THE ROLE OF SUPPLY CHAIN INTEGRATION ON ORGANIZATIONAL

PERFORMANCE
(The Case of Selected Food Oil Factories in Amhara Region)

A proposal Submitted to the College of Business and Economics Department of

management in partial fulfillment of the Requirements for the Award Degree of
Masters of business administration.

DEPARTMENT OF MANAGEMENT

COLLEGE OF BUSINESS AND ECONOMICS

ADDIS ABABA UNIVERSITY

By: Melat Habtemariam Abate

Advisor:

February, 2023
Addis Abeba, Ethiopia
 Contents
Introduction ................................................................................................................................................... 3
1.1. Background of the Study: ................................................................................................................. 3
1.2. Statement of the Problem .................................................................................................................. 5
1.3. Objective of the study ....................................................................................................................... 6
1.3.1. General objective .......................................................................................................................... 6
1.3.2. Specific Objectives ....................................................................................................................... 6
1.3.3. Research Question ........................................................................................................................ 6
1.4. Significance of the Study .................................................................................................................. 7
1.5. Scope of the study ............................................................................................................................. 8
1.6. Limitations of the study .................................................................................................................... 9
REVIEW OF RELATED LITERATURE .................................................................................................. 10
2.1. Introduction ..................................................................................................................................... 10
2.2. Conceptual Definition ..................................................................................................................... 10
2.3. Theoretical Framework ................................................................................................................... 11
2.4. Supply Chain Integration ................................................................................................................ 11
2.6. Demand uncertainty ........................................................................................................................ 14
2.7. Supply Chain Operational Performance: ........................................................................................ 14
2.8. Organizational performance ............................................................................................................ 14
2.8.1. Relationship between SCI and organizational performance ....................................................... 15
2.9. Empirical Reviews ...................................................................................................................... 16
2.10. Conceptual Framework & Design............................................................................................... 18
Research Methodology ............................................................................................................................... 19
3.1. Research Approach ......................................................................................................................... 19
3.2. Research Design.............................................................................................................................. 19
3.3. Population of the Study ................................................................................................................... 20
3.4. Sampling Technique ....................................................................................................................... 20
3.5. Sample Size Determination............................................................................................................. 20
3.6. Data type and source ....................................................................................................................... 21
3.7. Data Collection Method & Procedure ............................................................................................. 22
3.8. Data Analysis Method..................................................................................................................... 22

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3.9. Reliability........................................................................................................................................ 22
3.10. Validity ....................................................................................................................................... 22
4. Work Plan and Budget ........................................................................................................................ 23
4.1. Time plan ........................................................................................................................................ 23
4.2. Budget ............................................................................................................................................. 23
Conclusion .................................................................................................................................................. 24
References ................................................................................................................................................... 25

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 CHAPTER ONE

Introduction

1.1. Background of the Study:

A well-integrated supply chain is a major business concern for companies looking to compete in the
international markets. Supply chain integration (SCI) encourages firms to reconfigure their assets and
abilities internally and externally to solidify their supply chain overall with an end goal to enhance long
haul performance (Huo, 2012).

Today the new source of competition lies outside the walls of organizations, and is determined by how
effectively companies link their operations with their Supply Chain partners such as suppliers, distributors,
wholesalers, retailers and end customers Bogale A.(2016). Each firm in a Supply Chain therefore, directly
or indirectly affects the performance of other Supply Chain members, as well as the overall performance of
the Supply Chain. (Sengupta, K., D.R. Heiser, L.S. Cook. 2006).

Kim (2006) measured the level of supply chain integration in terms of a company’s integration with
suppliers, with customers, and cross functional integration within a company and showed the potential
benefits of integrating a supply chain as a basic in accomplishing performance and competitive advantages
(Zhao et al., 2013).

Supply chain management (SCM) seeks to enhance competitive performance by closely

integrating the internal functions within a company and effectively linking them with the external
operations of suppliers, customers, and other channel members. Achieving SCI is a complex task.
The benefit of such SCI can be attained through efficient linkage among various supply chain
activities, and the linkage should be subject to the effective construction and utilization of various
supply chain practices for integrated supply chain. This means that a firm that is pursuing the
effective construction of SCM practices needs to pay attention to SCI.

Supply chain integration (SCI) has become increasingly critical for organizational success in the
long run (Huo et al., 2014). In order to survive, firms need to integrate with their suppliers and
customers and have extensive collaboration with them. SCI refers to the strategic collaboration
between manufacturers and their supply chain partners in order to leverage internal and external
resources and capabilities across the whole supply chain (Flynn et al., 2010). Members of the
supply chain work together and collaborate to improve performance, resulting in more profitability
while meeting customer demand (Kumar et al., 2017). SCI has been commonly recognized as an
important factor that positively influences firms’ competitive advantage (Devaraj et al., 2007). It
has proved to have a significant positive impact on firm’s operational and financial performance
(Mohammadi et al., 2014). Supply chain integration is a system that improves all activities which

3
carried out by organization. Supply chain management is a complex system which covers all
supportive activities from suppliers to after sales services. Vaidya and Hudnurkar (2012) stated
that collaboration in supply chain plays a dominant role for improving organization’s performance
and gaining competitive advantage. Cooper, et al. (1997) said that to utilize the supply chain at its
maximum performance level, organizations have to integrate its goals and activities together.
Vaidya, et. al (2012:294) mentioned that supply-chain partners need to focus on various elements
to ensure competitive advantage: price negotiation to increase in margin, and financial
collaboration to ensure innovative product design. Lambert and cooper, (2000) announced that
supply chain management requires integration and coordination for satisfying and responding to
change in consumer demand. Finally, Frohlich and Westbrook, (2001) pointed out that supply
chain integration influences performance.

In this study the relationship between SCI and performance will be investigated from the perspective of
organizational performance. Thus, SCI can be viewed as internal and external integrative capabilities that
lead directly or indirectly to company performance.

Therefore, it seems that its worth to study the role of supply chain integration processes and
activities on organizational performance, so this study will investigates the roles of supply chain
integration on organizational performance for selected food oil factories in Amhara region.

