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HAWASSA UNIVERSITY COLLAGE OF BUSSINES AND ECONOMICS DEPARTMENT OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT

FACTORS AFFECTING EFFECTIVE IMPLEMENTATION OF SUPPLY CHAIN MANAGEMENT ACTIVITY IN CASE OF HAWASSA FLOUR FACTOR

THE RESEARCH PAPER SUBMITTED TO DEPARTMENT OF LOGISTIC AND SUPPLY CHAIN MANAGEMENT FOR THE PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE BACHELOR OF ART DEGREE IN LOGISTIC AND SUPPLY CHAIN MANAGEMENT Conducted by: TADIWOS AGIDEW ID No………… 0100/06 Advisor: TESHOME BELAY (MBA)

Hawassa, Ethiopia June, 2008 E.C

Abstract This descriptive research designed with devotes to examine the assessment of factors affecting effective implementation of SCM activity in case of Hawassa flour factory. The study was conducted the problem such as major factors that affecting effective implementation of SCM, see the current downstream SCM and the roles of effective implementation of SCM activity in satisfying customers’ needs and wants in case company. The study has general and specific objectives. The researcher used primary and secondary data sources and probability (simple random) and non –probability (purposive and convenience) sampling method used. And also the researcher used primary/personal structured interview and questionnaire/ in order to collect data. In addition to this the researcher used qualitative and quantitative data processing methods, table and percentage to analysis and interpreted data. After this study is accomplished, there will be some beneficiary such as enable the researcher is experienced in research work; help the company to develop effective implementation of SCM activity strategies and it can serve as an input for other researchers. Generally this research has four parts. These are Introduction, Review literature, data analysis, interpretation and conclusion and recommendation.

Acknowledgement First and for most, I would like to reflect my deep thanks for GOD Lord for endowing Me the endurance and courage of going through all ups and downs to reach the state where I am now. There are many people contribute for the accomplishment of this study but difficult to site them in the acknowledgement. So that I would like site the most impact full in order to writing the research of this study: next I would like great thanks My Advisor, Teshome Belay (MBA) has a source of support and encouragement. His comments, suggestions and useful advice are invaluable inputs that have improve the quality of my work and also help my career at large. In addition to this, I would also like to extend my great fullness equally to the customer and employee of Hawassa Flours factory who have showed great interest and effort for fill questionnaire and interview response. Finally, I would like to thank my family for their financial and moral support.

Acronomy EDI: Electronic Data Interchange IT: Information Technology SC: Supply Chain

SCM: Supply chain management

Table of Content Content

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Abstract……………………………………………………………………………………………………….I Acronomy……………………………………………………………………………………………………II Chapter One 1. Introduction 1.1 Background of the Study…………………………………………………………………..1 1.2 Background of the Organization……………………………………………………....2 1.3 Statement of the problems……………………………………………………………….3 1.4 research question…………………………………………………………………………….. .. 1.5 Objectives of the Study……………………………………………………………………..3 1.5.1 General Objective……………………………………………………………….…3 1.5.2 Specific Objective……………………………………………………………..…..3 1.6 Significance of the Study…………………………………………………………..………4 1.7 Scope of the Study……………………………………………………………….…………..4 1.8 Limitation of the Study……………………………………………………..………………4 1.9 Research methodology……………………………………………………….…………………5 1.9.1 Research design……………………………………………………………………………………. 1.9.2 Source of data…………………………………………………………………………………….. 1.9.3 Sampling method………………………………………………………………………………… 1.9.4 Method of data collection………………………………………………………………….... 1.9.5 Method of data processing and analysis………………………………………………..

Chapter Two 2. Reviews Literature 2.1 Concept of SCM…………………………………………………………………………………..….6 2.2 Objectives SCM……………………………………………………………………………………….6 2.3 The role of SCM for the Organization……………………………………………………6 2.4 Participant of SCM ………………………………………………………………………………..7 2.5 Demand forecasting in SCM…………………………………………………………….……7 2.5.1 The role of forecasting in SCM………………………………………………….……….7 2.6 Elements in SCM…………………………………………………………………….……………7 2.7 SCM drivers and Metrics……………………………………………………………………8 2.8 Internal and External SCM…………………………………………………………………….8 2.9 SCM Strategies …………………………………………………………………………………8 2.10 Decision phase in SCM……………………………………………………………………..9

2.11 SC performance and measurements…………………………………………………..9 2.12 The roles of IT in SCM……………………………………………………………………………………………9 2.13 Identification of SCM Factors…………………………………………………………………………………… 2.13.1 Environmental Uncertainty……………………………………………………………………………… 2.13.2 Information Technology……………………………………………………………………………………………. 2.13.3 Supply Chain Relationship……………………………………………………………………………………… 2.13.4 Value Added Process (Manufacturing)……………………………………………………………….. 2.13.5 Supply Chain Management Performance………………………………………………………………… 2.13.6 Business Management………………………………………………………………………………………….. 2.13.7 Customer Satisfaction……………………………………………………………………………………………… 2.14 The Bullwhip Effect in SCM Activities…………………………………………………………………………………… 2.14.1 Causes of Bullwhip Effect…………………………………………………………………………………………………… 2.14.2 How to counter act the Bullwhip Effect…………………………………………………………………………………

CHAPTER-THREE 3. Data Analysis and Interpretation……………………………………………………………………….. 3.1 analysis of employee response……………………………………………………………………….. 3.2 interpretation of data interviews with customers……………………………………………. 3.3 data interpretation of interviews with managers……………………………………………

CHAPTER FOUR 4 .summary, Conclusion and recommendation of the study…………………………… summary………………………………………………………………………………………. 4.2 conclusion……………………………………………………………………………………………… 4.3 recommendation……………………………………………………………………………… Appendix A…………………………………………………………………………………………………….. Appendix B Reference……………………………………………………………………………………………..

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List of table List Table 3.1 Summary of distributed and returned questioner……………………… Table3.2 Profile of respondents…………………………………………………………………….. Table 3.3 Current downstream SCM relationship……………………………………………… Table 3.4 Standard of SC activities Table 3.5 Factor that affect effective implementation of SCM Table 3.6 Organization and their customer’s relationship Table 3.7 Training and experience sharing programs Table 3.8 Integration among its function areas Table 3.9 Product distribution channels of the factory Table 3.10 Feedback receiving Table 3.11 Relationship between companies and their customers Table 3.12 kinds of customers Table 3.13 Measures of company’s product delivery Table 3.14 Information technology with SC partners

CHAPTER ONE 1. INTRODUCTION 1.1. Background of the Study

The concept of Supply Chain (SC) existed right from the evolution of trade and could be traced back up to 5000 years BC in India. India was a trade leader in those periods and deals with Egyptian and Romanian cultures along with huge domestic operations. However, because of the exploitation and invasion by British and others, India could not maintain the efficiency in the trade operations (Rahui V.Altekar, 2005, ). The term supply chain is a longer channels stretching from raw material to components to finished products carried to final buyer (Phillip Kotler p33) The term SCM has become popular bull world, probably first used by consultants in the late 1980’s and then analyzed by the academic community in the 1990’s. If one wants a simple definition, SCM links all the supply interacting organizations in an integrated two way communication system to manage high quality inventory in the most effective manner (world class SCM, Richarge, L,Pinkerton SCM is the network of organizations that are involved through upstream and downstream linkages in the different process and activities that produce value in the form of product and service delivered to ultimate (Coyle Langley, Novak and Gibson 2013) Supply Chain Management (SCM) is the integration of key business processes from end user through original supplier that provides products, services, and information that add value for customers and other stakeholders (Douglas Long, 2003,). Supply Chain Management (SCM) is the coordination of production, inventory, location and transportation among the participants in a Supply chain to achieved the best mix of responses and efficiency for the market being served (Michael Hugos, 2006,). SCM is the ways of links are integrated to promote efficiency. Another term for this same idea is SC integration. The reason this is important is because well integrated supply chains can increase the value of the whole process for all the companies involved, and creates superior customer value (Douglas Long, 2003, A SC consists of all parties involved, directly or indirectly, in fulfilling a customer request. The SC not only includes the manufacturer and suppliers, but also

transporters, warehouses, retailers, and customers themselves. Within each organization, such as a manufacturer, the SC includes all functions involved in receiving and filling a customer request (Sunil Chopra, 2007, ). SCM is the flow of materials through procurement, manufacturer, distribution, sales and disposal, together with associated transport and strategy (Kenneth Lyons, 2006, p-101). The company can do and the ways that it can compete in its markets are all very much dependent on the effectiveness of SC. If a company’s strategy is to serve a mass market and Compete on the basis of price, it had a better have SC that is optimized for low cost. If a company’s strategy is to serve a market segment and compete on the basis of customer service and convenience, it had a better have optimized for responsiveness (Michael Hugos, 2006, ). This study strongly attempt to investigate the effectiveness of SCM activities of Hawassa Flour factory and find out the problem of factory in distribution and how to overcome this problem.

