Supply Chain Management Practices and SME Performance in Arua Municipality, Uganda

This study focused on the relationship between supply chain management practices and SME performance in Arua Municipality, Uganda. The research axiology is value free and the approach is deductive. Data were sourced using both structured and semi-structured questionnaire survey consisting of 140 SMEs registered with the Uganda Registration Services Bureau (URSB). Research outcomes revealed that supply chain collaboration is a precursor of SME performance. Whereas, internal management, use of information communication technology and innovation were proven to be statistically insignificant predictors of SME performance. The analysis of the study is deterministic and findings are hypothetical. The research design prohibits studying SME performance using exploratory views. In addition, data collection tool was standardized questionnaire design, and operationalised using quantitative procedures. Application of an in-depth interview could have given profound insights of the studied phenomenon. The practical effects of this study are that: owners and/or Managers of SMEs should improve performance by engaging in collaborative approaches such as long term contracts and interdependence. Scholarly presentations on the effects of supply chain management practices on the performance of SMEs in Arua Municipality, Uganda have attracted little scholarly Business Management and Strategy ISSN 2157-6068 2019, Vol. 10, No. 2 www.macrothink.org/bms 164 attention in the past years. This study is therefore of momentous contribution in this area of research.


Introduction
Small and medium Enterprises (SMEs) are seen as a driving force for the promotion of economic development of any country (Abor et al., 2010). Like any other country, Uganda's private sector is dominated by SMEs which account for over 90% of total non-farming private sector workers (UIA, 2017). SMEs contribute 20% to gross domestic product and employ over 80% of the total workforce in the country. Importantly, there is no globally acceptable definition of SMEs. Many scholars and practioners have defined SMEs on the basis of both the number of people employed and the annual turnover of the enterprise. SME performance is an indicator which measures how well an enterprise achieves its objectives. According to Karimi and Rafiee (2014), SME performance is viewed from the perspectives of marketing performance, operational performance and financial performance, whereas, Tippins and Sohi (2010) proposed six parameters of measuring SME performance, they include sales growth, lead time, cost reduction, quality improvement, return on investment and customer satisfaction.
Significant studies have been concluded by indigenous scholars concerning determinants of SME performance. Such studies include: Sebikari (2014) who examined the impact of entrepreneurial performance on small business enterprises in Uganda. Olutayo et al., (2015) explored the influence of age on SME performance. Aketch (2014) studied effect of organizational culture on performance of SMEs, whereas Turyahebwa et al., (2013) investigated the effect of financial management practices on SME performance. Olutayo (2015) investigated gender and SME performance. Mutesigensi carried out a study on cash flow and survival of SMEs. It is however particularly relevant to observe that none of these studies specifically sought to examine the effect of supply chain management practices on SME performance.

Research Problem and Motivation
The performance and survival of small scale businesses in Arua Municipality in particular, and Uganda as whole has become under serious public and scholarly scrutiny given that their performance is characterized by stagnant and sometimes dwindling sales, long lead times and high cost of operation, pitiable quality of products and services and low profit margins. Many SMEs are struggling to grow with very disturbing survival rate. Fewer than half of all new SMEs usually remain in active operation only after five years of creation (UBOS, 2016). Furthermore, the Town Clerk of Arua Municipality wept in desperation that 2 in every 3 SME start-ups in the Municipality cannot live to celebrate their first anniversary. Thus, business performance and sustainability is a major problem among SMEs. This is unacceptable and cannot be tolerated; otherwise the private sector will become stagnant and slowly cease to exist. Given this state of affairs, the need to establish factors affecting SME performance is a collective responsibility in Uganda.
The drive of this study is to establish the impact of the independent variable on SME performance in Arua Municipality, in Uganda. This study has both theoretical and practical contributions. Theoretically, scholars and academicians will find this study an invaluable source of reference material for future studies and subsequent discussions in the area. Practically, this study will be helpful to business owners and or SME Managers who can use the findings of the study to improve SME performance. The study also provides important insights that allow civil servants such as Town Clerks to better understand SME performance and survival related issues.

