Hawassa University Collage of Bussines and Economics Department of Logistics and Supply Chain Management

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 page
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…………………………… 4.1
summary……………………………………………………………………………………….
4.2 conclusion………………………………………………………………………………………………
4.3 recommendation………………………………………………………………………………
Appendix A……………………………………………………………………………………………………..
Appendix B
Reference……………………………………………………………………………………………..
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 semi-
professionals 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 cross-
functional 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 sub-
factors 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).
.
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 30 30

factory
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 Category respondent
In no of percentage
respondent
1 gender Male 19 63%
Female 11 37%
Total 30 100%
2 Age 18-25 9 30%
26-35 10 33.3%
36-45 7 23.3%
Above 46 4 13.3%
3 Educational Below 10 7 23%
level
Grade 10-12 7 23%
completed
Certificate 5 17%
Collage 3 10%
Degree 6 20%
2nd degree 2 7%
and above
4 Work Zero years 3 10%
experience
1-2years 10 33%
3-5 years 8 23%
5-10 years 4 13%
Above 10 5 17%
years
5 Marital status Married 18 60%
Unmarried 12 40%
Source: primary data (questionnaire) 2008
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 Item Alternative Respondents
No percentage
1 What looks like Very strong 4 13%
the current Strong 7 23%
downstream SCM Moderate 17 57%
relationship?
Weak 2 7%
Very weak - -
Total 30 100%

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 Respondent
No
No Percentage
What look like the Poor 1 3%
2 standard of SC
Good 13 43%
activities in your
organization? Very good 11 37%
Excellent 5 17%
30 100%
Total
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
No
No Percentage
3 What are the Lack of 14 47%
factors that affect coordination
effective Information 5 17%
implementation barrier
of SCM in your Uncertainty 5 17%
organization?
Absence of trust 2 6%
All 4 13%
Total 30 100%
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

No No Percentage
4 Does your Yes 23 77%
organization have No 7 23%
long term Total 30 100%
customer
relation?
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 Item Alternative Respondent
No Percentage
7 Did the organization create Yes 6 20%
opportunity for training No 24 80%
and experience sharing
Total 30 100%
program for its employees?

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 Percentage
What looks like the factory Very strong 6 20%
9 integration among its Strong 11 37%
functional area?
Moderate 13 43%
Weak - -
Very weak - -
Total 30 100%
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 Percentage
10 What type of distribution Direct 4 13%
channels the campany use to distribution
delivery its product to Indirect 6 20%
customers? distribution
Both 20 67%
Total 30 100%
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 Percentage
11 Are you ready to Yes 29 97%
accept any No 1 3%
suggestion from Total 30 100%
customer?
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 Percentage
13 What type of relationship Excellent 9 30%
the company has with its
customers? Very good 10 33%
Good 11 37%
Poor - -
Very poor - -
Total 30 100%

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 Percentage
14 What kind of Permanent - -
customer do you Temporary - -
have? Both 30 100%
Total 30 100%
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 Percentage
15 How did you measure Very fast 8 27%
company product delivery to Fast 21 70
the customer? Slow 1 3%
Very slow - -
Total 30 100%
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 Percentage
16 Does the company have Yes 14 47%
effective information No 16 53%
technology to communicate Total 30 100%
with supply chain partner?
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 Male Female-
2. Age 18-25 years 26-35 years 36-45 years
Above 46
3. Educational level below grade 10 10-12 certificate

master degree college 12 completed
4. Work experience zero years 1-2 year 3-5 year 5-10

year above 10 years
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. How looks like the companies’ product quality when compare from
other compotator’s product?
2. What looks like packaging system of the company and customer
satisfaction?
3. How the company deliver product related to speed?
4. 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?
Reference
Chikin and H, W, J, Lee, Supply chain Risk management, 2005
Coyle Langley, Novak, and Gibson world class supply chain management
2013
DonaldDoblars and Stephens Starling, world class supply chain management
2004
Donald J, Bowersox, Supply chain logistics management, 2010
Douglas long Global supply chain management 2003, 3rd edition
Hau L Leen,V padamana bhang and seungjin hang the A-triple supply chain
1997
John D, Daniel, Social Psychology, 2003,7th edition.
Kenneth Lyons, purchasing and supply chain management ,2006
Michael Hugo’s .Essential of supply chain management, 2006,2nd edition
Philip Kotler 2012 principle of marketing 12th edition
Rahul Altekar supply chain management 2005
Richard L, pinker ton World class supply chain management 7th edition
Robrt B, Hand field, Introduction to supply chain management (2002)
Sunil Chopra, supply chain management; strategy planning and operation
2007
WWW.Inter Chopen .com
WWW.it sworld.com
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.

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HAWASSA UNIVERSITY

COLLAGE OF BUSSINES AND ECONOMICS

FACTORS AFFECTING EFFECTIVE IMPLEMENTATION OF SUPPLY CHAIN

THE RESEARCH PAPER SUBMITTED TO DEPARTMENT OF LOGISTIC AND SUPPLY CHAIN

Conducted by: TADIWOS AGIDEW

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………………………………………………..

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

2.12 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

2.14.2 How to counter act the Bullwhip

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……………………………………………

4 .summary, Conclusion and recommendation of the study…………………………… 4.1

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