Upstream Supply Chain Coordination on Performance of Zimbabwean Agro Processing Sector: A Transaction Cost Theory Approach.

International Journal of Research and Innovation in Social Science (IJRISS) | Volume VI, Issue III, March 2022 | ISSN 2454–6186

Upstream Supply Chain Coordination on Performance of Zimbabwean Agro Processing Sector: A Transaction Cost Theory Approach.

Judith Charumbira¹, Florance Shumba², George Shava³, Mlisa Jasper Ndlovu⁴
1 Lecturer in the Department of Marketing, National University of Science and Technology, Bulawayo.
2 Lecturer in the Department of Accounting, National University of Science and Technology, Bulawayo.
3 National University of Science and Technology, Bulawayo.
4 Lecturer in the Department of Business Management, National University of Science and Technology, Bulawayo.

ABSTRACT
The purpose of the study was to establish the effect of trust, communication and relationship transaction-specific investments on the coordination of upstream supply chain activities and assess its impact on the performance of the Zimbabwean agro-processing sector. The conceptual framework of the study was drawn from Williamsons’ (1975, 1985) transaction cost theory of coordination and seven hypotheses were developed. The study adopted a cross-sectional survey of the Zimbabwean agro-processing sector. Data were collected from fifty-nine stratified randomly sampled Zimbabwean agro-processing organisations and twenty purposively sampled supplier organisations. A self-administered questionnaire containing 7 points Likert scale ranging between (1) representing strongly disagree and (7) representing strongly agree was used. Descriptive statistical measures were used to analyze and present the quantitative data leading to the formulation of a theoretical model which was tested using structural equation modelling. From the model five hypothesis affect supply chain coordination i.e.; trust among supply chain players has a positive influence on supply chain coordination, communication has a positive influence on supply chain coordination, supply chain coordination has a positive impact on organisational performance, trust among supply chain players has a positive impact on organisational performance and transaction-specific investments have a positive impact on organisational performance. However, the study revealed that transaction-specific investments do not influence supply chain coordination while communication has no impact on organisational performance. The study, therefore, concluded that trust and communication among supply chain players have a positive influence on supply chain coordination. The findings also conclude that supply chain coordination, trust among supply chain partners and transaction-specific investments have a positive impact on organisational performance.

Keywords: Trust, Communication, Transaction specific investments, Supply chain coordination, Organisational performance, Agro-processing

Introduction
The purpose of coordination is to achieve collective goals that individual companies cannot achieve. The need for coordination is evident in supply chains, as companies forming a supply chain are dependent on the performance of other organisations. There has been an emphasis on supply chain coordination as a strategy through which firms can achieve competitive advantage in markets (Collins 2003). There is very little coordination between Zimbabwean farmers, training and extension institutions and agro-processors which have resulted in poor research prioritisation, outdated training materials and extension messages. This paper focuses on the influence of trust, communication and relationship transaction-specific investments on coordination of upstream supply chain activities and assess its impact on the performance of the Zimbabwean agro-processing sector.
The Zimbabwean agro-processing sector relies heavily on the agricultural sector for raw materials since agriculture is the backbone of the Zimbabwean economy (Mahofa 2007). Before the land reform in the year 2000, resources have been concentrated on improving the performance of agriculture in the communal land through supporting cotton and maize production (Mahofa 2007). Before the year 2000, the major raw materials such as grain, meat (beef and pork), fruits and vegetables, sugar, oilseeds such as soybean and sunflower and milk have traditionally been produced in Zimbabwe. The commercial area, which before and after 1980 has highly contributed to the production of cotton, grain and other products has shrunk significantly as a result of the Fast Track Land Reform Programme (FTLRP). Since 2001 agricultural output has been on a negative trend and this has impacted negatively on the performance of the agro-processing sector. Availability of raw materials has a huge bearing on productivity in this sector. Since the year 2000, Zimbabwe, being an agro-based economy has been affected by the land redistribution, leading to many white farmers who were the sole suppliers to the agro-processing sector, leaving the country. Production has gone down in the last few years due to a lack of continuity on the farms after the land reform programme and the shortage of inputs like seed and fertilisers. The amount of rainfall received during the cropping season has also affected the quantity and quality of the inputs for the sector. This land grabbing, still in progress has also affected the coordination that used to exist between companies and their upstream suppliers who were mainly white commercial farmers. There seems to be a lack of proper coordination of activities among Zimbabwean agro-processing organisations, which has culminated in local producers charging exorbitant prices that are beyond the reach of the customers.

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