ASSESSMENT OF FACTORS AFFECTING

FLORICULTURAL SUPPLY CHAIN DISTRIBUTION

PERFORMANCE:

(A CASE STUDY: TANA FLORA PLC.)

CHAPTER ONE
1. Introduction

1.1. Background of the Study

People demand materials for the satisfaction of their basic needs as well as to express their
feelings, and emotions. Human emotions and feelings can be expressed thorough different ways
and the expression gives them better physical, mental and emotional health. This needs and
interests demand many materials which have been produce somewhere and distributed far from
the production areas. These activities need more care and system. This system is currently takes
place in supply chain distribution. Any company that produces materials need to address the
customers’ interest on the product in terms of quality and quantity. Every producers need to
follow the scientific approaches to win the market by providing high quality and adequate
amount ofproduct. To do so, the supply chain management plays a great role. It is the oversight
of materials, information, and finances as they move in a process from supplier to manufacturer
to wholesaler to retailer to consumer. Supply chain management involves coordinating and
integrating these flows both within and among companies.

The company which needs to apply the supply chain management system through its product
distribution should use all the factors that are determining the effectiveness of the system
performance. Thus, a company has to know how to use and control these factors in supply chain
management performances.

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As Oliver defined in 1982, Supply Chain Supply chain management (SCM) is the process of
planning, implementing, and controlling the operations of the supply chain with the purpose to
satisfy customer requirements as efficiently as possible. Supply chain management spans all
movement and storage of raw materials, work-in-process inventory, and finished goods from
point-of-origin to point-of-consumption (Lambert, 1997). In order to understand how a supply
chain works, it is important to identify the factors affecting supply chain management. The
identification of these factors has been based on previous work by Li (2002), and Quesada
andMeneses (2010). The generic supply chain management factors and sub-factors that might
affect supply chain management activities i.e. environmental uncertainty, company environment,
government support, uncertainty aspects from overseas, information technology, supply chain
relationships & value-add process/manufacturing/ & business management

High value crops like cut flowers only fetch premium prices when they make it to the markets
quickly and in the best possible shape. More often than not, cut flowers arrive in the international
market at temperatures that are too high because of inefficient supply chain management. The
supply chain starts at the farm. If the quality of cut flowers that feeds into the supply chain is
compromised, the entire supply chain can at best only maintain this input quality.

In the last decade, trade in fresh horticultural products has become increasingly global and
vertically integrated through contracts rather than control and ownership of the means of
production (Hortwise, 2012).

Tana Flora PLC located in the north western part of the country and the only flower exporter
from the region, has faced supply chain disruptions (Omondi, 2014). The supply chain
management practices in the company are: Cold chain packaging standards and protocols;
Synchronization of electronic information; and Education on cold chain management and
packaging. It is very important to know that these supply chain factors should be implemented in
a highly sensitive and careful manner when the company’s products are highly perishable and
easily lose their quality. The typical kind of this product is that of the floriculture products.

What was suggested is also the problem of the company under the study. The factors affecting
the company’s supply chain activity and their application determine the effectiveness of the
company in international market in terms of price and quality even in terms of availability of

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product that the market needs. For this fact, the researchers decided to focus on investigating
factors affecting floricultural Supply Chain Distribution Performance in Tana Flora PLC and at
the end to suggest possible recommendation.

1.2. Statement of the problem

Exports of cut-flowers from Ethiopia have grown dramatically from less than a million dollar in
1995 to 69 million dollars in 2007(COMTRED, 2008). In this production period, more than
139000 jobs were created by the industry, of which 70% were women (Demeke et al
2007&Melese, 20007). Currently more than 100 private firms are involved in cut-flowers
production & export operation of which 55% are owned foreign investors. At present, cut-
flowers are the 6th largest exportable commodity of the country. In 2008, exports to Europe, Asia,
& Middle East were reported to reach 111million (EIU country report, 2009). Ethiopia is now 2 nd
largest flower exporter after Kenya (COMTREDE, 2008).

Even though the sub-sector in Ethiopia is showing dramatic growth & still has potential to grow
more, expansion is limited due to high fixed & variable cost of production & post-harvest
distribution cost (World Bank, 2004).

According to report from Hortiflora Ethiopia 2013 fifth events from March 20-22, 2013 in
AddisAbaba, the government of Ethiopia must try a little bit with the transportation facility for
the export of cut-flowers. The report indicated that for all farmers, infrastructure is unsolved
challenge, the cost of bringing agricultural products to the consumer remained very high and the
transportation cost far surpasses the production costs. The report added that the sector needs
cool chain facilities for vegetables, fruits, & flowers right from harvest totheend customers’
homes in vase life.

On the other hand the Ethiopian-Netherlands horticultural partnership draft-2 mission report
concluded some constraints in fruit, vegetable, & flower export development. According to the

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mission report; packaging problems, transportation cost, cold storage, land tenure, lack of skilled
labor resources & technical known-how, availability and use of agro-chemical, information
about market access, & performance of the banking system are some constraints for the supply of
horticultural product.

Tana flora PLC which is one of the dominant flower exporter companies located in north western
part of the country has not escaped from this constraint. The north western part of the country is
not experienced in exporting agro-processing product, the number of producer & exporters are
few in numbers. According to report from hortiflora 2015 international floricultural trade fair
(march 25-27,2015) Addis Ababa Ethiopia, the challenge of the Tana flora company is that they
are located 560kms fromAddisAbaba, so there is no air cargo access. This make them to
transport their flowers with trucks from Bahir Dar to Addis Ababa which is nearly 10-12 hours’
drive that charges a lot as compared to farms around Addis. The company is the 1 st one with the
commitment to the region as a flower industry so, there is lack of experience for the employees,
but this problem has been solved& the transportation problem followed by long lead time & cool
chain problem persists.

Therefore the basic question is that of how successful the company is in understanding the
impact of transportation cost, lead time, information sharing and cool supply chain on
floricultural supply chain distribution performance of Tana Flora PLC in reaching its goals with
pre-planned schedules. The results show that there has been no research done in this area
specifically in the country. So the main goal of this research was to answer this question.

1.3Research Questions

1.3.1 Basic Research Question

What are the critical factors that affect supply chaindistribution performance of floricultural
products in Tana Flora PLC?

1.3.2 Sub-research Questions

 How does transportation cost affect the floricultural supply chain distribution performance
of Tana flora PLC?

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 How does lead time affects the floricultural supply chaindistribution performance of Tana
Flora PLC?
 What is the effect of information sharing on the effectiveness of
floriculturalproductdistribution performance of Tana Flora PLC?
 What is the effect of cool supply chain on floricultural supply chain distribution
performance of Tana Flora PLC?

