance is measured by price, quality, sales volumes, lead time and inventory level.

2.5 Research Gap

Numerous studies have been conducting research focusing on the role of supplier
development on organisational performance of manufacturing industry done by Wachiuri,
Waigano and Oballah (2015), the effects of supplier development on procurement
performance in Bungoma country. Case study of Nzoia Sugar company in Kenya done by
Cheboss, Namusonge and Nambuswa (2017), also other studies have focused on the effect of
supplier development on supplier performance. A survey of food manufacturing companies in
Kisumu County done by Lukhoba and Muturi (2015), and also effect of supplier development
practices on performance of procurement performance of world food programme in Kenya.
This shows that there is little or no research done in the area on evaluating the effectiveness
of supplier development towards revitalisation of procurement performance. Case of Ethical
leaf tobacco company. Therefore, this research sought to fill that gap.

2.6 Chapter Summary

This chapter effectively highlighted different concepts that are related to the study of supplier
development and procurement performance. It further looked at the theoretical framework
and provide empirical evidence from past studies done by different researchers in the area of
supplier development and how it revitalises the procurement performance. The next chapter
will look at the research methodology and research instruments as well.
 CHAPTER 3
3.0 RESEARCH METHODOLOGY
3.1 Introduction
The purpose of this chapter is to give an overview of the methodology used in this research
study. According to David and Peter (2003) they defined research methodology as a specific
procedure or technique used to identify, select, process and analyse information about a topic
or area of study and in this case a research is conducted on evaluating the effectiveness of
supplier development towards revitalisation of procurement performance. Also, the chapter
will further look at how participants for the research will be selected, and types of data
gathering instruments that will be employed such as primary sources that is questionnaires
and interviews. More so, the chapter will present the research design, reliability and validity
of the data.

3.2 Research Design

According to Barbara (2006) a research design refers to the overall strategy that can be used
to integrate different components of the study in a coherent and logical way and ensuring that
it effectively address the research problem. In addition, it is a blueprint for the collection,
measurement and analysis of data. A description research design will be used to carry out the
research. According to Jeane (1999) a description research yields an accurate and rich data
that lead to important recommendation in the area of the study.

3.3 Target Population

A population is a group of individuals, institution, objects that have a common characteristic
that are the interest of a researcher, David and Peter (2003). The research will target all the
employees of Ethical leaf tobacco that is, 32 workers which comprise of 4 from procurement,
10 from finance, 4 from grower’s accounts, 2 from operations, 6 from admin and 6 from top
management.

3.4 Sample Size and Sampling Techniques

It is not possible for the researcher to approach all individuals in a population for the purpose
of collecting data, instead the researcher will select and approach a representative of the
group of individuals who fall under a particular population to collect needed information
regarding the group and this process will be termed as a sample. In short sense According to
David and Peter (2003), sampling is a process of selecting accurate representation of a unit,
group or sample from a population of interest. Due to the small number of the total
population, the researcher will use a sample size of 10 personnel who are linked to the
purchasing and supply department who will be selected using a simple random sampling. The
researcher strongly believe that the selected sample size will be adequate and able to provide
relevant and accurate data and also this will reduce time taken in the collection of data.

3.5 RESEARCH INSTRUMENTS

These are tools used to collect data related to the research being conducted. They can be
interviews, survey, scales, questionnaires, or even checklists, David and Peter (2003). In this
study the researcher will make use of questionnaires and online interviews. According to
Saunders, et al (2009), every research instrument has its own weakness, the researcher sought
to use at least two different research instruments in order to improve the reliability of the
research findings.

3.5.1 Questionnaire

This is a research instrument which present information in writing to the respondents in the
form of a series of question which require a written down response that can be used for a
targeted research study, Robson (2008). In addition, Wallimum (2005) went on to say a
questionnaire consists of a set of well formulated questions to probe and obtain responses. It
is advantageous to the researcher because it enables the researcher to organize questions and
receive applicable response without talking to every respondent. Also, Kumar (2011) argued
that results of the questionnaire can be quickly and effortlessly quantified by the researcher.
Gay (1987) emphasised a view that, using questionnaires as a way of gathering data it
attributed to the economic efficiencies as the instrument could collect from a large sample
and at a lower cost.

3.5.2 Online Interviews

In this study the researcher will make use of online interviews as a source of collecting data
from a selected sample and this is due to the case of the covid pandemic which limits the
researcher to make face to face approach. According to Salmons (2010) defines online
interviews as an online research method conducted using electronic mediated communication
such as telephone, instant messaging, email or video. In this study the researcher will use
emailing as a way of conducting the interview since it is cheaper, faster and reliable.
3.6 Validity of data

The term validity refers to whether or not the test measures what it is intended to measure.
There are different types of validity which are construct validity, external validity and utility
criterion validity. Construct validity is, an abstract characteristic that cannot be observed
directly but must be inferred by observing its effects. Also, External validity is concerned
with the applicability of the findings in other settings or with other subjects and utility
criterion validity which states that according to Lynch (1996) Utility refers to the degree of
usefulness the evaluation findings have for administrators, managers and other stakeholders.
The criterion intends to inquire whether or not the research works. That is, utility criterion
asks whether the evaluation endeavor generates enough information for the decision makers.

There are several ways to estimate the validity of a test including content validity, concurrent
validity, and predictive validity and the researcher will use content validity in order to
indicate whether the test items represented the content that the test was designed to measure.

3.7 Reliability
Saunders et al (2009), explains reliability of research instruments as an extent to which data
collection technique or techniques will yield consistent findings, similar observations would
be made or conclusions reached by other researchers or there is transparency in how sense
was made from the raw data. Polit (1999), adds on to say it is an extent to which a
questionnaire, test, observation or any measurement procedure produces the same results on
repeated trials. The research will manage to obtain validity and reliability through

• Making sure the respondents does feel free to answer all questions without fear or
intimidation.

• Ensuring they is appropriate time of the day when the respondent will not be in hurry.

• Avoiding interruptions, change in conditions of testing to maintain the situation while

the respondents feel free to answer all questions.

• Assessing the type of individuals who constitute the sample.

• Administering the questionnaires to an appropriate group who are directly affected by

the research problem.
3.8 Data presentation and analysis

The researcher will make use of both quantitative and qualitative methods of data analysis in
conducting the study. Tables and graphs will be used for easy interpretations. Figures will be
constructed to show relationship between variables for better understanding. Tables, graphs
and charts will be prepared using Microsoft excel.

The researcher is going to use qualitative techniques also on data collected through online
interviews. Qualitative techniques such as data reduction will be used. Miles and Huberman
(1994) defines data reduction as simply summarising, paraphrasing and classifying responds
in different categories.

3.9 Research Budget

This is an exercise of planning for a defined period of time, which takes into account
available revenue, costs and expenses, liabilities and cash flows. The researcher will be using
a $200 zwl budget which will be allocated in the following areas below

• Stationery and Printing $100

• Transport and food $100

3.10 Chapter Summary

This chapter mainly focused on the research methodology of the study and made a review for
the research design that the researcher will use, target population, sample size, sampling
techniques, research instruments, the validity and reliability of the instrument, data
presentation and analysis.
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