Theoretical Underpinning
Supply chain management has been grounded in many theories, some of them complementary and others are contradictory, but for the purposes of this study, the following theories are analyzed: The Transaction Cost theory (Williamson, 1981) stressed the need to shrink the rising cost of operations. Transaction cost theory is a common research framework for managing costs. Grover and Malhotra (2003) carried out a vigorous study on the application of transaction cost theory in supply chain management consisting of 1000 purchasing managers. The study clinched that transaction cost theory applies to organizational supply chain management in four facets: effort, monitor, problem and advantage. The Relevance of transaction cost theory to this study is that according to proponents of the theory, if SMEs develop trustworthiness and engage in repeated transactions with a small set of suppliers, their costs will be low. However, critics argued that TCE neglected the role of differential capabilities in structuring economic organizations (Richardson, 1972); and power relations (Perrow, 1986).
Another important theory is the Technology Acceptance theory of Fred Davis 1986. Davis (1986 used TAM to explain the general determinants of computer acceptance and behavior across a broad range of end-user computing technologies and user populations. The basic TAM model examined two specific beliefs viz-a-viz Perceived Usefulness and Perceived Ease of Use. According to Davis (1989) people tend to use or decline to use certain technology with the objective to improve performance at workperceived use. However, even if this person understands that certain technology is useful, its use may be damaged if it is too complicated in a way that the effort is not worthwhile the useperceived facility. According to Venkatesh et al., (2003) the technological innovations need to be accepted and actually used by the SMEs for extensive inter firm information sharing, which reduces asymmetric information and improve communication and productivity. The Relevance of Technology Acceptance Model to this study is its robust, powerful and parsimonious prediction of user acceptance of information technologies. However, the theory does not reflect diversity in user task environments and constraints that are prevalent in Ugandan Business Management and Strategy ISSN 2157-6068 2019 SMEs.
Another theory of relevance to this study is the componential theory of organizational creativity and innovation. This theory was introduced by Teresa Amabile in 1983. This theory is premised on the work environment's impact on creativity. The theory stipulates that creativity requires domain-relevant skills such as knowledge, expertise, technical skills, intelligence and talent in the particular domain where the problem-solver is working. Creativity-relevant processes include a cognitive style and personality characteristics that are conducive to independence, risk-taking, problem solving and skills in generating ideas. There are three major components contributing to individual or small team creativity: expertise, creative-thinking skill, and intrinsic motivation. The Relevance of componential theory of organizational creativity and innovation to this study is the conceptualization of employee motivation that triggers creativity and innovation in an organization. Therefore, SME managers can rely on tools and techniques developed from the theory to stimulate creativity and innovation within their organizations. However, the componential theory mainly focuses on factors within an organization.

Supply Chain Collaboration and Performance of SMEs
Whipple and Russell (2012) described collaboration as two or more companies working together to create a competitive advantage and higher profits than can be achieved by acting alone. Supply chain collaboration is very important in supply chain management, in that the flow of goods, information, and money from one part of the supply chain to the other requires a smooth interplay between and among the stakeholders of the supply chain. Efficiency and effectiveness of coordination of supply chain activities are needed to meet the customers' requirements on time and accurately. Fawcett et al., studied the practices and requirements for successful collaboration. They include: long-term contracts, interdependence, commitment, information sharing and system integration, relationship management, rationalization and simplification. Effective collaboration depends on mutual trust between business partners as well as the readiness to share information that can benefit all within the supply chain. Anecdotal evidence has shown that firms that adopt supply chain collaboration gained several benefits in terms of improved product quality, cost reduction, better risk management, demand planning and increased sales (Sanders, 2014). Firms generally enter into supply chain collaboration with the objective of enhancing performance and competitive advantage. Li et al., (2009) found that supply chain collaboration has a positive effect on organizational performance. Similarly, Wisner (2003), found a significant relationship between immediate and second-tier supply chain management strategies and firm performance. He argued that, to improve market share, competitiveness, product quality, and customer service; firms should assess and modify their immediate supplier and customer relationship capabilities. Nyaga & Whipple (2013), in an empirical study found that the quality of the relationship with key suppliers has a significant positive impact on the operational performance of the firm. Few studies support the positive relationship between engagement of SMEs in SCM and their performance, other studies provide controversial findings. Koh et al. (2011), found that two classes of SCM practices including: strategic collaboration and lean practices and outsourcing and multi-suppliers have a direct positive and significant impact on the operational performance of SMEs. Therefore, the following hypothesis is proposed: H 1 : Supply Chain Collaboration is positively and significantly related to SME performance.

