AN ASSESSMENT OF EFFECTIVE LOGISTICS SUPPLY CHAIN

MANAGEMENT AND ITS IMPACT ON TOBACCO COMPANY

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 ABSTRACT

The logistics supply chain management involves the flow of goods and services

through the economic system and management of the entire value added chain from

supplier down to the final customer.

This study is therefore carried out to assess the impact of logistics supply chain

management in reducing inventory, increasing transaction speed and on time

delivery, cost reduction, value adding and the elimination of waste.

The finds revealed that logistics supply chain management influence and impact on

organizational efficiency growth and development but that fleet maintenance from

suppliers and delivery failures affects smooth production.

Useful recommendations have been offered for better management of the supply

chain and these are in detail within the project work.

TABLE OF CONTENT

Title page i
Declaration ii

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Certification iii
Dedication iv
Acknowledgment v
Abstract vi
Table of Content vii
CHAPTER ONE: INTRODUCTION

1.1 Background of the study------------------------------------------------- 1

1.2 Statement of the problem------------------------------------------------ 2

1.3 Objective of the study---------------------------------------------------- 3

1.4 Research question--------------------------------------------------------- 4

1.5 Hypothesis----------------------------------------------------------------- 5

1.6 Significance of the study------------------------------------------------- 6

1.7 Lamentation of the study------------------------------------------------- 7

1.8 Scope of the study--------------------------------------------------------- 8

1.9 Definition of the key term------------------------------------------------ 9

CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction------------------------------------------------------------------ 8

2.2 The logistic concept--------------------------------------------------------- 9

2.3 Objectives of logistics------------------------------------------------------ 11

2.4 Logistics operation---------------------------------------------------------- 12

2.5 Logistics coordination-------------------------------------------------------13

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2.6 Logistics information system-----------------------------------------------14

2.7 Inbound goods movement-------------------------------------------------- 15

2.8 Internet Goods Movement------------------------------------------------- 20

2.9 Goods Movement Theory-------------------------------------------------- 21

2.10 Materials Handing--------------------------------------------------------- 21

2.11 Warehousing---------------------------------------------------------------- 23

2.12 Outbound Goods Movement--------------------------------------------- 25

2.13 Transportation ---------------------------------------------------------------26

2.14 Benefits of logistics -------------------------------------------------------- 26

2.15 The Supply Chain Concept ------------------------------------------------ 27

2.16 Supply Chain Management (SCM) --------------------------------------- 29

2.17 Organizing for supply chain management ------------------------------ -34

2.18 The benefits of integrated supply chain concept ------------------------- 35

2.19 The supply chain activities and functions --------------------------------- 36

2.20 Supply chain Business process integration ------------------------------ -39

2.21 Supply chain management and information system---------------------- 40

2.22 Benefit of supply chain management -------------------------------------- 42

2.23 Supply chain management problem ---------------------------------------- 44

2.24 Suppliers Relations ------------------------------------------------------------ 45

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2.25 Suppliers selection ------------------------------------------------------------ 46

2.26 The Lean supply chain concept --------------------------------------------- 47

2.27 Summary of the chapter ------------------------------------------------------- 52

CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Introduction -------------------------------------------------------------------- 55

3.2 Research design --------------------------------------------------------------- 55

3.3 Population of the study ------------------------------------------------------- 56 3.4

Sampling Techniques and sample size ------------------------------------- 56

3.5 Data collection instrument --------------------------------------------------- 56

3.6 Validity and Reliability of Data collection instrument ------------------ 57

3.7 Administration of Data Collection instrument ---------------------------- 57

3.8 Methods of Data Analysis --------------------------------------------------- 58

3.9 Methodological Difficulties ------------------------------------------------- 58

3.10 A profile of the case study ------------------------------------------------- 58

CHAPTER FOUR: DATA PRESENTATIONS ANALYSIS AND

INTEPRETATIONS

4.1 Introduction ------------------------------------------------------------------ 62

4.2 Presentation and Analysis ------------------------------------------------- 62

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4.3 Discussion of Results ------------------------------------------------------ 68

4.4 Findings --------------------------------------------------------------------- 70

4.5 Hypothesis Testing ---------------------------------------------------------71

CHAPTER FIVE: SUMMARY, CONCLUSIONS AND

RECOMMENDATION

5.1 Summary --------------------------------------------------------------------- --73

5.2 Conclusion -------------------------------------------------------------------- -74

5.3 Recommendations ------------------------------------------------------------ -75

Reference ----------------------------------------------------------------------------- - 77

Appendices --------------------------------------------------------------------------- - 80

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CHAPTER ONE

INTRODUCTION

1.1 Background of the study.

With the increasing number of world – class competitors domestically and abroad,

organizations have to rapidly improve their internal processes to stay competitive.

They have to become increasingly flexible and responsive to modify existing

products, services, and processes or to develop new one to meet ever – changing

customers needs. In the 1990s, with the improvement of organizational

capabilities, Managers realized that ability to meet customer needs. This led to the

increased focus on the supply base and the responsibilities of purchasing. Managers

also realized that producing a quality product was not enough. Getting products and

services to customers – when, where, how, in the quantity required and in a cost

effective manner – constituted an entirely new type of challenge. (Monezka et al

2002) More recently, the era of the “Logistics Renaissance” was also born, spawning

a whole set of time reducing information technologies and logistics networks aimed

at meeting these challenges.

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As a result of these changes, organizations now find that they must be involved in

the management of all upstream firms (suppliers ) that provide direct and indirect

inputs. They must also be concerned with the network of downstream firms

responsible for delivery and after market service of the product to the end customer.

According to Bailey, et al (1994). Logistics involves the flow of materials from

suppliers, through the organization and out to the customers of the organization. The

activities include, coordination of receipt of orders from customers, developing a

network of warehouses, picking carriers to get products to customers and setting up

an invoicing system to receive payments. The smooth operations of these logistics

flows are essential for the effective management of supply chain. These functions

need to be managed in such a way that they maximize their contribution to the

management of the supply chain and that all non – value adding activities are

eliminated. The supply chain encompasses all activities associated with the flow and

transformation of goods from the raw materials stage, through to end users, as well

as the associated information flows (Monezka et al (200) ). Materials and

information flows both up and down the supply chain. The supply chain includes:

systems management, operations and assembly, purchasing, production scheduling,

order processing, inventory management, transportation, warehousing and customer

service. Supply chains are essentially a series of linked suppliers and customers;

every customer is in turn a supplier to the nest down stream organization until a

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finished product reaches the ultimate end user. Supply chain management if the

integration of supply chain activities through improved relationships to achieve a

sustainable competitive advantage (Monezka et al 2002). It involves the strategy of

the product or service. A big piece of planning is needed in developing a set of

metrics to monitor the supply chain so that it is efficient, cost less and delivers high

quality and value to customers. The increasing importance of logistics supply chain

management is forcing organizations to rethink their distribution, purchasing and

sourcing strategies.

1.2 Statement of the Problem

Organizations face several difficulties in their operations. The problem of incomplete

and incorrect information on stock which results in production bottlenecks like poor

demand planning and inventory deployment, materials and component inventory

existing at high levels in the organization which gives rise to increase cost of carrying

inventory and materials remaining in a non – value added state longer.

Organizations also face the problem of maintaining quality levels and good prices as

a result of low quality raw materials, which give, rise to the production of defective

and substandard products. High material and product damage as a result of excessive

transportation and material handling. These problems affect organizations

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performance and efficiency and so therefore a desperate need for effective logistics

supply chain management.

1.3 Objectives of the study

a. Studying the implications of logistics supply chain management on

organization.

b. Assessing the impact of logistics supply chain management in adding value to

quality, the flow of value to customers and low prices on the suppliers.

c. Examining the basic supportive activities for effective logistics supply chain

management.

d. Coming up with recommendation for better and effective logistics supply

chain management.

1.4 Research Questions

This assessment of effective logistics supply chain management on organization will

aim at addressing the following questions:

a. What are the benefits of effective logistics in an organization?

b. Why do materials remain longer in non- value added state?

c. Why are information flows incomplete and incorrect?

d. How can effective transportation eliminate supply chain waste?

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e. What are the factors considered in supplier selection?

f. How can the organization pursue zero defects throughout the chain?

g. How can the organization coordinate the movement of inventory?

h. What are the problems created excessive material handling and raw material

inventory?

i. How would problems of overproduction and unnecessary production steps e

eliminated?

1.5 Hypothesis:

Ho: There is no significant relationship between logistics supply chain management

and organizational efficiency

Hi: There is significant relationship between logistics supply chain management and

organizational efficiency.

1.6 Significance of the Study

Logistics supply chain management deals with the total concept of managing

materials in a positive way, all aspects from the suppliers and subcontractors through

purchasing, stock control, production and distribution to the final customer. Hence

the significance of this research includes:

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a. It will help organization to reduce materials and inventory waste, which

Makes them inefficient producers vulnerable to challenges from cost efficient

producers.

b. It will help organizations see the need for continous supply relationships

which ensures quality and flow of value to the customers and pressures for low prices

on the suppliers.

c. It will reveal the necessities of effective logistics supply chain management

and also add to the existing literature and knowledge, considering the importance of

supply chain to the growth of organizations and the satisfaction of customers, the

research will motivate and provoke more research in the field for improved logistics

supply chain management to the betterment of organizations and satisfaction of

customers and the society.