1.4 Research Hypotheses

In this study the following hypotheses were developed in order to measure the factors that affect
floricultural supply chain distribution performance. Multiple regression analysis were used to test
the hypotheses.

 H1: Transportation cost has negative and significant effect on supply chain distribution
Performance ofTana Flora PLC.
 H2: Lead time has negative and significant effect on supply chain distribution
performance ofTana Flora PLC.
 H3:Information sharing has positive and significant effect on supply chain distribution
Performance of Tana Flora PLC
 H4: Cool supply chain has positive and significant effect on supply chain distribution
performance ofTana Flora PLC.

1.5 Objectives of the Study

1.5.1 General Objective

 The general objective of this study was to investigate the critical factors that affect
floricultural supply chaindistribution performance of Tana Flora plc. With the intension to
provide possible recommendation to supply chain distribution of Tana flora plc.

1.5.2 Specific Objectives

 To examine the impact of transportation cost on floricultural supply chain distribution
performance of Tana Flora plc.

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 To evaluate the effect of lead time on floricultural supply chain distribution performance of
Tana Flora plc.
 To investigate how information sharing affectsfloricultural supply chain
distributionperformance of Tana Flora plc.
 To evaluate the effect of cool chain on floricultural supply chain distribution performance of
Tana Flora plc.

1.6 Significance of the Study

This study will have a greater significance for the organization, for the professionals in the area
of supply chain management and for the researchers.

 The will study enables the organization to identify critical factors that affect its supply
chain distribution performance.
 It will help the organization to pay more attention to supply chain management to
become competitive in their business.
 It will help the organization to solve problems related to its supply chain distribution
performance.
 The studywill serve as a steppingstone for others professionals who want to conduct
related research.
 Lastly for the researcher, the study was not only fulfill the partial requirements for the
award of the degree of Bachelor of Arts in logistics and supply chain management, but
itwillalso serve as basis for further research in the field of supply chain management.

1.7 Scope of the Study

In this research the area of the study is delimited to the topic of factors affecting supply chain
distribution performance of floricultural products in case of Tana Flora private limited company
in Bahir Dar north western Gojjam. Due to farness of the customers from the company(i.e.
abroad)this study focus only on distribution of flowers from the company up to Addis Ababa
bole international airport. Even though there are so many factors that affect supply chain

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distribution performance as found by many authors(Henry Quesada, et.al 2007), i.e.
environmental uncertainty, company environment, government support, uncertainty aspects from
overseas, information technology, supply chain relationships & value-add
process/manufacturing/ & business management, this research tries to focus only on
Transportation Cost, Lead Time, Information Sharing and cool supply chain. On the other hand
for measuring supply chain distribution performance five constructs:Quality, Response Time,
Cost/Financial, Productivity and Information sharing were chosen. As was found by (Rich and
Peter, 1997) an efficient and responsive horticultural supply chain occurs when customer
satisfaction levels are maintained consistently, product waste levels are kept minimal, cost of
compliance and freight logistics are sustainable & lead time are as short as possible. Therefore
the student researchers believed that these four independent variable factors are the focus of this
study.

1.8 Limitations of the Study

Limitations of the study which should be underlined are:

 It was found during the course of this research that there was a problem of getting all the
relevant information from the respondent because of potential suspicion that the researchers
may be an investigator in disguise.
 There was a shortage of secondary sources of data, especially since Ethiopia is not so much
experienced in producing and exporting horticultural products there was a shortage of
journals, articles and books printed out in the area.
 It is worthwhile considering whether effectiveness of floricultural supply chain distribution
has any impact on business performance and competitive advantage of this company.
 The frameworkdeveloped in this study may need further testing since this research was
conducted on a single organization.

1.9 Organization of the Study

The study is organized in five (5) chapters. The 1 stchapter is the introduction part that includes
background of the study, statement of the problem, and significance of the study, scope of the
study, limitation of the study and Organization of the paper. Chapter two discuses related

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literature review on supply chain distribution, transportation cost, lead time, information sharing
and cool supply chain. Chapter three is about the research methodology that provides research
approach, population and sampling instrument and data collection techniques, methods of data
analysis and interpretation. Analysis of profile of population, hypothesis testing and analysis are
presented in chapter four. The paper ends with discussions, conclusion and suggestion for future
studies in chapter five
1.10 Definition of key terms
 Supply chain distribution: are the chain of business or intermediaries through
which a good or service passes until it reaches the end customer & can include
wholesalers, retailers, distributors, & even the Internet or the firms or individuals that
participate in the movement of good &service from raw material supplies to the end users
(lee, 2002).
 Floricultural product: the cultivation of flowering or ornamental plants or
the farming of flowers
 Cool supply chain: referring to the capacity to maintain perishable
productsatacceptable temperature regimes within the distribution chain to avoid wastages

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 CHAPTER TWO
2. Literature Review and Conceptual Framework
2.1. Introduction

This chapter gives an extensive review of the available theoretical & empirical literature to the
problem being investigated.

2.2. Theoretical Review

A theoretical review is an account of the theories that have been established on the topic by
accredited scholars & researchers. The purpose of this section is to convey to the reader what
theory or models have been established on the research subject. The theories are formulated to
explain, predict, & understand phenomenon & in many cases, to challenge & extend existing
knowledge hence they form the structure that hold or support a research study.

2.3. Concepts of supply Chain

The term "supply chain management" entered the public domain when Keith Oliver, a consultant
at Booz Allen Hamilton, used it in an interview for the Financial Times in 1982. The term was
slow to take hold. It gained currency in the mid-1990s, when a flurry of articles and books came
out on the subject. In the late 1990s it rose to prominence as a management buzzword, and
operations managers began to use it in their titles with increasing regularity.

Oliver defined in 1982 the Supply Chain concept as follows: “Supply chain management (SCM)
is the process of planning, implementing, and controlling the operations of the supply chain with
the purpose to satisfy customer requirements as efficiently as possible. Supply chain
management spans all movement and storage of raw materials, work-in-process inventory, and

9
finished goods from point-of-origin to point-of-consumption”. Since then, almost all Supply
Chain Book authors have developed their own definitions. Some of them are subtle variations
and others add more detail, but most of them remain close to Oliver's original definition.

The concept of Supply Chain Management is based on two core ideas. The first is that practically
every product that reaches an end user represents the cumulative effort of multiple organizations.
These organizations are referred to collectively as the supply chain. (Robert Hand field, 2011)

The second idea is that while supply chains have existed for a long time, most organizations have
only paid attention to what was happening within their “four walls.” Few businesses understood,
much less managed, the entire chain of activities that ultimately delivered products to the final
customer. The result was disjointed and often ineffective supply chains.