Back ground of the organization In Ethiopia Hawassa flour share companies is one of the top food, food and beverage company in south region of Hawassa city, is located in 1986 G.C. this top flour share company has been expanding for years now in both domestic market and throughout the regions to further consolidate, its strong position through strategic partnership and acquisitions as part of this expansion strategy. Hawassa flour Share Company recently introduce and diversified many production line. The company restructured and incorporated in to share company in 1999 G.C registering its paid-up capital at birr 12.7 million it was reported to have a permanent labor force of about 120 and out of this ten permanent workers are professional with university degree serving permanently. There are also 35 semiprofessionals in the same categories and working in different part (interview from the manager of Hawassa flour share company Ato Belay Dika). Vision We will competent in domestic and foreign market by producing quality flour and flour products. Mission Create maximum satisfaction for the service demand community and profitable organization by producing quality and cost competitive flour product output Objective We properly plan and implement strategy to reach our vision with in a scheduled.

1.3. Statement of the Problems Effective SCM activities for any organization have vital role in the process of conforming the customer requirement, because the goal of the organization is to satisfy the customer and getting the required profit. SCM plays a great role in output of in the case company. Because of effective SCM process helps factory to give satisfaction for its customers and to be successful and competitive in the market. A full and strong discipline of SCM practice leads the organization to continuous and sustainable success. On the other side, the weakness or poor activities of SCM such as lack of modern distribution system, lack of potential suppliers, inadequate information system, shortage of input, lack of experienced SC managers leads the organization to a great loss and damage. So that, the researcher raised question to improve the company on the basis of this study and also the reason for this study is attempt to answer the following basic research question. So there is poor implementation of SCM activities in Hawassa flour factory and the researcher saw this problem and wants to conduct research work in that company. 1. What are the major factors affecting effective SCM in case company? 2. What mechanism use the campany to perform SCM effectively? 3. What looks likes the current downstream SCM practices of the case company? 4. 4. What are the problem which hinder supply participant to participate effectively? 5. What are the roles of effective SCM in satisfying customers’ needs and wants in case company?

1.4. Objectives of the Study 1.4.1 General Objective The main objective of this study was to assess the factor affecting effective implementation of SCM activity in case company. 1.4.2. Specific Objectives More specifically the researcher intends to: 1. To identify the major factor affecting effective SCM activities. 2. To identify mechanism to perform SCM activity effectively 3. To determine the coordination of the case company with its downstream SC participants. 4. To identify problem which hinder SC participant to participate effectively 5. To determine the role of effective SCM activities in satisfying customer needs and wants in the factory. 1.5. Significance of the Study From the beginning, every research has its own significance. Therefore, the researcher has strongly believed that, the following main significances related to the effective SCM activities in the case study. - It will enable the researcher be experience in research work. - It helps the company to develop effective SCM strategies by identifying its organization strength and weakness in SCM so as to meet the customers’ needs and wants. - It can serve as an input for other researchers who want to conduct future investigation in SCM. 1.6 Scope of the Study Scope of the study is ranges of action which are influences of the study. In this case study gave emphasized on assessment of factors affecting effective implementation of SCM activities and its effect on organization profit in case of Hawassa Flours factory, in Hawassa town. Therefore, in order to make the research work more manageable and meaning full the researcher has

been decided to study the downstream of SCM activities or the coordination from the organization up to ultimate customers. The researcher did not select the whole SCM from supplier to customer. Because of SCM activities are very vast and consume high cost and time, so by this main reason the scope of this study is the downstream SCM activities. 1.7. Limitation of the Study Low willingness of employees and customers to give information Shortage of time Carelessness of customers to fill questionnaires Transportation problems 1.9 RESEARCH DESIGN AND METHODOLOGY 1.9.1. Research Design Research design is a detailed plan of how the goals of research can be achieved. There are three types of research design. These are descriptive, explanatory and exploratory. Based on the purpose of the research, the researcher was used a descriptive research design for assessing factors affecting effective implementation SCM activities in the case company. Because of the researcher intention was to collect sufficient and real data by using this research design from case company. But the researcher did not used explanatory and exploratory research design. Because, both are find special skill or experience to collect, interpreted and analyses of the data. As beginner researcher and based on the purpose of the study descriptive type of research design was more appropriate. 1.9.2. Source of Data There are two types of data sources. These are primary and secondary data source. Primary data is a data that is collected for the first time for the intended study by use researcher with different data collection tools. But, secondary data are usually historical or already collected by someone else for his/her own purpose. The reason why select these data source, because the two data source gave enough information for the researcher. Therefore, for this study both primary and secondary source of data were available. 1.9.3. Sampling Method it is difficult to use the whole population. Therefore, the researcher was enforced to use sample in order to have manageable and relevant data for this research work. Accordingly to the researcher decided to use 25% of the total population as sample representative of the total population of the case company. That means in the total of 30 respondents are taken as a sample of the researcher to collect the relevant data. And also the case company has large number of customers. From these customers, the researcher was to taken 20 of them. There are two types of sampling techniques. These are probability and non-probability. Probability sampling is one in which every unit of the population has an equal probability of being selected for the sample. While non-probability sampling makes no claim for representativeness as every unit does not get equal chance of being selected. Probability sampling technique has different type. From these,

the researcher was used simple random sampling for randomly select samples from the employees. On the other side the researcher also use purposive /judgmental/ sampling, the researcher purposely chooses the case company managers and convenience /accidental/ sampling technique was also used for this research. This was because the total numbers of customers are not clearly stated. Therefore, for this study both probability and non-probability sampling techniques were applied. 1.9.4. Methods of Data Collection There are different ways of data collection. These are questioners, interview, observation and focus group discussion. Among them the researcher used questionnaires’ and personal interview. In case of questionnaires, the researcher was used both open and close ended questionnaires. Because these two types of questionnaires gave unlimited chance for the respondents and also the researcher was got sufficient information. In addition to questionnaires, the researcher enforced to use structured personal interview. 1.9.5. Methods of Data Processing and Analysis There are two types of data processing methods. These are qualitative and quantitative methods. In case of qualitative data processing method, the researcher process data’s obtained by open ended questionnaires and structured personal interview. But in case of quantitative data processing method, the researcher was used statically data obtained by close ended questionnaires. The statically tools to used for this research were table and percentage. Therefore, the researcher used these methods of data analysis and to interpreted, summarized, concluded and came up with the recommendation.

CHAPTER TWO 2. Review of Related Literature 2.1. Concept of Supply Chain Management SC SC is viewed as a whole a single entity rather than fragmented groups each performing its own function. A firm supply systems includes all internal and external suppliers involved in the identification and fulfillment of need for material, equipment and service in an optimized fashion. This supply system play a key role in helping the form satisfy its role in its supply chain (Donald Doblar and Stephen Stearling, 2004 world class SCM 7th ed) . Supply chain are relatively easy to describe and visualize company connected with one another in supply in simple linear chain, running from raw material producer to distributer to retailer.(Dnald Doblar and Stephen stearling, 2004 world class supply chain management p7 ). It is (sometimes called the value chain or demand chain) management consists of firms collaborating to leverage strategic positioning and to improve operation efficiency. For each firm involved, the SC relationship reflects strategic choice. A SC strategy is a channel arrangement based on acknowledged dependency and relationship management. SC operations require managerial process that span across functional areas within individual firms and link trading partners and customers across organizational boundaries (Donald J. Bowersox, 2010). A company’s SC encompasses the coordination of materials, information and funds from the initial raw material supplier to the ultimate customer. It is the management of the value added process from the suppliers’ supplier to the customers’ customer (John D.Danieu, 2003). 2.2. Objective of Supply Chain Management The objective of every SCM is to maximize the overall value generated. The value a SC generates is the difference between what the final product is worth to the customer and the effort SC expends in filling the customer’s request. For most commercial supply chains, value will be strongly correlated with SC profitability, the difference between the revenue generated from the customer and the overall cost across the SC. SC profitability is the total profit to be shared across all SC stages. The higher SC profitability, the more successful the SC. SC success should be measured in terms of SC profitability and not in terms of the profits at an individual stage. Having defined success of SC interims of SC profitability, the next logical step is to look for sources of revenue and cost. For any SC, there is only one source of revenue; that is customer. All flows of information, product, or funds generate costs within the SC. Thus, the appropriate management of these flows is a key to SC success. Effective SCM involves the management of SC assets and product, information and fund flows to maximize total SC profitability (Sunil Chopra, 2007).

