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 19th
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.
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