ASSE

SSMENT OF SUPPLY CHAIN PRACTICE IN CASE OF BAHIR

DAR LEATHER TANNERY

PREPARED BY:-
DOZITEA BELE
FAKLYA REDUAN
GIRUM GEZAHEGNE

ADVISORS:-
YOHANNES TEFFERA

A SENIOR ESSAY SUBMITTED TO LOGISTICS AND SUPPLY CHAIN

MANAGEMENT PROGRAM IN PARILAL FULFILLMENT OF THE
REQUIREMENTS FOR THE BACHELOR OF ARTS DEGREE IN LOGISTICS
AND SUPPLY CHAIN MANAGEMENT

BAHIR DAR UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS LOGISTICS AND
SUPPLY CHAIN MANAGEMENT PROGRAM
 ASSESMENT OF SUPPLY CHAIN PRACTICE IN CASE OF BAHIR DAR
LEATHER TANNERY

Approved By:

------------------------- ------------------------ -----------------------

Advisor Signature Date

------------------------ ---------------------- ----------------------

Examiner Signature Date

May, 2014
 Acknowledgement

First and most, we would like to thank almighty god for fall his charity and
kindness he has shown us throughout or life.

The most sincere and deepest gratitude goes to our advisor. Yohannes T. Who
really encourages and helped us in correcting and giving advice, from
beginning of the study until the fairest draft. Our deepest love, appreciations
and gratitude goes to our families for financial and moral support we have
immensely benefited not only in doing this paper but in all years of our
education. We would also like to thank all our friends who hand helped us the
completion of this paper.
 Abstract

The title of this research was being entitled with the assessment of supply chain
activities in Bahir Dar leather tannery. The main objective of this study of assess
the supply chain activities of the company. Primary data would be used to
conduct the research. The primary data would be collected through interview and
questionnaires from the manager and employees of Bahir Dar leather tannery.
And descriptive sample technique was also used to collect data from the total
employees. After the data was collected it would be analyzed and interpreted
through table, percentage and mean. As our study indicates that the supply
chain practices is not good enough. There is lack of supply plan of the factory
and can’t satisfy the demands of the customers, there is no improvements of raw
materials, the raw materials quality is low. Based on the finding the researchers
recommended that the company should have to used technology for more being
productive and should have to increase work with suppliers to increase raw
materials quality and the company should avoid the difference in demand and
supply.
 Table of contents

Contents Page

Acknowledgement -------------------------------------------------------------------

Abstract -------------------------------------------------------------------------------

List of table ---------------------------------------------------------------------------

CHAPTER ONE

1. Introduction------------------------------------------------------------------------
1.1 Background of the study ------------------------------------------------
1.2 Statement of the problem -----------------------------------------------
1.3 Objectives of the study --------------------------------------------------
1.3.1 General objectives-------------------------------------------------------
1.3.2 Specific objectives ----------------------------------------------------
1.4 Significance of the study -------------------------------------------------

CHAPTER TWO

2. Review related literature ------------------------------------------------------

2.1 The concept of supply chain ----------------------------------------
2.2 Definitions ----------------------------------------------------------------
2.2.1 Types of supply chain --------------------------------------------
2.3 Objectives of supply chain management -----------------------------
2.4 Features of supply chain -------------------------------------------------
2.5 Collaboration of supply chain -------------------------------------------
2.6 Elements of supply chain -------------------------------------------------
2.6.1 Supply chain operations --------------------------------------------
2.7 Supply chain logistics ------------------------------------------------------
2.8 Green supply chain ---------------------------------------------------------
2.8.1 Profiting from being green -----------------------------------------
CHAPTER THREE

3. Research methodology ---------------------------------------------------------

3.1 Research approach ----------------------------------------------------
3.2 Population and sampling -------------------------------------------
3.3 Data collection instruments --------------------------------------

CHAPTER FOUR

4. Data analysis and interpretation ---------------------------------------

4.1 General profile of the respondents -----------------------------

CHAPTER FIVE

5. Summary, conclusion and recommendation ------------------------

5.1 Summary------------------------------------------------------------
5.2 Conclusion ---------------------------------------------------------
5.3 Recommendation -------------------------------------------------

Reference -------------------------------------------------------------------------
 List of Table

Page

Table 4.1 Sex of respondents --------------------------------------------------

Table 4.2 Age of respondents -----------------------------------------------

Table 4.3 Work experience of the respondents -----------------------------

Table 4.4 Educational level of the respondents --------------------------------

Table 4.5 Field of specialization of the respondents ---------------------------

Table 4.6 Supply chain performance of Bahir Dar leather tannery--------------

Table 4.7 Plan performance of the company -------------------------------------

Table 4.8 Source performance of the company------------------------------------

Table 4.9 Make performance of the employees --------------------------------------

Table 4.10 Delivery performance of the company -----------------------------------

Table 4.11 Disposal performance of the company ------------------------------------

Table 4.12 Employees response about collaboration performance of the

Company---------------------------------------------------------------
 Chapter One

1. Introduction
1.1 Background of the study

The wide spread recognitions of the term “Supply chain” has become primary
as a result of the globalization of manufacturing since the mid 1990s. The
focus on globalization accepted the need for logistics strategies to deal with
complex networks including multiple entities spanning multiple countries with
divers control. The has been an increasing trend to use the term supply chain
to refer to strategic issue and logistics to refer to tactical and operational
issues.

Supply chain management was typically viewed to lay between fully vertically
integrated firms where entire material member operate independently. There
fore co-ordination between the various players in the chain is critically in its
effect (Joeld, Wisher. G. keongleoning. Kean-Choon 1995).

