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Archives of Business Research – Vol. 9, No. 4
Publication Date: April 25, 2021
DOI:10.14738/abr.94.9845. Cyril, I. A., Okwandu, G. A., & Kenneth, C. A. (2021). Correlational Evaluation of Cost Management and Supply Chain Performance
of Food and Beverages Firms in Port Harcourt. Archives of Business Research, 9(4). 143-159.
Services for Science and Education – United Kingdom
Correlational Evaluation of Cost Management and Supply Chain
Performance of Food and Beverages Firms in Port Harcourt
Cyril, Ibama Awoiyim
Department of Marketing, Faculty of Management Sciences
Rivers State University, Port Harcourt, Nigeria
Gabriel A. Okwandu
Professor of Marketing, Department of Marketing
Faculty of Management Sciences, Rivers State University, Port Harcourt, Nigeria
Kenneth, C. Adiele (PhD)
Senior Lecturer, Department of Marketing
Faculty of Management Sciences, Rivers State University, Port Harcourt, Nigeria
ABSTRACT
This study adopted a correlational investigation to examine the relationship
between Cost Management and Supply Chain Performance of food and Beverages
firms in Port Harcourt. The population for this study consists of seventeen (17) food
and beverages firms in Port Harcourt. The researcher conducted a census study due
to the small size of the population. However, a total of Eighty Five (85) top
managerial staff of the firms constituted the respondents for the study.
Furthermore, Eighty five (85) copies of the questionnaire were administered to the
top managers of each of the 17 food and beverages companies while seventy (70)
copies were retrieved and used for the study. The respondent’s demographics were
analyzed by employing the measures of central tendencies and measures of
dispersions. Correspondingly, the Pearson Product Moment Correlation was used
in testing the study hypotheses in other to ascertain the relationship between the
predictor variable (Cost Management) and the criterion variable (Supply Chain
Performance).The result of the analysis revealed that Cost Management
significantly influenced Supply Chain Performance of food and Beverages firms in
Port Harcourt. Hence, the authors concluded that Cost Management significantly
affect Supply Chain Performance and therefore recommended that the management
of food and Beverages firms in Port Harcourt should adopt appropriate cost
management strategies in other to increase their level of supply chain
performance.
Key Words: Cost Management, Product Quality, Customer Satisfaction, Food and
beverages Firms and Supply Chain Performance.
INTRODUCTION
Food and Beverages industry is one of the highest growth sectors with the annual growth of
6.54% on average, and it contributes significantly to the economic growth of Nigeria. As
declared by the Federal Ministry of Mines, Agriculture and Industry (2019), the food and
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Archives of Business Research (ABR) Vol. 9, Issue 4, April-2021
Services for Science and Education – United Kingdom
beverages industry is an essential contributing sector to the gross domestic product (GDP) of
Nigeria. This is reasonable as this industry supply the fundamental need for the human life, and
the growth directly correlates to the number of population. Data obtained from the National
Bureau of Statistics (2018) indicated that the food and beverages industry accounted for 4.58%
of the GDP. This contribution is substantial in the case of Nigeria. This high growth industry
sector and the substantial potential domestic market had attracted the domestic and
international investors to establish the food and beverages firms in Nigeria, especially in Port
Harcourt Rivers State, since the state is one of the most populated states in Nigeria. However,
this industry is currently facing deep uncertainty and highly dynamic environment for two
reasons. First, the increased number of companies engaged in this industry has saturated and
made the fiercer competition unavoidable following the law of supply and demand. Second, the
raw material supply, which previously mostly supplied from the domestic agricultural product,
is gradually becoming insufficient due to limited domestic supply capacity while the demand is
gradually increasing, hence the need for strategic procurement practices in Nigeria food and
beverages firms with emphasis on cost reduction.
Furthermore, today’s dynamic food industry generates a highly competitive environment for
food manufacturers and food retailers alike. Part of this ever-changing environment includes
consolidation, new retail formats, and globalization. Food manufacturers must also contend
with power shifts in the channel that favor retailers and create pressure on manufacturers to
increase service while reducing costs. Food manufacturers therefore face a challenging
prospect where service level, quality, and price expectations from retail customers and end
consumers are high and continue to rise while pressure exists to keep prices table or even to
reduce them. Purchasing, if managed effectively, offers opportunities for better cost control
while improving service levels (Kocabasoglu and Suresh 2006).