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 1.2. Statement of the Problem
According to Li et al (2006), different organizations have not recognized role of supply integration
on building sustainable competitiveness of their goods and services in an increasingly crowded
market places and enhancing firm performance and overall supply chain performance. This has
resulted in increased attention of managers, consultants and business owners towards proper
supply chain management in business organizations (Tan et al, 2008). The early attempts of
empirical research in SCM have been limited at developing instruments capable of measuring
SCM practices. Most recently, Gibson et al., (2006), Alvarado et al., (2011). They have used
financial and market criteria to organizational performance (return on investment, market share,
profit margin on sales, the growth of return on investment, the growth of sales and the growth of
market share). Also, they investigated the relationship among SCM practices, operational
performance and SCM-related organizational performance. These studies and others have
produced various results due to the performance of the organization subjectively and objectively.

Shepherd and Günter (2006) categorize SC performance measures into five SC processes: plan,
source, make, deliver and return or customer satisfaction, whether they measure cost, time, quality,
flexibility and innovativeness and whether they are quantitative or qualitative measures. Measures
can be categorized according to business processes or into strategic, operational and tactical
management levels. (Shepherd & Gunter 2006).

Measuring supply chain performance is not as such simple as traditionally known sets of
performance measurement that only focuses on financial measures. Frohlich and Westbrook
(2001) investigate the effects of supplier-customer integration on organizational performance;
Gyaneshwar, (2012) study operational performance through SCM Practices and Moslem (2013)
study the impact of supply chain management practices on competitive advantage.

Managing the supply chain has become a way of improving performance by reducing uncertainty
and improving service (Li et al. 2006), and many organizations continue to struggle to understand
the complex issues associated with the coordinated planning and supply chain integration among
members of their supply network (Lori & Daniel 2011). Footwear is an active product in
international markets with a very stiff competitive market, where shoe producers have a range of
costs to manage with a particular focus on raw material and production costs. Other important
costs include regulatory compliance costs, logistics costs, general overheads (such as utilities) and
marketing.

Therefore, for the effort to achieve generalization of the causal relationship between SCM and
firm performance, this paper is to contribute to measure the role of supply chain integration and
organizational performance in the case three well known oil factories.

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1.3. Objective of the study
In this section, both the general and specific objectives of the study which were analyzed in
the results and discussions part are separately elaborated.

1.3.1. General objective

The general objective of this study is to assess the role of Supply Chain integration on
organizational performances (the case of selected food oil factories in Amhara region).

1.3.2. Specific Objectives

Specific objectives of the study are:

1. To analyze the relationships between supply chain integration and the organizational
performance with the respect to internal, external, information, supplier, customer and
measurement integrations, and non-financial performance (Responsiveness, Reliability,
Flexibility, Quality, Innovation, and Delivery) respectively.
2. Examine the dimensions of supply chain integration with respect to internal integration,
external integration, information integration, supplier integration, customer integration
and measurement integration
3. To assess roles of supply chain integration on organizational performance related to the
internal, external, information, supplier, customer and measurement integrations of
supply chain, and on that of non-financial (Responsiveness, Reliability, Flexibility,
Quality, Innovation, and Delivery) organizational performance (the case of selected food
oil factories in Amhara region).

1.3.3. Research Question

1. What is the level of supply chain performance of the selected companies?

2. What is effect of Customer Relationship on organizational performance?

3. How supply chain share information on organizational performance?

4. To what extent is companies supply chain performance is measured?

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 1.3.4. Research Hypothesis

H1. Different dimensions of supply chain integration improve organizational performance.

H1a. Internal integration improves organizational performance.

H1b. Product integration improves organizational performance.

H1c. Process integration improves organizational performance.

HI. Different dimensions of supply chain integration improve financial performance.

Ha. Internal integration improves financial performance.

H1b. Product integration improves financial performance.

H1c. Process integration improves financial performance.

1.4. Significance of the Study

First, the study will serves as source of reference for further studies in the area of supply chain
integration and management of food oil exporter factories. Hopefully, it will inspire other
students to further deepen their research knowledge while opening the doors to investigate or
reference who wants to study further in this.

Second, the study will help the management of selected Food oil Factories, specifically department
heads at supply chain management of the organization, in the process of decision making and
organization performance in exporting. The study will provide extensive knowledge for the
researcher on supply chain management practices and their role and impact on organizational
performance.

Third, the study will also benefit for other similar studies both academicians and other
practitioners as a documented in the future. In addition, the final findings of the research paper
will contribute a lot for food oil companies on how to implement better supply chain integration
that will meet their customer satisfaction and more to be productive.

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Key terms and terminologies

Supply Chain:

Supply chain is considered as a system that includes group of activities, processes and sub-
processes such as procurement, operations, transportation, warehousing. It aims to provide the
products and/or services either to consumer or customer starting with purchasing materials and
equipment then transforming it to semi- finished products that will be reprocessed again to produce
the final products. Supply chain management is concerned with the planning and managing the
flow of materials, products and services among and between these processes. The ultimate goals
of managing supply chain is to provide the products at the agreed delivery time, suitable quality,
and competitive price to the customers, and that is reflected by the customer's satisfaction and the
overall organizational performance.

Supply Chain Integration:

Due to the intense of global competition, the organizations create cooperative and mutually
beneficial relationship among supply chain partners (Wisner and Tan, 2000). Bowersox et. al.
1999, Westbrook and Frohlish (2001), pointed out that organizations or companies need to
implement supply chain integration to meet the new challenges of the global competitive
environment. Many studies propose different supply chain definitions. Rosenzweig, et. al. (2002),
Pagell (2004),and Han & Omta (2007) defined integration of supply chain as a process of
collaboration in which companies work together in a cooperative manner to arrive at mutually
acceptable outcomes. Zhao, et. al. (2008) described supply chain integration as “the degree to
which an organization strategically collaborates with its supply chain partners and manages intra-
and inter-organization processes to achieve effective and efficient flows of products, services,
information, money and decisions, with the objective of providing maximum value to its
customers”.