1.7 Limitations of the study

The logistics supply chain management seems to be a new concept and broad. There

seemed to be inadequate or insufficient coverage on the project due to the time frame

in conducting the research, but what ever materials I did lay my hands on had already

justified its being considered an interesting and just project.

1.8 Scope of the study:

The area of study for this research will be an assessment of logistics supply chain

management in British American Tobacco Zaria covering year2000 to date.

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1.9 Definition of Key Terms

Logistics: Is the art and science of managing and controlling the flow of Goods,

energy, information and other resources like product, services and people from the

sources of production to the market place (Arnold 1991).

In Bound Logistics: Involves all the activities, which impact upon the flow of Goods

into the organization, and therefore include purchasing, contract management,

incoming transportation and receipt of materials (Bailey, 1994).

Supply Chain: Encompasses all activities associated with the flow and

transformation of goods from the raw materials stage through to end users, as well

as the associated information flows (Monezka, 2002).

Supply Chain Management: Is the process of planning, implementing and

controlling the operations of the supply chain with the purpose to satisfy customer

requirements as efficiency as possible (Monezka, 2002).

CHAPTER TWO

Theoretical Framework Literature Review

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1. Introduction

In light of the intended nature of the study, efforts has been made to consult and

review relevant works of earliest scholars primarily to indicate and appreciate their

concern and opinion in respect to Logistics Supply Chain Management.

According to Martin Christopher (1986), the logistics orientation recognizes that that

in order to improve the performance of the system, as measured by the cost effective

provision of customer service, all the interrelated activities in moving materials and

goods from source to user must be managed as a whole. Logistics is specifically

concerned with the flow of goods through the economic system. In the business firm

the logistician is concerned with the in bound movement of goods to supply the

production processes of the firm. The activities which are referred to as logistics

activities are a consequence of the distance and time gap between production’s

location and the point of consumption and of the inability or the economic

undesirability of having production output respond instantaneously, to the needs of

the market place. Thus, primary logistics activities includes movement and storage,

information flow, especially sales information that sets the logistics system in

motion. The logistician sets the level of the move-store activities in a way that gives

an optimum balance between the contribution of revenues associated with the level

of customer service provided and the cost maintaining the customer service level.

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Nowadays, one of the few outcomes in the constantly changing business world is

that organizations can no longer compete solely as individual entities. Increasingly,

they must rely on effective supply chains, or network, to successfully compete in the

global market and networked economy 9Baziotopulus, 2004).

Supply chain management is specially concerned with the management of entire

value – added chain, from the supplier to the manufacturer right through to the

retailer and the final customer. The primary goals is area to reduce inventory,

increase the transaction speed by exchanging data in real time and increase sales by

implementing customer requirements more efficiently. It is now recognized in major

organization as an area for reducing costs and adding value. It also improve trust and

collaboration among supply chain partners, thus improving inventory visibility and

improving inventory velocity.

2.2 The Logistics Concept:

Logistics as a concept is considered to revolve from the military’s need to supply

themselves as they moved from their base to a forward position. In ancient Greek,

Roman and Byzan empires, there were military officers with the title “Logistikas’

who were responsible for financial and supply distribution matters. Logistics as its

own concept in business evolved only in the 1950s. This was mainly due to the

increasing complexity of supplying one’s business with materials and shipping out

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products in an increasingly globalize supply chain, calling for experts in the field

(Christopher, 1992).

The logistics concept according to Martin Christopher 91986) involves a radical

transformation of the way a company faces up to the needs of the market place in

terms of its entire operation management. What is implicit in this new approach is

the recognition of the need to balance the requirements of customer service against

the internal management of its resources. The integrative nature of the logistics task

is to bridge the operations gap between source of supply and final demand.

This concept is analogous to the concept of material management and distribution

management. The suggestion is that logistics is a planning framework rather than a

business function. In other words the management task interest in logistics is not so

much concerned with the management of material flows but rather with providing

the mechanism for establishing objectives and strategies within which the day-today

activities of material management and distribution management can take place.

Logistics affects the balance sheet and the profit and loss account. It has implications

for resources utilization and it can provide the means for coordinating supply,

operations and distribution. According to Jensen (1992) logistics can be defined as

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having the right quantity at the right time for the right price. It is the science of

process. In corporate all industry sectors, and manages the friction of project life

cycles, supply chains and resultant efficiencies. Logistics is the art and science of

determining requirements; acquiring them; distributing them and finally maintaining

them in an operational ready condition for their entire life (Donald, 1978). Hadfied

and Nichols (2002) view logistics as the art and science of managing and controlling

the flow of goods, energy, information and other resources like products, services

and people form the source of production to the market place. It is difficult to

accomplish any marketing or manufacturing without logistical support. It involves

the integration of information, transportation, inventory, ware housing, material

handling and packaging. The operating responsibility of logistics is the geographic

repositioning of raw materials, work in process and finished inventories where

required at the lowest cost possible.

2.3 Objective of Logistics

Within the broader objectives of the firm, the business logistician seeks his own

functional goals that will move the firm towards its overall objectives. Logistics

activity results in the highest possible return on investment over time. There are two

dimensions to this goal.

1. The impact of the logistics system design on the revenue contribution

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2. The cost for he system design.

Ideally, the logistician should know how much additional revenue would be

generated through incremental improvements in the quality of customer service

provided. However, such revenue information is not generally known with great

accuracy. The analysis then turns to a cost analysis rather than profit or return on

investment analysis.

According to Donald (1978), costs involved in the logistics system are broadly of

two types: operating costs and capital costs. The greater the time value of money,

then maximizing the present value of cash flows or maximizing the internal rate of

return of cash flows would be an appropriate statement of the objective. Maximizing

the cumulative return on investment over time is the single most important objective

to assure the survival of the firm.

2.4 Logistics Operations

According to Donald and Closs (1996), the operational aspect of logistics is

concerned with management of the movement and storage of enterprise materials

and finished products. As such, logistical operations are viewed as commencing with

the initial transportation of materials or component parts from source of procurement

and terminating with the final delivery of manufactured or processed products to a

customers or consumers. For a large manufacturer, logistics operations may consist

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of thousands of an industrial user, retailer, wholesaler, dealer or other marketing

intermediary. For a large retailer, logistics operations may commence with the

purchase of products for resale and terminate either with consumer pickup or with

delivery to the consumers home. For a hospital, logistics starts with procurement and

ends with full support of surgical and recovery operations. The significant point is

that regardless of the size and type of enterprise. Logistics operations are divided

into three categories:

1. Physical distribution management: This is concerned with movement of

product to customers. In a physical distribution sense, the customer is viewed as the

final stop in the marketing channel. It is through the physical distribution process

that the time and space of customer service become an integral part of marketing.

Thus physical distribution links an enterprise with its customers.

2. Materials management: Sometimes referred to as physical supply is concerned

with the procurement and movement of materials, parts and finished inventory from

geographical points of purchase to manufacturing or assembly plants, warehouses or

retail stores. Depending upon the situation, the process of acquisition is commonly

identified by different titles. For the manufacturer, the process of materials

acquisition is typically called purchasing. Material relates to inventory with respect

to inbound flow, and product is used to identify inventory for outbound customer

shipment. The fundamental difference is that a product results from whatever value

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is added to material as a consequence of the enterprise’s manufacturing sorting or

assembly.

3. Internal inventory transfer: This process concerns control over semi finished

components as they flow between stages of manufacturing and the initial movement

of finished product to warehouses or retail outlets. Inventory transfer has one

significant distinction when contrasted to physical distribution or materials

management. Whereas both physical distribution and materials management deal

with the uncertainty of market forces, inventory transfer operations are limited to

movement within and ostensibly under the complete control of the enterprise.

2.5 Logistics Coordination

Logistics coordination is concerned with the establishment of requirements and

specifications which integrates overall logistical operation (Donald 1978).

Coordination is required to establish and maintain operational continuity. Logistics

coordination involves planning and control of operation matters. Coordination is

divided into four areas of managerial concern.

1. Product – market forecasting: The establishment of objectives of guide

logistic operations requires that estimates be compiled concerning future sales

expectations and inventory requirements. The formulation for a statistical estimate

of future sales is the primary concern of product – market forecasting. It constitutes

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a firms initial effort to reconcile, program, and if possible postpone the anticipatory

process inherent in a free market system.

2. Order processing: Constitutes a “here and now” measure of marketing activity

by the forecast. The arrival of a customer order initiates the physical distribution

process which, when completed, provides the logistics effort necessary to support

marketing. Order processing of demand, is an essential aspect of logistics

coordination.

3. Operational planning: The operational plan integrates what the enterprise is

capable of doing with what management decides to attempt in the future. The plan

specifies how the enterprise will deploy available resources over a specified period.

The main point is that the operational plan provides managerial direction to the

overall enterprise and details specific logistics activities.

