AN APPRASAL OF THE USE OF SUPPLY CHAIN FOR DISTRIBUTION OF PRODUCTS BY MANUFACTURING ORGANISATIONS IN NIGERIA

AN APPRASAL OF THE USE OF SUPPLY CHAIN FOR DISTRIBUTION OF PRODUCTS BY MANUFACTURING ORGANISATIONS IN NIGERIA

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CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

          All over the universe reduced delivery time, higher customer satisfaction, reduced financial cost and a high level trust amongst suppliers established results produced by supply chain management. Supply chain management (SCM) is the coordinated set of procedures which is used in receiving raw materials from suppliers, process those into finished goods and then supply to end users. It involves a whole lot of skills ranging from gathering of information, to planning and control to resources management, communication and performance measurement. This concept which was born out of Just-In- Time (JIT) production and logistics flourishes in product based and manufacturing  companies.

          The delivery of product items in shape of lead time and cost has changed the competition has raised and has become hostile in current times (P. Vogt & A. Wojak, 2007). As organisations try to support strategic management practices such as market entry, introduction of new products, growth and expansion, improvement and reliability and speed of delivery of order while trying to lower cost. For organisations to work closely with their suppliers, logistics providers, distributors/ wholesalers and retailers, their supply chain must be streamlined and backed up with technological aids.

          As global completion increase, manufacturing companies should be more involved in how their suppliers and customers conduct their businesses. To compete successfully in today’s challenging business environment manufacturing companies should be able to effectively integrate the internal functions within a company and effectively link them with the external operations of suppliers and supply chain members. They need to focus on supply chain management practices that have impact on enhancing SCM activities and ultimately performance (Arawati, 2011).

          However, several external forces continue to strive the organisation to adopt the new way of conducting business i.e. increasing globalisation, decreased barriers to international trade, improvement of information availability through information technology and increased customer demand ( Sahay & Mohan, 2003: Gunasekaran et al 2003). In other to survive, companies must be able to reduce cost, improve quality and provide fast response to the customer needs, one of the ways of achieving that competitive edge is through the implementation of SCM practices (Muhammad, 2004).

          The manufacturing sector in Nigeria contributes a good portion to its GDP thus plays an important role in its economy. Nigerian manufacturing firms include multinationals, large, small and medium scaled companies. These companies are all involved in supply chain whether they recognise it or not. They may be assemblers, sub- contractors or small participants. However, as a result of the governments underscore on the increase of foreign direct investments, joint ventures or associate companies from developed countries, require local supporting companies (i.e. supplier, services, logistic) to organise their SCM operations to meet up with global standards.

          Despite various evidences regarding performance improvements related to SCM, relatively few empirical study exist to measure the extent of performance improvements resulting from the SCM programs especially in the Nigerian context. We sought to address this apparent gap in literature by conducting an appraisal of the use of supply chain for distribution of products by manufacturing organisations in Nigeria.

          Thus, the purpose of this study is to appreciate the level at which the Nigerian manufacturing companies are involved in SCM practices as well determine the effect of these practices on SCM performance.

1.2     STATEMENT OF THE PROBLEM

          Increasingly, supply chain management is being recognized as the management of key business processes across the network of organizations that comprise the supply chain. While many have recognized the benefits of a process approach to managing the business and the supply chain, most are vague about what processes are to be considered, what sub-processes and activities are contained in each process, and how the processes interact with each other and with the traditional functional methods. Regardless of how much effort is put into obtaining a good product, if it does not get to the customer in good time, in good condition and at the right cost all efforts will be in futility.

          Issues and challenges in supply chain management, as listed by Fawcett, Ellram and Ogden (2007) are poor coordination of effort, incompatible information systems, long cycle times, communication problems, customer service issues, excessive waste and environmental degradation, relatively high inventory for the level of customer service achieved and lower than optimal profits. On the other hand Chandra and Grabis (2007) have identified supply chain issues and related problems as distribution network configuration, inventory control, supply contract, distribution strategies, supply chain integration and strategic partnering, outsourcing and procurement strategies, information technology and decision support systems (DSS) and customer value. They also categorized these problems into general and specific problems. The specific problems are those that deal with one particular issue like inventory management, production, maintenance, procurement etc… while the general problems are problems that cross multiple specific problems. For example, information communication involves all members from the customers back to the other end suppliers.

