Research Paper AI in Procurement | Albeda College | 2025/26

Table of Contents
....................................................................................................................................................2
CHAPTER ONE.............................................................................................................................2
INTRODUCTION..........................................................................................................................2
1.1 Background of the Study..................................................................................................2
1.1.1 Artificial Intelligence Capability in Procurement.......................................................4
1.1.2 Decision-Making Quality as a Mediator....................................................................5
1.1.3 Public Sector Organizations and Procurement in Nairobi County, Kenya.................7
1.2 Statement of the Problem................................................................................................8
1.3 General Objective of the Study........................................................................................9
1.3.1 Specific Objectives.....................................................................................................9
1.4 Research Questions........................................................................................................10
1.5 Significance of the Study................................................................................................10
1.5.1 Management of Manufacturing Firms....................................................................10
1.5.2 Policy Makers...........................................................................................................11
1.5.3 Procurement Professionals and Supply Chain Practitioners...................................11
1.5.4 Academic and Research Community.......................................................................11
1.5.5 Government of Kenya, and Development Partners................................................12
1.6 Scope of the Study..........................................................................................................12
CHAPTER TWO..........................................................................................................................14
LITERATURE REVIEW.................................................................................................................14
2.1 Introduction....................................................................................................................14
2.2 Theoretical Review.........................................................................................................15
2.2.1 Resource-Based View (RBV) Theory........................................................................15
2.2.2 Dynamic Capabilities Theory...................................................................................17
2.3 Empirical Review............................................................................................................18
2.3.1 Artificial Intelligence Capability and Procurement Performance............................18
2.3.2 Top Management Support and Procurement Performance....................................19
2.3.3 Employee AI Competence and Procurement Performance....................................20
2.3.4 Combined Effect of the Variables on Procurement Performance...........................22
2.4 Conceptual Framework..................................................................................................23
2.5 Knowledge Gap...............................................................................................................23
2.6 Operationalization of Variables......................................................................................24

,References................................................................................................................................26




CHAPTER ONE


INTRODUCTION

1.1 Background of the Study

The manufacturing industry remains among the most crucial pillars of employment

creation, economic development and industrialization agenda in Kenya. In a period

categorized by drastically shifting customer demands, fluctuating prices of raw materials,

intense world competition, and supply chain interruptions, manufacturing organizations

constantly seeks means of optimizing their activities. Procurement, which entails the

acquisition of spare parts, raw materials, services and components, forms a large part of

overall production costs, mostly ranging 50-70% in numerous manufacturing firms.

Ineffective procurement practices often lead to quality inconsistencies, production delays,

elevated inventory holding costs, and decreased general competitiveness.

This research examines how artificial intelligence capability influences procurement

performance, where decision-making quality functions as a mediating variable. Artificial

Intelligence has risen as a critical and highly transformative technology which can

revolutionize procurement practices in the manufacturing sector. The study focuses on public

sector institutions within Nairobi County. Kenya. There is a positive link between AI

adoption in procurement in relation to tackling systemic issues like suboptimal resource

, allocation, inefficiency, delays and corruption which have been a major hindrance to public

expenditure in developing economies.

Public procurement is a critical component of public financial management.

Universally, public procurement contributes to 10% to 20% of GDP in majority of nations

and up to 40% of countries’ public budgets including Kenya (National Treasury, 2023; World

Bank, 2021; OECD, 2022). In Kenya, the Public Procurement and Asset Disposal Act of 2015

govern public procurement processes. The Act seeks to foster value for money, transparency,

competitiveness and accountability. Recurrent PPRA evaluations and reports by the Auditor

General continuously underpin challenges like weak contract management, integrity issues,

overstated procurement costs, supplier underperformances, and lengthy bidding processes

(PPRA, 2023; Office of the Auditor General, 2022–2024).

In the African setting, manufacturing companies in Morocco and South Africa are

increasingly adopting AI-enabled and digital procurement solutions to foster competitiveness

in the middle universal supply chain challenges (Anzolin & Andreoni, 2023). In the Kenyan

context, the manufacturing industry is renowned for its substantial contribution to the

Bottom-Up Economic Transformation Agenda and Vision 2030. The manufacturing sector

contributes significantly to GDP, employment creation, and export earnings, especially in

Nairobi, which functions as the nation’s commercial and industrial capital. Nonetheless,

numerous manufacturing companies continuously depend on traditional manual procurement

strategies, resulting in loss of opportunities, inefficiencies, and elevated costs. The Kenya

National Artificial Intelligence Strategy offers a national policy paradigm to bolster AI

adoption, but empirical evidence on its adoption in procurement in the manufacturing

industry within Nairobi. This research study seeks to bridge crucial knowledge gap.