Published on International Journal of Economics & Business
Publication Date: January, 2020
Lecturer Salale University, College of Business & Economics, Department of Management
Supply chain management gives numerous advantages of business expansion and long term existence of the business in the market. In addition to this, supply chain management provides payback for the producer of the product to supply the products to the end users efficiently. Generally, supply chain management has great benefits for producers, suppliers, and other marketing agents. For the successfulness of the study quantitative mated was utilized, convenience sampling methods were used and structured questionnaires were sent to sampled representatives of the study. The study has assessed different related empirical studies which advocates supply chain management has a great role and significant effect on business profitability. Because of some constraints the study focuses only on dairy products producers in North Shewa Zone selected woredas.
Keywords: Supply chain management, business expansion, business profitability and dairy products producers.
In contemporary business management the interdependency of the stockholders is highly important for mutual beneficiary. As a result of this supply chain management (SCM) stresses the interdependency of producers with suppliers got attention of the researchers throughout the globe. Supply chain management is the process of planning and controlling of material, logistics, and service and information flow from suppliers to manufacturers and to the end consumers. (Fantazy KA, 2010).
According to (Ou CS, 2010) Supply chain management (SCM) is the most advantageous methods to improve the profitability of any business. The concept of SCM has been involved from two separate paths: purchasing and supply management, and transportation and logistics management. (Jharkharia, 2006) According to purchasing and supply management perspective, SCM is the same with the integration of supply base that evolved from the traditional purchasing and materials functions (Lopes de Sousa Jabbour, 2011).
Companies are becoming more aware of that the successful integration and management of key business processes across the supply chain will determine the success of the single enterprise. The most important question is how to manage the company’s supply chain network and thereby achieve the potential of SCM. One way of assembling this network of firms is developing strong relationships with key partners who can add value to the market offering. The ideal partner adds significant value to your market offering without being a high risk as a partner (Pohja, 2004)
Collaborative practices have shown to deliver a wide range of benefits which enhance competitiveness and performance in terms of better cost management, improved time, improved resource and risk management and delivering incremental business value and innovation (Lysons, 2012).
Supply chain coordination occurs when all the different stages of supply chain work toward the objective of maximizing total supply chain profitability rather than each stage devoting itself to its own profitability (Chopra, 2010). Supply chains encompass the companies and the business activities needed to design, make, deliver, and use a product or service. Businesses depend on their supply chains to provide them with what they need to survive and thrive. Every business fits into one or more supply chains and has a role to play in each of them (Son, 2003).
Performance measurement describes the feedback on operations which are geared towards customer satisfaction, strategic decisions and objectives. They further point out that performance
measurement reflects the need for improvement in operational areas which are referred to as bottlenecks in performance measures (Bhagwat, 2007)
The goal of a supply chain manager must therefore be to link the end customers, the channels of distribution, the production processes and the procurement activity in such a way that customers’ service expectations are exceeded and yet at a lower total cost than the competition. Many SCM studies were conducted in developed countries. In the other side the supply chain of performance there are some studies focused on measuring supply chain performance, such as Performance metrics in supply chain management (Cao, 2008).
There are very few studies on supply chain management around the selected areas of the study. In addition to this there is a lack on studies that link the products with buyers and distributors; therefore, this study seeking to contribute in filling this gap, this study mainly focuses on North Shewa Zone selected Dairy producers.
2. Theory of the Supply Chain
The definition of supply chain management is the integration of business processes from end user through original supplies that provides products, services and information that add value to customers. Supply chain seems to be common across authors than the definition of “supply chain management.
Supply Chain is a critical part of world trade activities. However, a Supply Chain in itself is no sufficient. In consideration of a Supply Chain to be efficient, it is crucial to understand its principal functions as well as the role played by each function in the Supply Chain’s overall efficiency. Accomplishing this makes it facile to identify obstacles and impact the essential improvements (Janvier-James, 2012)
3. Function of supply chain management
It is well known that supply chain management is an integral part of most businesses and is essential to company success and customer satisfaction.
Boost Customer Service፡ Customers expect the correct product assortment and quantity to be delivered. Customers expect products to be available at the right location. (i.e., customer satisfaction diminishes if an auto repair shop does not have the necessary parts in stock and can’t fix your car for an extra day or two). Right Delivery Time – Customers expect products to be delivered on time. Right After Sale Support – Customers expect products to be serviced quickly.