1.5. Scope of the study

This study intends to identify the role of supply chain integration on organizational
performance. For this objective the researcher used role of supply chain integration on
organizational performance of food oil factories in Amhara region. This study is delimited to only
supply chain management department and organizational performance. The supply chain
integration that are included in the study are strategic supplier partnership, customer relationship,
level of information sharing and quality of information sharing and extent of internal lean
practices. In addition to this the study shows the right way of exporting seed oil product of supply
chain integration from food oil companies to the right wholesaler and retails.

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1.6. Limitations of the study

1. Target population willingness are a big challenge to pursued to fill the questioner.
2. The research data will be collected in different areas of Amhara region so the data
collection will be difficult in a short period of time.
3. The expected staff member of the factories may not be available at the right time for the
interview and data collection.

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 CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1.Introduction
This chapter focuses on the literature review as conducted by the researcher. It includes a review
of the various studies that have been conducted by other researchers relating to the need for
integration of SC partners and the performance of organizations. Among the areas reviewed
include: supply chain integration, supply chain integration and organizational performance, the
drivers of supply chain integration, the benefits of supply chain integration. The chapter also
provides the research gaps identified and a comprehensive conceptual framework

2.2. Conceptual Definition

 Supply chain integration: the degree to which an organization strategically collaborates
with its supply chain partners and collaboratively manages intra-and inter organization
processes (Flynn, et al.2010).
 Supply Chain: Network of organizations that are involved, through upstream and
downstream linkages, in the different processes and activities that produce value in the
form of products and services in the hands of ultimate consumer (Ivy wigmore, 2013).
 Supplier partnership: a commitment over an extended time to work together to the
mutualbenefit of parties, sharing relevant information and the risks and rewards of the
relationship (H. Deshpande, 2017).
 Firm performance: The concept of organizational performance is the comparison of an
organization's goals and objectives with its actual performance in three distinct areas:
financial performance, market performance, and shareholder value. Financial
performance refers to an organization's results with regard to return on investment and
return on assets. The market performance refers to a company's ability to make and
distribute their outputs in the most cost effective way and to set a price that returns a
reasonable amount to suppliers.
 Internal integration: Internal integration is defined as the strategically aligned and
coordinated internal processes and functions for the purpose of achieving maximum
performance of an organization (Kumar, V., Nwakama, E., Garza-reyes, J. A.,
Rochalona, L., & Lopez-torres, G. C., 2017).
 External Integration: The ability of two or more companies to develop shared
connections that serve to guide their interactions when working together (i.e., external
relationship management) (Close, 2011).

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  Information integration: Information integration refers to the coordination of
information transfer, collaborative communication and supporting technology among
firms in the supply chain Leuschner, Rogers and Charvet (2013).
 Supplier integration: Supplier integration is the back down to the suppliers with product
development, flexibility of order of fulfilment, supply of high quality products, process
and specification change information, technology exchange and design support
(Baharanchi, 2011).
 Customer integration: The integration of customers in the supply chain is the
opportunity of having an overview of the requirements and customer’s specific needs as
the advantage of serving them better (Lotfi, Z., Sahran, S., & Mukhtar, 2013).
 Measurement Integration: It is the performance assessment of the supply chain as a
whole that also holds each individual firm or business unit accountable for meeting its
own goals (Scheinbaum, 2011).

2.3.Theoretical Framework
The theories of supply chain management, organizational performance and perspectives of supply
chain integration have been reviewed in the following sub-topics of this section.

2.4.Supply Chain Integration

A supply chain includes all parties involved in realizing customer demand. In addition to the
manufacturer and suppliers, supply chain includes distributers, wholesalers, retailers, and the end
customers. Inside the organization, supply chain includes the functions related to receiving and
fulfilling customer order. Some of these functions are operations, new product development,
marketing, finance, distribution, and customer service (Chopra & Meindl, 2007). SCI refers to the
level of strategic collaboration and management of inter- and intraorganizational processes in the
supply chain (Flynn et al., 2010). Most previous studies have considered SCI as an approach to
integrate information among suppliers, manufacturers, distributors, and customers (Pagell, 2004).
While some definitions of SCI emphasize material flows and components, others focus on
information, resources, and cash flows. (Flynn et al., 2010). SCI has many benefits for the firm,
including improvement in financial performance (Flynn et al., 2010; Kim, 2009; Oghazi, 2009;
Rosenzweig et al., 2003; Vickery et al., 2003), increase in customer satisfaction (Kim & Chai,
2016; Oghazi, 2009; Zailani & Rajagopal, 2005), and rise in the market share (Kim, 2009; Oghazi,
2009).

In general, SCI is divided into internal and external integration (Droge et al., 2004; Li, 2015).
Internal integration refers to the level at which the manufacturer organizes its internal activities,
processes, and strategies to meet the needs of its customers (Kahn & Mentzer, 1996). It involves

11
collaboration and coordination across organizational functions through information sharing in
order to better understand and address the needs of its customers (Flynn et al., 2016). External
integration refers to collaboration and coordination between the firm and its external supply chain
partners (Zhao et al., 2013). Previous studies have taken different approaches to categorizing
external integration. One approach divides external integration into supplier and customer
integration, which refers to coordinated and cohesive links between a firm and its suppliers or
customers (e.g., Boon-itt & Pongpanarat, 2011; Fazli & Amin Afshar, 2016; Flynn et al., 2010,
2016; Hosseini & Sheikhi, 2013; Kim, 2009; Oghazi, 2009).

Another approach categorizes external SCI into product and process dimensions (Fabbe-Costes &
Jahre, 2008; Huo et al., 2014). Product integration refers to the participation of suppliers and
customers in the development of new products (Huo et al., 2014; Khazanchi et al., 2007; Wagner,
2008). It aims to support the product development activities through close interaction between the
firm and its key suppliers and customers. Process integration refers to the cooperative and
coordinated design and implementation of supply chain processes with suppliers and customers.
The aim is to eliminate non-value added activities and improve the speed and flow of information,
material, and cash flow across the supply chain (Huo et al., 2014; Kim et al., 2012; Wagner, 2008).
In this study, we used the second approach for categorizing external dimensions of SCI. Thus, we
classify integration into internal, product, and process integration.