4. Material requirement planning: Is a useful technique in the manufacturing

industry for overcoming the problems of inventory management for components,

which are in dependent and lumpy demand (Baily, 1994). Material requirement

planning can be described as a system for supplying the number of components

required to produce a known quantity of finished assemblies. Procurement and short

– term scheduling in manufacturing typically require a great deal more coordination

than procurement of resale. Thus material Requirement Planning (MRP) has been

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developed to assist management in time phasing of acquisition and conversion in a

manufacturing or assembly situation. The three ingredients, which go into the MRP

package, are the bill of materials, the inventory status file and the master production

schedule.

2.6 Logistics Information System

At the heart of an efficiently managed material flow there has to be an efficiently

managed flow information. Information is the trigger function for the logistics

system as well as being vital for its maintenance. Information is what keeps the

materials flow system “open” in the sense that it is capable of adjusting to new

circumstances. Any system that does not incorporate a feed back and control

element, succumbs eventually to entropy or decay. To provide a responsive,

customer – oriented logistics system, it is therefore necessary to ensure that the

physical system is paralleled by an information system.

The information system needs to produce timely and relevant information which can

produce the basis for logistics response and where necessary corrective management

action (Donald, 1978). One further element for definition remains and that is the

concept of an information system. A system might simply be defined as a device for

converting an input into an output. An information system normally uses multiple

inputs that is data from many sources and process and integrates that data to give

specified information outputs. For example, demand for a particular item might be

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recorded at each sales point in the logistics system amalgamated, trends established

and then compared with records of stock on hand and planned production levels to

provide an output of projected stock availability. This can then provide basis for

management action.

The complete logistics information system will be a complex set of data which is

capable of manipulation and analysis in as many ways as are required by the logistics

manager. More often than not the system must incorporate the capability for more

detailed statistical analysis to be performed. At the end of it all there must be an

output which makes sense in terms of the decisions that have to be taken and which

reflects the costs as well as the benefits of operating and maintaining the system.

The specific functions performed by the logistics information system include:

1. Customer service and communications function: The efficiency with which

customer orders are processed and the extent to which communications with

customers are maintained is determined by the effectiveness of the logistics

information system. The typical logistics system must cope with a wide variety of

customer demands. It is the suppliers information system, which takes the first

impact of the customers order and thus the system responsiveness, and flexibility

becomes all – important.

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2. Planning and control function: To provide and adequate basis for planning the

logistics information system must incorporate a forecasting facility based upon

demand data captured as the order is entered obviously the information system is

uniquely positioned to perform this task in that order entry is the point of entry to

the system. The combination of forecast demand with information on replenishment

lead times makes possible the planning of stock and its location within the physical

system. The control of performance is only possible through the logistics

information system. Standards need to be established on all aspects of the logistics

system. Thus service levels by product and customer category, as well as facility

utilization targets and budgeted costs, need to be embedded into the system’s

database. Against these benchmarks performance can be monitored and variances

reported where necessary.

3. Coordination function: The concept of logistics stands or falls upon the ability

of the organization to manage its materials flow and the related information flow in

an integrated way. Means must therefore be found to enable production planning to

be tied in with procurement schedules, for delivery frequencies to be matched to

sales – call cycle etc. The common bond that binds these various activities together

is shared information.

2.7 Inbound goods Movement.

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According to Baily and Farmer (1994) in bound goods movement, or inbound

logistics involves all the activities, which impact upon the flow of goods into the

organization, and may therefore be thought of as including purchasing, contract

management, incoming transportation and receipt of materials.

Ideally these activities should be handled in an integrated manner, resulting in such

in such benefits as lower costs, improved supplier relations, improved product valve,

on time delivery, receipt of Goods in better condition and less defective material.

This function needs to be managed in such a way that they maximize its contribution

to the management of the supply chain and that all non – valve adding activities are

eliminated.

2.8 Internal goods Movement

Internal goods movement incorporates control, storage and handling. Careful

attention paid to these aspects can lead to added value through a reduction in

inventory carrying costs through lower stocks, reduced losses and damage and

improved utilization of storehouse space. The following points should be noted when

considering the internal movement of goods.

a. Utilization: The choice of the most appropriate unit load for example pallets,

containers, cage pallets etc.

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b. Population storage: That is putting the most rapidly moving goods together

near to the point issues.

c. Location: Random or fixed. Fixed is better for location but poor on space

utilization and vice versa for random

d. U-flow or through – floe: Through – flow is generally considered to be

suitable for manufacturing operations and the u – flow for fast moving goods

being received and issued in the same state.

e. Minimize movement of materials

f. Select the most suitable handling equipment

g. Make maximum use of information technology for location and retrieval.

2.9. Goods Movement Theory

This theory suggest that the movement, handling or transportation of materials adds

to the cost of the material without adding in any way to value. If the objective is to

achieve the lower overall acquisition cost then this has important implications and

care must be taken not to add unnecessarily to cost by inefficient handling. The rule

is therefore to handle (move) goods as little as position (Bail and Farmer, 1994).

2.10 Materials Handling

The British standards institution defines materials handling as technology employed

to move, transport store or discriminate materials wit or without the aid of

mechanical appliances. The enythasis is on the movements of materials into, out of

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and within store. Materials handling cover a wide range of technology. It provides a

means for considerable cost savings, particularly in labour – intensives activities.

According to Donald and Closs (1996) Materials handling functions include:

1. Loading and unloading: The first and last activities in the materials handling

chain of events are loading and unloading. When goods arrive at a warehouse

they must be off loaded from the transportation equipment. In many cases,

unloading and movement to storage are handled as one operation. In others,

they are separate processes, sometimes requiring special equipment. When

unloading equipment is not different from the equipment used to move goods

to storage, unloading may be treated as a separate activity since goods may be

off loaded and then sorted, inspected, and classified before moving on to a

storage location. Several additional activities may take place at the loading

point. A final check as to order content and order sequencing may be carried

out before loading onto the transportation equipment.

2. Movement to and from storage: Between the unloading and loading points in

a storage facility, goods maybe moved several times movement from the

unloading point to a storage are, movement may be to the shipping dock or to

an order – picking area for stock replenishment. The actual movement activity

can be accomplished by any number of the many types or materials handling

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 equipment available. These range from manual push trucks to fully automated

conveyor system.

3. Order filling: The final materials handling activity is that of order filling.

This is the selection of stock from the storage area according to customer requests.

Order selection may take place directly from semi-permanent storage areas or from

areas especially laid out to enhance the orderly flow of materials and therefore to

promote efficient order selection. Order filing is often the most critical of small –

volume orders makes this labour intensive and because the speed at which orders are

selected directly affects customer service.

2.11 Warehousing:

To be efficient in meeting consumer and customer demands and responding to

competition firms must establish warehouses a various locations. Some of the firm’s

stock or materials will be kept near the plant while the rest will be located in some

rented or public warehouses. The advantage in owning a warehouse is the controls

is it affords the firm the helps assure efficient ware housing and a high level of

customer service. Additional service can be provided such as, inspecting goods

packaging them, shipping them to customers, involving customers and even

providing desk space and telephone service or company sales people.

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Firms may choose to own a private warehouse or take up a public warehouse. The

private warehouse is an attractive alternative under a number of specific conditions:

a. If the product line requires special handling and storage, it may be necessary

to train and control the operating personnel and acquire specialized equipment

and facilities for handling and storage to assure the quality of warehousing

needed.

b. It offers less expensive warehousing when there is a high and stable volume

of demand flowing though the facility such that full utilization of the facility

is possible.

c. It offers high degree of control.

d. All the benefits of real estate ownership accrue to the warehousing

e. It may later be converted to a manufacturing facility, especially a warehousing

located next to production facilities. The private warehousing has the potential

for offering better control, lower costs and greater flexibility. The public

warehousing also offers many advantages like:

a. No fixed investment: It requires no investment for the firm renting, space. All

warehousing costs are variable.

b. Lower costs: It offers lower costs when inventory is low or inventory patterns

are seasonal.

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c. Location flexibility: It is easy to change warehouse locations as market

shifts.

d. In transit privilege: That is granting of a single transportation rate from origin

to destination.

2.12. Out bound goods Movement

This concerns the activities involved with transport and distribution. Effective

management in this element of the supply chain can generate substantial benefits

through efficiency in the management of finished goods inventories, selection of the

most suitable mode of transport, selection of the most effective channels of

distribution and the routing of transport. The management of outbound goods

requires the consideration and coordination of the following:

a. Transport: Vehicles and routes

b. Warehousing: central and local

c. Production: Batch size and lead

d. Customer service: Appropriate level

e. Depots: size; number and location

f. Finance; capital investment

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2.13 Transportation

According to Martin Christopher (1994), effective transportation management

minimize cost, with the transport function being evaluated in terms of cost per mile

or cost per case shipped or some such similar measure.

The type of transportation a firm chooses will affect the price of its product, its on

time delivery performance, the inventory level, and the condition of materials or

goods when they arrive. These results also affect consumer’s attitude towards the

firm and its products.

2.14 Benefits of Logistics

1. Adjusting to rate, time and place: Effective logistics system help firms to

adjust to rate, time and place of production to meet customers demand.

2. Influence buying and size of inventory: Effective logistics system enables

firms to buy in large quantities thus taking advantage of quantity discount offered

by suppliers and also avoid overstocking and also avoid overstocking and stockouts.