Supply chain management, then, is the active management of supply chain activities to maximize
customer value and achieve a sustainable competitive advantage. It represents a conscious effort
by the supply chain firms to develop and run supply chains in the most effective & efficient ways
possible. Supply chain activities cover everything from product development, sourcing,
production, and logistics, as well as the information systems needed to coordinate these
activities.

The horticultural supply chain is the entire vertical chain of activities from the supply of input
(seed, fertilizer, chemicals) through production, post-harvest operations, distribution, and retail.
Horticultural supply chains involve a fragmented loose chain of highly specialized tasks that are
performed by individual participants (stakeholders) who are of different social, economic and
cultural backgrounds. The weak link(s) determine(s) the strength of the supply chain. Along the
chain, there is a dynamic and constant shift of bargaining power among members. With the
emergence of modern trade stores (e.g. supermarkets), bargaining power and profit margins shift
from sellers (producers, traders, exporters, importers) to buyers, and particularly the retailers.
(Kanlayanarat&Rolle, 2009)

Distribution channel are the chain of business or intermediaries through which a good or service
passes until it reaches the end customer & can include wholesalers, retailers, distributors, & even
the Internet or the firms or individuals that participate in the movement of good &service from
raw material supplies to the end users (lee, 2002).

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In this section theories available on the problems under investigation have been reviewed.

2.4. Definition and Measurement of Variables

2.4.1. Transportation Cost

Most large scale farmers have invested in costly sophisticated post-harvest cold chain
infrastructures & 90% of export flowers are handled by specialized air conditioned freight
forwarders with the clearance process involving custom clearance & cargo inspection.

Air freight is typically the major cost component in horticultural exports. In some South America
and African countries air transportation of perishable represents 80-90% of total exported
airfreight (Henry Vega, 2nd quarter 2008).

Bole airport is the only airport in Ethiopia that handles international flights. Bahir Dar, Dire
Dawa, Gondar, Mekele and Arbaminch have airports capable of handling international traffic
but, as yet, no international flight use these destinations. Airfreight for horticultural product is
available either through the chartering of cargo aircraft or use of space on passenger aircraft. The
volume of passenger flight airfreight is closely related to general trade and tourism development-
currently, a small number of airline operate in Ethiopia (anonymous, 2003). The new cargo
terminal of Ethiopian airlines is on improvement; unfortunately it only offers space for 5 trucks
which creates long queues. Ethiopian exporters currently do not export year round. EAL B-757
charter jets carry a minimum load of 5 tons of cargo space per week. EAL offers flight to
Europe, Dubai, Saud Arabia, West Africa, Hong Kong, Thailand, & the USA. Each year,
EALnegotiates an airfreight agreement with et-fruit covering the major export plans per week,
but this number dropped to three charters per week in the 2001/2002 export
season(anonymous,2003)

Other airline transporting cargo to Europe includes the passenger flight s of British Airway (BA)
& Lufthansa, but space availability on these flights is severely constrained. The government

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recently announced an “open skies” policy to increase capacity & completion in the sector, but as
of yet, no cargo freight companies have established operations.

Freight prices are influenced by fuel prices & number of southbound cargos, take off time also
influences cost, but because at higher temperature the loading capacity is reduced.

Unfortunately, the availability and cost of airfreight is problematic, for two main reasons. 1 st,
volumes to be exported exceed available passenger flight cargo capacity. 2 nd, there is insufficient
amount of exports to justify regular cargo charters. Because of this and the considerable variation
of rates quoted by the various airlines, it is difficult to generalize freight costs. However, it can
be maintained that the cost of airline is more expensive than that of chartered cargo planes, that
exporters complete for limited & higher cost space on passenger airlines instead of using less
expensive chartered cargos, because of insufficient volume to fill the latter (anonymous, 2003).

2.4.2. Cool Supply Chain

One challenge in managing fresh produce is that product value deteriorates with time in supply
chain at rates that are highly temperature and humidity dependent. As noted by Vander Vorst
(2006), it is imperative to analyze supply chain within the context of the full complexity of their
network structure & product type. Effective cooling, storage and handling system are vital to
maintain the quality of horticultural products.

At the pack house the product should be cooled, graded & packed under temperature & humidity
controlled conditions. Refrigerated transport is required from pack house to airport, & then at the
airport, appropriate storage facilities for an already chilled & packed product are required
particularly if the product is not to be immediately loaded on an air craft.

In most studies, cool chain determines perish ability hence the wastage levels and this has strong
correlation with level of customer’s claims which is measured as number of units of product that
out date (perish) or which the customers rejects (Sloof, Tijskens,& Wilkinson,1996). Fujiwara
&Pereira (1993) developed EOQ models for inventory management under the assumption that
product value diminishes over time according to an exponential distribution. A study by the
flower council of Holland confirms that in the past five years, the purchase of cut flower in the
united kingdom have doubled (flower watch, 2011) but despite this, the net returns have not been

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in line with this increases particularly due to the wastage in distribution & taxes within the
supply chain.

2.4.3. Lead Time

Within the horticultural supply chains the extended lead time of up to ten days have been
recorded causing massive quality deterioration & with no formal supply planning systems nor
contracts specifying volumes to be supplied, the buyers push the financial risk from their end of
the chain while at the same time creating inconsistencies on effective lead times (Rikken, 2011).
What this mean is that exporters cannot be sure beforehand how much recourse to engage which
put the growers under extreme pressure to meet targets daily. This pressure is pushed up in
supply chain leading to inefficiencies & lead time uncertainties in an already unpredictable
environment (Chopra &meindl, 2008). The success of supply chain depends on the exchange &
processing of information between supplier and buyer. Hence, communication, a proactive
integration, plays important role in managing supply chain (lamming, 2000).

2.4.4. Information Sharing/Bullwhip Effect/

In recent years numerous studies have emphasized the importance of information sharing within
the supply chain (Barrett, 2004). Information should be ready available to all companies in the
supply chain and the business process should structure in a way so as to allow full use of this
information (trkman et al, 2007).

Supply chain inventories are prone to fluctuations and instability: Even small variations in end
item demand create oscillations that amplify throughout the chain, also known as the bullwhip
effect (Lee et al. 1997, Sterman 2000). It is shown that order batching, demand signal processing
and lead times cause bullwhip effect even if each agent applies locally optimal ordering policies
(Lee et al. 1997). Supply chain management literature focuses on coordination policies that
employ information sharing in order to reduce the bullwhip effect. Chen et al. (1998) argues that
centralizing demand information could significantly reduce bullwhip effect. Information sharing

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can be in the form of end item demand sharing, inventory information sharing, and forecast
sharing. Xu et al. (2000) reports that demand and forecast sharing is effective in reducing order
fluctuations and safety stocks.