2.3. The role of Supply Chain Management for the Organization In modern organization /corporate management the area of SCM has been considered as a competitive strategy for integrating suppliers and customers with the objective of improving responsiveness of flexibility of manufacturing or service organization so that the design of SC is crucial issue of SCM.

An effective SCM policy can reduce average holding inventory level as well as related cost. It means that effective coordination plays an important role in the successful operation of under manufacturing and inventory systems. If no such coordination exists then the vender buyer will act independently to make decision that maximizes their respective profit minimize costs. This may not be optimal if one considers the SC as a whole. How best to achieve effective coordination between the actors the most crucial point for any organization. The supply chain management function will be observed from three point of view first as a function of business second as one of the basic elements required to accomplish productivity work, and third as the key department responsible for outside manufacturing and services.(Donald Doblar and Stephen’s Starling world class SCM P37) Coordination is a fundamental to the effective SC. Its function is to embody commitment and to smooth the collaboration with in the SC. To make sure that each plays takes a consistent direction, adjusting the speed (agility) is also essential to collaboration with in the SC. Even though some player are very agile the though put is decided by the slowest part (stage) in SCM. A SC or network may be considered to be a set of linked processes connecting downstream customers to upstream suppliers, factories, distribution centers and retailers (Chikin & H.W.J.Lee, 2005). 2.4. Participant of SCM In downstream aspect of SCM is composed of participant like the company itself, distributer (wholesalers), retailers, and companies or individuals who are customers for the final consumers of a product. A. Producers: Producers or manufactures are organizations that make a product. This includes companies that are producers of raw materials and finished goods. Made other producers to create their products. B. Distributers: Distributers are companies that take inventory in bulk from producers and deliver a bundle of related product lines to customers. Distributors are also known as wholesalers. They typically sell to other business and they sell products in large quantities than an Producers of raw materials are organization that mine for minerals, drill for oil and gas, and cut timber. It also includes organization that farms the land, raise animals, or catch sea food. Producers of finished goods use the raw materials and sub assemblies individual consumer would usually buy. Distributer buffers the producers from fluctuations in product demand by stocking inventory and doing much of the sells work to find and service customers. For the customer, distributor’s full fill the “time and place” function-they deliver products when and where the customer wants them. A distributor is typically an organization that takes owner ship of significant inventory of products that they buy from producers and sell to customers. A distributor can also be an organization that only brokers a product between the producer and the customer and never takes ownership of that product. C. Retailers: Retailers stock inventory and sell in small quantities to the general public. This organization also closely takes the preference and demands of the customers that it sells to. It advertises to its customers and often uses some combination of price, product selection, service, and conveniences, as the primary draw to attract customers for the products it sells.

D. Customers: Customers or consumers are any organization that purchases and uses a product. A customer’s organization may purchase a product in order to incorporate it in to another product that they inter to other customers or customer may be the final end user of a product who buys the product in order to consume it. . E. Service providers: These are organizations that provide services to producers, distributors, retailers, and customers. Service providers have developed special expertise and skill that focus on a particular activity needed by a SC. Because of this, they are able to perform these services more effectively and at a better price than producers, distributors, retailers, or consumers could do on their own

Some common service providers in any SC are providers of transportation services and warehousing services. These are trucking companies and public warehouse companies and they are known as logistics providers (Michael Hugos, 2006). 2.5. Demand Forecasting In SCM 2.5.1 The Role of Forecasting In a Supply Chain Management When each stage of in SC makes its own separate forecast, these forecasts are often very different. The result is a mismatch between supply and demand. When all stages of a SC work together to produce a collaborative forecast, it tends to be much more accurate. The resulting forecast accuracy enables supply chains to be both more responsive and more efficient in serving their customers. The forecast of demand forms the basis for all strategic and planning decisions in SC. throughout the SC, all push processes are performed in anticipation of customer demanded whereas pull processes are performed in response to customer demand. For push processes, a manager must plan the level of production. For pull processes, a manager must plan the level of available capacity and inventory. In both instances, the first step a manager must take is to forecast what customer demand will be. 2.5.2 Characteristics of Forecasts 1. Forecasts are always wrong and should thus include both the expected value of the forecast and measure of forecast error. Thus, the forecast error (demand uncertainty) must be a key input in to most SC decisions. Unfortunately, most firms do not maintain any estimate of forecast error. 2. Long-term forecasts are usually less accurate than short-term forecasts, that is, long-term forecasts have a larger standard deviation of error relative to the mean than short-term forecasts. 3. Aggregate forecasts are usually more accurate than disaggregate forecasts, as they tend to have a smaller standard deviation of error relative to the mean. 4. The farther up the SC a company is (the farther it is from the consumer), the greater is the distortion of information it receives. As a result, the farther up the SC an enterprise is, the larger is the forecast error. Collaborative forecasting based on sales to the end customer helps upstream enterprises reduce forecast error. 2.5.3 Forecast Methods Forecasting methods are classified according to the following four types: 1. Qualitative: Is forecasting methods are primarily subjective and rely on human judgement. They are most appropriate when little historical data is available or when experts have market intelligence that may affect the forecast. Such methods may also be necessary to forecast demand several years in to the future in a new industry. 2. Time series: is the forecasting methods use historical demand to make a forecast. They are based on the assumption that past demand history is a good indicator of future demand. These methods are most appropriate when the basic demand pattern does not very significantly from one year to the next. These are simplest methods to implement and can serve as a good starting point for a demand forecast.

3. Causal: is the forecasting method assumed that the demand forecast is highly correlated with certain factors in the environment (the state of the economy, interest rates, etc). Causal forecasting methods find this correlation between demand and environmental factors and use estimates of what environmental factors will be to forecast future demand. For example, product pricing is strongly correlated with demand. Companies can thus use causal methods to determine the impact of price promotions on demand. 4. Simulation: is the forecasting method imitating the consumer choices that give rise to demand to arrive at a forecast. Using simulation, a firm can combine time-series and causal methods to answer such questions as: what will be the impact of a price promotion? What will be the impact of a competitor opening a store nearby? Airlines simulate customer buying behaviour to forecast demand for higher-fare seats when there are no seats available at the lower fares. 2.5.4. Basic Approach to Demand Forecasting The following basic, six-step approach helps an organization perform effective forecasting: 1. Understanding the objective of forecasting Every forecast supports decisions that based on the forecast, so an important first step is to identify these decisions clearly. Examples of such decisions include how much of a particular product to make, how much to inventory, and how much to order. All parties affected by a SC decision should be aware of the link between the decision and the forecast. 2. Integrate Demand planning and forecasting throughout the supply chain A company should link its forecast to all planning activities throughout the Sc. This includes capacity planning, production planning, promotion planning and purchasing among others. This link should exist at both the information system and the human resource management levels. As a variety of functions are affected by the outcomes of the planning process, it is important that all of them are integrated and the forecasting process. To accomplish this integration, it is a good idea for a firm to have a cross function deem, with members from each affected function responsible fore casting demand and an even better idea is to have a member of different companies in the SC working together to create a forecast. 3. Understand and identify customer segment A firm must identify the customer segment a SC serves. Customer may be grouped by similarity in service requirement demand volume, order frequency, demand volatility, seasonality and so forth. In general, companies may use different forecasting methods for different segments facilities an accurate and simplified approach to forecasting. 4. Identify major factors that influence the demand forecast A firm must identified demand, supply, and product phenomena that influence the demand forecast. On the demand side, a company must ascertain whether demand is growing, declining, or has a seasonal pattern. This estimate must be based on demand -not sells data.