This classification has several advantages. First, it helps us to address the impact of SCI on firm
performance from an angel that has been less studied before. Previous studies have mainly focused
on integration with suppliers and customers as the dimensions of external integration. The use of
product and process integration in this study allows us to have a unified approach towards
integration with the main partners in supply chain (i.e., suppliers and customers) and examine the
effect of external integration across the whole supply chain instead of examining the separate
effects of integration with suppliers and customers. Furthermore, combining the relationship with
suppliers and customers assists in developing integrated strategies across the whole supply chain.
This enables firms to use their limited resources more effectively and improve their performance

2.5.Uncertainty

Uncertainty is the changes in environmental status and the inability to predict the effects of such
changes and their expected consequences on firms (Milliken, 1987). Flynn et al. (2016) classified
the uncertainty in supply chains into micro-, meso- and macro-levels. The micro-level uncertainty
occurs in processes repeating in firms and found in environments with lower complexity (Flynn et
al., 2016). Variability of material and information flows in value and time results in uncertainty
(Sivadasan et al., 2002).

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Micro-level uncertainty is concerned with data predicting through distribution, such as variability
of customer demand (Flynn et al., 2016). The meso-level of supply chain uncertainty refers to the
deviation between the information required by a supply chain member and the available
information (Galbraith, 1977). As the supply chain complexity increases, the need for information
increases (Leuschner et al., 2013).

Table 1.SCI Classifications

SCI classification Author(s)

Internal & External Integration Li (2015). Drage et al. (2004)
Internal Integration, Supplier Boon-itt & Pangpanarat (2011), Fazli & Amin Afshar (2016), Flynn
Integration & Customer Integration et al. (2010), Flynn et al. (2016), Hasseini & Sheiki (2013), Kim
(2009), Orghazi (2009), Zhao (2015)
Internal Integration, Product Fabbe-Castes & Jahre (2008), Huo et al. (2014)
Integration, & Process Integration

The macro-level supply chain uncertainty is related with a complex and dynamic environment in
which there are ambiguous and unstructured circumstances (Flynn et al., 2016), such as facing
natural disasters or unexpected shifts in customer demand. Other examples of macro-level
uncertainty are accidents, wars and terrorist attacks (Kauppi, 2013). Changes in economic
conditions, market turmoil, competition intensity and turmoil in industry and technology are major
sources of uncertainty in macro-level (Germain et al., 2008).

Boonyathan and Power (2007) argue that it is possible to mitigate uncertainty by close
coordination with both suppliers and customers. On the customer side, firm customers such as
wholesalers and retailers are closer to the end customers in the supply chain. Integration with them
leads to better demand forecasting through receiving more accurate information regarding the
demand of end customers. In the face of demand uncertainty, access to a more accurate information
on demand fluctuations becomes even more critical and helps in mitigating bullwhip effect and its
harmful consequences on firm performance. On the supply side, the early involvement of suppliers
in the production of new products is highly critical and can reduce costs associated with
uncertainties in new product development, resulting in positive impact on operational and financial
performance. While the effect of environmental uncertainty on firm performance appears to be
negative, it can have positive effects in practice. According to previous studies, environmental
uncertainty can result in higher levels of manufacturing flexibility (Patel et al., 2012), which, in
turn, improves firm performance (Ebrahimpour Azbari et al., 2018). Uncertainties in demand and
technology dimensions reinforce the positive relationship between customer participation and
process flexibility (Feng et al., 2010).

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 2.6.Demand uncertainty
Demand uncertainty (DU) is one type of micro-level uncertainty which can have a significant
impact on firm performance (Flynn et al., 2016). It refers to the extent to which the needs of
customers change over time (Chang et al., 2002). DU is one of the external factors that firms face
in the supply chain (O’Leary-Kelly & Flores, 2002). Geary et al. (2002) argue that demand
uncertainty can be seen as the difference between actual market demand and projected
customerorders in an organization. In fact, DU refers to the difficulty level in predicting future
demand characteristics of the firm’s customers (Bernstein & Federgruen, 2005).

2.7.Supply Chain Operational Performance:

The concept of supply chain operational performance has been emerged from supply chain strategy which
derived from overall business strategy. A competitive strategy defined as "the set of customer needs that it
seeks to satisfy through its products and services" Chopra and Meindal (2007). Each organization attempt
to adopt different competitive strategy that fit to its strategy, then it seeks to afford the suitable capabilities
and resources that help to achieve it. For example, one organization aims to provide high quality products
with high price, another organization aims to provide high availability of a variety of products of reasonable
quality at low price, while another organization aims to provide too many

2.8.Organizational performance
Organizational performance refers to how well an organization achieves its marketoriented
goals as well as its financial goals (Yamin, 2009). The short-term objectives of SCM are primarily
to increase productivity and reduce inventory and cycle time, while long-term objectives are to
increase market share and profits for all members of the supply chain (Tan, 2008). Financial
metrics have served as a tool for comparing organizations and evaluating an organization’s
behavior over time (Holmberg, 2000). Any organizational initiative, including supply chain
management, should ultimately lead to enhanced organizational performance. A number of prior
studies have Measured organizational performance using both financial and market criteria,
including return on investment (ROI), market share, profit margin on sales, the growth of ROI, the
growth of sales, the growth of market share, and overall competitive position represented by
constructs like, Price/Cost. It is the ability of an organization to compete against major competitors
based on low price and quality (Li, 2006). The ability of an organization to offer product quality
and performance that creates higher value for customers’ delivery dependability. It includes the
ability of an organization to provide on time the type and volume of product required by
customer(s) (Li et al, 2006).

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 2.8.1. Relationship between SCI and organizational performance
SCI can have a positive effect on firm performance (Li, 2015; Tarifa-Fernandez & De
BurgosJiménez, 2017). According to information processing theory, SCI can improve
communication between the firm’s employees and external partners, resulting in higher quality
and more informed decision making. In addition, SCI allows firms to attain required information
related to demand, technology, and strategy in a timely manner. This can help in better aligning
and coordinating activities among supply chain partners, decreasing waste, and providing products
at a higher speed and lower cost to customers (Li, 2015). Internal integration can improve internal
processes and prevent the occurrence of non-value added and duplicated activities within the firm.
This results in the production of higher quality products at lower costs (Flynn et al., 2010). External
integration can help in acquiring information regarding supply chain including information about
suppliers’ activities and customer demand in a timely manner, which helps in higher coordination
and collaboration among supply chain members, and avoiding inefficiencies across the whole
supply chain (Swink et al., 2007).