2.5. Empirical Review/Critique of Past Study

Available empirical studies stated that floricultural supply chains are complex networks creating
pathway from farms to consumers, involving production, processing, distributing, &disposal
(ahumada&villalobos, 2009). Statistics form united kingdom department of agriculture
(UKDA,2011) as documented in the fresh produce journal indicate that the consumption of fresh
flowers has increased at much faster pace than the demand for traditional crop such as wheat &
other grains.

Blackburn &scudder (2009) provide a useful framework to analyze perishable product

distribution. In their paper, a marginal value of time (MVT) model is used to suggest a supply
chain strategy for melous& sweet corn. While distributing perishable products, the MVT
deteriorates over time, & the objective is to minimize lost value of these products in the supply
chain. Authors suggest a two stage combination of responsive chain from Post-harvest to cooling
when product deterioration rates are high, &an efficient chain for shipping stage when product
value is stabilized once it reaches cold chain. The authors state that if MVT stays stable, one type
of distribution strategy (efficient strategy to minimize costs) is appropriate.

Bogataj et al (2005) evaluate the performance of cold chain management (CCM) using net
present value (NPV) of the delivered product after subtracting manufacturing, distribution &
cooling costs, as well as deterioration of value. The authors present an input-output model that
assesses the impact of changes in transportation or temperature control on the stability of cold
chain.

Ahumada&villalobos (2009) present a tactical planning model for producing & manufacturing
fresh agricultural products in Mexico with the objective to maximize revenues. In a mixed
integer-programming model, the authors introduce linear product value decay function on the

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revenue-maximizing function, also using product value decay as constraint for product storage in
the model. Besides production quantity decision, the model also determines transportation
models taking in to account quality deterioration & service level impact. A case study used by
authors to validate the model confirmed that using tracks to transport perishable product is more
adequate if compared to rail, because of lead-time requirements.

Bourassa(2006) examines distribution of perishable pharmaceutical products(nuclear medicines)

& the choice of transportation to deliver such products with the objective to minimize
distribution cost while balancing factors such as product (radioactive) decay, service level,
transportation cost &etc. The product has extremely high decay rates, on average 20% - 30% in
one day on average,& delivery times are therefore very short. He concludes that product
production & shipping can be re organized to match the time demand spikes, whereas for less
perishable products an existing distribution network of radio pharmacies can be used.

A number of distribution frameworks have been proposed from supply Chain design. One of the
1st was introduced by Fisher (1997), who devises taxonomy of supply chains based on the nature
of the product. For functional products (stable predictable demand, long life cycle) Fisher argued
that the supply chain should be designed for cost efficiency; for innovative products (volatile
demand, short life cycle) like the fresh produce he maintained that the supply chain should be
designed to be fast& responsive. Specifically, Fisher sheds light on how product type affects the
design, selection, & classification of distribution network SCN design & its responsiveness &
efficiency is critically dependent on the product type.

An efficient & responsive horticultural supply chain occurs when customers’ satisfaction levels
are maintained consistently, product waste levels are kept minimal, and cost of compliance &
freight logistics are sustainable & lead time are as short as possible (Rich, & Peter, 1997)

The research explored the concept of supply chain performance in the key floricultural
distribution channels in order to illustrate its significance as essentials of creating competitive
advantage. Key performance measures or metrics used in the sector are geared towards
improving customer satisfaction through cost efficiencies, minimal lead time, & supply chain
responsiveness (pollens, 2006) among others. Consequently there is aneed for SCM to cope with
these challenges & this cannot be done by one party alone hence cooperation is needed to fulfill

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 market demands for responsive, low cost& high quality deliveries. The intrinsic characteristics of
cut-flowers specially their perishables& the necessity to maintain a high level of customer
confidence in product quality also makes the management of flowers supply chains particularly
challenging. This is mainly because the perishability a cut- flowers demands that the product is
distributed quickly irrespective of the existing market price (tolinas, 2006).

In the face of continuing globalization and complexity of the international business environment
it is vital that supply chain managers gain a lot more clarity on the factors causing supply chain
distribution. Supply chain distribution has caused the decline of many business enterprises,
including the floriculture industry, and affected many livelihoods across the globe. In this regard,
supply chain managers need to gain deep practical understanding on the dynamics of the root
causes of such distribution factors so as to be better placed to craft preventive and remediation
strategies. Shah, (2009) indicates that supply chain distribution factors have not received enough
attention.
Green house or fie Out grower

- Grade
- Bunch
Packing house or grading shed
- Place in buckets
with treatment
solution
- Grade
- Precool
Cold room
- Store

Insulated/refrigerated truck
Road transport

- Record arrival
temperature
- Inspection
- Documentation
Freight handlers - Palletize
- Record temperature
before load

Aircraft

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Figure 2: supply chain for cut flowers from field to aircraft

Summary

Under the theoretical part of this study, on an investigation factors affecting the supply chain
distribution in floriculture products are discussed in details. First, the concept of supply chain
factors is discussed based on scholars’ points of view. Second, supply chain factors in
floriculture products distribution specially and intelligibility is discussed based on what scholars
have been said. Next, the connection between supply chain factors that affect the performance
andthe floriculture experience is discussed. The two activities are interrelated one support the
other. But, if the factorsare not performing effectively the expected customer satisfaction and
quality and cheap products cannot be achieved.After that, relationship between the factors and
performances raised. After that the cause of the factors affecting supply chain management
problems and to what extent these problems affect distribution process have been raised.

To sum up, this historical background of factors affecting supply chain distribution is a clue for
an investigation factors affecting supply chain distribution performance at Tana flora PLC. So, it
encourages the researchers on what area to focus on while investigation is carried out.

2.6. Supply Chain Distribution Performance Measurement/

Metrics
2.6.1. Introduction

To show improvements in operation, many supply chain management specialist consider

improving supply chain performance indicators or metrics as one of the simplest and least
expensive, and least time consuming activities. It is well known fact that, “people behave on the
way they are measured” Tana Flora floricultural supply chain distribution are not different;
unless clear measurable indicators are in place, staff may not completely understand what is
expected of them; as a consequence, they may not carry out their tasks as well as they could.

