Examining the interface between supply chain governance structure choice and supply chain performances of dairy chains in Ethiopia

Abstract

Recently, the concept of supply chain management has been applied in the food chains with the idea of transforming agribusiness through networking and trustful partnership in the food chains. In this regard, it is important to consider the empirical knowledge of the interface among the variables of factors in the supply chain governance structure choices, the chain actors’ choice of governance models, and the effects of these on the supply chain performances. The aim of this study was to empirically verify the relationships between factors existing in the business scenarios, the chain actors’ governance structure choice, and supply chain performances of dairy chains in Ethiopia. The chains were assessed using the survey data that were collected from 215 chain actors and analyzed using structural equation modelling and IBM SPSS and IBM AMOS of version 24 software. The data collected were tested for the Cronbach’s alpha reliability test for the internal consistency and using the different model goodness of fit measure tests. The results showed that the transaction cost, trust, and uncertainty significantly (P<0.001) predicted the chain actors’ supply chain governance model choice. On the other hand, uncertainty, willingness to collaborate, and collaborations advantages explained trust significantly (P<0.001). The correlations analysis among the factors showed that there existed negative significant correlation between transaction cost and willingness to collaborate. The correlation between willingness to collaborate and collaborative advantages was found positive and significant. Similarly, the correlation between uncertainty and transaction specific investments was found positive and significant. Moreover, chain actors’ supply chain governance structure choice significantly explained the supply chain performances, such as efficiency, flexibility, level of dairy losses, and level of integrations in the dairy chains. Promoting established dairy chain governance system, either through dependable relational governances or through formal contractual structure has been found improving the performances of the studied dairy chains.