On the supplies sides, a company must consider the available supply source to decide on the accuracy of the forecast desired. If alternative supply sources short lead times are available, a highly accurate forecast may not be especially important. On the other side, a firm must know the number of varieties of a product sold and whether these varieties substitute for all complement each other. It demand for a product influences or is influenced by demand for another product, the two products are best made jointly. 5. Determine the appropriate forecasting technique In selecting an appropriate forecasting technique, a company should first understand dimensions that are relevant to the forecast. These dimensions include geographic area, product groups, and customer groups. The company should understand the differences in demand along each dimension and likely what different forecasts and technique for e ach dimension. 6. Establish performance and error measures for the forecast Companies should establish clear performance measures to calculate accuracy and time lines of the forecast these measures should be highly correlated with the objective of business decisions based on these forecasts. 2.5.5 Measures of forecast error Forecast errors contain valuable information and must be analyzed carefully for two reasons: 1. Managers use error analysis to determine whether the current forecasting method is predicting the systematic component of demand accurately. For example, if a forecasting method consistently produces a positive error, the forecasting method is over estimating the systematic component and should be corrected. 2. All contingency plans must account for last error (Sunil Chopra, 2007). 2.6. Elements in SCM SCM consists of two major elements: these are SCM planning and SCM execution. The efficiency of SC is the result of both the planning and execution decisions. 2.6.1 SCM planning It is based on the optimization theory and the use of highly sophisticated systems is imperative to arrive at the most efficient production schedules, distribution plans, transportation plans and also fulfilment plans. The SCM planning process will recommend various activities, their schedules being based on the overall requirements and resource loading factors. These plans will ensure that the operating costs are minimal with all the services being offered as per expectations. 2.6.2 SCM Execution It typically starts from the date of schedule. Due to various practical reasons and limitations deviations from the plans are generated. To handle these fluctuations and still meet the targets as per plans, SCM execution systems will help users with various alternatives. Typical execution level decisions include re-planning of the material flows, loading factors and also the margins.

Sometimes these decisions are based on sub-optimal planning of the resources based on the changes that occurred (Rahul.V.Altekar, 2005). 2.7. SCM Drivers and Metrics To understand how a company can improve SC performance in terms of responsiveness and efficiency, we must examine the flour drivers of SC performance: facilities, inventory, transportation and information. These derivers not only determine the supply chain’s performance interims of responsiveness and efficiency, they also determine whether strategic fit is achieved across the SC. 1. Facilities: are the actual physical locations in the SC network where product is stored, assembled, or fabricated. The two major types of facilities are production sites and storage sites. Decisions regarding the role, location, capacity, and flexibility of facilities have a significant impact on the SC’s performance. 2. Inventory : compasses all raw materials, work in process and finished goods with in SC. Changing inventory policies can dramatically alter the SC’s efficiency and responsiveness. A large inventory, however, increase the retailer’s cost, thereby making it less efficient. Reducing inventory makes the retailer work efficient but parties its respond responsiveness. 3. Transportation: initials moving inventory from point to point in the SC. Transportation can take the form of many competitions of modes and routes, each with its own performance characters tics. Transportation choices have a large impact on SC responsive and efficiency. 4. Information : consists of data and analysis concerning facilities, inventory, transportation, costs, prices, and customers throughout the Sc. Information is potentially the biggest driver of performance in the SC because it directly affects each of the other drivers. Information presents management with the opportunity to make supply chains more responsive and more efficient. 5. Sourcing: is the choice of who will perform a particular SC activity such as production, storage, transportation, or the management of information. At the strategic level, these decisions determine what functions a firm performs and what functions the firm out sources. Decisions affect both the responsiveness and efficiency of a SC. 6. Pricing: determines how much a firm will charge for goods and services that it makes available in the SC. Pricing affects the behaviour of the buyer of the good or service, thus affecting SC performance (Sunil Chopra, 2007). 2.8. Internal and External SCM 2.8.1 Internal SCM The internal SC is that portion of a given SC that occurs within an individual organization. Internal supply chains can be quite complex. Developing an understanding of the organization’s internal SC is often an appropriate starting point for firms considering an SCM initiative. Developing SC process maps (flow charts) for major supply chains and their related processes helps establish an understanding of the internal SC. Process map development is best accomplished through the use of cross-functional teams comprised of personnel from all parts

of the organization included in the SC under review. Team members must be knowledgeable regarding their part of the SC and also must understand how their part interfaces with the other SC members. To facilitate the process mapping activity, each team member should be provided with instructions about the mapping convention to be utilized, along with other information requirements. The objective of this exercise is to develop SC maps that present all SC entities along with key processes. Once team members have completed the process maps for their part of the SC, entire crossfunctional team meets to develop the overall internal SC map. 2.8.2 External SCM Once the key supply chains have been identified, one must identify the SC member organizations that are considered most critical to the organizations SCM efforts. These key suppliers and customers are likely to provide the greatest benefits to the SCM initiative. Organizations must be important members of the SC because the time and effort required for significant SCM program is not warranted for ‘minor players’. In selecting external members, several issues should be addressed. These are: - One must identify the commutative situation that exists between prospective SCM members. SCM endeavors are likely to be more productive if participating organizations are not direct competitors. There may be limits to collaborative SC efforts when both buyer-supplier and competitor relationships exist between participating organizations. - All organizations and their representatives must be pursuing similar goals. This does not mean that each organization should have identical goals, but that their respective goals must be compatible with the overall SCM initiative. - SCM efforts have limited potential success unless all organizations feel their involvement is beneficial. In an internal setting, participants may be to survive situations where individual business units as a result of decisions considered optimal for the overall organization. An external SCM initiative is unlikely to be successful unless all members from each organization involved feel they are benefiting from participation (Robert B.Handfield, 2002). 2.9. Supply Chain Management Strategy SCM strategy will have a major impact on creating value for a company and its SC partners. An effective SCM strategy may be formulated to meet the needs of the market and integrate them with technology to generate the highest level of customer satisfaction while delivering the highest value to the shareholders. SCM strategy is based on collaboration, demand flow, customer service, and technology integration strategy. (Show below fig) Demand flow strategy Customer service strategy SC strategy framework Collaboration strategy `

Technology integration strategy Collaboration Strategy The three main types of collaboration are as follows: 1. Manufacturer/supply collaboration: By collaborating with the suppliers, manufacturers will derive benefits in activities such as product development, order fulfilment and capacity planning. 2. Manufacturer/ customer collaboration: The opportunities of collaboration between manufacturers and customers are focused on demand planning and inventory replenishment. This approach ensures that the customer requirements are met efficiently. 3. Collaboration with third and fourth party logistics providers: The collaboration of companies with 3rd party logistics providers focuses on jointly planning logistics Activities. It also gives the company the added advantage of better packaging. The 4th party logistics organization is one of the intermediate stages along the logistics spectrum that combine the benefits of outsourcing and in sourcing. Demand Flow Strategy The key in demand management is the continuous flow of demand information from customer and end users through distribution and manufacturing to suppliers. Customers can never be totally predictable but then a good demand flow strategy enables the company to simplify their SC operations. Customer service strategy Customer satisfaction level is directly proportional to the service provided by the company. Formulating a customer service strategy involves addressing 3 steps: 1. Customer segmentation: A company has to decide on the segment it wants to target for a particular commodity. It can decide not to have a homogenous market which is unacceptable. 2. Cost to serve: It is important to obtain an impartial assessment of whether the things that the customers want are feasible for the company. It is also important to determine the kind of support needed from the suppliers or other parties in the SC. Finally, it is required to project the cost of the support system and its feasibility of execution. 3. Revenue management: Determination of the appropriate response to the identified needs and expectations of each customer segment must be completed. In short, the response which maximizes the firm’s profitability and growth should be determined. Technology Integration Strategy Developments in IT enabled the integration of business information systems, both horizontally and vertically. A number of IT based SC information management tools are now available management (Rahul.V. Altekar, 2005). 2.10. Decision Phases in Supply Chain Management Successful SCM requires many decisions relating to the flow of information, product, and funds. These decisions fall in to three categories or phases, depending on the frequency of each decision and the time frame over which a decision phase has an impact. These are:

1. SC strategy or design 2. SC planning 3. SC operation 1. SC strategy or design: during this phase, given the marketing and pricing plans for a product, company decides how to structure the SC over the next several tears. It decides what the chain’s configuration will be, how resources will be allocated, and what processes each stage will perform. Strategic decisions made by companies include whether to outsource or perform a SC function in house, the location and capacities of production and warehousing facilities, the products to be manufactured or stored at various locations, the modes of transportation to be made available along different shipping legs, and the type of information system to be utilized. 2. SC planning: for decisions made during this phase, the time frame considered is a quarter to a year. Therefore, the supply chain’s configuration determined in the strategic phase is fixed. This configuration establishes constraints within which planning must be done. The goal of planning is to maximize the SC surplus that can be generated over the planning horizon given the constraints established during the strategic or design phase. Companies start the planning phase with a forecast for the coming year (a comparable time frame) of demand in different markets. Planning includes making decisions regarding which markets will be supplied from which locations, the sub contracting of manufacturing, the inventory policies to be followed, and the timing and size of marketing and price promotions. 3. SC Operation: the time horizon here is weekly or daily, and during this phase companies make decisions regarding individual customer orders. At the organizational level, SC Configuration is considered fixed and planning policies are already defined. The goal of SC operations is to handle incoming customer orders in the best possible manner. During this The design, planning, and operation of a SC hove a strong impact on overall profitability and success (Suil Chopra, 2007). 2.11 Supply Chain Management Performance and Measurements Developing and maintaining a SC phase, firms allocate inventory or production to individual orders, set a data that an order is to be filled, generate pick lists at a warehouse, and allocate an order to a particular shipping made and shipment, set delivery schedules of trucks, and place replenishment orders. Because operational decisions are being made in the short term (minutes, hours, or days), there is less uncertainty about demand information. Performance measurement system represents one of the more significant challenges faced in SCM initiatives. However, if supply chains are to be improved, decisions need to be based on objective performance information and will require sharing of this type of information with key SC members. 2.11.1 Role of Benchmarking Benchmarking analysis has been shown to be an effective means of determining the supply chain’s performance relative to these of other organizations. It is the process of identifying, understanding, and adopting outstanding practices from within the same organization or from other businesses to help improve performance.