2.6.2. Types of Indicators and Their Harmonization

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Several types of indicators have been developed to measure supply chain and logistics activities.
Choosing a type indicator to measure can be daunting, and it could be dangerous to simply focus
attention on one area. For example focusing only cost containment could improve one area but
not affect the overall performance of supply chain. For this reason we adopted a model
developed by Edward Frazzle (2001) that is more holistic and more consists of four types of
indicators: quality, time, financial, and productivity. To complete the analysis, all indicators
types need to be considered, and they need to work together. As Edward indicates each of the
supply chain/logistics functions (i.e. product selection/forecasting/procurement,
supplier/sourcing, warehousing/storage, inventory management/LMIS/customer response,
distribution/transportation) is then further divided by type of indicators. As this research is about
the factors that affect supply chain distribution performance the researchers were used
distribution/transportation performance indicators. As Edward indicates
distribution/transportation is measured by quality, response time, financial, and productivity and
then these four indicators are subdivided in to another sub indicators as follows:

2.6.2.1. Quality
A. On-Time Arrivals- this indicator measures the percentage of shipments arriving on time
for a set of delivery date during a definite period of time.
Formula
number of shipments arriving within agreed time window
×100
total number of shipments

Purpose and Issues

Let deliveries can cause stock outs, not only at the receiving facility, but throughout in
country network. It can indicate transportation problem in the system, such as condition of
vehicles, difficult terrain-indicating the need to adjust schedules accordingly-or driver
performance issues.

B. Percentage of Shipments Where Quantity Dispatched Equals to Quantity

Received- this indicator measures the percentage of shipments where the correct items and
quantity of products dispatched with the vehicle match the amount received during a defined
period of time.

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 Formula
number of shipments where product shipped equals product received
total number of shipments

Purpose and Issues

This measures the ability of the transport system to reliably deliver products, which can affect
the quantities and items reaching a facility. Large difference can reveal problems during transit,
which would need further investigation.

C. Percentage of Shipments Arriving in Good Condition-

This indicator measures the percentage of shipments arriving in good condition

without damage to the products (e.g., punctures to the packages, crushed package;
or exposure to water damage, direct sunlight, or high temperatures) during a
defined period of time.

Formula

number of shipments arriving with no damage product

×100
total number of shipment received

Purpose and Issues

Products arrived undamaged prevents wastage of products, saving money and also ensuring the
products are available to clients. High rates of damaged products can indicate problems in the
transport system, such as mishandling of products in the loading and unloading processes or
inadequate protection from natural elements (e.g., sun, rain). It can also be an indication that the
vehicles are at fault, e.g., product is not properly secured in thevehicle or not packed correctly in
a container or vehicle.

D. Kilometers Between Accidents-

19
This indicator measures the average number of kilometers between vehicle
accident by a specific driver, vehicle, or route during a definite period of time.

Formula
total kilometres driven
number of accidents

Purpose and Issues

This can reveal poor transportation practices or poor road condition; it can help pinpoint areas
needing improvement by determining the cause of the accidents, whether they were caused
because of human error or other reasons. .

E. Time Between Accidents

This indicator measures the average amount of time between vehicle accidents by a specific
driver, vehicle, or route during a defined period of time.

Formula

total timedriven
number of accidents

Purpose and Issues

This can reveal poor transportation practices and it can help pinpoint where most accidents are
occurring in order to investigate where they are attributable to human error or other reasons and
to take actions.

2.6.2.2. Response Time

A. Average Delivery Time-This indicator measures the average time (hours or days) from
when a shipment leaves a facility until it arrives at its destination, for a specified warehouse,
distribution point, region/district, vehicle, or route during a definite period of time, usually
one year.

20
 Formula
∑ of total number hours ¿ dispatch ¿ receip at destination fo all shipments number of¿shipments

Purpose and Issues.

This indicator reflects the efficiency of the transport or distribution systems. Long transit time
should be considered when planning inventory levels and shipment schedules. Monitoring
average transit time for a specific region, route, or facility can also help managers improve
response time and efficiency and reduce wastage

B. Average Vehicle Loading/Unloading Time

This indicator measures the average amount of time it takes to load or unload a vehicle at each
pickup/delivery location during a definite period of time.

Formula

∑ of total number of hours ¿ load∨unload a vehicle for all shipment number of¿ shipment

Purpose and Issues.

This indicator reflects the efficiency of transport and distribution systems. The longer a vehicle is
stationed for loading and unloading, the less time it can spend on the road making deliveries and
responding to orders from clients. Loading and unloading time should be taken in to account
when scheduling deliveries and planning transportation routes for different kinds of vehicles and
products

C. Vehicle Turnaround Time

This indicator measures the percentage of time (hours/days) spent idle between a vehicles arrival
at a facility and its departure, inclusive of loading/unloading time, during a definite period of
time (e.g. Specified day/week/month)

21
Formula

total amount of hours∨days vehicle spent idle at afaciity

× 100
number of actual driving ( ¿ working ) hours oor days∈that timme period

Purpose and Issues

To ensure the efficient use of vehicle and resources in general, managers can monitor vehicle
turnaround time for a given route, region, or district. To eliminate waste and time lost to
inefficient distribution, managers should strive to reduce the time that vehicles spend idle.
Vehicles that have higher turnaround times are also reliably serving more clients.

2.6.2.3. Cost/Financial
A. Total Transportation Cost

This indicator measures the sum of all transportation costs related to a specific delivery, type of
vehicle, carrier (if outsourced), route, or region/district/facility during a defined period of time;
including inbound and outbound transport, fuel, tires, maintenance, acquiring and staffing a fleet
or if outsourced, freight bills.

Formula

Sum of all transportation costs (as suggested above) during a specified period of time.

Purpose and Issues

Calculating total transportation costs can help managers monitor these costs over time to follow
trends and to make budgetary and operational decisions about delivery schedules, use of
vehicles, routing, outsourcing and etc.

B. Average Transportation Costs

This indicator measures the average transportation costs per kilometers (km) or volume or
weight (as relevant/appropriate)costs related to a specific delivery, type of vehicle, carrier (if

22
outsourced), route, or region/district/facility during a defined period of time; including inbound
and outbound transport, fuel, tires, maintenance, acquiring and staffing a fleet or if outsourced,
freight bills.

Formula

∑ of all transportation costs

m3
total numbeerof km driven∨ of products of product shipped
kg

Purpose and Issues

Calculating average transportation cost per km/m3/kg can help managers monitor these costs over
time to follow trends and to make budgetary and operational decisions about delivery schedules,
use of vehicles, routing, outsourcing and etc.

C. Ratio of Transportation Cost to the Value of Product

This indicator measures the ratio of all transportation costs related to a specific delivery, type of
vehicle, carrier (if outsourced), route, or region/district/facility during a defined period of time;
including inbound and outbound transport, fuel, tires, maintenance, acquiring and staffing a fleet
or if outsourced, freight bills.

Formula

∑ of all transportation costs

total value of product shiped

Purpose and Issues

Monitoring the ratio of transportation costs to the value of products managers monitor these costs
over time to follow trends and to make budgetary and operational decisions about delivery
schedules (e.g. Frequency), use of vehicles, routing, outsourcing and etc. when delivery routes

23
are being evaluated, high ratio of transportation compared to value of product may suggest that
the review periods for those facilities be lengthened or that shipments to those facilities be
consolidated with shipments to other facilities.

