IMPACT OF LOGISTICS MANAGEMENT ON THE PERFORMANCE OF COMPANY

 

 

                                                  RESEARCH TITLE:

 IMPACT OF LOGISTICS MANAGEMENT ON THE PERFORMANCE OF                                                                        COMPANY

 

 

CHAPTER ONE

INTRODUCTION

1.1 Introduction.

This chapter looks at the background of the study. statement of the problem. rurpose of the

study. specific objectives. research questions. scope of the study. signilkancc' of the stud). and

the conceptual frame work.

1.2 Background to the Study

The expansion of industrialization accelerated by development of science and technology lead to the increased of supply and demand on international trade, many companies tend to change to occupying the revolution of the world marketing in order to win the market competition. (Roth et al ,2013) the evolution causes many companies facing unpredictable market, For the company to survival must lower the cost of production and transportation cost as much as possible and improve its management by respond quickly to customers orders to meet customer satisfaction, also it must improve the keeping and processing of data in order to facilitates analysis and forecasting of the world market (Delfmann and Gehring 2003).

Logistics management was operated and practiced before the starting of the first world war, were by the Department of British military supply chain was responsible for building infrastructure like ports, air fields, railways to facilitates the movement of their weapons to the field.

In 19^th century the international logistics management have been undergoes a huge transformation on their systems to enhancing the quality, efficiency and speed. Also, it focused on increasing companies profit by increasing sales and lower the cost of production and transportation. Controlling processing, planning process, storage process and flow of information are the logistics processing which included in now days companies’ logistics management. These processing are more useful to the company because they make managers to decide the better methods and strategies to control the production, storage, packing and transportation, until they arrive to the final user. (Awino ,2011)

 

 Tanzania Portland Cement Public Limited Company (TPC PLC) is the largest cement producing company in Tanzania. It is part of Heidelberg Cement Group. It was established in 1966 with the principal activity of manufactacturing and selling the cement. The company is located at latitude of 6.6° and longitude of 39.1°

The company currently produces five main brands of cement, and are Twiga Ordinary (42.5N), Twiga Plus (42.5N), Twiga Extra (32.5R), Twiga Super (32.5N), and Twiga Jenga (MC 22.5X) where by its production capacity is 1.4 million metric tons per year, 

       Twiga cement has been the major supplier of cement to build this landmark Tanzanite Bridge With a length of 1.03km and 20.5m width, the bridge connects roads linking Aga Khan Hospital and Coco Beach and it measures approximately 6.23 kilometers.  Concrete Poles – made with Twiga Cement, these concrete poles are used for electric power transmission replacing the traditional wooden poles. Also the company had supplying cement to the SGR Railway bridge in coast region .

 

1.3 Statement of the Problem

Logistics management adopting different strategies to enhancing their daily performance ,According to bagshow (2017) logistics activities management can be one of those strategies crucial for a firm to obtain high performance , the company must take into consideration the comperative advantage and the competitive advantages.

  Twiga Cement company have been developed and improved itself over the years to increase production and sales of the company , But there are challenges like delaying on fulfilling the customer orders ,the company experience the huge  congestion on the waiting line  which hinder the company to archive high performance ,The company experience the frequently changes of the market demanding

1.3.1 research objective

1.3.2  main objective

The main objective of this research is to assess the impact of logistics management on the performance of Twiga cement company.

 1.3.3  specific objective

1: To examine the importance of managing the logistics function in Twiga cement company

2: To analyze the challenges logistic management encounter on daily operational performance of Twiga cement company

3: To establish the relationship between logistics management and organizational performance.

1.3.4 Research Questions

The research question focused on effect of logistics management on the performance of Twiga cement companies.

. The research questions are as follows: -

1: What is the importance of managing the logistics function in Twiga cement company

2: What challenges that facing logistics management on daily operational performance of Twiga cement company

3: What is the relationship between logistics management and organizational performance

1.3.5 Scope and Limitation of the Study

The Research cover aspects related to the impact of logistics management on performance of Twiga cement company, its scope must be known. The study confined itself to the The dimension of the study was also delimited to the logistics management which are Order making and processing , Production management ,Quality management, Transportation .

