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CHAPTER ONE: INTRODUCTION

1.1  Background of the Study

Organizations adopt numerous business improvement methodologies to improve their performance. As competition intensifies, so do the challenges associated with getting a product or service to the right place at the right time at the lowest delivered total cost. Manufacturing organizations have begun to realize the potential benefits and importance of strategic and cooperative buyer-supplier relationships. They have started to involve strategic suppliers in resource management decisions (Morgan and Monczka, 2006). Instead of relying on tools such as acceptance sampling to establish the quality of incoming materials and component parts, manufacturers purchase from a more limited number of qualified or certified suppliers and embrace the concept of supply base management, hoping to reduce costs by cutting inventory and improving efficiency throughout the supply chain (Watts and Hahn, 2003). In addition, organizations have come to place more emphasis on customer driven corporate policies that seek to simultaneously pursue objectives of customer satisfaction, quality and productivity improvement, and cost reduction.

SCM practices have received numerous other definitions; Koh et al., (2007) defined SCM practice as the set of activities undertaken by an organization to promote effective management of its supply chain; as the approaches applied in integration, managing and

 

coordination of supply, demand and relationships in order to satisfy clients in an effective way (Wong et al., 2005); as tangible activities/technologies that have a relevant role in the collaboration of a focal firm with its suppliers and/or clients (Vaart and Donk, 2008); and as the approach to involve suppliers in decision making, encouraging information sharing and looking for new ways to integrate upstream activities. As a consequence, it involves developing customer contacts by customer feedback to integrate the downstream activities and delivering orders directly to customers (Chow et al., 2008). The concepts and practices of SCM have been touted as improving the performance of organizations who participate in them.

The supply chain management in general aims at improving value delivery to customers; relying on just-in-time system; eliminating waste; getting the involvement of all stakeholders in the value creation process as well as working closely with suppliers. According to Ireland and Webb (2007), SCM continues to be adopted by organizations as the medium for creating and sustaining a competitive advantage and points out that such a displacement is understandable considering the potential benefits of successful supply chain management. These benefits attributed to supply chain management include inventory reduction, improved delivery service, and shorter product development cycles. On their part, Slack et al., (1995) observed that the objectives of supply chain management include focusing in satisfying end customers, to formulate and implement strategies based on capturing and retaining end-customer business and also to manage the whole chain effectively and efficiently. SCM is one of the most effective ways for firms to improve their performance (Ou et al., 2010). With the purpose of managing the supply

 

chain actions for realizing improvement in enterprise performance, it is necessary to improve the planning and management of activities such as materials planning, inventory management, capacity planning, and logistics (Chandra and Kumar, 2000) with suppliers and clients.

The simultaneous integration of customer requirements, internal processes, and upstream supplier performance is commonly referred to as supply chain management (SCM). Supply chain management (SCM) is an integrated approach beginning with planning and control of materials, logistics, services, and information stream from suppliers to manufacturers or service providers to the end client; it represents a most important change in business management practices (Fantazy et al., 2010). SCM is one of the most effective ways for firms to improve their performance (Ou et al., 2010). With the purpose of managing the supply chain actions for realizing improvement in enterprise performance, it is necessary to improve the planning and management of activities such as materials planning, inventory management, capacity planning, and logistics with suppliers and clients.

Supply chain practices cannot on their own improve efficiencies individually, since the efficiency can be achieved through the interaction of various supply chain practices. Dawe (2004) point that, for effective SCM, a comprehensive effort for improvement in all of supply chain functions within a firm should be made, and, first of all, the focus of supply chain practices should shift from functional and independent to general and integrative. This implies that the performance of each supply chain practice should be evaluated depending on how the practice has a significant effect on the efficient integration of entire supply chain processes, and thus, the successful achievement of SCM integration can be possible by the systematic utilization of various supply chain practices. Bowersox (2009) also have the same perspective with the above argument.