Internal Management and SME Performance
The ever-changing business environment in emerging economies create a degree of uncertainty that causes problems for various organizations (Connie, 2015), especially for SMEs. Best management practices should be a target in all types of organizations because the techniques, methods, and actions carried out to control and reduce inefficiencies in processes and procedures is what ultimately will provide the organization with the desired performance. According to Ejiofor (1985), internal management is the science of working in an organization through directing and coordinating the activities of people to achieve common objectives. It includes: employee management, financial management, internal control, motivation among others.
Employee management refers to philosophy, politics, procedures and practices linked to management of employees in an organization. The survival of every enterprise is dependent on the effective management of human resources. According to Hendry (2011) employee management is achieved when practices related to the personnel are consistently communicated throughout the organization. Such consistency should be visible throughout all practices. MacDuffie (1995) posits that the philosophy of human resource management has three main focuses: employee efficiency, effectiveness and employee needs. High-performing organizations invest in employee development through training and retaining people through roles and responsibilities (Bhalla et al., 2011). Mathuva (2009) examined the influence of Business Management and Strategy ISSN 2157-6068 2019 working capital management components on corporate profitability by using a sample of 30 firms listed on the Nairobi Stock Exchange (NSE) for the periods 1993 to 2008. Findings exposed that there exists a highly significant positive relationship between the period taken to convert inventories into sales and profitability, and there exists a highly significant positive relationship between the time it takes the firm to pay its creditors and profitability. The same results are not at variance with Uyar (2009) whose results showed statistically significant between working capital and firm performance. Therefore, we hypothesize that: H 2 : Internal management significantly influences SME performance.

IT integration in SCM and performance of SMEs
Technological developments have changed the way business is conducted today. Thus, application of basic internet services as well as the use of business management systems in the supply chain such as Electronic Data Interchange (EDI), Global System for Mobile communications (GSM) a packet oriented mobile data service on the 3G and 4G cellular communication systems, Enterprise Resource Planning (ERP), Intranets and extranets count a lot today in business (Lai, 2016). In the current digital era, it is unlikely for any business to thrive without better use of information technology (IT). Businesses, particularly SMEs, cannot grow faster unless they embrace technology (Kozak, (2011). Today, all businesses regardless of their size, are faced with several competitive challenges. To cope with this phenomenon, managers are adopting e-commerce in their respective organizations in order to grow and remain competitive (Poorangi, Khin, Nikoonejad & Kardevani, 2013). SMEs in particular need to embrace innovative e-commerce strategies in order to stay competitive, profitable and successful in local and global markets (Awiagah, Kang and Lim, 2016). Indeed, e-commerce adoption has been earmarked as one of the innovations that could help SMEs to grow and survive. Increased use of the Internet provides potential benefits to SMEs, such as cost reduction and enhanced business growth (Standing, Standing and Love, 2010). Certainly, e-commerce makes communication within an organization faster and facilitates efficient management of the resources (Ahmad, Baker, Faziharudean, & Zaki, 2015).
While the Internet-based e-commerce offers considerable prospects for SMEs to increase their customer base (Wanjau, Macharia & Ayodo, 2012), the growth of e-commerce use by businesses is largely driven by large companies. In contrast with larger businesses, the adoption rate of e-commerce by SMEs is fairly low (Govindaraju, Wiratmadja, & Rivana, 2015). SMEs, particularly in Uganda, have generally been slow in adopting such initiatives. They could be unaware of the potential of IT to enhance their business operations and growth. Although many studies have been conducted regarding e-commerce adoption, the majority were mainly carried out in developed countries (Kurnia, Choudrie, Mahbubur & Alzougool, 2015), and only a few focused on SMEs in developing countries (Ahmad et al., 2015). Hence, we hypothesize that: H 3 : IT integration in SCM is positively and significantly related to SME performance