1.4 Significance of the study.

The finding of this study will help the Twiga company to resolve their management performance in order to increase efficiency and flexibility on operating the production and transportation of the goods to their final buyers

Also, it will help the company to make the evaluation on their management for the aim of increase the performance production as well as customer satisfactions

 

 

 

CHAPTER 2

LITERATURE REVIEW

2:1Introduction

This chapter covers the theoretical and empirical literature review whereby various related literature are visiting be visited also it covers conceptual framework and research gap. it is a comprehensive review of what past authors have said within the areas of specific interest to the researcher and thus the fittings of these past works into the context of the potential researcher’s problem. The researcher will review several publications, journals, newspapers, magazines, dissertations, government publications and other reports to hunt out this information on the topic. Reviewing will help the researcher to focus on the subject matter.

 

2.2 conceptual definition

     Logistic is  the activity of organizing the movement, equipment, and accommodation of goods and commodities.it's critical to manage different logistic activities included within the supply chain management  as described by Bowersox et al. (2003), classified as material procurement, receiving of orders also processing orders, storing of goods, shopping, distribution, internal control, picking materials finally  transportation. Also, other researchers (Campos-García et al., 2011), have described these activities as logistics practices involved the delivering of goods  from a supplier to a final customer including the purchases, production, sales, storing and transport

    supply chain is the activities required by the organization to deliver goods or services to their customers. A supply chain is also deals with the  activities within organization required to process and convert raw materials  to finished products or services.

 Carrier: It could be viewed as  company’s own transportation services, a company, or even a railroad. The carrier can arrange the  transportation of  goods from the client to final customer, further because the customer to the tip consumer or consignee. The carrier’s have responsibility to provide  maximum security to ensure there is no theft or damage to the goods ,also he must transport goods safely with its good condition

2:3 Concept of logistics management

Logistics management is that the an element and part of the supply chain process that plans, implements, and controls the  flow and storage of products, services, and related information for just in time in order to fulfill the customer orderds.  The goal of the logistics management is to provide the proper product with the right quality at the right time within the correct place at the right price to consumer (Ristovska et al., 2017). Logistic resources, like tanks, pipelines, and ships, have the foremost objective of constructing products, equipment, and staple flow easier throughout processes to maximise profits

2:3:1 operating objective of logistics management

I. Rapid Response:  The aim of rapid response Within a firms is ability to satisfy customer's requirement in a very timely manner. The company will not  stocking the products and supplying on demand ,therefore orders are being planned and executed on shipment-to-shipment basis.

2.Minimum Variance: Variance is any unplanned mission  that disrupts system. Logistical performance are disrupted by things like delays so as receipt. disruption can occur in manufacturing of goods . goods damaged at customer's location and sometimes goods can be  delivered to an incorrect location .solution to overcome variance is  to keep safety stock and  use high-cost in  transportation.

3. Minimum Inventory:by discussing  minimum inventory we have to start with its aim which involves asset commitment and inventory turnover. Asset commitment is that the financial value of inventory developed with in  the system of logic and inventory turnover is the frequently or inventory usage over time. the target is to cut back the inventory without sacrificing customer satisfaction.

 

4. Movement Consolidation:The transportation is  one of the  significant logistical costs .Transportation cost  depends on  size goods  and distance taken . Movement consolidation means grouping together small goods inorder to scale back transportation cost.

 

2:4 Logistic activities

Logistics function includes material planning, purchasing goods or supplying raw materials, internal transportation, warehouse (Storage) and physical distribution. Material requirement planning is additionally called a micro level of managing inventory (Weele, 2002). It starts with schedule a sales plan within the sales division and therefore the pan is an estimate of the quantities that may or are often sold within the forthcoming periods. MRP in logistics management may help organizations to posse‟s inventory volume and can also assist the manufacturing planning, purchasing and delivering the subsequent steps.Purchasing in today is taken a broader view by many researchers as “Managing the supply” of materials, services and knowledge (Gundlach et al., 2006). In other words purchasing isn't any longer just blindly purchase but must manage and consider about the availability.

In transportation part, transport could be a main activities in logistics which concern in time and place utility (Coyle et al., 1996) cited by Stefansson, 2005). In logistics, warehouse operation also one in all a very important section which provides an area for storage products like raw materials, components, processing goods and finished goods between origin and consumption points (Lambert et al, 1998 cited in Stefansson, 2005). In other words, warehousing includes receive, store, ship and obtain the products additionally, Stefansson‟s mentioned that DC (Operation of distribution centers) is another term which usually utilized in association with warehousing