Supply chain as a flow and management of resources across the enterprise for
the purpose of maintaining the business operations profitably. The concept of
supply chain was essential for different sectors in our country. In the leather
and leather products industry. The concept of supply chain was a base for
success of the sector (Vlvekseagal 1992).

In Ethiopia supply chain were involved in the participation of a Varity of

players levels and functions. A 2004 national assessment of the existing supply
system were identified a number of challenges in the supply chain. Those
challenges demonstrated that linkage between entities in the supply chain were
broken or missing contributing to poor performance. The responsibility of
actors with in the supply chain were unclear. The supply chain had multiple
levels, requiring products and information to flow through numerous channels,
leading to long lead time. Further more, three were non-value adding activities
at every level of the supply chain, leading to duplication of certain tasks and
gaps in other areas (www.wikipidia.com).

The fashionable leather shoes and bags and garments on sale in high street
shops around the world are the out come of a long and varied processes the
begins with the reading cattle, sheep and goats on small farms and large
agribusiness. On the hills and plains and in the valleys of many very different
regions; animals are recovered are tanned and become leather. The leather
were further processed in to leather products these products are packaged and
transported and marketed and sold around the world. (Leather and leather
products technology institution 2010)

1.2 Statement of the problem

The value of supply chain concept was that it provides an integrated approach
to the an analysis of problems and constraints throughout an industry.
(Leather and leather products technology institute 2010)

Supply chain is essential for every organization in the selection and purchasing
of raw materials and components in the production processes in the marketing
distribution and sale.

Ethiopia has the largest livestock resource in Africa this livestock population is
a vast and reliable source of raw material for the leather and leather products
industry with proves that the leather industry has enormous raw materials
availability potential was unable to be capitalized for better economic values
both in terms of export and creation of job opportunities for the mass.

The shoes that we wear and the other leather goods the we were use are not
the products of one industry nor yet of several separate industries but of an
integrated industrial chain a supply chain where the quality and commercial
successes of both intermediate and end products in determined by many
different factors in the successive stage of the chain. In the selection and
purchase of raw materials and components in the production processing
marketing distribution, sales and finally by consumer demand both at home
and abroad. (Leather products technology institute 2010)

The study would try to addressed the following research questions

1. What’s the supply chain activities in Bahir Dar leather factory?

2. What’s the basic importance of supply chain collaboration?
3. What is the use of collaborative performance management for the
organization?
4. What hinder the collaboration processes of the company?
5. How the company consider the consequences and challenges of wastes
materials for the environments a green supply chain?
1.3 Objective of the study

1.3.1 General objectives

The general objectives of this study was to assess the supply chain activities in
Bahir Dar leather tannery.

1.3.2 Specific objectives

- To identified the importance of supply chain collaboration

- To identified the use of collaborative performance management for the

organization.

- To identified hindrance of collaboration processes

- To determined the company consideration on the consequences and

challenges of wastes materials for the environment as a green supply chain.

1.4 Significance of the study

This research has different benefit to different practices. First it was uses as a
stepping stone for other investigator. Who are willing to conduct research on
the some areas or used as reference research on the area or it used as
reference for further study. Next the company (Bahir Dar leather tannery) itself
beneficiary from this research because the research could help to know it’s a
time to pay attention for the supply chain activities and also this research can
help the organization to provide information about supply chain activities.
 Chapter Two

2. Review of related literature

2.1 The concept of supply chain

The practice of supply chain management is guided by some basic underlying

concepts that have not changed much over the centuries. The basic concepts of
supply chain are:-

 “A supply chain is a network of facilities and distribution options that

performs the function of procurement of materials, transportation of
these finished products to customers” (Ganeshan and Harrioson Pg 2,
1995).
 “The systemic, strategic co-ordination of the traditional business
functions and the tactics across these business functions with in a
particular company and across business with in the supply chain for the
purpose of improving the long term performance of the individual
companies and the supply chain as a whole” (Mentzer, Dewitt, Deebler P.
18,2001).

Most basic level means consistently high order fill rates, high on time delivery
rates, and a very low rate of products returned by customers for what ever
reason. Internal efficiency for organizations in a supply chain that these
organizations get an attractive rate of return on their investments in inventory
and other assets and that they find ways to lower their operating and sales
expenses.

There is a basic pattern to the practice of supply chain management. Each

supply chain has its own unique set of market demands and operating
challenges and yet the issues remain essentially the same in every case.
Companies in any supply chain must make decision individually and
collectively regarding their actions in five areas:-
 1. Production:- What product the market want? How Much of which
products should be produced and by when? This activity include the
creation of master production schedules that take in to account plant
capacities, work load balancing, quality control, and equipment
maintenance.
2. Inventory:- What inventory should be stocked at each stage in a supply
chain? How much inventory should be held as raw material, semi-
finished, or finished good? The primary purpose of inventory is to act as
a buffer against uncertainty in supply chain. However, holding inventory
can be expensive, so what are the optimal inventory levels are re-order
point?
3. Location:- Where should facilities for production and inventory storage
be located? Where are the most cost efficient locations for production
and for storage of inventory? Should existing facilities be used or new
ones built? Once these decisions are made they determine the possible
paths available for products to flow through for delivery to the final
customers.
4. Transportation:- How should inventory be moved fro one supply chain
location to anther? Air freight and truck delivery are generally fast and
liable but they are expensive. Shipping by sea or rail is much less
expensive by usually involves longer transit time and more uncertainty.
This uncertainty must be compensated for by stocking higher level of
inventory.
5. Information:- Timely and accurate information holds the promise of
better co-ordination and better decision making. With good information,
people can make effective decision about what to produce and how
much, about where to locate inventory and how best to transport it.