2.6.2.4. Productivity
A. Vehicle Use Availability

This indicator measures the amount of time a vehicle is available for use during a specified
period of time because it was out of service.

Formula

total number ot days ∈ period−total days unavailable

×100
total number of days∈ period

Purpose and Issues

The availability of vehicles in a fleet is an indication of the condition of the fleet overall and
reflects how the vehicles are being maintained and utilized. Low availability can impact delivery
performance. However, because routine maintenance is crucial, a target for the indicators can be
between 80-95% availability.

B. Container Capacity Utilization

This indicator measures the percentage of vehicle/container capacity used out of the maximum
available by weight or volume.

Formula

total kilograms∨m 3 shipped

× 100
theoreticalmaximum for each type oof vehicle

Purpose and Issues

24
Managers can monitor container capacity utilization for given route, region, or district to ensure
the efficient use of vehicle and resources in general. Managers should strive to increase capacity
utilization to eliminate waste and to improve to clients.

C. Fleet Yield

This indicator measures the average quality of products by case or kilograms delivered per
person-hour (part and/or full-time staff) during a definite period of time.

Formula

∑ of the quality of cases per kilograms delivered

person−hours for part−¿∨full time staff

Purpose and Issues.

To improve efficiencies in the use of human resources and vehicles, this indicator can be
monitored over time.

D. Average Number of Stops per Route

This indicator measures the average number of delivers per route in a given region/district during
a defined period of time.

Formula

∑ of the numbers of stops for all routes

number of routes

Purpose and Issues

To ensure the efficient use of vehicles or resources in general, manager can monitor the average
number of stops per routes in a given region or district. Manager should optimize the time the

25
time that vehicles spent on the road to reduce costs and eliminate waste and time lost to
inefficient distribution.

2.7. Conceptual Frame Work

Based on reviewed literature conceptual frame work depicting the relationship between the
independent supply chain distribution factors being stated and the dependent supply chain
distribution performance measures or merits has been developed. The various components of the
dependent and independent variables has been defined in the literature review where by cool
chain effectiveness is referring to the capacity to maintain perishable produce at within
acceptable temperature regimes within the distribution chain to avoid wastages, transport or
freight costs refers to the actual costs associated with freighting the product while information
sharing refers to the exchange of idea or appropriate information between supply chain partners.
Lead time is the time taken from order placement to delivery to final customers of the finished
good.

Independent variable Dependent variable

Transportation cost
H1
Supply chain
Lead time H2
distribution performance

Information
sharing/bullwhip effect/ H3

H4
Cool supply chain

26
Figure 1. Conceptual frame work of the study

CHAPTER THREE

3. Research Methodology and Procedures

3.1. Research Approach

Since the major purpose of this study was to investigate the critical factors that affect the supply
chain distribution performance, descriptive type of research approach was used in order to
describe the condition that exists or existed. Descriptive study is a suitable method for this study
to survey problems as suggested by (Creswell, 2003). Tayie (2005) also stated that a survey
research is used to investigate problems and it is easy to control large amount of data collected.
He also added “a descriptive survey attempts to picture out or document current conditions or
attitudes that is to describe what exists at the moment” (2005, p.50). As pointed out by the above
two scholars, a descriptive survey method is convenient to portray the broad description of the
existing factors affecting the supply distribution of a company. Since the present study is
concerned with investigating factors affecting supply chain distribution in Tana Flora PLC, the
descriptive method of research is an appropriate method to use.

3.2. Population& Sampling Technique

The research is about assessing the critical factors that affect the supply chain effectiveness in
Bahir Dar Tana Flora PLC. Thus the population of this study was employees of Tana Flora PLC.
Currently the company has 927 permanent employees, but the focus of the study more relates
with logistics, production, finance, management, & marketing departments of the company.
Since the employees in these departments are assumed to have better understanding about the
area of this study, the sample of the study was taken from these five departments. The total target
population of these five departments is 85. For selecting the respondents from the total

27
population census sampling technique was used, since the entire population of the study was
sufficiently small and respondents from these departments are assumed to be representative the
researchers included the entire population in the study.

3.3. Variable of the Study

3.3.1. Independent Variables

In this study the independent variable can be operationalized as transportation cost,

lead time, cool chain, & information sharing.

 Transportation Cost- refers to the actual costs associated with freighting the
products.
 Lead Time- the time between order placements to delivery to final customers
of the finished products.
 Cool Chain- refers to the capacity to maintain perishable produce at within
acceptable temperature regimes with in the distribution chain to avoid
wastage.
 Information sharing-sharing relevant business ideas with supply chain
partners.
3.3.2. Dependent Variable

Supply Chain Distribution Performance (SCDP) -in this study dependent variable
can be operationalized as quality, response time, cost/financial, productivity& information
sharing.

 Quality-these indicators typically tell you how well you are performing a specific
activity

28
  Response Time-these indicators focus on the time it takes to complete specific activity.
They show where saving time during a specific activities can improve the overall supply
chain performance.
 Cost/Financial-these indicators help managers identify supply chain cost and help move
toward a more efficiency managed supply chain.
 Productivity-these indicators examine how well resources are used. For example, filling
vehicle to their capacity, instead of sending out vehicles half-full, could reduce costs and
improve efficiency.

 Information Sharing-sharing relevant business ideas with supply chain

partners.
3.4. Source of Data & Methods of Data Collection
In order to achieve the objective of the study both primary &secondary source of data was used
to gather relevant information. The primary data was collected through self designed questioner.
A self-designedstructured questioner was used for data collection for all variables under study
and this was designed and distributed by the student researchers. Using this self designed
structured questioner a primary data was collected from respondents who are directly related
with the issue under study (production, logistics, management, marketing and finance).The
designed questioner was based on a five liker scale in order to provide the extent of the
respondents feeling or opinion on the impact of the independent variables onsupply chain
distribution performance .The choice of this instrument has been justified by the fact that
respondents were expected to be literate and information required has easily been described in a
consistently written manner. The questioner was first prepared in English and then translated to
Amharic for better understanding. Secondary data was also obtained as well, by referring
different materials like written documents in the organization, reports and plans, manuals and
internet.

3.5. Data Analysis and Interpretation Method

To examine the effect of Transportation cost, Lead time, Information sharing and cool supply
chain on supply chain distribution performance in the proposed model, Statistical Package for
Social Science (SPSS) version 20 software was utilized as the analytical technique of

29
choice.Once entered into SPSS, data cleaning were done to improve the quality of data through
ensuring data completeness and consistency. Pearson coefficient of correlation analysis has been
carried out on the data obtained from the respondents to examine the relationship between the
independent and dependent variables, and multiple regressions is used to examine the four
combined effect of the four independent variable aspects have on supply chain distribution
performance.