I) Warehousing

Warehousing involve the process of receiving, putting away products and picking the product. The company could get high and great efficiency by proper follow these process (Ensermu, 2013). The company tends to open the warehouses near their plant and  markets inorder to balance the supply and demand by reducing the time of product reach to final consumer hence lead to  minimization of cost and increase profit of company . The more expanded concept internal control aimed to maximise profits while providing good customer service (Tompkins & Smith, 1998)

     II) Inventory Management

According to (Girma, 2006) the inventories are materials / assets of any kind having a few financial esteem, anticipating change or utilize in future. Stock is the key issue to supply chain organization successes.The company tend to occupy different strategies to minimize cost ,One among of it is the Balancing of the level of inventories carried on the organization. Harrison and Van (2008) have put forward inventory reduction strategies such as: reduction of production lead times, product postponement, total cycle time, compression, centralization of inventory and the virtual warehousing concept.The inventory is very useful and is used to minimize the level of market fluctuation, and hence provide good flow of materials and cash through the supply chain.

 

III) Transportation

Transport management is the arranging, controlling and choice making on operational region of logistics that geologically moved and situated stock (Bowersox, Closs, & Cooper, 2010). Since of its essential significance and obvious taken a toll, transportation had customarily gotten significant administrative consideration and nearly all endeavors, huge and little, had supervisors capable for transportation (Bowersox, et al., 2010).Transportation possessed one-third to two thirds of the sum within the logistics costs subsequently transport administration impacted the execution of logistics framework monstrously (Bowersox, et al., 2010). Transporting is required within the whole production strategies, from fabricating to conveyance to the ultimate buyers and returns. As it were a great administration and coordination between each component would bring the benefits of logistics to a most extreme.. A great transport management in logistics exercises might give superior logistics effectiveness, decrease operation taken a toll, and advance benefit quality on firms (Bowersox, et al., 2010). From the calculated framework point of see, three components were principal to transportation execution: taken a toll, speed, and consistency (Bowersox, et al., 2010).   

IV) Distribution

Distribution is an indispensably portion of the larger universe of logistics and provide chain administration. Distribution management incorporates determining, transportation, warehousing, and conveyance. These require exact following, genuine time data, and exceedingly talented staffing to execute successfully. Whereas persistently confronting a spread of things in their each day trade, conveyance directors are charged with settling the three crucial address like when, where and the way much ( Brwilliams,2019).For any organization to be compelling there must be viable conveyance management prepare to speak committed items from the producer to the final word shoppers. Usually since without dispersion the leading item won't be conveyed and therefore the showcasing blend will break down and go wrong. As a results of this, firms are progressively receiving supply chain administration to diminish fetched, increment advertise share and deals, and construct strong client relations (Ferguson 2000).Supply chain management may be seen as reasoning supported the conviction that every firm within the availability chain specifically and by implication influences the execution of all the opposite supply chain individuals, similarly as eventually, generally supply chain execution (Cooper et al, 1997). The successful utilize of this logic requires that utilitarian and supply-chain accomplice exercises are adjusted with company methodology and harmonized with organizational structure, forms, culture, motivation and individuals (Abell,1999). Distribution channel comprises of a bunch of individuals or organizations that help in getting the item to the right put at the correct time. Conveyance plays a imperative part, essentially since it eventually influences the deals turnover and benefit edges of the organization. just in case the item cannot reach its chosen goal at the acceptable time, at that time it can dissolve competitive advantage and client maintenance. (September, 2013)

Importance of logistics  management

• It facilitates warehousing, logistics helps company on storing of their product and reduces the inventory which will be accumulated inside the company production area. The warehousing help in the grouping the related products together and the goods will be packaged hence increase the value to products. Many warehouses are constructed near the manufacture and market palaces hence lead to increase the sales on market.
• It facilitates the transportation, Transportation is among major factor in logistic management, since it ensures the distribution and flow of raw materials to the manufacturing and from manufacturing to the final buyer. The company tends to improves transportation managements in order to increase just in time.
• Logistics management help to increase the profit of the company, many companies doesn’t put more efforts directly on increase profit rather they concentrating on reducing the company cost as much as possible while maintain the value of products. The costs which can accelerate the loss to the company is production cost, handling cost and transportation cost. The company tends to reduce the costs while maintaining the value of their products in order to gain profit and win their competitive on market.
• It enables stock control, The availability of right level of stock ensures the production and sales of the company, the stock must be at the good and right quantity, if the stock is huge, it cause the handling and holding cost to increase as well and it will affect the efficiency in production. the low level of stock will reduce the production and performance of company

 