          For this particular research, the researcher would identify the general problems that have an impact on the service delivery of Dangote Cement Company since the introduction of SCM techniques and its level of compliance with SCM standards. An appraisal of the extent to which SCM has affected Dangote Cement Company will be our major focus.

1.3     OBJECTIVES OF THE STUDY

The objectives of the study are to find out the following:

1.       To find out whether the supply chain management system has enhanced service delivery at Dangote Cement Company in terms of their strategic,        tactical, and operational levels.

2.       To find out whether the introduction of SCM at Dangote Cement Company      is successful in terms of profitability and customer satisfaction.

3.       To find out the challenges of products distribution at Dangote Cement     Company.

1.4     RESEARCH QUESTIONS

1.     Does supply chain management enhance effective service delivery in        Dangote Cement Company?

2.     Does using supply chain management reduce product delivery time at      Dangote Cement Company?

3.     Does supply chain management reduce cost of product distribution in     Dangote Cement Company?

4.     How does supply chain management affect profitability at Dangote Cement         Company?

1.5     RESEARCH HYPOTHESES

The following research hypotheses were formulated to guide this study:

Hypothesis 1

H0:     Supply chain management does not enhance effective service delivery in Dangote Cement Company.                 

Hypothesis 2

H0:     Supply chain management does not reduce product delivery time at Dangote    Cement Company.

Hypothesis 3

H0:     Supply chain management does not reduce cost of product distribution at Dangote Cement Company.

Hypothesis 4

H0:     Supply chain management does not increase the profitability at Dangote Cement Company.

1.6     SIGNIFICANCE OF THE STUDY

This study is significance to the following:

1.       It is the first empirical study on the use of Supply Chain Management by          Dangote Cement Company.

2.       To the researcher, since research is a continuous process in the academic           field, it will enable to widen up the vocabulary and horizon of the researcher       in his academic pursuit.

3.       To future researchers, this study will serve as a secondary source of data to      them.

4.       To the product and distribution managers, to highlight the strengths and weaknesses of the organisation in supply chain management.

1.7     SCOPE OF THE STUDY

The study is limited to the distribution department, of Dangote Cement Company, Nigeria and upon the research topic which is an appraisal of the use of supply chain for distribution of products by manufacturing organisations in Nigeria.

1.8     LIMITATION OF THE STUDY

          The limitation of this study consists of the following:

1.       Time Factor: It has been very difficult for the researcher in sharing the     limited time between exams, regular job, and domestic works other activities     as well as writing of this research project.

2.       The outright inability of some respondents to complete and return the     questionnaires on time contributes to the limitations of this research work.

3.       The adequacy of good textbooks in the library to assist the researcher in further investigations and consultations also counts the limitations of this study.

1.9     OPERATIONAL DEFINITION OF TERMS

a)      Distribution is the process of making a product or service available for use or consumption by a consumer or business user, using direct means, or using indirect means with intermediaries. The other three parts of the marketing mix are product, pricing, and promotion.

b)      Dangote Cement PLC is a Nigerian multinational publicly traded cement manufacturer headquartered in Lagos. The company is engaged in the manufacture, preparation, import, packaging, and distribution of cement and related products across the African continent. Dangote Cement Plc was formerly known as Obajana Cement Plc and changed its name to Dangote Cement Plc in July 2010. Obajana Cement Plc was incorporated in 1992. Dangote Cement Plc is a subsidiary of Dangote Industries Limited.

c)       Manufacturing is the process making a good with tools and / or machines by effecting chemical, mechanical, or physical transformation of materials, substances, or components, or by stimulating natural processes, usually repeatedly and on a large scale with a division of labour.

d)      Manufacturing Organisation is any business that uses components, parts or raw materials to make a finished good. These finished goods can be sold directly to consumers or to other manufacturing businesses that use them for making a different product.

e)       Performance is the accomplishment of a given task measured against      present known standards of accuracy, completeness, cost and speed.

f)       A product is an article or substance that is manufactured or refined for sale.

g)      Products Distribution is one of the four elements of the marketing mix. H)          Distribution is the process of making a product or service available for use      or consumption by a consumer or business user, using direct means, or using        indirect means with intermediaries.

i)       Supply chain management (SCM) is the design, planning, execution,     control, and monitoring of supply chain activities.


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