2.15 The Supply Chain Concept

The perception that purchasing is no longer a routine, administrative ‘ordering’

activity is now widely, if not universally held. The expression supply chain has come

into prominence, although there is competing terminology such as the expression

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‘value stream’ preferred by the promoters of “lean manufacturing”. Pipeline

management is another expression with a similar meaning, and there are advocates

of the term “networks”. All of these terms effect the fact that purchasing is no longer

just about ordering or buying, but has a strategic role, and is concerned with the flow

of materials from raw state to use and disposal (Baily et al 2005).

During the past decades, globalization, outsourcing and information technology have

enabled many organizations to successfully operate solid collaborative supply

networks in which each specialized business partner focuses on only a few key

strategic activities (Scott, 1993). This inter-organizational supply network can be

acknowledged as a new form of organization. Traditionally, companies in a supply

network concentrate on the inputs and outputs of the processes, with little concern

for the internal management working of other individual players.

In the 21st century, there have been few changes in business environment that have

contributed to the development of supply chain networks. First as an outcome of

globalization and proliferation of multi-national companies, joint ventures, strategic

alliances and business partnerships were found to be significant success factors,

following the earlier “Just-in-Time”, “Lean management” and “Agile

manufacturing” practices (Macduffic and Helper 1997). Second, technological

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changes, particularly the dramatic fall in information communication costs, a

paramount component of transaction cost, has led to changes in coordination among

the members of the supply chain network (Coase, 1998).

The term supply chain according to Monezka et al (2002 encompasses all activities

associated with the flow and transformation of goods from the raw materials stage

(extraction), through to end users, as well as the associated information flows.

Materials and information flows both up and down the supply chain. The supply

chain includes all those involved in organizing and converting materials through the

input stage, conversion phase and outputs. The cycle is often repeated several times

in the journey from the initial producer to the ultimate customer as on organization’s

finished good is another’s input. The structural entity of the supply chain is

concerned with activities such as make, transform, move and store.

Primary supply chains are those that ultimately provide the goods or services to the

customer. The support chains are regarded as those that supply consumables or

maintenance, repair and operating (MRO) items and capital items to support the

activities. It is desirable that developing good practices and concepts are implemental

throughout the supply chain by migrating these ideas both upstream. This will

require inter-organization cooperation and may involve such factors as cross-

33
functional teams, recognition of the need to delight both internal and external

customers, empowerment, more flexible management structures, effective

partnerships etc. Such developments will reduce costs and add value throughout the

supply chain.

2.16 Supply Chain Management (SCM)

What supply chain management is about is the linkage of the immediate

seller/buyer relationship into a longer series of events. A company’s suppliers have

their own suppliers, and often our direct customers are not the ultimate consumers.

Supply chain management sees the various buyers and sellers as being part of a

continuum, and recognizes the benefit to be derived from attempting to take a

strategic and integrated view of the chain rather than focusing on the individual links

and thereby sub – optimizing. In other words, the focus of managerial attention is

not just the individual company or organization but the interactions between the

series of organizations that constitute the chain. It might be helpful to visualize the

firms in the chain, and the flow of goods or services and information passing between

them as links.

Supply Chain Management is concerned with the coordinated flow of materials and

services from origins through suppliers into and through the organization and onto

34
the ultimate consumer in such a way as to maximize value added and minimize cost.

Associated flows of information and funds are also included (Baily et al 2005).

According to Monezka et al (2002) Supply chain management is the integration of

activities through improved supply chain relationships to achieve a sustainable

competitive advantage.

Supply chain management is the process of planning, implementing and

controlling the operations of the supply chain with the purpose to satisfy customer

requirements as efficiently as possible. Supply chain management spans finished

goods from point-of-origin to point-of-consumption.

Aziotopoulos (2004) view supply chain management as a cross-functional approach

to managing the movement of raw materials into an organization and the movement

of finished goods out of the organization toward the end-consumer. As corporations

strive to focus on core competencies and become more flexible, they have reduced

their ownership of raw materials sources and distribution channels. These functions

are increasingly being out sourced to other corporations that can perform the

activities better or more cost effectively. The effect has been to increase the number

of companies involved in satisfying consumer demand, while reducing management

35
control of daily logistics operations. Less control and more supply chain partners led

to the creation of supply chain management concepts.

Hadfield and Nicholas (2002) defined supply chain management as the management

of the entire value added chain, from the supplier to manufacturer right through to

the retailer and the final customer. It is the oversight of materials, information and

finances as they move in a process from supplier to manufacturer to wholesaler to

retailer to consumer. Supply chain management involves coordinating and

coordinating and integrating these flows both within and among companies.

It is said that the ultimate goal of any effective supply chain Management system is

to reduce inventory (with the assumption that products are available when need).

According to the chartered supply chain management, professionals (CSCMP), a

professional association that developed a definition in 2004, supply chain

management encompasses the planning and management of all activities involved in

sourcing and procurement, conversion, and all logistics management activities.

Importantly, it also includes coordination and collaborating with channel partners,

which can be suppliers, intermecharies, third – party service providers ad customers.

36
In essence, supply chain management integrates supply and demand management

within and cross companies.

Baily and Farmer (1990) posited that the partnership approach to supplier is part of

the concept of supply chain management. This approach is broader than the simple

relationship between the suppliers and buyers of separate organizations. It deals with

the total concept of managing materials in a positive way, all aspects from the

suppliers and subcontractors through purchasing, stock control, production and

distribution to the final customer. It is concerned with achieving the lowest cost in

the whole manufacturing and supply process by identifying and balancing the

relationship between the separate links in the supply chain and ensuring that the

whole chain operates at the lowest total cost and the maximum efficiency. The point

we are considering here is the link in the chain between the buyer’s organization and

the supplier as this is a vital element in ensuring continuity of supply, particularly

where a JIT System is in operation and there is no margin of error on supplies. The

supply chain assumes a flow of value to the customer and pressure for low prices on

the supplier.

According to Vickery et al (2003), supply chain management is the combination of

art and science that goes into improving the way a company finds the raw

37
components it needs to make a product or service and deliver it to customers. The

following are five basic components of supply chain management.

1. Planning: This is the strategic portion of supply chain management. A bid

piece of planning is developing a set of metrics to monitor the supply chain so that

it is efficient, cost less and delivers high quality and value to customers.

2. Source: Choosing the suppliers that will deliver the materials for creating the

product. Develop a set of pricing, delivery and payment processes with suppliers and

create metric for monitoring and improving the relationships. And putting together

processes for managing the inventory of goods and services from suppliers,

including receiving shipment, verifying them, transferring them to your

manufacturing facilities and authorizing supplier payments.

3. Make: This is the manufacturing step. Schedule the activities necessary for

production, testing, packaging the preparation for delivery. As the most

metricintensive portion of the supply chain, measure quality levels, production

output and worker productivity.

4. Delivery: Coordinating the receipt of orders from customers, develop a

network of warehouses, pick carries to get products to customers and set up an

invoicing system to receive payment.

38
5. Return: The problem part of the supply chain creates a network for receiving

defective and excess products back from customers and supporting customers who

have problems with delivered products.

2.17 Organizing for Supply Chain Management

The need to coordinate and share information across organizations and functional

groups has resulted in the development of higher –level positions designed to oversee

various supply chain activities.

Total supply chain management is an organizational concept whose primary

objective is to proactively manage the two – way movement and coordination of

goods, services and information from raw material through end user (Monezka et al,

2002). Materials management focuses on the coordination of goods, services and

information from suppliers through operations, and it is a subset of total supply chain

management. Physical distribution management focuses on the coordination of

goods, services and information from operations through end user, and it is also a

subset of total supply chain management. Conceptually, total supply chain

management involves both materials management and physical distribution

management.

39
A structure that coordinates the diverse activities within a supply chain contracts

greatly with one where separate supply chain groups or activities report to different

executive managers. Organizing as an integrated supply chain structure requires

traditionally separate activities to report to an executive responsible for coordinating

the two – way flow of goods, services and information from supplier through

customer. Most large organizations have a materials or supply chain executive

responsible for coordinating separate supply chain activities. The supply chain

executive may even report directly to the executive committee, which reflect the

importance of this activity.

2.18 The Benefits of integrated supply chain concept

1. Provide direct over materials and service costs

2. Develop awareness of managing the system trade offs within a supply chain.

3. Open channels of communication and stimulate the sharing of ideas across

organizations and groups.

4. Support the career paths of talented personnel by providing the means to

develop-well-rounded expertise.

5. Develop greater operating efficiencies as supply chain activities work together

to create materials systems, coordinate procedures, and streamline the

movement of material and data.

40
6. Create a direct link from the customer to external suppliers

2.19 The Supply Chain Activities and Functions.

Purchasing: The perception of the role of purchasing has changed considerably. The

function is now seen as being of major importance in ensuring the profitability and

indeed survival of the organization.

Inbound Transportation: Organization usually have a specialized traffic and

transportation function to manage the physical and informational links between the

supplier and the buyer. Organizations that focus on supply chain management must

pay close attention to transportation. They recognize the need to control inbound

materials shipments as tightly as they control outbound shipments to customers.

Allowing a supplier to arrange for inbound transportation may not provide the cost

control or coordination required on the inbound side of the supply chain. Inbound

transportation is often outsourced to a specialized transportation provider.