CORRELATION BETWEEN LOGISTICS MANAGEMENT AND PERFORMANCE

The increasing on logistics strategic makes it have complication (chang and griman 2006), These complications tend to make growth and increase customer value and services. The company must develop their operation and services to acquire customer satisfaction, measuring performance of logistics management has become high priority (Griffs et al .2007). Key performance indicator (KPI) is a quantitative scale of organization operation and performance over a period under targeted objectives. This includes the transportation performance, warehouse performance, and manufacture performance.  The organizational Managers use this to measure the efficiency of their working strategies and to optimize the logistical processes.  Also, manager take advantage on Technology to improve the marketing tactics by forecasting the demand and makes changes to the supply to occupy market condition which help in adding value.

  The value to the organization is added through effectiveness and efficiency

Ø  Logistics efficiency refers to the effectiveness in optimization of resources and operations of organization of organization, way to achieve efficiency is by considering demand planning, sustained evaluation, analysis of the actual cost.

Ø  Logistics effectiveness refer to the ability of the company to handle their operation with cost minimization and delivery goods to their customer the right things at right time with low cost.

 

The biggest challenge factor in logistics is cost. The Manager take into consideration all expenses related to transportation, storing and packing; Hence the proper strategies should be implemented to govern these operations in order to reduce and eliminate excessive expenses. The followings are tactics to reduce the logistics cost.

Ø  Reliability

This is the ability of the company to improve the customer royalty and maintaining trustworthy in whole operation performance. Trustworthy in organization help to increase the relationship between the customers (Panayides 2007).  Supplychain management has more consignee about high level of the reliability and this lead to the reduction in cost between the customer and supply (Selnes and Sallis, 2003).

Ø  Flexibility

Refer to the quickness of the company to occupy with market changes to serve the customer requirements (Zhong et al, 2002). This makes the company win their competitors and increase profit by raise in sales. Logistics management has more capability in term of flexibility (Dagayachi and Deshmukh, 2001)

The logistics management has a visual impact to the performance of organization. The managers consider their daily operational strategic to increase the operations of their departments.

o   Organizational financial and customer loyalty performance

Organization financial performance is determined by the way it govern the management and uses of its assets over a period. Asset management is obtained by reducing liability which are termed as the loss.

 

 Challenges logistic management encounter on daily operational performance of Twiga cement company

 

Demand volatility creates problems in forecasting and making supply chain planning.

Lack of integrated end-to-end planning, as the culture of functional silos is still a major operational challenge.

Shortage of rakes, especially during peak season, which results either in production loss or movement by costlier mode which is road

Poor road infrastructure, vehicle movement restrictions on routes passing through villages and towns, add to delays and underutilisation of logistics assets, adding to cost increases

There is hardly any mechanisation in handling of cement at warehouses. Manual labour is both inefficient and expensive. There have been a few efforts in semi-mechanization at a few warehouses, but have not scaled up till date.

Use of hooks in handling cement bags is another major issue, as there has been not much of mechanisation in handling cement. This results in spillage and wastage besides loss of brand equity for many sellers.

 

 

 

2:5 Theories involved in logistics and Supply Chain Management

There is concepts which are conceptualized resulting in framing of a number of the applicable theories used in logistics and also in supply chain management. These theories include: -

2:5:1 Just In Time

This is a practice which explains that the products of the correct quantity and specified quality are supplied in time with none surpluses. (Ketchen & Hult, 2006)

Materials Requirement Planning (MRP). This theory states that before goods are ordered and subsequently supplied, there's a desire to arrange and plan everything which is  required with the details and specifications of every customer.

Theory of Constraints (TOC) .This is a theory that designs a budget line with the desired institutional specifications.

Performance Information Procurement Systems (PIPPS). this is often a practice which designs an system which evaluate and measure  the actual performance of procurement procedures and processes of the company.

Performance Information Risk Management Systems (PIRMS). This theory is enabled to ensures that each  risk which could be detected during the procurement and supplies activities are being evaluated and solved

Total Quality Management (TQM). this  theory ensure that each one of  the raw materials which are tranported must be of relevant quality.

 

2:5:2Agile Manufacturing Theory

The theory stipulates that the availability chain management should be oriented towards improving the output within the organization. (Ketchen & Hult, 2006)

•Time-Based Competition Theory (TBC) .This is a theory  which deals to ensures that the management of supplies is completely arranged  in time.