Previous empirical studies have supported the positive effect of SCI in the form of internal and
external integration on firm’s operational and financial performance (Flynn et al., 2016; Kumar et
al., 2017; Rosenzweig et al., 2003; Vickery et al., 2003). In one study, Kumar et al. (2017) found
that SCI had a positive effect on supply chain performance, including operational performance,
production flexibility, inventory turnover, order fulfillment rate, and total logistics costs. In
another study, Othman et al. (2016) found that SCI had a positive effect on the logistics
performance. Li (2015) found that internal and product integration had a positive effect on
operational performance among organization or companies.

In another study, researchers found that SCI, including internal integration and external
integration with suppliers and customers had positive effects on financial performance. In addition,
internal integration had a positive effect on operational performance (Zailani & Rajagopal, 2005).
Beheshti et al.’s (2014) study on manufacturing companies showed that all SCI dimensions,
including internal integration and external integration with suppliers and customers were beneficial
to organizations’ financial performance. In other words, firms with higher levels of SCI had higher
levels of financial performance. Flynn et al. (2010) found a positive relationship between external
integration with customers and suppliers and operational performance. Fazli and Amin Afshar
(2016) found that SCI had a positive effect on operational and financial performance of the
organizations. Other research has shown that internal integration improves external integration and
that internal and external integration both directly and indirectly improves firm performance (Huo
& Zhao, 2012; Nazemi & Kharidar, 2012).

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 2.9.Empirical Reviews
Otchere, Annan, & Anin, (2013) concluded in their studies that supply chain integration
directly relates with business performance. Internal collaboration directly affects firm
performance. Higher levels of integration generally lead to better performance.

Kim, (2006) found that in small firms, efficient SC integration may play a more critical role
for sustainable performance improvement, while, in large firms, the close interrelationship
between the level of SCM practices and competition capability may have more significant effect
on performance improvement.

Flynn, Huo, & Zhao (2010) assessed the impact of three dimensions of supply chain integration
(supplier integration, customer integration, and internal integration) on operational and business
performance and stated that internal integration directly relates to both business and operational
performance and that customer integration directly relate to operational performance. Although
supplier integration is not relate directly to either type of performance, the integration of supplier
and customer were related to operational performance. Internal and external integration influence
each other along with performance. The effect of integration between corporate competitive
capability and SC operational capability on performance improvement becomes insignificant as
the developmental stage of SC integration increases (Otchere, Annan, & Anin, 2013).

Alireza et al. (2011) conducted study on Malaysia Electronic Industry to present a mode for
supply chain performance by employing supply chain design, supply chain information sharing,
and flexibility and delivery components as independent variables influencing supply chain
performance. The results from this study depicted that supply chain design influences supply chain
performance through delivery and information sharing. Furthermore, information sharing and
delivery have a direct influence on supply chain performance. The findings also showed that
flexibility influences supply chain performance through delivery. Information sharing affects
supply chain performance directly and has also an indirect impact on supply chain performance
through flexibility. This study elaborates the significant effect of the design of the supply chain on
its performance while considering the impact of information sharing.

Moslem (2013), conducted research on impact of supply chain management practices on

competitive advantage in manufacturing companies of Khuzestan province (Iran) by using
strategic partnerships with supplier, customer relationship, information sharing, quality of
information sharing and internal lean practices as independent variables affecting the competitive

16
advantage. The result from this study was indicates as there is relationships between SCM practices
and competitive advantage.

Lenny et al. (2007) conducted study on the impact of supply chain management practices on
performance of SMEs in Turkey. Based on exploratory factor analysis (EFA), researchers were
grouped SCM practices in two factors: outsourcing and multi-suppliers (OMS), and strategic
collaboration and lean practices (SCLP). The results indicate that both factors of SCLP and OMS
have direct positive and significant impact on operational performance. In contrast, both SCLP
and OMS do not have a significant and direct impact on SCM-related organizational performance.
Also, as the direct relationship between the two performance-constructs was found significant,
both factors of SCM practices have an indirect and significant positive effect on organizational
performance through operational.

On the research topic Supply Chain Management measurement and its influence on
Operational Performance conducted by Priscila and Luiz (2011), SCM measurements were
considered as consists of information sharing, long term relations, cooperation and process
integration as independent variables influences operational performance in case of Brazilian
companies. The empirical results of this study provided evidence of a positive impact of SCM
measurements on operational performance.

Supply Chain Management, Product Quality and Business Performance in case of Malaysian
manufacturing companies conducted by Arawati (2011) and the study specifically investigates
relationships between SCM, product quality and business performance and these associations are
analyzed and the result demonstrates that SCM dimensions namely ‘lean production’, ‘new-
technology and innovation’, ‘strategic supplier partnership’ and ‘postponement concept’ appear to
be of primary importance and exhibit significant effects on product quality and business
performance.

Adebayo (2012) conducted study on SCM Practices in Nigeria Today: Impact on SCM
Performance. The SCM practices considered in this paper were namely strategic supplier
partnership, customer relations practices, information sharing, information quality and
postponement. This paper provides empirical justification for five key dimensions of SCM
practices identified and describes the relationship among SCM practices and SCM performance as
well as the impact of these practices on SCM performance. The study thus showed that SCM
practices definitely impacts SCM performance. Mahbubul (2013) conducted research on Effects
of Supply Chain Management Practices on Customer Satisfaction in the pharmaceutical industry
of Bangladesh: Evidence from Pharmaceutical Industry of Bangladesh. The results of the study
indicate that SCM practices as observed in the industry comprise three dimensions, namely,
collaboration and information sharing, logistics design and IT infrastructure, and organizational

17
 culture (OC). However, while the first two exert their impact on customer satisfaction, OC does
not have any influence on it.

