Procurement process risk and performance: empirical evidence from manufacturing firms

This paper employs the positivism paradigm, quantitative approach and explanatory research design. It analyses primary data obtained from manufacturing firms via structured questionnaires and uses the partial least square-structural equation modelling technique to establish the effect of individual procurement process risk on procurement performance.

Procurement risks are inevitable in manufacturing procurement process; a situation that could undermine the performance of manufacturing firms if not properly managed. Yet, with procurement accounting of about 14–19% of developing countries gross domestic product, the effects of procurement process risk on performance remain scarce in manufacturing firms in developing countries. Therefore, the paper aims to investigate the effect of procurement process risk on procurement performance of manufacturing firms.

In this paper, five out of the six procurement process risks studied were found to be undermining procurement performance of manufacturing firms significantly. However, the risk threshold effect on the performance differs.

Although this research is geographically/sector bias, several insightful managerial implications can be drawn to manage procurement process risk in manufacturing settings irrespective of the area of operation. The results of this research imply that manufacturing firms' procurement process is risk prone and the effect of risk surrounding each procurement process on procurement performance differs. Hence, the need to identify and analyse the risks surrounding each procurement process before making managerial decision to spend firms limited resources in response to the individual risk to improve procurement performance in the manufacturing sector.

This paper is the first to provide existing and future procuring practitioners/firms with in-depth empirical evidence of the effect of the procurement process risks on procurement performance in manufacturing firms operating in developing economies.