Food and Beverages firms face a number of challenges which are likely to explain the
performance of their supply chains and their survival. A study on Food and Beverages firms in
Nigeria by Onugu (2005) found that less than 5% of the firms survive beyond their first year of
existence because of the numerous challenges that limit their competitiveness.
However, most of what has been written about the relationship between cost management and
procurement appears in the popular press and remains virtually unexplored in the academic
literature. Some Food and Beverages firms supply chains in Nigeria are characterized by late
deliveries, poor quality products or no deliveries at all, which are indicators of poor supply
chain performance. This poor supply chain performance negatively impacts on their
performance given that customers today evaluate firms based on the performance of its supply
chain given that competition has shifted from between firms to between entire supply
chains(Ntayi et al., 2009). When the supply chain of a firm fails to perform, it is competed out
of the market and is therefore likely to “die”.
Several studies have been conducted in the Food and Beverages industry involving different
constructs of interest as identified by the researchers. Okello, Minishi, & Ikoja-(2008), studied
the impact of information access on the performance of the SMEs in Northern Uganda. Ntayi,
Rooks & Eyaa (2009) examined the impact of procurement practices, information technology
flexibility and collaborative relationships on supply chain swiftness in retail stores in U.S.A.
Studies have also been carried out to assess procurement practices in Saudi Arabia (Cox and
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Cyril, I. A., Okwandu, G. A., & Kenneth, C. A. (2021). Correlational Evaluation of Cost Management and Supply Chain Performance of Food and
Beverages Firms in Port Harcourt. Archives of Business Research, 9(4). 143-159.
URL: http://dx.doi.org/10.14738/abr.94.9845
Lamming, 2007)), Botswana (Msimangira, 2003), Taiwan (Carr et al., 2000) and United
Kingdom (Pittaway and Morrissey 2004). From the review of empirical literature, it appears
that there is paucity of research on Cost Management and supply chain performance especially
as it affects food and beverages firms in Nigeria. To this end therefore, this study is designed to
investigate the relationship between Cost Management and Supply Chain Performance in Food
and Beverages firms in Port Harcourt, Rivers State, Nigeria.
LITERATURE REVIEW
Theoretical Framework - Transaction Cost Analysis Theory
Transaction cost theory’s basic premise is that the cost of doing transactions could be too high
under certain conditions (Grover & Malhotra, 2003). Transaction cost theory is an economic
approach (Williamson, 2008) and reflects different types of transaction costs (coordination,
contracting deals and information sharing) (Eiriz & Wilson, 2006). Thus, this economic
perspective needs to take into account the economic rationality of supply chain relationships.
This perspective provides explanations for transaction dimensions (asset specificity,
uncertainty and frequency) between firms and their relationships. Transaction cost theory
explains how information advantage in a relationship is enjoyable and beneficial for firms and
information sharing in business is a transaction cost (Eiriz & Wilson, 2006). Transaction cost
theory contributes to the study of supply chain relationships and networks, and the efficiency
of economic activities.
The behavioural assumptions are bounded rationality and opportunism, which forces firms to
make self-enforcing promises to behave responsibly in terms of increasing their profit.
Bounded rationality is accepting the limits of the human ability to process information
comprehensively. Transaction cost theory views bounded rationality as a problem under
conditions of uncertainty, which make it difficult to fully specify the conditions surrounding an
exchange, thereby causing an economic problem (Grover & Malhotra, 2003). Opportunism is
defined as “self-interest seeking with guile” by a human actor in business relationships
(Williamson, 2008).
When high asset specificity is required, such as the assets that are required to produce a
complex item, TCA theory predicts that global internal sourcing (hierarchies) will be the
preferred method to minimize transactions costs (Murray 2001). However, a stream of
research has emerged that questions the reliance on TCA and its ability to predict the
purchasing exchange or structure that buyers will employ (Walker & Poppa 1991; Murray,
2001). This theory can be applied in this study because for supply chain performance to be
enhanced members of supply chain managers need to adopt transaction cost reduction
strategies since high transaction cost will significantly impact on total cost of production,
product demand and ultimately on supply chain performance.
Understanding Cost Management
The importance of cost management application in material procurement and storage cannot
be over emphasized. Cost management is the process of ensuring that organizational resources
are optimally used to the benefit of the organization. In cost management, raw material cost,
human resource and operational costs are reduced to the barest minimum that will enhance
organization’s operational efficiency. Cost management (CM) is the deliberate alignment of
firms' resources and associated cost structure with long-term strategy and short-term tactics