Pearson Coefficient of Correlation Analysis

First, it was used to investigate whether an association between variables was established by
using a test of the hypothesis of statistical independence. The second aspect was to determine the
strength of the relationships between variables. According to Phyllis and his associates (2007:18-
55), inferences have a very important in management research. This is so because conclusions
are normally established on the bases of results. Such generalizations were therefore, be made for
the population from the samples. They speculate that the Pearson Product Moment Correlation
Coefficient is a widely used statistical method for obtaining an index of the relationships
between two variables when the relationships between the variables is linear and when the two
variables correlation are continuous.

According to Duncan C. and Dennis H. (2004:38-41), correlation coefficient can range from -1
to +1. The value of -1 represents a perfect negative correlation while a value of +1 represents a
perfect positive correlation. A value of 0 correlations represents no relationship. The results of
correlation coefficient may be interpreted as follows.

Correlation Coefficient Interpretation

(-1.00 to -0.8] Strong

(-0.8 to -0.6] Substantial
Negative
(-0.6 to -0.4] Medium negative
(-0.4 to -0.2] Low
(-0.2 to 0.2) Very Low
(0.2 to 0.4) Low
Positive

30
(0.4 to 0.6) Medium positive
(0.6 to 0.8) Substantial
(0.8 to 1.00) Strong

Multiple Regression Analysis

The second aspect of the relationship between variables that is examined by multiple regression
which involves specification of the form of the relationships so as to find a mathematical
expression that enables us to predict the score of one variable (called dependent variable) from
knowing the score of the other variables (called independent variables).

Multiple regression analysis is a statistical analysis technique used to establish the linear
relationship between a single dependent variable and two or more independent (explanatory)
variables and is used to test the proposed hypotheses (Cooper and Schindler, 2001). It provides
an index of the degree of relationship (1 = perfect relationship, 0 = no relationship) between the
criterion variable(s), on the one hand, and the weighted combination of the predictor variables as
specified by the regression equation, on the other hand—that is, R (Hair et al., 2006). Regression
analysis predicts changes in a dependent variable by simultaneously accounting for the impact of
various independent variables via their weighted combination. Interpreting the results of
regression analysis may be more easily evaluated by examining the R-squared (R2) statistic,
which indicates the proportion of variance in the dependent variable that is shared by the
weighted combination of independent variables (Hair et al., 2006).

The use of multiple regression analysis is very appropriate in cases where it is of interest to
discover the collective effect of several independent variables on a particular dependent variable
(adjusted R square), as well as it being of interest to know the specific effect of each independent
variable on the dependent variable in the presence of the other independent variables (i.e.
determining the effect of each independent variable while controlling the effect of the other
independent variables).

The regression analysis used the F-statistic to measure the predictors (Transportation cost, Lead
time, Information sharing and cool supply chain) effect on the dependent variables (supply chain

31
distribution performance). Each F statistic is a ratio of mean squares. The numerator is the mean
square for the term. The denominator is chosen such that the expected value of the numerator
mean square differs from the expected value of the denominator mean square only by the effect
of interest. The effect for a random term is represented by the variance component of the term.
The effect for a fixed term is represented by the sum of squares of the model components
associated with that term divided by its degrees of freedom. Therefore, a high F statistic indicates
a more significant effect (Hirschey, 1995:181).

The model to be used in the study takes the form below:

Y = α +β1X1 + β2X2 + β3X3 + β4X4 + Ɛ

Where;
Y= the dependent variable (supply chain distribution performance)
α - Is the intercept term- constant which would be equal to the mean if all slope coefficients are 0.
β1, β2, and β3, β4 – Are constants regression coefficients representing the condition of the
independent variables to the dependent variables.
X1- Transportation cost, X2-Lead time, X3-Information sharing and X4- Cool supply chain Ɛ -
(Extraneous) Error term.

3.6. Research Ethics

Like other aspects of business, research demand ethics from its participants. Ethics are norms or
standards of behavior that give moral choice about one behavior and our relationship with others.
The goal of ethics in research is to ensure that no one is harmed or suffers adverse consequences
of research activities (Daheld. R Cooper.c. William emory, 1995: 97)

So arising from this we are ready to take of ethical consideration in the study, starting from the
beginning until the completion of the study in all case try to take care of the personality of the
individual or subject.

32
CHAPTER FOUR

4. Data Presentation, Analysis and Interpretation

To investigate the factors that affect supply chain distribution performance of floricultural
products in Tanaplc, in this chapter, the data collected by using five-point a Likert scale ware
subjected to analysis. The analysis was carried out by using multiple regression and prisons
correlation using SPSS software. In addition descriptive analyses were used to gain insight
information about respondents. The results of the analysis are presented using table and figures.

4.1. General Characteristics of the Respondents

To assess the factors that affect supply chain distribution performance of floricultural products in
case of Tana Flora PLC a total of 85 employees and corporate executives took part in this survey.
From those respondents 22.4% &77.6% were male and female respectively. Most of the
employees in the company are between the age of 18-34 which is 89.6% of the total respondents
and the rest are between the ages of 35-50 which accounts for 10.6%. it was found that majority
of the respondents have work experience between 0-2 years which is 61. 2% of the total
respondents. The other 36.5 & 2.4 % of the respondents have work experiences of 3-5 & 6-10
years respectively. In general 36.5% of the respondents took part in logistics and material
management (i.e., transportation, distribution, & purchasing), 36.5% in production, 15.3% in
sales, 5.9% in corporate executive &5.9% in finance in Tana Flora private limited company. This
result is shown in the table 4.1 below.

33
Table 4.1 Respondents’ Background Information

Frequency Percent Valid percent Cumulative

percent
Male 66 77.6 77.6 22.4
Sex Female 19 22.4 22.4 100
Total 85 100 100
18-24 38 44.7 44.7 44.7
Age 25-34 38 44.7 44.7 89.4
35-50 9 10.6 10.6 100
Total 85 100 100
0-2 52 61.2 61.2 61.2
Work 3-5 31 36.5 36.5 97.6
experience 6-10 2 2.4 2.4 1oo
Total 85 100 100
Educational 10th and 12th 6 7.1 7.1 7.1
level certificate.
diploma 19 22.4 22.4 29.5
1st degree 58 68.2 68.2 97.7
2ad degree & 2 2.4 2.4 100
above
Corporate 5 5.9 5.9 5.9
executive
Job position Purchasing 5 5.9 5.9 11.8
in the Distribution 5 5.9 5.9 17.6
company Transportation 9 10.6 10.6 28.2
Logistics 12 14.1 14.1 42.4

34
 Finance 5 5.9 5.9 48.2
Production 31 36.5 36.5 84.7
Sales 13 15.3 15.3 100s
Total 85 100 100
4. 2. Pearson’s Product Moment Correlation Coefficient

The aim of correlation analysis also known as the Pearson’s correlation coefficient is to
investigate the relationship between two variables. Specifically, a correlation coefficient
determines the degree to which variation in one variable is related to variation in another variable
(Malhotra, 1996:575).