Steps in Benchmarking Process 1. Identify and understand current processes 2. Form a Benchmarking team 3. Determine what to benchmark 4. Identify benchmarking partners 5. Collecting data 6. Analyze data and identify performance gaps. 7. Take actions to improve 8. Review results Benchmarking provides a means to focus the SCM efforts on those areas most in need of improvement. One of these areas that spans multiple areas of the SC is process cycle time. 2.11.2 Effective SC Performance Measurement System Timely and accurate assessment of overall system and individual system component performance is paramount. An effective performance measurement (1) provides the basis to understand the system, (2) influences behaviour throughout the system, and (3) provides information regarding the results of system efforts to SC members and outside stakeholders. In effects, performance measurement is the glue that holds the complex value-creating system together, directing strategic formulation as well as playing a major role in monitoring the implementation of that strategy (Robert B.Hand Field, 2003). 2.12. The Role of IT in A Supply Chain Management Information is a key SC driver because it serves as the glue that allows other SC drivers to work together with the goal of creating an integrated, coordinated SC. I information is crucial to SC performance because it provides the foundation on which SC processes execute transactions and managers make decision. Without information, a manager cannot know what customers want, how much inventory is in stock, and when more products should be produced or shipped. In short, without information, a manager can only make decision blindly. Therefore, information makes the SC visible to a manager. With this visibility, a manager can make decisions to improve the supply chain’s performance. Information is the key to the success of SC because it enables management to make decision over a broad scope that crosses both functions and companies. By using it systems to capture and analyze information can have a significant impact on firm’s performance. -Information must have the following characteristics to be useful when making SCM decisions: - Information must be accurate: without information that gives a true picture of the state of the SC, it is very difficult to make good decisions. - Information must be accessible in a timely manner: often, accurate information exists, but by the time it is available, it is either out of data or, if it is current, it is not in an accessible form. To make good decisions, a manager needs to have up-to-date information that is easily accessible.

- Information must be of the right kind: decision makers need information that they can use. Companies must think about what information should be recorded so that valuable resources are not wasted collecting meaningless data while important data goes unrecorded. Generally information is crucial to making good SC decisions at all three levels of decision making (strategy, planning, and operation) and in each of the other SC drivers (facilities, inventory, transportation, sourcing, and pricing). It enables not only gathering of these data to create SC visibility, but also the analysis of these data so that the SC decisions made will maximize profitability (Sunil Chopra, 2007). 2.13. Identification of SCM Factors In order to understand how SC works, it is important to identify the factors affecting SCM. The following show generic SCM factors and sub-factors that might affect SCM activities. 2.13.1. Environmental Uncertainty Environmental uncertainty refers to the environmental issues in the product chain. This is the unexpected changes of customers, supplier, competitors, and Technology. The government support plays an important role for business success; environmental uncertainty is an important factor in the realization of strategic supply management plans. The increase of outsourcing activities in the industry had augmented the awareness of the important of strategic supply management, which leads to better relationship among organizations. Under this factor, three sub-factors were identified: environmental, government support, and uncertainty aspects from overseas. A, Company Environment It is related to the company’s relationship with suppliers and their level of trust and commitment company environment is also related to the company’s expectations of quality, on time delivery, competition in the sector and the level of rivalry among firms. In order to respond effectively to demand, companies realize that imports are a good option for obtaining flexibility in response, even though working with countries from overseas implies working with uncertainty. Uncertainty negatively affects company performance. But this can be reduced if a strategic relationship with critical suppliers is established thus; companies need to implement new strategies that allow them to deal with environmental uncertainties in SC in order to perform in a proficient manner. B, Government Support The level of support that the company receives from the government when importing raw materials or products from overseas or using domestics materials. It includes the use of norms, regulations, policies, and advice for the sector. The government can make a serious of reforms to encourage exports by increasing manufacturing sector competitiveness in the international market through logistic competency. The increase of international trade for acquiring resources from other countries introduces complicated matters such as language barriers, transportation, transportation costs, exchange rates, tariffs and administrative practices. C, Uncertainty Aspects from Overseas

When requiring the outsource of raw materials or products, it is important to acknowledge the existence of environmental factors such as political uncertainty in other countries that can increase risk for suppliers, provoke decisions of no investment, change business strategies, and in general influence business decisions, social uncertainties such as religion, environment, language, cultural issues, limitations of communication and also the technology used in other countries might interfere with SC planning and function. 2.13.2. Information Technology The use of IT allows suppliers, manufactures, distributor’s retailers and customers to reduce load time, paper work and other unnecessary activities. It is also mentioned that managers will experience considerable advantages with its use such as the flow of information in a coordinated manner, access to information and data interchange, improved customer and supplier relationships and inventory management not only the national level but also internationally. Information technology has two sub factory tools. These are: - Communication tools: are used to facilitate data transfer and communication between the parts and this might include EDI (electronic data interchange), electronic fund transfer (EFT), intranet, internet and extranet. - Planning tools: SCM planning tools are intended to integrate the resource planning activities in a firm or organization. Some of the most common planning tools are: materials requirement planning (MRP), manufacturing resource planning (MRPII), and enterprise resource planning (ERP). 2.13.3. Supply Chain Relationships SC relationships play an important role in achieving the firm’s goals. The coordination and integration of activities with suppliers and understanding of customer’s needs results in greater benefits for companies. SCM is directly related to relationship management which includes suppliers and customers. Strategic supplier partnerships and customer relationships are main companies in the SCM practical, loading to information sharing, which is one of the five pillars in achieving a solid supply chain relationship is the sub factors. 2.13.4. Value Added Process (Manufacturing) Value added products can be commodity processes or products that exist; you only have to use smart modifications and apply them. Value added is adding those manufacturing or service steps to a commodity product, which the customer perceives as increasing its value customers always went to pay the cost that they think is correct, and if they get something additional to the product, they got value added two factors are significant when we talk about value added: flexibility and quality and also production processes contribute to improved value added. 2.13.5. Supply Chain Management Performance SCM performance is the operational excellence to deliver loading customer experience. Some feature present in effective performance measurement systems and these include the following inclusiveness, universality, measurability and consistency SCM performance has four subfactors logistics, supplier markets, supplier performance and materials sourcing.

2.13.6. Business Management It consists of leading, planning, organizing, monitoring and controlling all the involved actors and activities in a company to achieve goals and objectives. It is the process of managing networking between companies. Fast changes in customer demand, globalization of marketing and changing technology require companies to focus their efforts on improving competitiveness trying to achieve customer’s satisfaction through adding more value to their product. Business management has four sub factors these are: process strategy, process performance, marketing strategy and innovation. 2.13.7. Customer Satisfaction The customer’s perception is not always the same as the product manufacture’s perception, customers may give more value to low cost, on time delivery, delivery date certainty or receiving a customized product, manufactures and retailer are always looking for practical after-sales policies that will permit them to enhance customer satisfaction levels. The customer firm supplier relationship management improves operational performance and customer satisfaction. Based on this, a sub-factor customer service is identified. Customer service: the goal the companies is to give customers the best service in an efficient and effective manner, without forgetting about information such as product description, product availability, order status, shipping dotes and assisting them in all what they need, customer service defined by demand forecasting, service levels, order processing, parts/service support, and after market operations (www. Intechopen.com) 2.14. The Bullwhip Effect in Supply Chain Management Activities The bullwhip effect on the supply chain occurs when changes in consumer demand causes the Campania in a SC to order more goods to meet the new demand. The bullwhip effect usually flows up the supply chain, starting with the retailer, wholesaler, distributor, manufacture and then the raw materials supplier. This effect can be observed through most supply chains across several industries, it occurs because the demand for goods is based on demand forecasts from companies, rather than actual consumer demand (WWW.if sworld.com). The bullwhip effect occurs when the demand order variability in the SC are amplified as they moved up the SC. Distorted information from one end of a SC to the other can lead to tremendous in efficiencies. Companies can effectively counteract the bullwhip effect by thoroughly understanding its underlying causes. Industry leaders are implementing innovative strategies that pose new challenges: 1. Interpreting new information systems 2. Defining new organizational relationships 3. Implementing new incentive and measurement systems. 2.14.1. Causes of Bullwhip Effect There are for major causes of the bullwhip effect: 1. Demand forecast updating 2. Order batching 3. Price fluctuation