The sum of these decisions will define the capability and effectiveness of a
company’s supply chain. The things a company can do and the way that it can
compete in its markets are all very much dependent on the effectiveness of its
supply chain.

Evaluation of the concept of supply chain management. The concept of supply

chain management has only recently stepped in to the marketing world.
(Bowerxos, closs, cooper 2010)

There decades back and has passed through three phases:

Phase I. Physical distribution management: This phase is better characterized

as inventory push phase when manufacturing was handled in isolation and
output was pushed down to the finished goods ware houses.

Phase II. Integrated logistics management the phase recognized the importance
of integrating operations with in the organizations like sales. Procurements
manufacturing, ware housing distribution and transportation to achieve an
efficient and effective goods distributers.

Phase III. Supply chain management: The graduation of logistics management

to modern day is better know as “Supply chain management” Supply chain
management extends the scope to link external partners like suppliers,
renders, distributors and customers with a view to deliver enhanced customers
of economic value through synchronized management of the flow of physical
goods and associated information from source of consumption (From Lambert,
stock, and Ellram).

In fact, the need for supply chain management is felt to benefit both customer
and enterprise. While it enhances customer delight by satisfying the customers
need for better products, lower costs and fast supply, it improves enterprise
plight by improving its productivity. The benefit of supply chain are:-

 Reduced operational costs.

 Improved flow of supply.
 Compelling bottom-line benefits to enterprise.
  Reduction of delays in distribution and
 Increased customer satisfaction

Chain these are:

 More collaborative, timely product development through enhanced

communication among fictional departments, suppliers. Customers and
even regulatory agencies.
 Reduction of channel inventory and product obsolescence owing to
closer linkage across the supply chain and better insight in to demand
signals to drive products schedule and ultimately achieve build-to order
capability.
 Reduction in communication costs and customer support costs with
more interactive tailored support capability inherent with internet
technologies.
 Ability to enhance. Traditional products and customers relation ships
through customization driven by internet connectivity and interactivity
 New channel capability to reach different customer segments and
further exploit current market (Michael Hagos 2003).
2.2 Definitions

What is supply chain management?

The term “supply chain management” a rose in the late 1980s and come in to
widespread use in the 1990s. Prior to that time business used terms such as
“Logistics” and “Operations management” instead. Some definitions of supply
chain are offered below:-

 “A supply chain is the alignment of firms that brings products or services

to market”
 “A supply chain consists of all stages involved, directly or indirectly a
customer request. The supply chain not only includes the manufacturer
and suppliers, but also transports, work houses retailers, and customers
 themselves” (From chopra and meind in their book supply chain
management (chopra, sunil and peter meindl, 2001 Pg.20).

Supply chain management is a network of facilities and distribution options

that performs the functions of procurement of distribution options that
performs the functions of procurement of materials transformation of these
materials in to intermediate and finished products, and the distribution of
these finished products to customers.

Supply chain management is the integration of key business processes from

initial raw materials extraction to final or end customers including
intermediate processing transportation, storage activities and final sale of the
end customers. To day the practice of supply chain management is becoming
extremely important to achieving and maintains competitiveness. Many firms
are just now beginning to realize the advantage of supply chain integration
(Joeld. Wisner. G. Keong Leong –Choon Tan).

Supply chain is the alignment of firms that brings products or services to

market and it’s a network of facilities and distribution options that performs
the functions of procurement of materials, transformation of these materials in
to intermediate and finished products, and the distribution of these finished
products to customers (From Ganshan and Harrison in their article An
Introduction of supply chain management).

2.2.1 Types of supply chain

A supply chain comprises of three or more companies directly linked based on

these on supply chain can be:

A. A basic supply chain: A company an immediate supplies and immediate

buyer.
B. An extended supply chain: It includes supplies of the immediate supplier
and immediate buyer of the immediate buyers.
 C. An ultimate supply chain: It includes all the companies involved in all
the upstream and down stream flow. (Ashish Bhatanagar)

2.3 Objectives of supply chain management

The objective of all well-managed supply chain is to plan and execute the flow
and management of the resource for the purpose of maintaining the business
operations profitably also that the resources are generally scares and cost
money. Putting these two together, the emphasis on profitability becomes clear.
If your supply chain can achieve this better than your competitors, you are in
good shape. If not, supply chain improvements can help.

The major objectives of supply chain management are:-

1. To provide uninterrupted flow of material and service required operating

the organization.
2. To keep the inventory investment at a minimum level.
3. To improve and maintain quality.
4. To find and develop competent supplies.
5. To purchase the required items and services at the lowest possible costs.
2.4 Features of supply chain

The key features of supply chain management:

1. Supply chain basically involves integrated of Business process.

2. Supply chain established linkages with suppliers customers with the
value chain established business units.
3. Supply chain encompasses all activities involved in the flow and
transformation of goods from the raw materials stage to the finished
products as well as associated with information flows, cash flow of
products flows in an organization.
 4. Supply chain is to be managed from upstream to downstream by
relationship with supply chain and customers to deliver superior
customer value at the least possible costs. (Ashish Bhatnagat 2009)

2.5 Collaboration of supply chain

Collaboration is a competitive weapon that you can use to improve business

performance. It allows you to establish strategic partnerships with suppliers
and training partners in order to set mutually beneficial goals and shares
business processes and information. Collaboration helps drive market share,
sales, and product adoption while maximizing the return on asset (ROA) and
return on investment (ROI). Successful collaboration relies on the development
of mutual trust between the companies, as well as the willingness to share
information that can benefit all the members of the collaborative team of
company. The goal is to treat all supplies, out sourcing partners, customers,
and service providers as extension of the organization.