Generally, from above literature reviews it can be easily understandable that the work on
supply chain management measurements/ practices and its influences on different perspectives of
the organization and overall supply chain partners increasing and yields good backgrounds.
However, the relationship of SCM with performance cannot be regarded as conclusive (Cousins,
et al., 2006). Despite the increase of empirical research in the last few years, important differences
in research design undermine comparability: lack of consensus about the definition and
dimensionality of the SCM construct, use of different units of analysis, and different approaches
to performance measurement.

2.10. Conceptual Framework & Design

On the basis of a brief literature review we have developed the following conceptual model to
pursue our study. The model illustrates the various relationships between studied variables which
were developed after careful study of literature.

Figure 1. Conceptual Frame work

Internal Integration (II)

External Integration (EI) Non-Financial

Organizational
Supplier Integration (SI) Performance
•Resposibility
Customer Integration (CI) ROLES
•Reliability
•Flexibility
information Integration (INFI)
•Quality
• Information Sharing •Delivery
• Integration Of Technology

Measurment Integration (MI)

The figure determines a brief introduction of the variables of the present study. Independent
variable consists of Supply Chain Integration, which cover integration with customer, integration
with supplier, with information integration and internal and external integration with in
organization. Dependent variable is Non financial organizational Performance which includes
responsibility, reliability, flexibility, quality and delivery. Furthermore, the model states that there
is a positive relationship between supply chain integration and organizational performance of a

18
firm. The model depicts the direct role of supply chain integration on organizational performance
as well as indirect effect of supply chain management on organizational performance.

CHAPTER THREE

Research Methodology

3.1. Research Approach

The study followed a deductive research approach that can help to think logically and make
meaningful decisions in the research area. This approach enables us to come to conclusions
based on premises assumed to be true or by taking a general assumption and turning it into a
more specific idea or action.

3.2. Research Design

Johnet et al (2007) stated that research design is the blueprint for fulfilling research objectives
and answering research questions. In other words, it is a master plan specifying the methods and
procedures for collecting and analyzing the needed information. Therefore, research design is a
detailed plan for how a research study is to be completed-operational variables so they can be
measured, selecting a sample of interest to study, collecting data to be used as a basis for testing
hypotheses, and analyzing the results.

This research is an explanatory study with survey based which focuses on expanding
knowledge on current issue through data collection and it describes the behavior of sample
population. The study has one independent variable which focuses on supply chain integration.
Data will be collected from the managers and experts of the Oil seed organizations with related
task functions. The main objective of this study is to examine the roles of supply chain integration on
organizational performance in amhara region food oil organizations. To achieve this objective
descriptive type of research design with a quantitative and qualitative approach will be used.

Flynn et al.’s (2016) questionnaire has been used in many studies, which demonstrates its
high reliability and validity (Ding et al., 2017. SCI and firm performance constructs will be
measured using questions. Considering the extensive literature search and use of face-to face
interviews in the development of Huo et al.’s questionnaire, it is among the high-quality

19
questionnaires will be used in the study (Huo et al., 2014). Product integrity questions dealt with
the collaboration with both suppliers and customers when designing and manufacturing new
products (Huo et al., 2014). Demand uncertainty was measured by factors such as demand for
products, orders received to generate demand, and demand forecasting (Flynn et al., 2016).
Operational performance will be measured by factors such as flexibility in product diversification,
delivery speed, production capacity change and support services are compared to the main
competitor.

3.3. Population of the Study

According to Bhattacherjee (2012), a population can be defined as all people or items (unit of
analysis) with the characteristics that one wishes to study. The target populations for this study are
three known food oil factories that are top performer food oil exporters in Amhara region which
are listed down on sample size determination.

Sampling is the statistical process of selecting a subset (called a “sample”) of a population of

interest for purposes of making observations and statistical inferences about that population.
(Bhattacherjee, 2012).

3.4. Sampling Technique

This study used probability sampling method which includes systematic simple random to
draw the sample from the population. Purposive sampling enables to use a judgment to select cases
that will best enable you to answer your research question(s) and to meet your objectives.
(Saunders et al 2009).

The researcher will not study all employees of the Food Oil Companies due to the population
are large and lack of availability and willingness of all employees and economically unaffordable.
Therefore, for these reasons to undertake the study the researcher will take permanently hired
clerical employees of the Companies which is management and experts staffs from selected Food
Oil Factories in Amhara Region.

3.5. Sample Size Determination

The total populations in the study area are 500 employees. It is very expensive to collect data
from all these employees, so that the researcher will use Toro Yamane’s (1973) to determine the
sample size which is from the representative of total population. The sample size will determine

20
 by the following formula take 95% confidence level assume that for this formula to determine
the sample size, at e=0.05.

Distribution of Organizational performance in each company

Name of the Place of the Numbers of Sample No Invested capital Refining Land
organization factory Employee of Employee production coverage
capacity
Tsehay Union Oil Gondar 100 40 70 Millioin 10,000 Ltr Oil per 8734 SqM
Factory day
PhiBela Business Burie 300 60 4.5 Billion 1.5 million Ltr Oil 300,000
Group per day SqM
WA Oil Factory Debre 100 40 5 billion 1.3 million Ltr Oil 101,103
Markos per day SqM
Total 500 140

Note: The study will use Yemane Toro’s population analysis method because the data which the
paper needs to collect are from the population to be interviewed but on the analysis of the
information using SPSS I will use every analysis methods which are important for the result.

𝑵 𝟏𝟒𝟎
𝒏= = 𝒏= = 103
𝟏+𝑵(𝒆)𝟐 (𝟏+𝟏𝟒𝟎(𝟎.𝟎𝟓)𝟐 )

 Where n is the required sample size,

 N is the population size and
 e indicates the level of precision or sampling error

3.6. Data type and source

There are two types of sources of data; primary and secondary data sources. The researcher
will collect primary data from the sample respondents via structure questionnaires. Moreover, the
researcher will use secondary data to support the study and to get the findings of other
researchers in the area (empirical study). The source of secondary date is library books, journals,
newspapers on business, and magazines on business gather by someone.