Decreases Purchasing Cost – Retailers depend on supply chains to quickly deliver expensive products to avoid holding costly inventories in stores any longer than necessary. For example, electronics stores require fast delivery of 60” flat-panel plasma HDTV’s to avoid high inventory costs. Manufacturers depend on supply chains to reliably deliver materials to assembly plants to avoid material shortages that would shutdown production. For example, an unexpected parts shipment delay that causes an auto assembly plant shutdown can cost $20,000 per minute and millions of dollars per day in lost wages.
Decreases Total Supply Chain Cost – Manufacturers and retailers depend on supply chain managers to design networks that meet customer service goals at the least total cost. Efficient supply chains enable a firm to be more competitive in the market place. For example, Dell’s revolutionary computer supply chain approach involved making each computer based on a specific customer order, then shipping the computer directly to the customer. As a result, Dell was able to avoid having large computer inventories sitting in warehouses and retail stores which saved millions of dollars. Also, Dell avoided carrying computer inventories that could become technologically obsolete as computer technology changed rapidly.
Increases Profit Leverage – Firms value supply chain managers because they help control and reduce supply chain costs. This can result in dramatic increases in firm profits. For instance, U.S. consumers eat 2.7 billion packages of cereal annually, so decreasing U.S. cereal supply chain costs just one cent per cereal box would result in $13 million dollars saved industry-wide as 13 billion boxes of cereal flowed through the improved supply chain over a five year period.
Decreases Fixed Assets – Firms value supply chain managers because they decrease the use of large fixed assets such as plants, warehouses and transportation vehicles in the supply chain. If supply chain experts can redesign the network to properly serve U.S. customers from six warehouses rather than ten, the firm will avoid building four very expensive buildings.
Increases Cash Flow – Firms value supply chain managers because they speed up product flows to customers. For example, if a firm can make and deliver a product to a customer in 10 days rather than 70 days, it can invoice the customer 60 days sooner.
Lesser known, is how supply chain management also plays a critical role in society. SCM knowledge and capabilities can be used to support medical missions, conduct disaster relief operations, and handle other types of emergencies. Whether dealing with day-to-day product flows or dealing with an unexpected natural disaster, supply chain experts roll up their sleeves and get busy. They diagnose problems, creatively work around disruptions, and figure out how to move essential products to people in need as efficiently as possible.
SCM Helps Sustains Human Life – Humans depend on supply chains to deliver basic necessities such as food and water. Any breakdown of these delivery pipelines quickly threatens human life. For example, in 2005, Hurricane Katrina flooded New Orleans, LA leaving the residents without a way to get food or clean water. As a result, a massive rescue of the inhabitants had to be made. During the first weekend of the rescue effort, 1.9 million meals and 6.7 million liters of water were delivered.
SCM Improves Human Healthcare – Humans depend on supply chains to deliver medicines and healthcare. During a medical emergency, supply chain performance can be the difference between life and death. For example, medical rescue helicopters can save lives by quickly transporting accident victims to hospitals for emergency medical treatment. In addition, the medicines and equipment necessary for treatment will be available at the hospital as a result of excellent supply chain execution
SCM Protects Humans from Climate Extremes – Humans depend on an energy supply chain to deliver electrical energy to homes and businesses for light, heat, refrigeration and air conditioning. Logistical failure (a power blackout) can quickly result in a threat to human life. For example, during a massive East Coast ice storm in January 1998, 80,000 miles of electrical power lines fell resulting in no electricity for 3,200,000 Montreal, Quebec residents. Due to extreme cold, 30 died and 25% of all Quebec residents left home to seek heated shelter. In addition, economic costs included $3 billion in lost business, $1 billion in home damage and $1 billion in government expenditures.
Protects Delivery of Necessities – Citizens of a country depend on supply chain managers to design and operate food, medicine and water supply chains that protect products from tampering. Sophisticated packaging techniques, state of the art surveillance cameras, global positioning systems and RFID inventory tracking are some of the methods used to deter terrorists from accessing these vital logistics systems (CSCMP, 2019).
4. Supply Chain Management task
On a broader level, supply chain management consists of these four major functions and key element components, such as:
Integration: This forms the crux of the supply chain and is meant to coordinate communications to produce effective and timely results. It can include innovation of new software or advanced technological processes to improve communications.