Six key steps to successful collaboration:

 Where to collaborate?
1. Collaborate in areas where you have a solid footing.
2. Turn win-lose situation in to win-win opportunities with the right
benefit-sharing models.
3. Select partners based on capacity and strategic alignment, not just
size.
 How collaborate?
4. Invest in the right infrastructure and people.
5. Jointly manage performance and measure impact.
6. Collaborate for the long term. (www.onvestopedia.com)

2.6 Elements of supply chain

 2.6.1 Supply chain operations

The design parameters or policy decision that define the shape and capability
of any supply chain with in the context created by the policy decisions, a
supply chain goes about doing its job by performing regular, ongoing
operations, these are the “nuts and bolts” operations at the core of every
supply chain.

As a way to get a high level understand of these operations and how they relate
to each other, we can use the supply chain operation research or SOCR model
developed by the supply chain council (Supply chain council Inc., 1150 free
port Road, Pittsburgh, PA 15238, www.supply chain. Org). This model
identifies four categories of operations. We will use these following four
categories to organize and discuss supply chain operations:-

I. Plan

This refers to all the operations needed to plan and organize the operations in
the other three categories. We will investigate three operations in this category
in some detail:- demand forecasting; product pricing; and inventory
management.

a. Demand forecasting:- Supply chain management decisions are based on

for casts that define which products will be required, what amount of
these products will be called for, and when they will be needed. The
demand fore cast becomes the basis for companies to plan their internal
operations and to co-operate among each other to meet market demand.

All forecasts deal with four major variables that combine to determine what
market conditions will be like. Those variables are:

1. Demand 2. Supply 3. Product characteristics 4. Competitive

Environment.
Demand refers to the overall market demand for a group of related products or
services.

Supply is determined by the number of producers or a product and by the lead

times that are associated with a product. The more producers there are of a
product and the shorter the lad times, the more predictable this variable is.
When there are only a few suppliers or when lead times are longer, there is
more potential uncertainty in a market like variability in demand, uncertainty
in supply makes forecasting more difficult. Also, longer lead times associated
with a product require a longer time horizon over which for costs must be
done supply chain for costs must cover a time period that encompasses the
combined lead times of the components that go in to the creation of a final
product.

Product characteristic includes the features of a product that influence

customer demand for the products. Is the product new and developing quickly
like many electronic products or is the product mature and changing slowly or
not at all?

Competitive environment refers to the actions of a company and its

competitors. Forecasts should also account for anticipated promotions and
price wars that will be initiated by competitors.

Forecasting methods

1. Qualitative Relies on a person’s intuition or opinions

2. Causal Assumes that demand is strongly related to
certain factors
3. Time series Based on historical demand patterns
4. Simulation Combines causal and time series methods.

b. Product pricing
Companies and entire supply chain can influence demand over time by using
price. It will tend to either maximize revenue or gross profit. Typically
marketing and sales people want to make pricing decisions that will stimulate
demand during peak seasons. The aim here is to maximize total revenue. Often
financial and production people want to make pricing decisions that stimulate
demand during low periods. Their aim is to maximize gross profit in peak
demand periods and generate revenue to cover costs during low demand
periods.

c. Inventory management

Inventory management is a set of techniques that are used to manage the

inventory levels with in different companies in a supply chain. The aim is to
reduce the cost of inventory as much as possible while still maintaining the
service levels that customers require. Inventory management as an ongoing
process of balancing products inventory level to meet demand and exploiting
economies of scale to get the best product prices. (Bhatunger 2000).

The inventory management operation in a company or an entire supply chain

is composed of a blend of activities related to managing the three different
types of inventory that is cycle inventory, seasonal inventory and safety
inventory. Each types of inventory has its own specific challenges and the mix
of these challenges will vary from one company to another and from one supply
chain to another.

1. Cycle inventory:- Is the inventory required to meet product demand over

the time period between placing orders for the products cycle inventory
exists because of economies of scale make it desirable to make fewer
orders of large quantities of a product rather than continuous orders of
small product quantity.
Cycle inventory is the build up of inventory in the supply chain due to
the fact that production and stocking of inventory is done is lot sizes that
are larger than the ongoing demand for the product.
 2. Seasonal inventory: It happens when a company or a supply chain with
a fixed amount of productive capacity decides to produce and stockpile
products in anticipation of future demand. If future demand is going to
exceed productive capacity, then the answer is to produce products in
times of low demand that can be put in to inventory to meet the high
demand in the future.
3. Safety inventory: Is necessary to compensate for the uncertainty that
exists in a supply chain. Retailers and distributors don’t want to run out
of inventory in the face of unexpected customer demand or unexpected
delay in receiving replenishment orders so they keep safety stock on
hand. Safety inventory for an item can be defined as the amount of
inventory on hand for an time when the next replenishment.