Inbound quality Control: Quaility emphasis has shifted from detecting defects at the

time of receipt or use to prevention early in the materials – sourcing process. This

requires a strong awareness concerning a supplier’s role in the quality process.

41
Progressive organizations work directly with suppliers to develop proper quality

control procedures and processes.

Receiving and Storage: Receiving and storage is usually part of the materials

management function because of the need to control the physical processing and

handling of inventory. Receiving and storage includes a variety of tasks. A firm must

process inkling receipt records, usually through a computer terminal, which update

the in – transit file, purchasing files, the accounts payable system, as well as any

other systems requiring receipt information, Material handling is also a critical part

of the receiving and storage process, including movement within a facility along with

any movement between facilities during the material transformation process.

Control Materials or Inventory: The Materials control group is often responsible for

managing materials releases to suppliers. This includes generating the materials

release, contacting a supplier directly concerning changes, and monitoring the status

of inbound shipments. Material control determines the actual order release quantities

and shipment schedules. The inventory control groups required to support customer

requirements, which emphasizes the physical distribution side of the supply chain.

Integrated supply chain management requires that the materials and inventory

42
control groups coordinate their efforts to ensure a smooth and uninterrupted flow to

customers.

Order processing is a vital link in ensuring that a customer receives materials when

and where it is needed. It involves accepting a customer order and the sequencing

that order internally for fulfillment. Order processing is an important part of supply

chain management – it represents a link between the producers and customer’s

supply chains.

Production planning and scheduling: This activity involves determining the

aggregate levels of production for a family of items along with a time – phased,

detailed schedule of production. It relies on forecasts from marketing to estimate the

volume of materials that are required over the near term. Because operations must

work together closely.

Warehousing: Before a product heads to the customer. It may be stored for a period

in a warehouse. This is particularly true for companies that produce according to a

forecast in anticipation of future sales.

Increasingly, as companies attempt to make a product only after receiving a customer

order, this part of the supply chain may become less important.

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Shipping: Shipping involves physically getting a product ready for distribution to the

customer. This required packing to prevent damage, completing any special labeling

requirements, completing required shipping documents, or arranging transportation

with an approved carrier.

Outbound Transportation: Fewer and fewer organizations “own” the transportation

link to their customers. This is a part of the supply chain where full –service

transportation providers can design and manage entire distribution networks.

Customer Service: This includes a wide range of activities that attempt to keep a

customer satisfied with a product or service after the initial sale. Often, this means

having dedicated customer account manager who help in managing customer

promotions, inventory control and delivery schedules. This may require providing

customer training or having technical support personnel available to answer phone

questions 24 hours a day.

2.20 Supply Chain Business Process Integration

Successful Supply chain management requires a change from managing individual

functions to integrating activities into key supply chain processes. The purchasing

department places orders as requirements become appropriate. Marketing,

44
responding to customer demand, communicates with several distributors and

retailers, and attempts to satisfy this demand shared information between supply

chains partners can only be fully leveraged through process integration.

Supply chain business process integration involves collaborative work between

buyers and suppliers, join product development, common systems and shared

information. According to Lambert and Cooper (2002) operating an integrated

supply chain requires continuous information flows, which in turn assist to achieve

the best product flows. The key supply chain processes stated by Lambert (2004)

are:

1. Customer relationship management

2. Customer service management

3. Demand Management

4. Order fulfillment

5. Manufacturing flow management

6. Supplier relationship management

7. Returns management

The level of integration and management of a business process link is a function of

the number and level ranging from low to high, of components added to the link
45
(Ellram and Cooper, 1990). Consequently, adding more management components or

increasing the level of each component.

2.21 Supply Chain Management and Information System

The introduction of information systems in supply chain management originally was

limited to the automation of clerical functions (William et al 1997). Information

systems were viewed as providing infrastructural support to the value chain and

having an indirect impact on the competitiveness of a product. Companies were able

to reduce costs through information systems, improve the time – to – market of

products and allow all parties in the supply chain to better manage current resources

and plan for future needs. Firms started to utilize information systems to directly

influence the processes comprising the value chain (Rushton and Oxley, 1994).

Through the utilization of information systems, companies have been able to

integrate similar functions spread over different areas as well as curtail unnecessary

activities, thus enhancing their capability to cope with sophisticated needs of

customers and meet product quality standards.

Early (1989), classified the scope of information technology into the following

categories according to whether information technology is widely used in the value

46
chain or selectively used for only information processing and whether it is applied

for value creation or applied for the connection of value adding activities:

1. Information technology that automates or improves the physical aspect of

every activity.

2. Information technology that is used for physically connecting each value

activity or controlling those activities at the connecting point.

3. Information systems that facilitate the implementation, support and

management of value activities.

4. Information systems that optimize or adjust the connection of each value

activity. Earl’s Classification covers the company’s supply chain, linking

suppliers and customers.

2.22 Benefits of Supply Chain Management

1. Ensuring the right quantity of parts for production or products fir resale arrive

at the right time. this is enabled through efficient communication, ensuring that

orders are placed with the appropriate amount of time available to be filled. The

supply chain management system also allows a company to constantly see what is

on stock and making sure that the right quantities are ordered to replace stock.

2. Keeping the cost of transporting materials as low as possible consistent with

safe and reliable delivery. Supply chain management system enables a company to

47
have constant contact with its distribution team, which could consist of trucks, trains,

or any other mode of transportation. It allows the company to track where the

required materials are at all times. As well, it may be cost effective to share

transportation costs with a partner company if shipments are not large enough to fill

a whole truck and this again, allows the company to make this decision.

3. Ensuring production lines function smoothly because high- quality parts are

available when needed. Having an effective supply chain management system in

place ensure that production can always run smoothly without delays due to ordering

and transportation.

4. Ensuring no sales are lost because shelves are empty. Managing the supply

chain improves a company’s flexibility has the ability to produce goods at lower

prices and distribute them to consumers quicker than companies without supply

chain management thus increasing the over all profit.

5. Keeping the cost of purchased parts and products at acceptable levels. Supply

chain management reduces costs by controlling the quality of goods thus reducing

internal and external failure costs and working with suppliers to produce the most

cost efficient means of manufacturing a product.

6. Cooperation among supply chain partners ensures mutual success. This

relationship allows a company to have access to current, reliable information, obtain

48
lower inventory levels, cut lead times, enhance product quality, improve forecasting

accuracy and ultimately improve customer service and overall profits.

2.23 Supply Chain management Problems

The supply chain management must address the following problems.

1. Distribution Network configurations: Number and location of suppliers,

production facilities, distribution centers, warehouses and customers.

2. Distribution strategy: Centralized versus decentralized, direct shipment, cross

docking, pull and push strategies, third party logistics.

3. Information: Integrate systems and processes through the supply chain to

share valuable information, including demand signals, forecasts, inventory and

transportation.

4. Inventory management: Quality and location of inventory including raw

materials, work – in – process and finished goods.

2.24 Supplier Relations

According to Baily and Farmer, (1990), one of the most important aspects for the

buyer of assuring supplies is the maintenance of good supplier relationships. Good

49
supplier relationships can be a major asset to the buyer not only in assuring supplies

but also in maintaining quality levels and good prices. Good supplier relations have

always been an important factor in the maintenance of supplies, particularly during

periods of shortage, over recent years attitudes towards suppliers relationships have

gradually changed from an adversarial to a partnership approach.

This change has been brought by the increasing use made by buyers of techniques

such as quality assurance, zero defect policies, statistical process control (SPC) and

Just-in-Time (JIT), all of which place additional responsibilities on to suppliers who

will only be willing to accept them if they see some long-term benefit for themselves

in the relationship. So in return for accepting these additional responsibilities it has

become common to offer the supplier a long – term prospect of business in what is

referred to as a partnership relationship with both parties offering and accepting

complementary responsibilities and helping to solve problems to their mutual

benefit.

The partnership approach, or co-makership clearly influences the nature of the

relationship between buyer and sellers. However, it also influences the selection

criteria for the selection of a supplier in the long-term relationship may differ from

the competitive criteria approach in the adversarial approach.

50
2.25 Supplier Selection

Choosing the right supplier is frequently the key to obtaining quality, performance

and price. One of the most important aspects of the supplier selection process for

important contracts is the plant visit known as the vendor audit or capability survey.

It is most important that such surveys for the determination of supplier capability are

conducted objectively. (Baily et al, 2005).

Supplier selection has traditionally been described as being based on the 5 RS

(Right price, right quality, right quantity, right time and right place). However,

greater emphasis is now placed on the management of the buyer / supplier

relationship in a non – adversarial longer – term perspective and it may mean that

the 5 RS are no longer sufficient when compared with the qualitative aspects of the

relationship and the longer – term perspective.

An article by Ray Carter (1991), entitled the 7 Cs of Effective Supplier Evaluation

advocates a more comprehensive approach does not actually make the 5 RS any less

important. They are still there, but the supplier selection approach is broader.

Carter’s 7 Cs for supplier selection are:

1. Company – all staff all the time

2. Capacity – sufficient and flexible

3. Commitment – to quality

51
4. Control – Control of process

5. Cash – Sufficient funds for the business

6. Cost – cost/price relationships and total cost ownership 7. Consistency –

Consistent production of goods or services

More recently Carter has added two more Cs, they are:

8. Culture – Compatible with similar values

9. Clean – environmentally sound

Hence the selection criteria have now become Carter’s 9 Cs of supplier selection

(Carter. R 2000).