Operations: This involves management of the day to day operations in the eCommerce business. For example, it may deal with keeping an eye on the inventory or coming up with marketing approaches.
Purchasing: This deals with the purchasing decisions and management, such as purchasing raw materials, source materials and so on.
Distribution: This deals with the management of logistics across wholesalers, retailers, and customers. This may mean keeping an eye on the shipment, and other details.
In addition to these, there are also some subsidiary functions that an effective supply chain management process fulfills, such as:
• Aligning distribution flows
• Integrating the functions from manufacture to delivery
• Designing complex and advanced systems
• Managing an coordinating resources
5. Materials and methods
A framework for data collection and analysis was used based on quantitative approach and non probability convenience sample was used. In order to be consistent with the purpose of this study, producers of dairy products were selected as a sample. The data were collected through questionnaires sent to supply chain managers and selected dairy producers. The questionnaires were hand delivered and collected. The participants of this study were 10 supply chain management members and 49 dairy product producers.
5.2 Methods of data collection
A questionnaire was designed by reviewing relevant theoretical and empirical studies. The final version of the questionnaire consists of 59 closed questions. The questionnaire of this study has profile of the respondents and specific questions designed to assess the supply chain management status. All items of SCM are assessed using five -point likert type scales ranging from “strongly disagree” to “strongly agree.
5.3 Data Analysis
Finally, after collecting the relevant data and survey, there were 54 complete and useable responses, representing a response rate of 91.5%. And the reliability statistic test conducted.
5.4 Reliability Analysis
To test reliability this study used Cronbach’s alpha as a diagnostic measure, which assesses the consistency of entire scale, since being the most widely used measure. According to Hair, Black and Anderson (Hair, 2010) the lower limit for Cronbach’s alpha is 0.70, although it may decrease to 0.60 in exploratory research.
Among the limitations of this study is the use of only one respondent per company. Also, this study depends on a questionnaire survey at one point in time from a manufacturing sector. Therefore Future research should, endeavor to collect data from multiple members across the supply chain, including semi structured interviews. As well Future research should develop SCM practices dimensions, and focus on measuring new dimensions of supply chain performance effectiveness and future scope it’s better to focusing on the factors effect on effectiveness of supply chain.
From the results achieved by data analysis one of the interesting finding is that the practice of supply management have a critical impact on the performance of the chain profitability. This implies that as the manager control the process of supplying the product and collecting the raw materials from the suppliers they can reduce the total expenditure of the company and grasping a profit. As a result of reducing the cost of getting raw material and providing the product they can increase the efficiency of the company as a whole. The correlation between suppliers and supply chain management practices has a decisive essentiality to compete with rivalries in the domestic and international market.
Based on the reflection of the respondents and answers from the closed questionnaires, the current status of supply chain management practice of dairy products in North Shewa Zone, Oromia Regional State, can be discussed as below:
The undermined issue but it is greatest from all in. obviously information is power and business. The power of information can convert the strategic theme of every company in the world. Promotion, advertising, selling, distribution and production are all about information in delivering the product we produce. Here as we can understand from the response of the respondents and interview there is high (over average) gap of information between suppliers and supply chain management in marketing program.
For the existence of the marketing program in the company there should be a positive bond between the suppliers and supply chain management agents. The cooperation there in the process of supply chain has a critical importance for success for the company. As per of the result of the data of the study there is questionable integration between them. The result of interview shows that 75% respondents agreed that there is no integration and effective customer handling in the company.
In the study area results shows that there is a problem of information of marketing program, general integration, handling of suppliers with safe manner and so on. Whenever we see those aforementioned problems they can impact the total effectiveness of the company not only this they can also affect the living condition of the surrounding communities as whole. In addition to this if there is no integration, communication and effective client handling in the company this will cause high risks in transporting the product and the quality of the products may be under question mark.
This study offers a number of managerial implications. First, it provides to the SCM managers with appropriate method for evaluating the effectiveness of the supply chain management way moreover a new dimensions of supply chain management developed. Second, the results also indicates that supply chain management impact on supply chain performance efficiency, therefore, the effectiveness of North Shewa dairy producers is dependent on the availability of effective supply chain management.
Generally, the theoretical contributing of the study that it’s provide to scholars new avenues for future research, and as well as extracting new dimension, and using a triangulation methodology.
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