Four ways to reduce safety inventory

1. Reduce demand uncertainty Learn to do better product demand forecast

2. Reduce order Lead time shorter lead times mean less safety inventory
needed for coverage
3. Reduce lead time variability:- Further reduces need for safety inventory
4. Reduce availability uncertainty:- Ensure product availability when
demand occurs (Bowersox, closs, cooper 2010)
II. Source (procurement)

Traditionally the main activities of a purchasing manager were to beat up

potential suppliers on price and then buy products from the lowest cost
suppliers that could be found. That is still an important activity, but there are
other activities that are becoming equally important. Because of this the
purchasing activity is now seen as a part of broader function called
procurement. The procurement function can be broken in to five main activity
categories these are:

1. Purchasing: These activities are the routine activities related to issuing

purchase orders for needed products.
 2. Consumption management: Effective procurement being with an
understanding of how much of what categories of products are being
bought across the entire company as well as by each operating unit.
There must be an understanding of how much of what kinds of products
are bought from whom and at what prices.
3. Vendor selection: There must be an ongoing process to define the
procurement capabilities needed to support the company’s business plan
and its operating modes. This definition will provide insight in to the
relative importance of vendor capabilities. The value of these capabilities
have to be considered in addition to simply the price of a vendor’s
products
4. Contract negotiation:- As particular business needs arise. Contracts
must be negotiated with individuals vendors on the preferred vendor list.
This is where the specific items, price, and service levels are worked out.
The simplest negotiations are for contracts to purchase indirect products
where suppliers are selected on the basis of lowest price. The most
complex negotiations are for contracts to purchase direct materials that
must meet exacting quality requirements and where nigh service levels
and technical support are needed.
5. Contract management: Once contracts are in place, vendor performance
against these contracts must be measured and managed. Because
companies are narrowing down their base of suppliers, the performance
of each supplier that is chosen becomes more important. A particular
supplier may be the only source of a whole category of products that a
company needs and if it is hot meeting its contractual obligations the
activities that depend on those products will suffer. (Douglas M. James
1998)
III. Make (product Design)

Product designs and selections of the components needed to build these

products are based on the technology available and product performance
requirements. When considering product design from a supply chain
perspective aim is to design products with fewer parts, simple designs, and
modular construction from generic sub-assemblies.

A product design that does a good job of co-ordinating the three perspectives-
design, procurement, and manufacturing will result in a product that can be
supported by an efficient supply chain. This will give the product a fast time to
market and a competitive cost.

Production scheduling (Make): Production scheduling allocates available

capacity (equipment, labor and facilities) to the work that needs to be done.
The goal is to use available capacity in the most efficient and profitable
manner. The production scheduling operation is a process of finding the right
balance between several competing objectives:

 High utilization rates- This often means long production runs and
centralized manufacturing and distribution centers. The idea is to
generate and benefit from economies of scale.
 Low inventory level- This usually means short production runs and just-
in time delivery of raw materials. The idea is to minimize the assets and
casted up in inventory.
 High level of customer service- Often requires high level of inventory or
many short production runs. The aim is to provide the customer with
quick delivery of products and not to run out of stock on any product.

When a single product is to be made in a dedicated facility, scheduling means

organizing operations as efficiently as possible and running the facility at the
level required to meet demand for the product.

Production scheduling is a constant balancing act between utilization rates,

inventory levels, and customer service levels.
 High utilization rates

long production runs, centralized

manufacturing and distribution facilities

Low level of inventory High level of customer service

Short production runs, Just in- Many short production runs, high
time delivery of law materials inventory levels

(From chopra and meindl in their supply chain management book)

Facility management (make): All facility management decision happen with in

the constrains set by decisions about facility locations facility management
takes location as a given and focuses on how best to use the capacity available.
This involves making decisions in three areas:

1. The role each facility will play

2. How capacity is allocated in each facility
3. The allocation of suppliers and markets to each facility the role of each
facility will play involves decisions that determine what activities will be
performed in which facilities.

How capacity is allocated in each facility is dictated by the role that the facility
plats- capacity allocation decisions results in the equipment and labor that is
employed of the facility. It’s easier to change capacity allocation decision than
to change location. So, once decided, capacity allocation strongly influences
supply chain performance and profitability, (From Ganeshan and Harrison)
The allocation of suppliers and markets to each facility is influenced by the
first two decisions. Depending on the role that a facility plays and the capacity
allocated to it, the facility will require certain kinds of suppliers and the
products and volumes that it can handle mean that it can support certain
types of markets. Decisions about the suppliers and markets to allocate to a
facility will affect the costs for transporting supplies to the facility and
transporting finished products from the facility to customers. These decisions
also affect the overall supply chain’s ability to meet market demands. (Peter
meindl, 2001)

IV. Delivery (order management)

Order management is the process of passing order, information grom

customers back through the supply chain from retailers to distributors to
service providers and producers. This process also include passing information
about order delivery dates, product substitutions, and back orders forward
through the use of the telephone and paper documents such as purchase
orders, sales orders, change orders, pick tickets, packing lists, and invoices.

The order management process needs to do exception handling and provide

people with ways to quickly spot problems and give, them the information they
need to take corrective action. This means the processing of routine orders
should be automated and orders that require special handling because of
issues such as insufficient inventory, missed delivery dares, or customer
change requests need to be brought to the attention of people who can handle
these issues. (From mentzer and Dewitt 2003)

Four Rules for efficient order management

1. Enter the order one and only once: Capture the order Electronically as
close to the organizational source as possible. Don’t manually re—enter
the order. Its usually best if the customers themselves enter their orders
into order entry system.
 2. Automate order routing: Automatically send orders to appropriate
fulfillment locations, people do only exception handing.
3. Make order status visible: Let customer and service agents see order
runs information automatically when ever they want. When an order
runs into problems, bring the order to the attention of service agents won
can resolve the problems.
4. Use integrated order management system: Electronically connect
order management systems with other related systems to maintain data
integrity order entry systems need product descriptive data and product
prices to guide the customer in making their choices. The system that
maintain this product data should communicate with order management
system (Zach G. Zacharia, 2001)

Delivery scheduling (Delivery)

The delivery scheduling process works with in the constraints set by

transportation decisions. For most modes of transportation there are two types
of delivery methods: Direct deliveries and milk run deliveries

a. Direct deliveries

Direct deliveries are deliveries made from one originating location to one
receiving location. With this method of delivery the routing is simply a matter
of selecting the shortest path between the two locations. Scheduling this types
of inventory involves decisions about the quantity to deliver and the frequency
of deliveries to each location. The advantages of this delivery method are found
in the simplicity of operations and delivery co-ordination since this method
moves products directly from the location where they are made or stored in
inventory to a location where the products will be used. It eliminates any
intermediate operations that combine different smaller shipments into a single,
combined larger shipment. ( Soonhong min, Nancy W. 2001)

b. Milk run Deliveries

Milk run deliveries are deliveries that are routed to either bring products from a
single originating location to multiple receiving locations or deliveries that
bring products from multiple originating locations to a single receiving location.