•Quick Response Manufacturing (QRM). This theory explains that there should be a highly  response in perform all the manufacturing process. (Halldorsson et al., 2007)

•Customer Relationship Management (CRM) theory. This explains that each one the programs are designed to form a decent relationship with the general public.

%•Requirements Chain Management. this can be a theory that ensures that the method of supply is completed with considerations of all the relevant procedures and requirements.

 

2:5:3 Other theories

•Resource-Based View (RBV). This theory stipulates that the designing of the provision management process should be supported the resources which are available to the corporate.

•Transaction analysis (TCA) theory. the idea relies on the transaction costs which are incurred during the supplies.

•Knowledge-Based View (KBV) theory. This theory is formulated going by the knowledge that's available.

•Strategic Choice Theory (SCT). the speculation is predicated and captivated with various strategic theories which are taken by the organization to make sure that they create correct decisions on logistics and supply chain. (Ketchen & Hult, 2006)

•Agency Theory (AT). This theory explains the correlation between the principals and therefore the agents. It ensures that relevant policies are adopted which help to minimize the prices and increase revenue.

• Systems Theory (ST). Systems theory is predicated on the systems within which the institution’s supplies are handled. the speculation is predicated on the systems of the organization. (Halldorsson et al., 2007)

• Network Perspective (NP) theory. this is often a theory that provides relationship and explanations on all the networks which are available to facilitate connections between all levels in logistic and supply management. • Materials Logistics Management theory (MLM). the idea designs mechanisms to confirm that the amount of inventory is controlled

2:6 Empirical Literature Review

A research conducted by Natashe Ristovska, Sasho Kozuharou and Vladmir Petkovski with the title of the impact of Logistics Management practices on organizational performance, the results indicate that accurate, relevant and timely information from inside and outside the company enables appropriate and timely decision making. To this end, it is complete management information is necessary, relevant data selection and control, rapid transmission and proper use. The exactness of information maintains a strategic distance from making unseemly choices and superfluous costs, and if the data is chosen in arranges of significance at that point the time required for preparing such information will be shorter and will permit rapidly making vital choices. Electronic databases give get  data anytime and a plausibility of utilization in any worldly and spatial separate when opportune choices are basic to the company, and hence lead to a diminishment of add up to costs whereas expanding its victory. Subsequently, the logistics exercises are critical to the modern companies, picking up them more esteem relative to their costs. The logistics management is the zones where companies ought to pinpoint and move forward in arrange to be between the foremost fruitful companies on the market.

Investigate conducted by Kunadhamraks and Hanaoka (2008) entitled “Evaluating the logistics performance of intermodal transportation in Thailand “. This ponders utilized Fluffy set hypothesis beneath Fluffy - handle pecking order investigation and Fluffy - multi criteria examination. In which the past is utilized to recognize relative centrality between qualities (calculated fetched, benefit quality, unwavering quality, and security) in arrange to level progression whereas the last mentioned is utilized to survey the discernment of logistics management from execution through legitimate task of numerical values. He comes about analyzed utilizing these two strategies demonstrate that the need of intermodal coordination limits the intermodal fascination framework and this result appears transportation on arrive (trucks and holders) is favored over trains and conduits .

Kumsa 2018, on his think about of the impacts of Logistics activities on organizational execution case ponder on Modjo dry port. The Four logistics activities are recognized from relationship investigation. These are Transportation management, inventory management, Distribution management and customer response. These four factors were critical and positive relationship with organizational performance. Transport administration was essentially and positive impact on organizational performance. Transportation management and inventory management are the foremost basic exercises for organizational performance. Organizational performance is dependent variable and independent variables were that there's rate of varieties in execution clarified by the inventory management and the coefficient for inventory management develop was significant. Despite literature has outlined Warehouse management was a negative effect on organizational performance and customer response as one of the important activities for organizational performance, the study indicated that it is insignificant predictor of organizational performance.

According to seble begashaw 2020 on his research at wine company, finds that there is negative relationship between customer response management and organizational perforamance . He addressed the company to conduct frequently customer satisfaction survey to improve quality of product , value of product and product relative price.

2:6 knowledge gap

From the literature reviewed above, it is obvious that there are many studies which have been conducted on the impact of logistic management on performance of company. However few studies have been conducted on the impact of logistics management on performance of cement company in Africa especially Tanzania. Hence, there is a knowledge gap that is needed to be bridged. It is the objective of this study to fill that gap by focusing on Wazo hill Twiga cement company  as a case study.