The Impact of Procurement on the Financial Performance of Large Scale Apparel Manufacturers of Sri Lanka

Abstract

The apparel industry, beheld as one of the outstanding economic engines in history, has evolved over the years with its milestone establishment in 1977 with the liberalization of the economy. However, amidst the challenging environment of short product life cycles, the industry is consistently struggling to formulate strategies for competitive advantages for the purpose of surviving. In such environment, it is of importance to manage costs that could hinder the competitiveness of the company. Thus, the focus of the study was on one such area of rising cost; procurement. Upon this formulation, the next struggle that companies faced was in attempting to link the procurement performance with the company’s overall performance. It is against this backdrop that the study is aimed at identifying the type of consequence a value added procurement function will have upon the financial performance of large scale manufacturers of Sri Lanka. For the purpose of exploring the research problem, the research questions were developed to fill the void and absence of literature on this matter as to how and why does the procurement performance, developed through the internal and external factors affect the financial performance of large scale apparel manufacturers of Sri Lanka? A survey approach was used to explore the developed research gap. The approach of the study is a deductive approach and since the study indicates characteristics of both quantitative and qualitative researches, the study can be categorised as a mixed method. The time horizon of the study is cross sectional since it consists of a sample and collected data through various sources both past and present. The validity of the data was tested using an expert opinion such as the one of the supervisor. The sample adequacy measured with the KMO Bartlett‘s test, stood at 0.503 along with a Cronbach Alpha value of 0.575, followed by a model fit CMIN/DF value of 1.338. With the use of the SPSS Amos Software data was analysed and supported the findings that the internal and external contributory factors influence the procurement performance in a positive manner and this in return affects the financial performance of large scale apparel manufacturers of Sri Lanka to a significant level, addressing the developed research gap.