The advantages of this method of delivery are in the fact that more efficient use
can be made of the mode of transportation used and the cost of receiving
deliveries is lower because receiving locations get fewer and larger deliveries.
There are two main techniques for routing milk run deliveries these are:-

 The savings matrix technique.

 The generalized assignment technique (Goldratt, Eliyahu M, 1984)

The saving matrix technique is the simpler of the two techniques and be used
to assign customers to vehicles and to design routs where are delivery time at
receiving locations and other constraints.

The generalized assignment techniques is more sophisticated and usually gives

a better solution than the savings matrix technique when there are no
constraints. On the delivery schedule other than the carrying capacity of he
delivery vehicle. The disadvantage of this technique is that it has a harder time
generating good delivery schedules as more and more constraints are included.
(Mentzer, John T., William De Witt)

Delivery sources

Deliveries can be made to customers from two sources:

 Single product location

 Distribution centers

Single product locations: Are facilities such as factories or ware houses where
a single product or a narrow range of related items are available for shipment.

Distribution centers: Are facilities where bulk shipments of products arrive

from single product location, when suppliers are located a long distance away
from customers, the use of the distribution center provides for economies of
scale in long distance transportation to bring large amounts of products to a
location close to the final customers. The distribution center may warehouse
inventory for future shipment or it may be used primarily for cross docking.
(Chopra and peter Meindl)

2.7 Supply chain logistics

Supply chain logistics is the flow of material, information and money between
corporations (inter workstation, inter facility, inter corporate and inter chine).
There is a lot of confusion surrounding the term logistics and supply chain
management. We distinguish the two by explaining hat the supply chain is the
network of facility (Warehouse, factories, terminals, ports, stores and homes).
Vehicles (Truck, trains, planes and ocean vessels) and logistics. Suppliers and
its customer’s customers logistics is what happens in the supply chain.
Logistics activities (customer’s response) inventory management. Supply,
transportation, and ware housing connect and activate the objects in the
supply chain. To borrow a sports analogy. Logistics is the game played in the
supply chain area. (Eduward H. Frazeleoh. 08)

2.8 Green supply chain

According to Bearing point’s 2008 supply chain monitor, 35% of companies

have already established a green supply chain. The bigger the company, the
greater the level of interest in green supply chain: 54% of companies with
turnover in excess of 700 million claim to have established a green supply
chain.

The main objective of a green supply chain is to find the right balance between
economic and ecological optimization. In the past optimization was mainly
driven by costs and service levels, but now the environmental impact adds a
third dimension. In terms of sustainability, companies have to react to climate
change and air pollution. Green supply chain is usually implemented in order
to

 Comply with new regulations (reduction of green house effect, carbon

emission limits)
 Decrease costs through optimized organization
 Enhance the company brand image (www.Wikipidia.com)

Green supply chain is about more than just reducing packaging or your carbon
foot print. It involves making environmentally wise choices in supply chain
design and execution including managing the reverse supply chain to efficiently
manage and remove waste. The key objective of a business is to grow share
holders values, so it would be a brave organization that decided to do
everything it could be green irrespective of costs.

2.8.1 Profiting from being green

How ever some companies have seen that this not a bad thing and indeed have
been able to convert the public’s interest in all things green into increased
profits. A number of companies have shown that there is a proof of the link
between improved environmental performance and financial gains. Companies
have looked to their supply chain and seen areas where improvements in the
way that they operate can produce profits. (www.greenprof.org)
 Chapter Three

3. Research methodology

3.1 Research approach

The research approach of this study was descriptive research for these
research we were choosed descriptive approach be cause its used to describe
the state of fairs as it exists at present.

3.2 population and sampling

The total population of Bahir Dar leather tannery were accounts 155 employee
from the total employee 114 of them are permanent and 41 are temporary and
from the total population in this research we took 35 (23%) samples. For this
study stratified sampling method would be used the reason was to collect full
information in each function. The respondents has been selected from each
factions randomly.

Department Number of Sample size Number of

population percentage sample size
Administration 5 1 2
Wet end production 34 4 6
Dry end production 35 4.5 7
Garment 35 4.5 7
Finance and procurement 10 2 3
Personnel and security 12 3 4
Store 16 3 4
Technical manager 8 1 2
Total 155 23 35

3.3 Data collecting instrument

In this research we used primary data source the primary source of data would
be collected from the sample 35(23%) of the employees by using questioner and
interviews the questioners format was likert scale the resone was it used when
ever respondents are asked to make a judgment in terms of sets of ordered
categories such as:

5. Strongly agree 4. Agree 3. No opinion 2. Disagree 1. Strongly

disagree
 Chapter Four

4. Data analysis and interpretation

Under this section the collected data are analyzed and the discussions are
done based on the information obtained from the respondents the
questionnaires were distributed to a total of 35 respondents from current
employees of Bahir Dar leather tannery among which 28(80%) where returned.