Innovative SCM practices and performance of SMEs
Supply chain innovation is the system by which companies reconfigure and integrate their internal and external structures/processes and infrastructure/humanware with the aim of sensing and seizing new opportunities that facilitate information management, sourcing, Production, and delivery of products in a responsive, cost efficient and timely manner to the end-consumer (Singhry et al., 2014). Innovative supply chain management practices include technological, organizational, marketing, process, and product. Innovation in supply chain leads to cost reduction, customer responsiveness, bullwhip effects and competitive advantage (Stank, Dittmann, & Autry, 2011). Ageron et al., (2013) argue that operational processes, information system/information technology, and managerial processes improve organizational performance.
Furthermore, Lee and Schniederjans (2010) concluded that supply chain innovation reduces operational cost, lead time, create superior operational strategies, enhance quality, and provide visibility and flexibility for dealing with rapid changes in customer demand. Caria and Guerini (2007) indicates that to achieve product development in an uncertain environment, communications and coordination between members of the supply chain has to be intensive. Indeed, relationships that companies develop with their suppliers and customers can ultimately be considered as competitive tools which contribute to improved organizational performance. Consequently, we posit that:

Conceptual Model
The conceptual framework looks relates supply chain management practices to SME performance. The dependent variable is performance of SMEs, while independent variables are supply chain collaboration, internal management, IT integration, and innovation and creativity as depicted in figure 1  Source: Adopted and modified from Bayraktar et al (2010); Kinyua (2014) Koh et al. (2011);Kauremaa and Ala-Risku (2009), Lavastre and Spalanzani, 2011and Singhry et al., (2014.

Methodology
This study used a descriptive research design. The target population was 220 SMEs registered with the Uganda Registration Services Bureau (URSB). The SMEs were categorized into manufacturing, construction, hotels and restaurants, education, wholesale and retail trade. The survey covered a sample of 140 SMEs based on Krejicie and Morgan (1970)  The study used stratified simple random sampling technique in coming up with the sample of the study. Primary data was collected for the purpose of investigating the effect of supply chain management practices on performance of small and medium enterprises. Data was collected using a five-point Likert scale questionnaire ranging from strongly disagree to strongly agree with close-ended questions. Data was analyzed using descriptive and inferential statistics.

Reliability and Validity Tests
We tested for reliability of the questionnaire using Cronbach's α coefficient. Cronbach (1951) requires a Cronbach's α coefficient of at least 0.7 and above and Cronbach's α values for this study were all above 0.7 and thus the instrument was reliable. ISSN 2157-6068 2019  Kaiser-Meyer-Olkin (KMO) and Bartlett was used test to affirm the suitability of the instrument for factorization. The results show that χ 2 = 476.373, df = 66 and p < 0.000 was obtained. Middling KMO Index = 0.647 was obtained suggesting that the variable was good for factorial analysis. .000

Business Management and Strategy
Source: Field data, 2019 In total 52.6% of the variance is explained by the five factors extracted. The Eigenvalue 1 and above was considered for the factors to be extracted. The rotated component matrix based on varimax rotation was obtained.

Confirmatory Factor Analysis
Confirmatory Factor Analysis (CFA) is a diagnostic tool used for the development and refinement of measurement instruments, assessment of construct validity and identifying methods effects (Brown, 2006). From Figure 2, it can be concluded that there was strong convergent validity since the NFI = .940, a significant result was obtained with χ 2 = 29.811, df = 36, p = 0.000 < .005. However, the RMSEA = .000 indicated a good fit (MacCallum, et.al, 1996) since the conventional rule is that a RMSEA below .08 be obtained (MacCallum, et.al, 1996). The results further indicate that a GFI = .954 > .90 was obtained implying that the co-variances and the variances accounted for by the model was closely replicating the observed covariance matrix (Diamantopoulos and Siguaw, 2000). This was further supported by AGFI = .900 indicating good fit of the model (Hooper, Coughlan and Mullen, 2008). The study also indicates that the comparative fit indices NFI = .940, TLI = 1.026, CFI = 1.00 for the measurement model were suitable and demonstrated a good fit for acceptance since the values were greater than .90 as recommended by (Bentler and Bonnet, 1980;Hu and Bentler,1999).