21
 3.7. Data Collection Method & Procedure
According to, Cohen (2011) questionnaire is a set of questions designed to produce
information from the respondents in order to accomplish research objectives and also it allows
the researcher to collect the relevant information necessary to address research question.

The data will be collected using questionnaires and interviewing managers and selected staff
members. The questionnaires will be prepared in open ended and close ended questions. And the
observation will use structured and unstructured observation methods.

The data procedure will be taken by requesting permission from all the Food Oil Company
Managers and each respondent to the study to be request to fill a questionnaire after a brief
introduction and objective of the study explained. And after that the research questionnaires will
be distribute in the Companies during working hours while employees are in their work place.
Then the questionnaires will be returned after they finished their choice of their answers. The
questionnaire will be prepared in Amharic & English languages.

3.8. Data Analysis Method

Once the data is statistical tool will be used. Descriptive analysis will be used to describe
demographic variables of the respondents, whereas as the study is quantitative and qualitative
nature use multiple regression analysis which is correlation and regression to find out the
relationship between supply chain integration and Organizational Performance using SPSS
software.

3.9. Reliability
Reliability is concerned with the internal consistency of the items. Hair et al (2007) defined
reliability as the extents to which a variable or a set of variable is consistent in what it is
extended to measure. Therefore study uses multiple items in all variables and internal
consistency analysis will be carried out through Cornbrash alpha reliability tests. Duffy et al
(2001) stated that, a high α (greater than .60) indicates that the items within a scale are measuring
the same construct.

3.10. Validity
Validity is the degree to which a measure accurately represents what it is supposed to .It is concerned
with how well the concept is defined by the measure(s). Therefore the study will try to addresses validity
through the review of literature and adapting instruments used in previous research.

22
4. Work Plan and Budget

4.1. Time plan

S.no Activity November December January February March April May

2022 2022 2023 2023 2023 2023 2023
1 Topic
selection X
2 Preparation X
of proposal x
3 Proposal x
Defense

5 Data
collection x x
6 Data
analysis and
writing final x x
research

7 Submission
of research
8 Presentation
of final
research

4.2. Budget

Item Quantity Per unit (Birr) Total cost

(Birr)
Paper 600 3 1800
Stationa
Equipm
ent and

Pens 20 15 300
Pencil 10 10 100
ry

Binder 3 70 210
Total cost 2410
Transportation 10trips 200 2000
Internet 3000hrs 1 3000
Personal

Typist 1 1000 300

cost

Total cost 5300

Contingency 35% 2000

23
 Overall total 9710
cost

Conclusion
There are two perspectives on the relationship between SCI and organization performance
(Huo et al., 2014). The first perspective, referred to as universal perspective, focuses on SCI
dimensions and asserts that certain types of SCI can have positive effects on firm performance
(Flynn et al., 2010; Huo & Zhao, 2012). The second perspective, referred to as contingency
perspective, emphasizes the role of moderating variables such as environmental factors on the
relationship between SCI and firm performance (Wong et al., 2011a). This study will attempt to
empirically examine the predictions of these two perspectives by testing the role of SCI dimensions
on organizational performance both directly and in interaction with demand uncertainty (Iyer et
al., 2009). The resultwill suggest that internal and process dimensions of SCI have positive effects
on operational performance. In addition, internal, product, and also process dimensions effects on
financial performance. Furthermore, demand uncertainty relationship. Therefore, firms will be
advised the positive results of the study. An important contribution of this study stems from its
emphasis on studying detailed dimensions of internal and external integration. This paper, will
synthesized the large and fragmented body of knowledge into three stream of approach including
(1) Company’s integration with suppliers (2) Cross functional integration within a company (3)
Company’s integration with customer. To bring about improved performance in a supply chain all
participants in the supply chain should be committed to common goal, such as for enhancing
customer satisfaction, market performance and financial performance.

24
 References
Abidi, H., & Klumpp, M. (n.d.). Measuring Success in Humanitarian Supply Chains, (ild), 1– 10.

Aid, H., & Logistics, E. (n.d.). Relief Supply Chain Management for Disasters: Humanitarian Aid
and.

Amit, S. and Jean, L.J. (2005). Organizational capabilities in e-commerce: an empirical

investigation of e-brokerage service providers. Journal of Academy of Marketing Science, Vol. 33
No. 3, pp. 360-75.

Andrew, H.G., Arvind, M. and Albert, H.S. (2001). Knowledge management: An organizational
capabilities perspective. Journal of Management Information Systems, Vol. 18 No. 1, pp. 185 214.

Angeline Close, Scheinbaum Donk and D. P. Van. (2004). Supply chain integration and
performance: the, (2002), 473–482. Anvar, M. M. (2013). Supply Chain Integration Model:
Practices and Customer Values, (October)

Vijay R. Kannan, Keah Choon Tan, (2010) "Supply chain integration: cluster analysis of the
impact of span of integration", Supply Chain Management: An International Journal, Vol. 15 Iss:
3, pp.207 – 215.

Marcos, A., Mendes P., (2010). Supply chain integration mechanisms for alleviating supply
problems in manufacturing firms. Operation Management Research, 3:43–59.

Ru-Jen Lin, (2009). Supplier integration and time-based capabilities: An empirical study, Journal
of the Chinese Institute of Industrial Engineers, Vol. 26, No. 3, pp. 215-227.

S. W. Kim, (2009) "Quality Management Strategy in Supply Chain for Performance

Improvement", Asian Journal on Quality, Vol. 10 Iss: 3, pp.43 – 64.

S. W. Kim, (2009). An investigation on the direct and indirect effect of supply chain integration
on firm performance. International Journal of Production Economics, 119, 328-346.

Taco van der Vaart, Dirk Pieter van Donk, (2008). A critical review of survey-based research in
supply chain integration, Int. J. Production Economics 111 (2008) 42-55.

Lee CW, Kwon IG, Severance D (2007) Relationship between supply chain performance and
degree of linkage among supplier, internal integration, and customer. Supply Chain Management
International Journal, 12:444–452.

Bowersox, D.; Closs, D.J.; and Stank, T.P. (1999). ''21st Century logistics: Making Supply Chain
Integration: A reality". Council of logistics management, Michigan State University, USA.