2.26 The Lean Supply Chain Concept

According to Monezka et al (2002) , when inventory moves so fast that firms

essentially hold zero inventory on hand, they are following a system know as the

lean supply chain – a combination of Just-in-Time purchasing, Just-in-Time

transportation and just –in-time production. All three elements combined to create a

supply chain that minimizes inventory investment and eliminate waste.

John Shook (2000), defines lean as a philosophy that seeks to shorten the time

between the customer order and he shipment to the customer by eliminating waste.

52
Womack and Jones (1996), in their book Lean Thinking, argue that all activities

associated with lean attempt to achieve three objectives: flow, pull and striving for

excellence. Flow means that inventory moves through the supply chain continuously

with minimal queuing or non – value – added activity being performed. Paul means

that customer orders start the work process. An upstream work centre will not create

output unless a down stream work center directly requests (pulls) that output. The

output is needed and consumed, leading to no inventory or waste. Striving for

excellence means that the supply chain must have perfect quality. Any thing less

than perfect quality leads to waste.

Those in charge of materials at the plant their key metric is to have inventory

available for production schedule and a secondary focus of not having too much or

too little inventory. Those in charge of inbound and outbound yard at the plant should

be managing all the inbound trailers, having high asset utilization and velocity in the

shipping yard, and high productivity in the work place. Shippers should make sure

that a trailer shows up on time to pick up materials and gets it to customers on time

and that materials get there undamaged (Darren Dolcemascola (2006).

53
Practitioners of lean supply chain focus on eliminating physical waste (in the form

of inventory ) and process waste (unnecessary steps in a value chain or time during

which assets or goods are unnecessarily idle).

Lean supply chain focuses on driving waste out of the entire value chain for a

product. To have a truly lean supply chain firms have to go outside their four walls.

They have to reach their suppliers because there are going to be constraints present

at but their suppliers and customers (Nussle and Morgan 2004).

Just –in – term Purchasing

Implementing a Just-in-time (JIT) purchasing system is the first major element of a

lean supply chain. A JIT purchasing system means receiving frequent receipts of

materials from suppliers to meet immediate requirement. The following features

define a true JIT purchasing system:

1. A commitment to zero defects by the buyer and seller

2. Frequent shipment of small not sizes according to strict quality and deliver

performance standards.

3. Closer, even collaborative, buyer – seller relationships

4. Extensive sharing of information between supply chain members

5. Electronic data interchange capability with suppliers.

54
A JIT purchasing system is an operating philosophy that does not tolerate high

inventory levels, less than perfect quality, or other inefficiency and waste between

buyer and seller. It is a continuous supply chin improvement process that requires

cooperation, coordination and information sharing to eliminate inventory throughout

the supply chain – (Monezka et al 2002).

Just –in – Time Transportation

JIT – in Time transportation, another key element of a lean supply chain, refers to

the efficient movement of goods between the buyer and seller. This involves frequent

deliveries of smaller quantities directly to the point of use at the purchaser. A lean

transportation network relies on company – owned or contracted vehicle that pick

up and deliver according to a regular and repeatable schedule in a closed loop – a

system that moves goods from supplier with return materials such as containers.

JIT transportation systems feature certain innovations that can further eliminate

supply chain waste. The first includes specialized transportation vehicles that allow

easy leading and unloading of smaller quantities. The second innovation includes the

extensive use of returnable plastic or steel containers. As drivers pickup materials

from suppliers they leave empty containers that were used in earlier deliveries. The

third innovation involves point – of – use doors at production facilities. Since

55
excessive material handling and travel within a facility is wasteful, delivery should

be made to the door closet to where the materials is needed

(Moneszka et al 2002)

Just-In-Time Production

This aspect of the lean supply chain involves taking raw and semi-finished material

and converting it to finished goods to satisfy customer orders. JIT production

consists of the following elements:

1. Uniform facility loading and level scheduling

.2 Equipment set – up reduction

3. Inventory pull systems with visible signals

4. Facility layout changes

5. Total quality and continuous improvement

6. Standardized material handling containers

7. Production and process simplification

8. Total preventive maintenance

9. Flexible work force featuring teamwork

10. Right performance measures.

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2.27 Summary of the Chapter Two

In the chapter of the study we have critical examined and reviewed relevant literature

on the logistics supply chain management.

We examined the concept of logistics which involves a radical transformation of the

way a firm faces up to the needs of the market place in terms of its entire operations

management, the logistics operation and coordination and the logistics information

systems which trigger the logistics activities. We also reviewed the objectives and

benefits of logistics, inbound goods movement, internal goods movement and the

goods movement theory and the techniques employed to move materials like

material handling, warehousing and transportation so as to obtain an overall cost

benefit of the firm and satisfactory customer service.

We also examined the concept of the supply chain, the supply chain management,

the benefits of the supply chain management and the problems encountered. We

reviewed the supply chain activities and function, supply chain business process

integration, the supplier relations and selection and the concept of lean supply chain

which have to do with the elimination of waste using the JIT purchasing,

transportation and production.

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 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction:

This selection of the research work is an attempt to produce a brief but

comprehensive description of the procedure involved in the research exercise. It

comprises of the research design, population, sampling techniques and sample size,

data collection instruments, method of data analysis, Methodological difficulties and

also a profile of the case study.

3.2 Research Design

Klinger (1977) described research design as the plan, structure and strategy of

investigation concerned so as to obtain answers to research questions and to control

variations. It is the specification of methods and procedures for acquiring the

information needed to structure or solve a problem. It’s the over all operational

pattern or frame work of projects that stipulates what information is to collected from

which source and by what procedures.

The descriptive research design will be used in this research. Descriptive research

describes and interprets what is and seeks to find out the conditions or relationships

58
that exists, effects that are evident, or trends that are developing. The survey research

will be used for the description using personal interview and questionnaires.

3.3 Population

The Population of this research work consists of the employees of British American

Tobacco (BAT) Zaria.

3.4 Sampling Technique and Sample size.

The sample size for this research consists of 40 employees in the following

functional areas: purchasing, storage and warehousing, transportation, production,

and distribution. This choice of sample size was informed by the number of

employee in the selected functional areas that cover the logistics supply chain

management in the organization.

The purpose sampling technique was used to select the sample areas and the simple

random sampling technique was adopted in selecting the research respondents, so

that all members of the population have equal chances of being selected.

59
3.5 Data Collection Instruments

Instrumentation involves careful selection of adequate and appropriate tools which

are administered in order to collect relevant data concerning the study. For this study

the questionnaire and interview schedule will be used.

The questionnaire will consists of structural questions and some open questions so

that it can adequately answer the research questions and solve the problems.

Consequently, an interview is scheduled with the supply chain manager.

3.6 Validity and Reliability of the Research Instrument

An instrument could be said to be valid for use in a research work when experts in

the field of the study express satisfaction after careful scrutiny with the quality of

the format in which the instrument was designed.

Hence, the research questions, questionnaires and interview questions to be used

have been duly forwarded to the supervisor of this research work consequently; his

approval was given after careful scrutiny.

The reliabilities of the questionnaire and interview questions would be established

by administration of the instrument to the respondents in the British American

60
Tobacco Zaria. The responses would be compared to determine consistency.

3.7 Administration of Data Collection Instruments.

The researcher administered and retrieved the questionnaires. A total of 40

questionnaires were administered, 34 retrieved and 6 were not retrieved. An

instructed interview scheduled with the supply chain manager was conducted. The

would be used for data analysis.

3.8 Methods of Data Analysis

The Analysis and interpretation of the raw data of any research are the vehicle

through which rational opinion can be expressed on the issue being investigated.

The techniques for data analysis for this research work will be the statistical

procedures, which include statistical tables, frequencies and percentages,

descriptions that would be considered adequate and appropriate for the purpose of

precision and clarity. The analysis and interpretation are the means by which the

research problems are answered. The hypothesis would be tested to verify results

using the Person product moment correlation coefficient.

61
3.9 Methodological Difficulties

Given the nature of the research, the researcher fund it difficult to cover a larger

number of respondents de to the policy of the organization which restricted the

employees from giving out some information and some refuse to return the

questionnaires.

3.10 Profile of British American Tobacco (BAT)

The historical development of BAT can never be complete without first looking back

at Nigerian Tobacco Company PLC, Zaria, being a company that British American

Tobacco was part and has taken over.

Nigerian Tobacco Company Ltd, Zaria, developed from a based import trading. Its

existence can be dated back to 1912 when all tobacco products and brands were

imported and sold by various trading companies.

In 1912, the British American Tobacco Company, BAT In London established

depots and sales organization in Nigeria to handle distribution of its own products.

A pilot factory was later established at Oshogbo in the present Osun State in 1933 to

manufacture cigarette from imported leafs. In 1937, the first full scale factory was

62
opened in Ibadan in Oyo State and subsequently the Port Harcourt factory was

opened and followed by Zaria Factory in 1959.

