INTRODUCTION.

It has been seen that in developing countries the number of smokers is higher than the developed
countries, Zimbabwe being a developing country it is not excluded from this fact. This has seen
cigarette manufacturing companies in Zimbabwe taking advantage and rising to the top. Example of
such a company is the Pacific Cigarette Company, having started operating in 2002 they have over
two decades of providing services and products to their valued customers. Their success can be
attributed to their Value Chain Analysis which we will thoroughly examine in this essay. Value Chain
Analysis can be defined as the systematic way of assessing the activities of a company and the
components of the different activities for Competitive Advantage and value addition to the
customer. The concept is very important for assisting firms in developing their strategies having
being introduced in 1985 by Michael Porter in his book “Competitive Advantage”. The value chain
model identifies 9 strategically relevant activities that create value for a business which are divided
into two categories namely primary and secondary activities with the former consisting of five main
activities which are inbound logistics, operations, outbound logistics, market and sales and service.
The secondary activities comprise of four support activities identified as procurement, human
resource management, technological developments and Infrastructure. Our discussion will be
focusing on two of the five main activities which are inbound and outbound logistics and how a
company like Pacific Cigarette Company in Zimbabwe make use of this concept. Inbound logistics is
an integral element of business operations for a manufacturing firm, involving the processes of
receiving, storing and distributing raw materials for use in production while on the other hand
outbound logistics is all about moving finished products out of a supply chain and fulfilling orders
and delivery of those orders to end customers in this example it is cigarettes to smokers. These two
main activities of the value chain analysis have had their effects on the quality of the products and
services of Pacific Cigarette Company to a greater extent this is because of an improvement in the
flow of goods, increased inventory and order accuracy, optimize speed of delivery, maximize sales
and revenue and reduced costs.

INBOUND LOGISTICS: PACIFIC CIGARETTE COMPANY

To begin with, inbound logistics is the first stage in the value chain as how Michael Porter outlined in
1985. Inbound logistics as defined above is an integral element of business operations for a
manufacturing firm, involving the processes of receiving, storing and distributing raw materials for
use in production. The nature of the industry that the Pacific Cigarette Company is in means that
their supply chain has two distinct supplier categories that is tobacco leaf and non-agricultural
materials, goods and services.

PROCUREMENT

Inbound logistics for Pacific Cigarette Company works by firstly procuring suppliers for their raw
materials. The procurement department has the sole responsibility for this task. They achieve this
task by identifying and analyzing possible suppliers, sorting quotes and reaching an agreement with
the suppliers. The raw materials that are involved in the cigarette manufacturing for Pacific Cigarette
Company are tobacco leaf and non- agricultural materials such as cigarette paper, seam glue, tiffin
paper, filter paper, foil paper, easy opening device and ink. Tobacco leaf remains at the core of the
company’s products, so to ensure that the company has a secure and sustainable agricultural supply
chain for long term is absolutely crucial to the success of the company business. Most of these raw
materials are imported while some are procured locally. For raw materials such as tobacco leaf that
are sourced locally through direct contracts with over 75,000+ farmers. The Pacific Cigarette
Company has subdivided its procurement department and has an independent department that
makes sure the demand of tobacco leaf in the company has been met. The company has the leaf
department which comprises of 12 buyers, 9 classifiers and a sample room clerk. The leaf
department personnels are stationed around the country during the buying season and at the
Mashonaland Tobacco Processing plant during packing season. The buyers are responsible for
buying and internal grading of tobacco leaf at the company sales point, the buyers determine price
and the internal grade. Whilst on the other hand the classification of tobacco at the company sales
points is done by the classifiers who then place a government regulated grade prior to purchase.
Tobacco leaf sourcing is key part of Pacific Cigarette Company supply chain, and a critical component
of future business growth. Every year the company procures approximately 50% of the planned leaf
requirements from the leaf merchants. Beyond tobacco, the company sources product materials like
paper and filters for cigarettes, these materials are mostly sourced from outside the country from
countries such as China, India, South Africa. The company has vast number of suppliers of indirect
goods and services that are not related to their products such as for IT services and facilities
management.

PURCHASE & TRANSPORTATION

When the suppliers have been identified and quotations are sourced and agreements have been
reached, what follows next is the purchase of resources and items the company requires, ensuring
the accurate amount is delivered on time. The decisions on the mode of transportation are made,
this means that if the company is importing raw materials such as cigarette paper, foil paper and
seam glue how will they bring them to the factory will it be by bus, trucks, airplanes and train.

STORAGE & HANDLING

Furthermore, after the company receives the resources that are required in the processes of
manufacturing cigarettes, the company has a department known as the stores and inventory
department that is solely responsible for the handling and organization of these resources into
assigned locations

MANAGEMENT

In addition to being stored and handled, the company then manages these materials and are placed
into an environment that is suitable for their requirements.

EXPEDITION & DISTRIBUTION

After being carefully managed into environments that are suitable for the raw materials
requirements, the raw materials are then expedited to the allocated facility or distributed to their
destinations within the company. The company heads departments can check on arriving orders
having access to documents and its location for a peace of mind.

REVERSE LOGISTICS

However, with all these operations in place, not everything goes to plan. This is where the reverse
logistics comes in play, it can be defined as the process where goods are brought back from
customers as a result of damages, returns, delivery issues and other factors.

To conclude, depending on the tobacco industry, and the relationship the Pacific Cigarette Company
has between the buyers and sellers this is how the company tackles its inbound logistics as outlined
in the above paragraphs.
OUTBOUND LOGISTICS: PACIFIC CIGARETTE COMPANY

Outbound logistics is defined as the method in which finished goods are transported to their final
destination. This type of logistics is focused mainly more on the demand part of the supply demand
concept. While the literature states that both inbound and outbound logistics involve the
transportation of goods, the difference is that inbound refers to all processes associated with
acquiring materials from suppliers and manufacturers. Whereas outbound is the transportation of
goods to the customers. Pacific Cigarette Company is the fastest growing cigarette manufacturing
company in Zimbabwe, and they manufacture Pacific, Branson, Pegasus and Acacia families’ brands.
The company hasn’t achieved this status by not delivering to the demand of their customers. Below
is highlighted the outbound activities that makes the Pacific Cigarette Company a successful entity in
the tobacco industry. The Pacific Cigarette Company of Zimbabwe extends all across Zimbabwe and
beyond Zimbabwe where the company operates directly and indirectly in countries such as South
Africa, Mozambique, Zambia, Lesotho, Swaziland, Malawi and DRC. The Pacific Cigarette Company
does not take their products directly to the market. They have authorized distributors that distribute
the products to over 10, 000 outlets approximately. The distribution is divided into three categories,
which are retail store, retail cash and. carry bazaar cash and carry.

CUSTOMER ORDER

To begin with from a broad understanding of value chain analysis, what kicks off outbound logistics
obviously begins with the purchase of goods. The customers for Pacific Cigarette Company will
purchase products from the company’s operations facilities.

CONFIRMATION

To add on, when the warehouse confirms the order of goods from customers, the department head
will then assign the most suitable inventory.

PACKAGING

What follows next is the packaging of the ordered goods so that they will be ready for transportation
to their final destinations.

TRANSPORTATION

This is where goods are moved across the first and last mile of delivery. The mode of transportation
is dependent on the type of customer that has ordered the goods, with the locally based customers
receiving their goods via road and train network while the foreign based customers also receive their
goods via road network or aero plane depending on the urgency of the order.

LAST-MILE DELIVERY

Last mile delivery is the final stage of the delivery process where goods are residing in transportation
hub are then shipped directly to the customers’ chosen destination.