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 Bowersox, D.; Closs, D.J.; and Stank, T.P. (2000). "Ten mega-trends that will revolutionize
supply chain logistics". Journal of Business Logistics, 21(2), 1-16.

Bowersox, D.; Closs, D.J.; and Copper, M.B. (2007). "Supply Chain Logistics Management:
Operational, Financial, and Social Performance". 2 nd ed., McGraw-Hill, New York.

Chen, I.J.; and Paulraj, A. (2004). "Towards a theory of supply chain management: the constructs
and measurements". Journal of Operations Management, 22(2), 119-150.

Bavarsad, B., Rahimi, F., Salimifard, A., & Ghalambor, M. (2017). Investigating the impact of
social capital on performance in mehr-eqtesad banks from employee’s perspective. Quarterly
Journal of Social Development (Previously Human Development), 11(3), 211–242.
https://dx.doi.org/10.22055/qjsd.2017.12831

Beheshti, H. M, Oghazi, P, Mostaghel, R, & Hultman, M. (2014). Supply chain integration and
firm performance: an empirical study of swedish manufacturing firms. Competitiveness Review.
https://doi.org/10. 1108/CR-06-2013-0060

Beheshti, M. H., Oghazi, P., Mostaghel, R., & Hultman, M. (2014). Supply chain integration and
firm performance: An empirical study of Swedish manufacturing firms. Competitiveness Review,
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Bernstein, F., & Federgruen, A. (2005). Decentralized supply chains with competing retailers
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Company information’s fromWaoilfactor.com/about-us

Company information’s fromgoogle.com/amp/s/www.foodbusiness.com

Company information’s from Addis fortune; the largest English weekly in Ethiopia

Company information’s frombelaynehkinde.com/index.php

Company information’s from www.business.linkupaddis.com/fibela

APPENDIX

26
 APPENDIX I: QUESTIONNAIRE

ADDIS ABEBA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

POST GRADUATE PROGRAM (MBA)

My Name is Melat Habtemariam Abate, This questionnaire is developed for an academic effort
planned for the collection of data to conduct a thesis paper on the title “The Role of Supply chain
Integration on organizational performance on selected Food oil factories in Amhra region” in order
to fulfill the University’s requirement set for awarding of a Master of Business Administration.
The information obtained from this questionnaire will be kept confidential and will not be used for
any other purposes. Hence, I am kindly asking respondents to give your candid information.

NB:

 It is not necessary to write your name

 Try to address the entire question given below

 Use (√) mark for your choice in the given box

Thank you for your cooperation! Tel:- Email: -

27
Instruction: Please Mark X where necessary.

I. Section A: General Information (Make “X” Symbol for Your Answers)

1. Sex: Male Female
2. Age: _______
3. Level of Education: Certificate Diploma Degree Masters PhD
4. What is your position in this organization?
A. Supply Chain:
Director Manager Officer Specialist Assistant
B. Operation Director:
Director Manager Officer Specialist Assistant
C. Logistics director:
Director Manager Officer Specialist Assistant
D. Procurement Directorate:
Director Manager Officer Specialist Assistant
E. Finance Team:
Director Manager Officer Specialist Assistant
F. Other
5. How long have you stayed at this organization?
A. <2years
B. 2-5 years
C. 6-10 years
D. Over 10 years
II. Section B: Extent of SC Integration please indicates the extent to which the
following statements concerning the level of SC Integration within your
organization occur.

Use the scale of:

1) DOES NOT OCCUR 2) SMALL EXTENT 3) MEDIUM EXTENT

4) LARGE EXTENT 5) VERY LARGE EXTENT

Statement 1 2 3 4 5
Extent of Supply chain integration
External integration
Sourcing and tendering decisions are easily made due to SC
Integration and information sharing
There are external SC integration that fastens flows such as, physical
and funds

28
Distribution and delivery is made at the right time and place due to
SC integration, information sharing and coordination.
There are integration of objectives, planning, and resources with
external organizations.
Internal integration
Monitoring stock movement has been made easier as a result of the
collaboration between procurement, logistics and warehouse/
inventory management
There are internal integration of functions and activities
With an integrated SC technologies and systems established, inter
and intra organizations’ communications are optimized.
Due to information and technology integration, there are accesses of
tracking performances of SC partners.
Supplier Integration
A database of suppliers is easily maintained as a result of SC
Integration.
With an integrated suppliers supply chain, logistics services are
improved
SC Integration has provided the organization the ability to quickly
and easily relate with suppliers.
Supply chain integration is led to a better supplier relationship
management.
Orders are easily processed as a result of supplier integration.
Customer Integration
SC Integration has assisted in improving the quality of goods, works
and services offered to the beneficiary
The speed of service delivery has been enhanced due to the supply
chain integration process
Customer integration has enabled to deliver services easily and
quickly.
The speedy customer collaboration has been maintained as a result of
SCI.
Information Integration
Due to information and technology integration, there are accesses of
tracking performances of SC partners.
With an integrated information and measurement SC, supply chain
analysis has been done.
With an integrated suppliers supply chain, logistics services are
improved.
There are external SC integration that fastens flows such as, physical
and funds.
Measurement Integration

29
 With an integrated SC technologies and systems established, inter
and intra organizations’ communications are optimized.
Distribution and delivery is made at the right time and place due to
SC integration, information sharing and coordination.
With an integrated SC technologies and systems established, inter
and intra organizations’ communications are optimized.

III. Section C: Organizational performance.

Please indicate the extent to which the following statement concerning the relationship that
exists between your SCI and the performance of your organization occurs.

Use the scale of:

1) VERY LOW EXTENT 2) LOW EXTENT 3) MODERATE EXTENT

4) GREAT EXTENT 5) VERY GREAT EXTENT.

Statement 1 2 3 4 5
Organizational performance
The firm has maintained Responsiveness and Flexibility of deliveries.
Uncertainty has been minimized in the receiving of products and
services
Cycle time reduced for some goods like that of assembled.
Reduced Inventory level in the organization
Shorter lead times needed for delivery of orders

Please state any other relationships:

_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_______________

30