Correlation Analysis
We used Pearson correlation coefficient to establish relationships between the study variables as hypothesized from literature review.  Results in Table 7 revealed a strong positive and significant relationship between supply chain management practices and SME performance. Specifically, the results denote solid association of supply chain collaboration with SME performance (r= .482**), internal management practices and performance of SMEs (r= .412**), innovative practices and SME performance (r= .108). The findings, however, have shown a negative relationship between use of information technology in supply chain management and SME performance (r= 0.-070).

Regression Analysis
Structural Equation Modeling was conducted using AMOS software in order to establish the predictive power of the independent variable on the dependent variable.  The regression results indicated that supply chain collaboration was a significant predictor of SME performance. Specifically, both long term contracts and interdependence have a significant effect on SME performance (P=0.000<0.05). However, the results show that internal management (P=0.663>0.05), use of information technology (P=0.504>0.05), and innovation (P=0.578>0.05) are not significant predictors of SME performance. Table 9. Decisions on the hypotheses

Label Hypothesis P-Value Decision H1
Supply chain collaboration is positively and significantly related to SME performance.

H2
There is a significant positive relationship between internal management and performance of SMEs.

H3
IT integration in SCM is positively and significantly related to SME performance.

H4
There is a significant positive relationship between Innovative SCM and performance of SMEs.

Discussion of Results
The results revealed a strong positive and significant relationship between supply chain management practices and SME performance. Specifically, the results denote solid association of supply chain collaboration with SME performance (r= .482**). This means that engaging supply chain participants in collaborative practices such as interdependence and long term contracts influences SMEs performance. This also implies that a unit change in supply chain collaboration leads to a unit change in SME performance. The results further designated significant relationship between internal management practices and performance of SMEs (r= .412**). This suggests that good internal management practices are highly associated with high SME performance. Similarly, a positive correlation between innovative practices and SME performance (r= .108). This shows a modest relationship between innovative practices and performance of SMEs. This implies that good innovative practices are associated with good performance levels. The findings however, have shown a negative relationship between use of information technology in supply chain management and SME performance (r= 0. -070). This shows that integration of IT in SCM is not associated with SME performance, and a unit change in IT use results into a negative change in SME performance.
In relation to the predictive power of the study variables, results have shown that supply chain collaboration (Table 8), is a significant predictor of SME performance (P=0.000<0.05), unlike internal management (P=0.663>0.05), use of information technology (P=0.504>0.05), and innovation (P=0.578>0.05) that are not a significant precursors of SME performance. This finding is consistent with Sanders (2014) who contents that firms that adopt supply chain collaboration stand to gain several benefits in terms of improved product quality, cost reduction, better risk management, demand planning and increased sales. Furthermore, the findings corroborate with Koh et al. (2011) who found that two classes of SCM practices (strategic collaboration and lean practices and outsourcing and multi-suppliers) have a direct positive and significant impact on the operational performance of SMEs. In respect of H1, which states that supply chain collaboration is positively and significantly related to SME performance, the study accepted the hypothesis and rejected H2, H3 and H4 respectively ( Table 9). The study supports the transaction cost theory (Williamson, 1981) in explaining the need to reduce ever increasing costs by SMEs so as to better business performance.

Conclusion
This study sought to establish whether SME performance is influenced by supply chain management practices. Results have shown that supply chain management practices have an effect on SME performance. Specifically, the findings have indicated that supply chain collaboration as a construct of supply chain management practices is a significant predictor of SME performance at 85%. Therefore, owners and or managers of SMEs should embrace supply chain collaboration in order to improve their performance and survive in the contemporary business world.
The results from this study should be viewed as a contribution to the knowledge of supply chain management practices (SCMP) on the performance of small and medium enterprises (SMEs). SME owners and/or managers should develop a positive attitude towards supply chain management practices such as supply chain collaboration through interdependence and long term contracts so as to achieve desired SME performance since SMEs are great contributors to the Ugandan economy.