Generally, the collected data are analyzed and presented below by using simple
statistical tools such as table, percentage and mean.

4.1 General profile of the respondents

Table 4.1 sex

Sex
Frequency Percent
Valid M 17 60.714
F 9 32.143
Total 26 92.857
Missing System 2 7.1429
Total 28 100
Source from questionnaire 2014

Table 4.1 indicates out of 28 respondents 17 (60.714) are male, only

9(32.143%) are females, and 2(7.1429%) are missing from the given
information.
Table 4.2 Age

Age
Frequency Percent
Valid 18-25 13 46.429
26-34 9 32.143
35-50 3 10.714
>50 2 7.1429
Total 27 96.429
Missing System 1 3.5714
Total 28 100
Source from questionnaire 2014

Table 4.2 show Bahir Dar leather tannery employees are more concentrated on
18-25 and it accounts 13(46.43%) of the respondents age groups from 31-45
are also accounts the next larger share 9(32.14%).

Table 4.3 Work experience

Work experience
Frequency Percent
Valid < 1 year 4 14.286
1-5 16 57.143
6-10 3 10.714
>11 5 17.857
Total 28 100
Source from questionnaire 2014
As table 4.3 explain from 28 respondents 4(14.3%) of them have work
experience < 1 year, while 16(57.143%) have worked between 1-5 years,
3(10.7%) have experience, between 6-10 years. 5(17.85%) worked for more than
11 years.

Table 4.4 Educational level

Educational level
Frequency Percent
Valid Certificate 8 28.571
MSC/MA 2 7.1429
BSC/BA 9 32.143
Diploma 3 10.714
Total 22 78.571
Missing System 6 21.429
Total 28 100
Source from questionnaire 2014

According to table 4.4, 8(28.57%) respondents are certificate holder, 2(7.14%)

respondents are MSC/MA holder, the remaining 9(32.14%) and 3(10.714%) of
the respondents are first deplete and Diploma holder respectively.

Table 4.5 Field of specialization

Field of specialization
Frequency Percent
Valid Management 3 10.714
Purchasing 4 14.286
Business related 5 17.857
Other 6 21.429
Total 18 64.286
Missing System 10 35.714
Total 28 100
Source from questionnaire 2014

As Table 4.5 reveals the specialization of the respondents from the total
number of respondents 3(10.714%) are specialized in management, 4(14.28%)
specialized in purchasing, while 5(17.86%) were specialized in business related,
6(21.43%) of the respondents are specialized by other business related fields.

Assessment of supply chain activities in Bahir Dar leather tannery

Table 4.6 supply chain performance of Bahir Dar leather tannery

No Operation Weighted mean

1 Plan 4.05
2 Source 3.64
3 Make 3.87
4 Delivery 3.87
5 Disposal 3.71
6 Collaboration 3.53
Source from questionnaire 2014

Based on the above figure plan performance experience 4.05 mean, source
experience a mean of 3.46, make performance have mean of 3.87, disposal
experience 3.71 mean and collaboration has got mean of 3.53. This indicates
that relatively the factory has higher performance in plan activity and relatively
lower performance in collaboration activity.

Plan performance

Supply chain planning typically consists of functions that produce a relatively

longer. From picture for future operations. The planning process provide the
ability to create multiple scenarios and evaluate them for specific metrics to
determine the optimal plans.
Table 4.7 Plan performance

No Statement Weighted mean

1 Collaboration planning for timely product 4.21
development
2 Indifference in demand and supply plans 3.741
3 Plan for price strategy to influence demand 4.14
4 Plan to use and manage inventory effectively 4.11
Source from questionnaire 2014

In table 4.7 collaborative planning for timely product development experience a

mean of 4.21 in plan aspect this shows the highest performance, difference in
demand and supply plans hold the lowest performance which is 3.74 mean,
mean 4.14 represent the difference in demand and supply plans and plan to
use and mange inventory effectively hold mean of 4.11.

Sourcing process consists of finding out the best source of supply, determining
the feasibility of a strong and lasting relationship with the vendor, and
managing this relationship over time to mutual benefit and advantage.

Table 4.8 Source performance

No Statement Mean
S5 Uninterrupted flow of materials required for 3.54
operation
S6 Working with suppliers to increase raw 3.48
materials quality
S7 Having competent supply 3.92
S8 Purchasing raw material with a right price 3.63
 and quality
Source from questionnaire 2014

In table 4.8 mean 3.54 represent uninterrupted flow of materials required for
operation, mean 3.48 represent working with suppliers to increase raw
materials quality, having competent suppliers has mean of 3.92. and
purchasing raw materials with a right price and quality hold mean of 3.63.
This figure shows us the company have strong suppliers and relatively low level
of working with suppliers to increase raw materials quality.

Make performance

Make performance or product design and selections of the components needed

to build these products are based on the technology available and product
performance requirements.

Table 4.9 Make performance

No Statement Weighted
mean
M9 Communication among functional 4.04
departments
M10 Designing products based on the technology 3.70
available
M11 Effective use of production materials 3.82
M12 Facility allocation for production 4.11
M21 Minimization of raw materials obsolescence 3.33
Source from questionnaire 2014

Table 4.9 shows the factory make performance mean 4.11 represent facility
location for production relatively it’s the highest performance from make
functions.
Where as mean 3.33 represents minimization of raw material obsolescence
which is the first lowest performance experienced among all function and also
list from make categories.

Delivery performance

Customer demand is the fountain head for all logistics activities. Each
organization must make a clear distinction between the customers and
consumers.