Organizational performance is the final achievement of an organization and contains; existence of certain targets to be achieved, has a period of time in achieving the targets and the realization of efficiency and effectiveness (Gibson et al., 2010). On the other hand, organizational performance refers to ability of an enterprise to achieve such objectives as high profit, quality product, large market share, good financial results, and survival at pre-determined time using relevant strategy for action (Koontz and Donnell, 2003). Organizational performance can also be used to view how an enterprise is doing in terms of level of profit, market share and product quality in relation to other enterprises in the same industry. Consequently, it is a reflection of productivity of members of an enterprise measured in terms of revenue, profit, growth, development and expansion of the organization.

All types of organizations, whether small or big, public or private, for-profit or non- profit, struggle for survival. In order to survive, they need to be successful (effective and efficient). To be assured of their success, organizations must perform well. Ultimately, performance lies at the heart of any managerial process and organizational construct and is therefore considered as a critical concept in the strategic management field. Organizational performance includes multiple activities that help in establishing the goals of the organization, and monitor the progress towards the target (Johnson et al., 2006). It is used to make adjustments to accomplish goals more efficiently and effectively. Organizational performance is what business executives and owners are usually frustrated about. This is so, because even though the employees of the company are hard-working and are busy doing their tasks, their companies are unable to achieve the planned results. Results are achieved more due to unexpected events and good fortune rather than the efforts made by the employees. However, for any business to be successful, functions must be defined and accomplished. It is important for an organization to develop strategies that are designed around the skills that would enhance the performance of the organization.

1.2  Statement of the Problem

 

In the face of a competitive global market, organizations have downsized, focused on core competencies, and attempted to achieve competitive advantage by more effectively managing purchasing activities and relationships with suppliers. The supply base management refers to how firms utilize their supply processes, technologies, and capabilities to enhance competitive advantage (Farley, 2007), and how the manufacturing, logistics, materials, distribution and transportation functions are coordinated within organizations (Lee and Billington, 2002). Many firms have reduced their supply base so they can more effectively manage relationships with strategic suppliers. Buying firms are developing cooperative, mutually beneficial relationships with suppliers and viewing suppliers as virtual extensions of their firm.

Recent evidence indicates that leading edge companies are shifting their quality emphasis from inspection to designing quality into products, accompanying this with process control and process improvement efforts (Greene, 1993). These initiatives, particularly when implemented concurrently with managing the supply base, are cited as strategic practices to achieve competitive advantage. Other practices associated with quality improvement mirror those embodied in the evaluation criteria for awards such as the Baldrige and Deming awards (Black and Porter, 2006). These include strategic quality planning and senior management leadership.

There have been a number of studies of SCM implementations among manufacturing firms (Sandberg, 2007) and large retailer organizations (Sandberg and Abrahamsson, 2010) that have established the importance of SCM. Mwingi (2011) and Andebe (2011) undertook research and found that sharing promotional information between retailers and manufacturers is useful especially in the international market. These studies have not fully explored the impact of SCM practices on an organization’s performance. This research, will therefore, establish the role of the Dangote flour mill, Illorin supply chain management on organizational performance.

 

1.3  Research Objectives

 

The study objectives were:

 

  1. To establish the extent of supply chain management practices employed by Dangote flour mill in
  2. To establish the relationship between supply chain management practices and the organizational performance of Dangote flour mill in Illorin.
    • Research Questions
  3. What is the extent of supply chain management practices employed by Dangote flour mill in Illorin?
  4. What is the relationship between supply chain management practices and the organizational performance of Dangote flour mill in Illorin?

1.5  Significance of the Study

 

The study will be of value to the management of Dangote flour mill in Nigeria as they will be able to know the importance and impact of having an effective supply chain and what role it will have on their performance. The findings of this study will form part of the action plans that will help the Dangote flour mill to gain competitive advantage over their competitors locally and also in the region.

 

The study will also create a monograph which could be replicated in other sectors which are facing high competition from the international players. Most importantly, this research is further aimed at offering some practical suggestions on a firm’s supply chain management impact on the performance of the firm. The policy makers will obtain knowledge of the agricultural sector dynamics and the supply chain practices; they will therefore obtain guidance from this study in designing appropriate policies that will regulate the sector.

  • Scope of the study

The study focused on the relationship between supply chain management and operational performance of Dangote Flour Mills in Illorin. The study was limited to the operations and staff of the mill in Illorin. In the course of carrying out this research, the researcher was limited by two major constraints; financial and time constraints.

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