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Mumbi King’ori

College of Human Resource and Development,

Jomo Kenyatta University of Agriculture and Technology

P. O. Box 62000, 00200 Nairobi, Kenya

Corresponding Author email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it


Dr. Allan Kihara

College of Human Resource and Development,

Jomo Kenyatta University of Agriculture and Technology

P. O. Box 62000, 00200 Nairobi, Kenya


CITATION: King’ori, M. & Kihara, A. (2017). Effect Of Cost Management Practices On Supply Chain Performance: A Case Of Licensed Logistics Companies In Kenya. International Journal of Human Resources and Procurement. Vol. 6 (6) pp 95 – 114.


Cost management within a supply chain management domain has lately received a great deal of interest from academics and practitioners; however, the literature is still dominated by conceptual and anecdotal work. The application of various cost management practices within the supply chain domain has been found to affect operation positively. With the inefficiency reported among the logistics companies in Kenya, there was a need to establish the extent of application of some cost management practices in the supply chain domain and its effect on supply chain performance. This study hence sought to investigate some of the cost management practices adopted by the company and their influence on supply chain performance with an aim of providing recommendations for improvement of the situation. This research is based on the enterprise risk management theory, SCOR model, the Social Exchange theory and the Transaction cost theory. The study specifically focused on total cost of ownership (TCO) analysis, value chain analysis, activity based costing and supplier development practices. The research design will be descriptive research design. The target population of this study included 1599 licensed logistics companies according to the Communications Authority report of December 2016. The sample size for the study was 319 respondents which represented 20% of the target population. One head of logistics from each company was targeted. The study used both descriptive and inferential statistics for analysis. A regression model was used to establish the relationship between the variables. The findings indicated that cost management practices (total cost of ownership, value chain analysis, and activity based costing and supplier development) practices are positively and significantly related to supply chain performance. The study recommends that management of logistics companies in Kenya and other parts of the world can use the findings of the study to formulate cost management strategies and allocate resources to their implementation in order of their effect value chain analysis followed by supplier development then total cost of ownership analysis and lastly activity based costing. If implemented, they will significantly reduce supply chain costs.

Key Words: Total cost of ownership analysis, Value chain analysis, Activity based costing, Supplier development practices, Supply Chain Performance, Logistics Company



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