Table 4.10 Delivery performance

No Statement Weighted mean

D13 Delivery at the right time 3.85
D14 Making the products easy to by consumer 3.96
D15 Choosing appropriate mode of transportation for 3.79
delivery
Source from questionnaire 2014

Based on Table 4.10 mean 3.96 represent making the products easy to get by
customers relatively it’s the highest performance experienced on delivery.
Inversely, mean 3.79 is the lowest performance experienced for choosing
appropriate mode of transportation for delivery

Disposal performance

The field of supply chain management has mare recently directed its attention
to the role of supply chain in both impacts to the natural environment and the
generation of environmental performance change.

Table 4.11 Disposal performance

No Statement Weighted mean

D16 Having good relation with environments 3.74
D17 Disposal of waste 3.76
D18 Effective use of repaired materials 3.61
Source from questionnaire 2014

From table 4.9 in Bahir Dar leather tannery having good relation with
environments hold 3.74 mean, mean 3.76 represent disposal of wastes and
effective use of repair materials hold mean of 3.61

Table 4.12 Collaboration performance

No Statement Weighted mean

C19 Willingness to share information that can benefit 3.69
all the members of collaboration team.
C20 Mutual trust between the organization and with 3.52
others.
C21 Use of information technology for data storage and 3.46
communication
Source from questionnaire 2014

Based on the table 4.10 willingness to share information that can benefit all
the members of collaboration team holds mean of 3.59, mean 3.52 represent
mutual trust between the organization and others and mean 3.52 represent
use of information technology for data storage and communication. Based on
table 4.10 the researchers conclude that is good willingness to share
information that can benefit all the member of collaboration team. In opposite,
use of information technology for data storage and communication have
relatively low performance in collaboration.
 Chapter five

5. Summary, conclusion and recommendation

This chapter deals with the last three parts of the study. The summary of
major findings, conclusion and recommendation.

5.1 Summary
- The lowest performance in the delivery was choosing appropriate mode
of transportation for delivery with a mean of 3.79.
- The lowest performance in collaboration performance of the company
was use of information technology for data storage and communication
with a mean of 3.46.
- The weakest performance in the disposal performance was effective use
of repaired materials with a mean of 3.61.
- In make performance the weakest part was minimization of raw
materials obsolescence with a mean of 3.33
- The lowest performance in the source performance was working with
suppliers to increase raw materials quality with a mean of 3.48
- In plan performance the weakest part was indifference in demand and
supply plans with a mean of 3.741.
- The lowest supply chain performance of Bahir Dar leather tannery was
collaboration with a mean of 3.53.
5.2 Conclusion

The research activity needs to be concluded from the result of the analysis
therefore the researcher here also conclude findings of the study on the role of
supply chain management on organizational performance.
 - Problem results in the delivery performance was use of mode of
transportation.
- In collaboration performance the problem result was lack of sufficient
use of information technology of data storage and lack of
communication.
- Problem results in the disposal performance was the way that the use of
repaired materials.
- Problem results in the make performance was excess of raw material
obsolescence and lack of ware house deign.
- Problem results in the source performance was lack of strong
relationship to working with suppliers to increase raw materials quality.
- Problem results in he plan performance was unbalanced demand and
supply plans.
- Among these performances collaboration of the Bhair Dar leather
tannery was lowest. The problem results in collaboration was strategic
partnership with suppliers and training partners in order to set mutually
beneficial goals.
5.3 Recommendation

After we conclude from the result of the analysis therefore the researcher here
also recommended findings of the study on the role of supply chain
management on organizational performance.

- To improve the delivery performance and minimizing transportation

shortage for employees by providing service.
- By building trust across the collaboration teams communicating the use
full information by using to days fastest communication technology.
- Giving training for maintenance department to repair used material.
- Minimizing raw material obsolescence by providing the right treatment
and increase warehouse design.
- Strong linkage with the suppliers to increase raw materials quality by
using price incentive for supplies with good quality.
- To avoid difference in demand and supply plans the company should
plan by considering capacity of production.
- To establish strategic partnership among suppliers and training partners

Bibliography

 Burt N. David, Donald W. Dobler and Stephen L. Starting world class

supply management. The Key to supply chain management.
 Chopra, Sunil, and peter Meindl, P.g 20,2001
 D.K Agrawal, text book of logistics and supply chain management,
Macmilan India.
 Donald I Brwer sox, David J closs, M Bix by cooper, supply chain
logistics management. Mc Graw. Hill companies, new Dehli
 Fundamental of Logistics Management. Boston, MA: Irwin/ Mc Graw-
Hill.
 from Ganeshan and Harrison. P.g 2, 1995
 from Mntzer, DeWitt, Deebler, Min, Nix, Smith and Zacharia in their
article Defining supply chain management.
 G. keong Leong. Kean-Choon Tan. 1995.
 Http://www.Wikipidia.com
 Kshrdara Bhat. Logistics and supply chain management homology
publishing house, 2009.
 Lambert, Douglas M., James R. Stock, and Lisa M. Ellram 1998.
 Leather and leather products technology institute 2010.
 Nancy W. Nix, Carlo D. Smith, and Zach G. Zacharia 2001.
 Poul R. Murphy, TR Donald F. Wood contemporary Logistics, prentice
hall of India. New Dehli 9th edition, 2008.
 Rahulu, Altekas 2003, supply chain management practice hail of India a
private Limited.
 Supply chain management Ashish Bhatnagar. Joel D. Wisner.
 Stanley E. Fawcett Lisa M. Ellram Jeffery A. Ogdan
 VIVEKSEAGAL, 1992