In 1951, the Nigerian Tobacco Company Ltd, was incorporated to BAT. In 1960,

NTC Ltd, became a public in Nigeria come of the ordinary shares of stocks of the

company. By December 1980 the number of NTC stockholders in Nigeria stood at

about 50,000, this made NTC then to be one of the first few publicly quoted Nigerian

company by the Nigerian Stock Exchange. By the same year the company’s paid up

share capital stood at N50,000,000.00 NTC activities were spread over the whole

company.

However, Nigerian Tobacco company pioneered the tobacco growing on a

commercial scale in 1934, when following the setting up of the pilot factory in

Osogbo, the company did a survey of a likely means of growing tobacco crops.

Tobacco growing was first concentrated around Oshogbo in Oyo State of Nigeria.

However, with rapid growth and expansions of NTC and due to larger market share

for its products the farming of Tobacco crops were soon extended to other areas Like

Iseyi and Ago-Are both in Oyo State and later extended to Northern Nigeria, Sokoto,

Kano, Maiduguri and Zaria.

63
The Port Harcourt factory was closed down in 1983 and Ibadan factory closure

followed in December 1995, leaving Zaria Factory alone for operation.

However, the British American Tobacco (Nig) Ltd. Acquired the ownership position

of Nigeria Tobacco company on 5th October 2001. The present company took over

with the name British American Tobacco (Nig) Ltd and registered under the

companies and Allied matters.

The British American Tobacco Company (Nig) Ltd as earlier pointed out was a share

holder in NTC PLC, Zaria with a share capital of 60% which gave them the right to

buy over the remaining share capital of 40% as a result of operational losses and

huge liabilities incurred by NTC PLC.

During the take over exercise, each shareholder was paid 20% above their initial

share holding as agreed upon by the shareholders during one of their annual General

Meetings where the decisions to finally sell the company to B.A.T.N.L was taken.

The new company has its Head Office in Lagos with regional offices at Zaria,

Enugu, Port Harcourt and Ibadan.

CHAPTER FOUR

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 DATA PRESENTATION ANALYSIS AND INTERPRETATIONS

4.1 INTRODUCTION

This chapter presents clearly and discusses all the data/information gathered in the

conduct of the study. The date collected was based on the logistics supply cgain

management activities in organization.

4.2 Presentation and analysis of the outcomes from the data collection instruments

administered.

1. Do the company do demand planning for its materials requirement

adequately ahead of production?

Table 4:1 Planning and Materials a head of production

VARIATION NO. OF PERCENTAGE (%)

RESPONDENTS

Yes 34 100

No - -

Total 34 100

Source: Questionnaire Administered

This table shows that the 34 respondents representing 100% expressed the view that

the company do demand planning for its materials requirement well ahead of

production.

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2. Does the company experience inadequatecy of materials and components?

Table 4.2 To who inadequate of Materials

VARIATION NO. OF REPONDENTS PERCENTAGE (%)

Agreed 20 85.8

Disagreed 14 41.2

Total 34 100

Source: Questionnaire Administered

From the above we could see that 20 respondents representing 58.8% agreed that the

company experience inadequacy of materials and components, while 14 respondents

represent 41.2% disagreed to the inadequacy of materials and components.

2 Does information flow adequately through the company?

Table 4.3 Information flows in the company.

VARIATION NO.OF PERCENTAGE (%)

RESPONDENTS

Yes 34 100

No - -

Total 34 200

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Source: Questions Administered

All the respondents representing 100% are of the view that information flow

adequately through the company.

4. Does the company maintain a continues relations with its suppliers, Table
Maintain a Continue Relations with Supplier with suppliers.

VARIATION NO OF PERCENTAGE (%)

RESPONDENTS

Yes 34 100

No - -

Total 34 100

Source: Questionnaire Administered

This table shows that all the 34 respondents representing 100% are of the view that

the company maintains a continous relationship with its suppliers.

5. Do suppliers sometimes supply low quality raw materials?

Table 4.5. The Supply of low quality raw Materials.

VARIATION NO OF PERCENTAGE (%)

RESPONDENTS

Agreed 19 55.9

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Disagreed 15 44.1

Total 34 100

Source: Questionnaire Administered

From the above we could see that 19 respondents representing 55.9% expressed the

view that suppliers sometimes supply low quality raw materials, while 15 the

respondent representing 44:1% disagreed.

6. Do the company place high concern for good quality and standard materials

used for production?

Table 4.6: Concern for good quality and standard materials used.
VARIATION NO OF PERCENTAGE (%)

RESPONDENTS

Yes 34 100

No - -

Total 34 100

Source: Questionnaire Administered

All the respondents representing 100% are of the view that the company has concern

for good quality and standard materials used for production.

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7. Do products damage on transit?

Table 4.7: Damage of products on transit.

VARIATION NO OF PERCENTAGE (%)

RESPONDENTS

Yes 18 52.9

No 16 47.1

Total 34 100

Source: Questionnaire Administered

This table shows that 18 respondents representing 52.9% expressed the view that

products damage on transit, while 16 respondents representing 47.1% disagreed that

product does not damage on transit.

8. Does the company sometimes produce defective products?

Table 4.8: Production of Defective Products.

VARIATION NO OF PERCENTAGE (%)

RESPONDENTS

Yes 15 44.1%

No 19 58.9%

Total 34 100

Source: Questionnaires Administered

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From the above, we could see that 15 respondent representing 44.1% expressed the

view that the company sometimes produces defectives products, while 19

respondents representing 55.9% disagreed.

9. If yes what is responsible for the production of defective products?

Table 4.9: Reasons for defective products.

VARIATION NO OF PERCENTAGE (%)

RESPONDENTS

Machine 5 33.3

Human Errors 3 20

Low Quality Materials 3 20

Process 4 26.7

Source: Questionnaire Administered

From the above, we could see that 33.3% of the respondents are of the view that the

machine is responsible for the production of defective products, 20% each are of the

view that it’s as a result of human errors and low quality raw materials, while 26.7%

are of the view that the production processes are responsible for the production of

defective products.

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10. Does the company pursue zero defects throughout the chain?

Table 4:10: Pursuit for zero defective products.

VARIATION NO OF PERCENTAGE (%)

RESPONDENTS

Yes 34 100

No - -

Total 34 100

Source: Questionnaire Administered

All the respondents representing 100% are of the view that the company pursues zero

defects throughout the chain.

11. What method does the company adopt in pursuing zero defects throughout the

chain?

Table 4:11 Methods to check zero defective products.

VARIATION NO OF PERCENTAGE (%)

RESPONDENTS

Quality check 25 73.5

Process check 6 17.6

Quality Workers 3 8.9

Source: Questionnaire Administered

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From the above table, 25 respondents representing 73.5% are of the view that quality

check is the method, 17.6% said it is through process check, while 8.9% said it is

through quality of workers.

12. Does the company experience the problems of over production?

Table 4.12: Problems of Over production.

VARIATION NO OF PERCENTAGE (%)

RESPONDENTS

Yes 34 100

No - -

Total 34 100

All the respondents are of the view that the company does not experience the problem

of over production.

13. Does the company adequately coordinate activities along the chain?

Table 4:13: Coordination of chain activities

VARIATION NO OF RESPONDENT PERCENTAGE (%)

Yes 34 100

No - -

Total 34 100

Source: Questionnaire Administered

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All the respondents are of the view that the company adequately coordinates

activities along the chain.

14. Does logistics supply chain management benefits the company?

Table 4:14 Benefit of supply chain management

VARIATION NO OF PERCENTAGE (%)

RESPONDENTS

Yes 34 100

No - -

Total 34 100

Source: Questionnaire Administered

All the respondents are of the view that logistic supply chain management benefits

the company.

4.3 DISCUSSION OF RESULT

Here the researcher intends to bring out the results obtained, in order to find out

whether the result of the research work is consistent with the already existing body

of knowledge. The researcher therefore determines to find out the areas of impact

effective logistics supply chain management has on the organization.

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In table 1, the researcher tried to find out whether the company does demand

planning for its materials requirement adequately ahead of production. The result

indicates that all the respondents agreed that the company does demand planning.

This is well conferred by Donald (1978), that the establishment of objectives to guide

operations requires demand planning, that is estimates be compiled concerning

future sales expectations and inventory requirements.

In table 3, all the respondents agreed that information flow adequately through the

company. It goes to mean that information is very important for the effective and

efficient flow of activities along the chain to reduce cost, improve time – to-market

of products and the management of current resources and planning for future needs.

In table 4, the respondents agreed that the company maintains a continuous

relationship with its suppliers. Baily and Farmer (1990), a good supplier

relationships are major asset to the buyer not only in assuring supplier but also in

maintaining quality levels and good prices.

The result in table 11, shows that the company pursue zero defect throughout the

chain by adopting through quality check, process check and acquiring high quality

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employees. Partnership relationship between buyers and suppliers is also a technique

in pursuing zero defects along the chain because it ensures quality of suppliers.

The researcher was also interested in finding out the benefit of logistics supply chain

management on the company. The respondents are of the view that the company

benefits in the areas of good planning, on time deliveries, improved service quality

availability of materials for production, costs reduction, prompt supply of

component parts and an organized logistics section. Effective logistics supply chain

management helps firms to adjust to rate, time and place of production to meet

customers demand, avoid overstocking and stock outs, improves flexibility to

respond to unforeseen changes in demand and supply.