1. Demand Forecast Updating Every company in a SC usually does product forecasting for its production scheduling, capacity planning; inventory control and materials a requirement planning forecasting is often based on the order history from the company’s immediate customers the outcomes of the beer game are the consequence of many behavioural factors, such as the player’s perceptions and mistrust. An important factor is each player’s through process in projecting the demand pattern based on what he or she observes. When a downstream operation places on order, the upstream manager process that place of information as a signal about future product demand based on this signal, the upstream manager readjusts his or her demand factors and in turn the orders placed with the suppliers of the upstream operation. 2. Order Batching In a supply chain, each company places orders with an upstream organization using some inventory monitoring or control. Demands come in, depleting inventory, but the company may not immediately place an order with its supplier. It often batches or accumulates demands before issuing an order. There are two forms of order batching: periodic ordering and push ordering. - Instead of ordering frequently, companies may order weekly, biweekly, or even monthly. There are many common reasons for an inventory system based on order cycles. Often the supplier cannot handle frequent order processing because the time and cost of processing an order can be substantial. - In push ordering a company experiences regular surges in demand. The company has orders pushed on it from customers periodically because sales people are regularly measured sometimes quarterly or annually, which causes and of quarter or end of year surges. - If the majority of companies that do materials requirement planning (MRP) or distribution requirement planning (DRP) to generate purchase orders do so at the beginning of the month (or end of the month) order cycles overlap. Periodic execution of MRPs contributed to the bullwhip effect. 3. Price fluctuation Manufactures and distributors periodically have special promotion like price discounts, quality discounts, coupons, rebates and so on. All these promotions result in price fluctuations. Additionally, manufacturers offer trade deals (e.g. special discounts, price terms, and payment terms) to the distributors and wholesalers which are an indirect from of price discounts. Different types of promotions listed the above paragraph can be costly to the supply chain management activities. When a products price is low (through direct discount or promotional schemes) a customer buys in bigger quantities than needed. When the products price returns to normal, the customer stops buying until it has depleted its inventory as a result, the customers buying pattern does not reflect its consumption pattern, and the variation of the buying quantities is much bigger than the variation of the consumption rate the bullwhip effect. 2.14.2. How to counter act the bullwhip effect

Understanding the causes of the bullwhip affect can help managers find strategies to mitigate it indeed, many companies have began to implement innovative programs that partially address the effect. Next examine how companies tackle each of the four causes. The various initiatives and other possible remise based on the underlying coordination mechanism, namely, information sharing channel alignment, and operational efficiency. With information sharing, demand information at a downstream site is transmitted upstream in a timely fashion. Channel alignment is the coordination of pricing transportation, inventory planning and ownership between the upper stream and downstream sites in a supply chain. Operational efficiency refers to activities that improve performance such as reduced costs and lead time. Major Ways to Control the Bullwhip Effect in SCM Activities are: -Avoid multiple demand forecast updates -Break order batches -Stabilize prices Avoid Multiple Demand Forecast updated Bullwhip effects are created when SC members process the demand input from their immediate downstream member in producing their own forecasts. Demand input from the immediate downstream member, of course, results from that member’s forecast with input from its own downstream member. Finally, long resupply load times can aggravate the bullwhip effect improvement in operational efficiency can help reduce the highly variable demand due to multiple forecast updates. Hence just in time replenishment is an effective way to mitigate the effect. Break Order Batches Since order batching contributes to the bullwhip effect companies need to devise strategies that lead to smaller batches or more frequent resupply. When an upstream company receives consumption data on a fixed, periodic schedule from its downstream customers, it will not be surprised by an unusually large batched order when there is a demand surge. Stabilize Prices The simplest way to control the bullwhip effect caused by forward buying and diversions is to reduce both the frequency and the level of whole sale price discounting the manufacturer can reduce the incentives for retail forward buying by establishing a uniform wholesale pricing policy(Sited from Hau L Lee, V Padmanabhan and Seungjin Whang, 1997).

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CHAPTER THREE 3. DATA ANALYSIS AND INTERPRETATION This chapter deals with the presentation, analysis and interpretation data gathered through questionnaires and interview. In the following part the researcher attempted to analyze the data which are collected from the respondents. As mentioned in chapter one in section 1.8 under the research methodology. Method of Data Presentation The data gathered from the respondent are presented in such a way that the responses for the questions are tabulated and their frequencies in number and percentages are depicted, the responses of respondents are presented and analyses in the following way.

Table 3.1 summary of distributed and returned questionnaires Questionnaire desire

No of questionnaires distributed No of questionnaire calculated

Employee of hawassa flour factory

30

30

Source: primary data (questionnaire) 2008 E.C

3.1. Analysis of Employee Response The data indicate that in the above table 3.1, the researcher distributed 30 questionnaires for employees from these employee respondents return 30 questionnaires.

Table 3.2 profile of respondents No

item

1

gender

2

Age

3

Educational level

4

Work experience

Category

Male Female Total 18-25 26-35 36-45 Above 46 Below 10 Grade 10-12 completed Certificate Collage Degree 2nd degree and above Zero years

1-2years 3-5 years 5-10 years Above 10 years 5 Marital status Married Unmarried Source: primary data (questionnaire) 2008

respondent In no of respondent 19 11 30 9 10 7 4 7

percentage 63% 37% 100% 30% 33.3% 23.3% 13.3% 23%

7

23%

5 3 6 2

17% 10% 20% 7%

3

10%

10 8 4 5

33% 23% 13% 17%

18 12

60% 40%

According to the profile of respondents data indicated in table item (1) 19(63%) of the respondents were males and 11(37%) of me respondents were females/. This indicated that male employees of the case company are greater than the number of female employees.

Regarding to their ager table 3.2 item (2) the majority of respondents 10(33.3%) were in between 26-35 years. 9(30%) of the respondents were in the age range between 18-25 years. 7(23.3%) of the respondents were in the age range between 36-45 years and the remaining 4(13.3%) respondents were in the age of above 46 years. Regarding to educational level in table 4.2 item (3) majority of workers belonging in to below grade ten and grade 10-12 completed. This means both are cover 7(23%) and 7(23%) respectively 6(20%) degree, 5(17%) of the respondents were certificate, 3(10%) respondents were college diploma and 2(7%) of the respondents were 2nd degree and above. According to work experience indicated in table 3.2 item (4) majority of workers belonging 1-2 years, that means 10(33%), 8(23%) of respondents were 3-5 years, 5(17%) of respondents were above 10 years, 4(13%) of respondents were 5-10 years the remaining 3(10%) of respondents were zero years’ experience. As indicated in table 3.2 item (5) majority of the respondents 18(60%) were married and also 12(40%) of the respondents were unmarried. Table 3.3: Current down SCM relationship No

1

Item

What looks like the current downstream SCM relationship?

Alternative

Respondents No

percentage

Very strong Strong Moderate

4 7 17

13% 23% 57%

Weak

2

7%

Very weak Total

30

100%

Source: primary data (questionnaire) 2008 E.C The above table 3.3 indicates 17(57%) respondents give answer for the organization current downstream SCM relationship is moderate, 7(23%) of the respondents were respond Strong’s 4(13%) of the respondents were respond very

strong and 2(7%) of respondents were respond weak. There for the researcher conclude that the case company current downstream SCM relationship is moderate. This moderate downstream SCM relationship is not enough. Because if the company had more than this moderate downstream SCM relationship, it attain the activities at short time and gave quality product and services for the customers. By this case the company generate maximum profit. Table 3.4: Standards of SC activities Item

Alternative

No

2

What look like the Poor standard of SC Good activities in your Very good organization? Excellent

Respondent No

Percentage

1

3%

13

43%

11

37%

5

17%

30

100%

Total Source: primary data (questionnaire) 2008 E.C According to the above table 3.4 indicates 13(43%) of respondents gave respond for the standards of SC activities in the organization is good, 11(37%) of the respondents were respond very good, 5(17%) of the respondents were respond excellent, and 1(3%) of the respondents were respond poor standards of SC activities in the case company. Therefore the researcher concludes that the case company has good standards of SC activities. But this good standards of SC activities not enough. Because if the responsible bodies should lose their full effort for the standards of SC activities, the company to attain other best standards of SC activities. Table 3.5: Factors that affect effective implementation of SCM Item

Alternative

No 3

Respondent No

What are the factors that affect

Lack of coordination

Percentage 14

47%

effective implementation of SCM in your organization?

Information barrier Uncertainty

5

17%

5

17%

Absence of trust

2

6%

All Total

4 30

13% 100%

Source: primary data (questionnaire) 2008 E.C According to the above table 3.5 indicated 14(47%) of the respondents respond that the case company face lack of coordination as a challenge for implementation of SCM. 5(17%) of respondents respond that the case company face both information barer and uncertainty in the same ratio to challenge the implementation of effective SCM activities in addition to these, 2(6%) of the respondents respond that absence of trust each other affect the implementation of SCM and 4(13%) of respondents respond that all types the above table 4.5 factors affect the implementation of SCM. Therefore the researcher can conclude that the case company has great problems related to lack of coordination on SCM implementations that leads the organization a great lose. Table 3.6: Organization and their customers’ relationship

Item No 4

Alternative

Does your Yes organization have No long term Total customer relation? Source: primary data (questionnaire) 2008 E.C

Respondent No Percentage 23 77% 7 23% 30 100%

As it is clearly stated in the above table 3.6, from the total no of respondents 23(77%) of them response that the organization has long term relationship its customer whereas the reaming 7(23%) of them response that the organization has not long term relation with its customers. From this researcher can conclude

that the organization has long term relation with its customer and the company continuously generate profit from case company’s loyal customers.

The researcher also collected response from the respondents who said yes on table 3.6 item (4) the mechanism did use the organization to create long term customer relation and analyzed as follows: - By product innovation, promotion and sampling test. - By cost reductive for loyal and permanent customers. - Most of the time the organization used advertisement in TV and radio program and printed media as well. - By using customization mechanism which helps to increase by producing their requirements. - By producing quality product then distribution by minimum cost at the right time in the right place. - By giving respect and improved the service.

Table 3.7: Training and experience sharing programs No

7

Item

Alternative

Did the organization create Yes opportunity for training No and experience sharing Total program for its employees?

Respondent No

Percentage

6

20%

24 30

80% 100%

Source: primary data (questionnaire) 2008 E.C As table 3.7 indicated 24(80%) of the respond that the case company does not create opportunity for training and experience sharing programs for its employees, and 6(20%) of the respondents respond that the case company have

opportunity for training and experience sharing programs for employees. Therefore the researcher can conclude that the case company has a problem to give training fort employees. That leads the employees of the organization to work without improvement. This problem leads to great loss for the company. So the organization should develop training for employees to perform job in a better way. This can be done by preparing workshop or sending some employees to a better performing organization to share experience.

Table 3.8: Integration among its function areas No

9

Item

What looks like the factory integration among its functional area?

Alternative

Very strong

Strong Moderate Weak Very weak Total Source: primary data (questionnaire) 2008 E.C

Respondent No

Percentage

6

20%

11 13 30

37% 43% 100%

As it is clearly stated in the above table 3.8, from the total no of respondents 6(20%) of them response that the factory has very strong integration among its functional areas, 11(37%) of them response that the factory has strong integration whereas the reaming 13(43%) of them response that the factory has moderate integration among its functional areas. From this the researcher can conclude that the organization has moderate integration among its functional areas. As the view of the researcher, moderate integration among its functional areas not enough. Because of the company lose their profits by the cause of moderate integration. But the company should improve the integration either internally or externally to attain maximum quality production and customer service. After that the company generate maximum profit.

Table 3.9: Product distribution channels of the factory No

Item

10

What type of distribution channels the campany use to delivery its product to customers?

Alternative

Direct distribution Indirect distribution Both Total Source: primary data (questionnaire) 2008 E.C

Respondent No Percentage 4 13% 6

20%

20 30

67% 100%

As it is clearly stated in the above table 3.9, from the total no of respondents 4(13%) of them response that the organization use direct distribution channels to deliver its product to their customers. In the other side 6(20%) of them response that the factory to use indirect distribution whereas the reaming 20(67%) of them response that the factory to use both direct and indirect distribution channel for the delivery of its product to customers. From this the researcher can conclude that the organizations use both direct and indirect distribution channels for the delivery of its product to their customers and also these types of distribution channels give fast and flexible product delivery to the case company customers. This leads to major advantage for company maximum profit generation.

-

Table 3.10 Feedback receiving No

Item

Alternative

11

Are you ready to Yes accept any No suggestion from Total customer? Source: primary data (questionnaire) 2008 E.C

Respondent No 29 1 30

Percentage 97% 3% 100%

As it is clearly stated in the above table 3.10, from the total no of respondents 29(97%) of them response that organization employees were accept any feedback, whereas the reaming 1(3%) of them response that the organization employee was not accept any feedback from their customers. From this the researcher can conclude that the majority of organization employees were accepts any feed aback from organization customers. Therefore the researcher to analysis this, the case company has good advantage to keep customers in the organization umbrella and force other competitors customers to change their choice. These enable the case company to stay in the market, highly complete and generate high profit. The research also collected response from the respondents who said yes on table 3.10 item (12) the ways for feedback receiving and type of feedback rise up from customers and analyzed as follows: Ways of feedback receiving from customers -

By telephone By direct thought/direct contact

Types of feedback rise up from customers - In case of product quality - In case of product delivery - Related to price In case of product, size and type In case of product damage during the delivery

Related to product packaging system Table 4.11: Relationship between companies and their customers No 13

Item What type of relationship the company has with its customers?

Alternative Excellent

Respondent No 9

Percentage 30%

Very good

10

33%

Good

11

37%

Poor

-

-

Very poor

-

-

Total

30

100%

Source: primary data (questionnaire) 2008 E.C As it is clearly stated that in the above 3.11, from the total no of respondents 9(30%) of them response that organization has excellent relationship with its customers’. In the other side 10(33%) of them response that the organization has very good relationship with its customers whereas the remaining 11(37%) of them response that the organization has good relationship with its customers. From this the researcher can conclude that the organization has better relationship with its customers. Table 3.12: Kinds of customers No 14

Item What kind of customer do you have?

Alternative

Permanent Temporary Both Total Source: primary data (questionnaire) 2008 E.C

Respondent No 30 30

Percentage 100% 100%

As table 3.12 indicated 30(100%) of the respondents are respond that organization has both permanent and temporary customers. Therefore the researcher concludes that the case company has both permanent and temporary customers. As researcher view from this kind of customers, the case company

does not satisfy. Because the case company should develop mechanisms like cost minimization and fast delivery system change temporary customers to permanent customers. Because of permanent customers are loyal customers who make the organization profitable. Table 3.13: Measure of company’s product delivery No

Item

Alternative

Respondent No 8 21 1 30

Percentage Very fast 27% Fast 70 Slow 3% Very slow Total 100% Source: primary data (questionnaire) 2006 E.C As it is clearly stated in the above table 3.13, from the total No of respondents 8(27%) of them response that the factory has very fast product delivery to the customers and 21(70%) of them response that the factory has fast product delivery system to the customers. Whereas the slow product delivery system to the customers. From this the researcher can conclude that organization has fast product delivery system to the customers. Even though the product delivery of the organization fast, there is a problem to be solved behind them. Because the case company still has a great opportunity to hold its customers and to attract new customers. This will enable the organization to survive in the market for long period of time and to get sustainable profit which makes the organization high competitor in the market. Table 3.14: Information technology with SC partners No Item Alternative Respondent No Percentage 16 Does the company have Yes 14 47% effective information No 16 53% technology to communicate Total 30 100% with supply chain partner? Source: primary data (questionnaire) 2008 E.C 15

How did you measure company product delivery to the customer?

As it is clearly stated in the above table 3.14, from the total No of respondents 14(47%) of them response that the organization has effective information technology to communicate with SC partners. Whereas the remaining 16(53%) of them response that the organization has not effective information technology to communicate with SC partners. Therefore the researcher can conclude that the organization has no effective information technology to communicate with SC partners. From this information technology gap, the company affected by information barer in SCM activities. This leads to great lose for company profitability. The researcher also collected from the respondents who said No on table 3.14 item (17) the ways of effective information technology to communicate with supply chain partners and analyzed as follows: Have no well integrated electronic and internet communication.