The researcher was able to find out the logistics supply chain management problems

the company aces. The respondents are of the view that the company face the

problems of suppliers not being bale to meet the agreed supply demanded on time,

fleet maintenance from suppliers and point of use delivery.

4.4 FINDING

Based on the research carried out it was found out that effective logistics supply

chain management has a great impact on the organization. That to ensure high quality

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of raw materials and productions constant quality and process check is necessary

throughout the chain.

It was identified that the production of defective products is as a result of the machine

usage which is not always hundred percent, the processes involved in production and

the human limitations. That to ensure zero defect information flow is necessary

within the organization and from customers, withdrawal of low quality materials and

use of quality employees to ensure proper quality control.

The problems encountered are the fleet maintenance from suppliers and delivery

failures, which affects productions.

4.5 HYPOTHESIS TESTING

The hypothesis will be tested using the Pearson product – moment correlation

coefficient (r). The level of significant is 5%.

r = N∑xy - ∑x ∑ x ∑y

The responses from the following question was used for the testing
76
 Questions Yes No XY

X Y

6 34 0 0

7 20 14 280

9 30 0 0

10 34 0 0

11 19 15 285

12 34 0 0

13 18 16 288

14 15 19 285

16 34 0 0

20 34 0 0

21 34 0 0

N = 11 ∑x x = 306 ∑y = 64 = ∑ xy =1138

∑x2 = 9146 ∑ y2 = 1038 (∑x)2

= 93636 (∑y)2 = 4096

r= 11 (1138) – (306) (64)

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r = 12518 – 19584

r= 7066

7147.6 = 0.9886

The degrees of freedom = N – 2 = 11 – 2 = 9

The critical using table = 0.6021

Therefore the obtained ® must be greater than the critical to be significant. If the

obtained is greater than the critical value, we reject the null hypothesis (Ho) and

accept the (Hi)

We therefore accept the Hi: There is significant relationship between logistics supply

chain management and organizational efficiency.

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 CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 SUMMARY

In this research work we have critically logistics supply chain management and its

impact on organization. We looked at the background of the supply chain, the

objectives and significance of the research work.

In accordance, we have reviewed some relevant literatures that seek to establish the

fact that effective logistics supply chain management has a strong impact in

determinant organizational growth, development and efficiency. The logistics

concept, which involves a transformation of the way an organization, faces up to the

need of the market place in its entire operations management and the supply chain

concept were well established in the theoretical framework for this study. The

activities along the chain which comprises of purchasing, transportation, quality

control, receiving and storage, warehousing, order processing, production planning

and scheduling and customer service that ensure satisfaction.

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We equally examined the procedures involved in the research work. The research

design, instruments and source for data collection, which was used to verify results

and the techniques used for data analysis for the purpose of clarity.

We also presented and analyzed the data collected, and to see whether the result of

the research is consistent with already existing body of knowledge. We saw that

demand planning is necessary for adequate production, a continous relationship with

suppliers for maintaining quality levels and good prices. On this basis, we

established the fact that logistics supply chain management is necessary for good

planning, materials available, on time delivery, costs reduction and the elimination

of wastes.

We have identified areas of deficiencies and suggestions for improvement were

made at the concluding part of this research work.

5.3 CONCLUSION

Based on the finding of this study, it could be concluded that effective logistics

supply chain management is of great necessity for organizational efficiency.

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To ensure high quality of materials the organization must maintain a constant quality

and process checks and a partnership relationship with suppliers. The flow of

information necessary for effective and efficient operations, and the delivery of value

to customers.

However, the organization is faced with the constraints of fleet maintenance form

suppliers and the inability to meet on time delivery demand of materials, which

affects production.

5.4. RECOMMENDATIONS

Any organization that intends to achieve operational efficiency and productivity

must place great importance to the management of its logistics supply chain so as to

reduce inventory, increase the speed of transactions, reduce cost and eliminate waste.

Organizations should institutionalize regular forums to review the performance of

the supply chain as a whole as well as each individual partners performance against

agreed metrics so that total quality of materials and products, on time delivery and

customer satisfaction will be achieved. A partnership relationship should be built

with suppliers to ensure deliveries of partnership relationship should be built with

81
suppliers to ensure deliveries of supply on time and the avoidance of delivery

failures.

The organization should out source the transportation of materials that is the inbound

movement of raw materials from suppliers to specialist or logistics partners for on

time delivery and materials availability and the avoidance of raw materials

remaining longer transit.

The organization should invest more on the development and training of its

employees through seminars, workshops and short study courses for effectiveness

and efficiency in the performance of operations and the elimination of wastes.

REFERENCES

Akuezuilo, E.O. and Agu N. (2002), Research and Statistics in Education and

Social Science: Method and Application. Awka: Nuel centi Publishers and

academic press Ltd. P. 47

Baily and Farmer (1990), Purchasing Principle and Management London: Pitman

Publishing. P. 82

Bailey, Peter et al (1994): Purchasing, Principles and Management 7th edition

82
 London: Pitman Publishing. Pp. 47 – 50

Baily Peter et al (2005) Purchasing Principle and Management 9th edition

Hampshire: Prentice Hall: pp. 88-92

Bechan Patrick (1988). Purchasing in government England: Longman Group Ltd.

P. 25

Christopher Martin (1986). The Strategy of distribution of Management London

William Heinemann Ltd. Pp. 8 – 13, 100-106

Christopher Martins (1998). The strategy of distribution management. London

William Heinemann Ltd. PP. 15 – 18

Dolcemasco D. (2006), Improving the extended value stream: Lean for the Entire

Supply Chain. Carlsbad Calf. Pp. 70- 76

Donal J. (1978), Logistics Management. A system integration of physical

Distribution Management and Materials Management. 3rd edition upper

Saddle River New Jersey, Prentice-Hill Inc. pp. 12-18

Donald J. (1990), The strategic benefit of logistics alliance New Jersey, prentice

Hill Inc. p. 13

Gilmour Peter (1974), Physical distribution management in Australia Melbourne

Chestire Publishing Pty. Pp. 144-149

Hadfield and Nichols (2002), Supply Chain Redesign, Oxford Prentice Hall. P. 18

Hughes et al (1999) Transform your supply chain. International Thompson Presss.

83
 Pp. 5-7

Lucey T (2002) Quantitative Techniques London: Thompson Leaderning. P. 67

Monezka Roberts et al (2002) Purchasing and supply chain management 2nd edition.

Crawfords ville. Southwest, R,.R, Donnelley and Sons Company.

Pp. 82-87, 572 – 579

Nussle and Morgan (2004). Integrated cost Reduction Reed reduction business

Press calif. P. 9.

Osuala, E. C. (2005). Introduction to research methodology. Onitsha Africa Fist

publisher Ltd. P. 14

Ronald H. (1973). Business Logistics Management Englewood. Cliffs. New Jersey

Prentice Hill Inc. p. 6

http://www.cio.com/research/scm/edi.

http://www.cio.com/research/scm/edi

http://www.advanstar.com!

http://www.autologisticsglobal.com!

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 APPENDIX

Questionnaire on the assessment of effective logistics supply chain management in

British American Tobacco BAT Zaria

1. Name of Respondent ____________________________________________

2. Sex Male Female

3. Educational Attainment?

a. Primary [ ]

b. Secondary [ ]

c. Polytechnic [ ] d University [ ]

e. Others (specify please ) [ ]

4. Which functional area do you belong to?

a. Purchasing

b. Storage and Warehousing

c. Transportation

d. Distribution/Marketing

e. Production

f. Customer service

85
5. Do you understand what the concept of logistics supply chain management

is all about?

Yes [ ] No [ ]

6. Do this company do demand planning for its materials requirement

adequately ahead of production? Yes [ ] No [ ]

7. Does the company experience inadequacy of materials and components?

Yes [ ] No [ ]

8. Do materials at stock exist at high level in the company?

Yes [ ] No [ ]

9. Does information flow adequately through the company?

Yes [ ] No [ ]

10. Does the company maintain a continuous relationship with its suppliers?

Yes [ ] No [ ]

11. Do suppliers sometimes supply low quality raw materials?

Yes [ ] No [ ]

12. Do you think that the company has concern for good quality and standard

materials used for production?

86
 Yes [ ] No [ ]

13. Do products damage on transit?

Yes [ ] No [ ]

14. Does the company sometimes produce defective products?

Yes [ ] No [ ]

15. If yes what is responsible for the production of defective products.

_____________________________________________________________

_____________________________________________________________

16. Does the company pursue Zero defect throughout the chain?

Yes [ ] No [ ]

17. If yes what method does the company adopt?

_____________________________________________________________

_____________________________________________________________

18. Does the company experience the problems of over production?

Yes [ ] No [ ]

19. If yes how can it be controlled or eliminated?

_____________________________________________________________

_____________________________________________________________

20. Do the companies adequately coordinate activities along the chain?

Yes [ ] No [ ]
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21. Does logistics supply chain management benefit the company?

Yes [ ] No [ ]

22. If yes does it benefit the organization?

_____________________________________________________________

_____________________________________________________________

23. What logistics supply chain management problem you think the company

face?

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________

88