Technological tools require high amount of capital. It has some communication between SC partners but not effective that is does not going parallel with today’s world. there is not effective technology system in the SC system.

3.2. Interpretation of Data Interviews with Customers The case company has many customers. From these customers; the researcher rise some interview questions for the general condition of company’s product. Taking this in to consideration the researcher prepared interviews with the customers of case company regarding to the product quality, product satisfaction, packaging system, product delivery and other related issues. Firstly, the researcher asked the customers that the comparison factory product quality with the other competitor’s factory products, majority of customers said that the case company has better product quality compare with the other competitors. But in some extent the case companies customers rise up complain by the factory product. So, the researcher concludes that the company has better product quality relative to other competitors. Secondly: the researcher asked customers related to the satisfaction and packaging system of the company product. The majority of customers gave answer positively. This means the majority of customers satisfied by the company product and packaging system. From this the researcher concludes that the company has good packaging systems and also satisfied their customers. Thirdly the researcher asked a question to customers related to company product delivery. The majority of customers said “the company has fast product delivery system.” That means the company has special product delivery system at the right time in the right customers appropriately. From this the researcher concludes that the company has best product delivery system to their users. Finally the researcher presented a question to the customers related to provide complain to the company. The most of customers said that provide thei complains to the factory by company sales agent and by phone directly call for the responsible body in the factory. As indicate customers several complains rise up like price problems, in some extent product delivery, product quality and other related issues. From this the researcher concludes that the company customers freely rise up complains to the case company.

3.3. Data Interpretation of Interviews with Manager It is obvious that the general manager of the organization has significant position to control the whole SCM activities of Hawassa flour factory. Taking this in to consideration the researcher collected the following answer from the manager. apply SCM; the manager answered that sometimes in case of delaying in put delivery, lack of well-trained of product distribution system, low internet access, lack of power during production, lack of well-trained human resource in SCM activities, in some extent low information exchange and the employees have law concept in SCM activities. Secondly the researcher asked manager related to take measurements to overcome the problems; the manager put measurement like gave short and long term training for the employees about SCM activities and other related things, legally communicate with any responsible bodies and solve the problems of power supply and internet access, to improved the ways of information exchange, to gave awareness for input supplier and improved the delivery of input and improved the ways of product distribution systems. Thirdly, the researcher asked question to manager related to the awareness of organization employees for SCM; the manager answered that the employees have some extent awareness for SCM. Because of the concept of SCM is the current issue in the company. So, this is the major obstacles of the company. Fourthly question say how did you see the level of relationship between customers and the organization the manager answered that the relation between organization and customers is moderate. Because of some obstacles happen like information barriers and infrastructure problems related to transport conjunctions. Finally the researcher collected information from manager related the method that the company use in order to increase customer satisfaction; the manager respond that the company used different ways of customers treatments like increase product capacity by quality and quantity as well as by size and packaging systems, to gave discount, by promotion and exhibit, by gave opportunity for customers in case of complain handling and gave fast and flexible service.

CHAPTER-FOUR 4. SUMMARY, CONCLUSION AND RECOMMENDATION OF THE STUDY 4.1. Summary The main purpose of this study was to measure the effectiveness of SCM activities in the case company. To this end the researcher attempt to: - To identify the major factor affecting effective SCM activities. - To identify mechanism to perform SCM effectively - To determine the coordination of the case company with its downstream SC participants. - To identify problem which hinder SC participant to participate effectively - To determine the role of effective SCM activities in satisfying customer needs and wants in the factory.

For attainment of the study requirement different technique are applied such as distribution of questions and conducting interview; the following where presented and interpreted according to the finding obtained from 30 respondents. More than 63% of the employees are male. 33.3% of the employees are adult, according to their educational level more than 23% are below grade 10 as the same time 23% of employees are from grade 10-12 completed. In case of work experience 33% of employees belong in 1-2 year work experience. In addition to this 60% of employees are married. More than 57% respond that the current downstream SCM relationship is moderate. According to the respondent more than 43% are responds the organization has good standards of SC activities. More than 47% of the employees respond the major factors that affect effective implementation of SCM in the organization is lack of coordination between SC actors. Out of the total 30 employees 13(43%) the respondent responds the factory has moderate integration among its functional areas. More than 67% of respondents respond the company use both direct and indirect distribution channels. According to the respondent more than 37% the company has good relationship with its customers. More than 53% of respondents respond the company does not has effective information technology to communicate with SC partners. Out of the total 30 respondents 23(77%) respond the factory has long term customer relation.

More than 97% of respondents respond the company ready for feedback receiving from customers. According to the respondents respond, 100% kinds of customers are both permanent and temporary. Out of the total 30 respondents 21(70%) of them responds, the factory has fast product delivery to the customers.

5.2. Conclusion

The researcher has tried to deal with the factors affecting effective implementation of SCM activities in Hawassa Flour factory. Majority of the employees are male and adult with low educational level and experience. The major problems that affect the effective implementation SCM activities are lack of coordination between SC actors and lack of well trend human resource in SCM activities. The organization has not effective information technology to communicate with SC partners. The organization integration among its functional area is moderate. The current organization’s downstream SCM relationship is moderate. The standard of SC activities in the organization is good. The organization does not create opportunity for training for the employees. The organization use both direct and indirect distribution channels. The organization accepts feedback from its customers. The organization has both permanent and temporary customers. The product delivery of the organization to the customer is fast.

4.3. Recommendation

Based on the conclusion the researcher suggestion the following recommendation: The organization better to improve its coordination with SC actors by working integrity with them and through good information exchange. The organization better to solve its communication problem with SC actors by using modern information technology system like EDI system.

The organization better to create opportunities of training for the employees by preparing workshops and sending the employees to the better performing similar organizations to experience sharing. The organization better to keep its permanent customers by providing quality products and timely providing the product because permanent customers make the organization profitable. It also better to make temporary customers to permanent by satisfying their need taking feedback from them.

APPENDEX Questionnaire appendix Hawassa University Collage of Business and Economics Department of Logistics and Supply Chain Management Dear respondent, this questionnaire is prepared by third year graduate student of logistics and supply chain management department and the objective of the questionnaire is to collect data about factor affecting effective implementation of supply chain management in case of hawassa flour factory. The data you provide will be valuable for successful accomplishment of the research. Thus, you are kindly requested to fill out the questionnaire accurately and frankly. Instruction, put mark in the box of cloth ended questionnaires and as need more than one answer is possible we would like to thank you in advance for your cooperation. Part-one Employee’s profile 1. Sex 2. Age

Male

Female-

18-25 years

26-35 years

36-45 years

Above 46 3. Educational level below grade 10 master degree college 4. Work experience zero years year above 10 years

10-12

1-2 year

certificate 12 completed 3-5 year

5-10

5. Marital status married

unmarried Part two Basic research questionnaire

1. What looks like the current downstream supply chain management relationship? Very strong strong moderate weak very weak 2. What looks like the standards of supply chain activities in your organization? Poor good very good excellent 3. What are the factors that affect effective implementation of supply chain management in your organization? Lack of coordination uncertainty information barrier absence of trust each other 4. Does your organization have long term customer relationship? Yes no 5. If your answer yes in question number 4 what your mechanism did use the organization to create long term customer relationship?---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------6. If your answer is No in question number 4 why explain?-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------7. Did the organization create opportunity for training and experience sharing program for its employees? Yes No 8. If No in question number 7 what is the reason ?---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9. What looks like the factory integration among its functional area? very good strong moderate weak very weak 10.What type of distribution channels the company use to delivery its product to customers? Direct distribution indirect distribution both 11.Are you ready to accept any suggestion from customers? Yes No 12.If the answer is yes in question number 11 what are way for feedback receiving and type of feedback rise up from customer?------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------13.What type of relationship the company has with its customers? Excellent very good good poor very poor 14.What kind of customer do you have? Permanent temporary both 15.How did you measure company product delivery to the customer? Very fast fast slow very slow 16.Does the company have effective information technology to communicate with supply chain partners? Yes No 17. If no what are the way of effective information technology to communicate with supply chain partner? ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------.

Appendix B Interview questionnaires With customer 1. 2. 3. 4.

How looks like the companies’ product quality when compare from other compotator’s product? What looks like packaging system of the company and customer satisfaction? How the company deliver product related to speed? How you provide complain for the company?

Interview questionnaire With manager 1. What the major problem facing the organization in order to apply SCM implementation activity effectively? 2. What measurement the manager take to overcome the problem of SCM activity? 3. Does the employee have awareness about SCM activity? 4. How did you see the level of relationship between customers and the organization? 5. What kind of method the organization use in order to increase customer satisfaction?

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