In this study, Pearson’s Product Moment Correlation Coefficient was used to determine whether
there is significant relationship between each independent and dependent variable. Gravetter and
Wallnau (2000: 531) define the Pearson correlation as, measures the degree and direction of
linear relationships between two variables. A correlation score of -1.00 means that there is a
perfect negative association between the two variables while a correlation score of 1.00 means
that there is a perfect positive association between the two variables. A correlation score of 0.00
means that there is no relationship between the two variables (Gravetter and Wallnau, 2000).To
determine the relationship between dependent and independent variables, Pearson correlation
was computed. Table 4.2 presents the results of Pearson correlation on the relationship between
supply chain distribution performance and its independent variables (Transportation cost, Lead
time, Information sharing and cool supply chain) are linear and positive ranging from substantial
to strong correlation coefficients.

Table 4.2 Correlation of supply chain distribution performancewith Transportation cost,

Lead time, Information sharing and cool supply chain

Variables SC Distribution Perf. (SCDP)

Pearson Correlation .124**
Sig. (2-tailed) .258
Transportation cost
N 85
Pearson Correlation .491**
Sig. (2-tailed) .000
Lead time
N 85
Information sharing Pearson Correlation .405**
Sig. (2-tailed) .000 .000

35
 N 85
Cool supply chain Pearson Correlation .158**
Sig. (2-tailed) .149
N 85
**. Correlation is significant at the 0.01 level (2-tailed).
**.correlation is significant at the 0.05 level (2-tailed). Source: Field survey (2015)

As it is clearly indicated in table 4.2, above, an insignificant and positive relationship was found
between transportation cost and supply chain distribution performance (SCDP) (r =.124, p > .01).
On the other hand a statistically significant & positive relationship was found between lead time
and supply chain distribution performance (SCDP) (r=.491, p < .01). In addition there is a
statistically significant and positive relation between information sharing and supply chain
distribution performance (SCDP) (r =.405, p < .01), & an insignificant and positive relationship
was found between cool supply chain and supply chain distribution performance (SCDP)
(r=.158, p> 0.01) which indicates that lead time and information sharing are statistically
significant at 99% confidence level (p<0.01). This implies that at a 1% level of significant it was
discovered that lead time and information sharing plays a significant role in determining supply
chain distribution performance. On the other hand it was found that transportation cost and cool
supply chain are not as much significant in determining supply chain distribution performance.
The highest correlation is signified by lead time at (r=.491), followed by information
sharing(r=.405), cool supply chain(r=.158), and transportation cost(r=.124). From these we can
understand that as their value fall between .124 and .491, medium positive correlation between
the four independent variables with that of the dependent variable.

Delivery lead time had shown the highest correlation coefficient (r=0.491) and transportation
cost has yielded the lowest correlation coefficient(r=0.124). Thus it is a strong indication that
failure of floricultural delivery lead time highly affects the supply chain distribution performance
of the company and will eventually lead to loss of market share and profitability.

In addition Information sharing between supply chin partners has positive and the second highest
relationship with supply chain distribution performance (r=.405). This means if the company
share reliable information about their business with their supply chain partners the supply chain
distribution performance of the company will be improved in very profitable manner. Reliable

36
information sharing among the supply chain partners has an influence to determine the supply
chain distribution performance of the company. Supply chain inventories are prone to
fluctuations and instability. Even small variations in end item demand create oscillations that
amplify throughout the chain, also known as the bullwhip effect (Lee et al. 1997, Sterman 2000).
Supply chain management literature focuses on coordination policies that employ information
sharing in order to reduce the bullwhip effect. Chen et al. (1998) argues that centralizing demand
information could significantly reduce bullwhip effect. Information sharing can be in the form of
end item demand sharing, inventory information sharing, and forecast sharing. Xu et al. (2000)
reports that demand and forecast sharing is effective in reducing order fluctuations and safety
stocks.

4.3. Regression Analysis & Hypotheses Testing

This section presents the results relating to Hypotheses 1 to 4 that were formulated in order to
achieve Research Objective 1-4 i.e., to examine the effects that Transportation cost, Lead time,
Information sharing and Cool supply chain have on supply chain distribution performance.
There are four independent variables: Transportation cost, Lead time, Information sharing and
cool supply chain in the Regression Model. These four independent variables were regressed
against supply chain distribution performance to test their effects on the latter. The results
relating to Hypotheses 1 to 4 are summarized in Table 4.3 below.
Table 4.3 Multiple Regression Model Summary
ModelSummary

Model R R Square Adjusted R Std. Error of Durbin-

Square the Estimate Watson

1 .543a .295 .260 .36260 1.719

a. Predictors: (Constant), CC, IS, TC, LTM

b. Dependent Variable: distribution performance

37
The model summary result shows that a regression model with R square .295 which implies that
the percentage of variation in supply chain distribution performance explained by the four
variables accounts for 29.5%, and other unexplored variables may explain the variation in supply
chain distribution performance for 71.5%.

In addition, the adjusted coefficient of determination (adjusted R-square) indicates the model fit.
The adjusted R2 revealed that 26% of the variance in supply chain distribution performance was
explained by the regression model. The p-values of the t-tests were at the 1% level of
significance for TC. CC construct was significant only at the 10% level.

Table 4.4.ANOVAa F test

ANOVAa

Model Sum of Df Mean Square F Sig.

Squares

Regression 4.400 4 1.100 8.367 .000b

1 Residual 10.518 80 .131

Total 14.919 84

a. Dependent Variable: distribution performance

b. Predictors: (Constant), CC, IS, TC, LTM

The F statistic of 8.367 was significant at the 1% level of significance. Therefore, the
independent variables have some power to predict supply chain distribution performance

38
Table 4.5.Multiple Regression Results Relating to Hypotheses One, Two, Three and Four
Coefficientsa

Model Unstandardized Standardized t Sig.

Coefficients Coefficients

B Std. Error Beta

(Constant) 1.826 .424 4.310 .000

TC .051 .087 .058 .586 .560

1 LTM .272 .077 .373 3.513 .001

IS .168 .076 .234 2.229 .029

CC .050 .077 .065 .647 .520

a. Dependent Variable: distribution performance

In the Regression Model, the standardized coefficients (β) of Transportation cost, Lead time,
Information sharing and cool supply chain show the relative influence on supply chain
distribution performance. LT (β =0.272) has the most influential effect on supply chain
distribution performance, followed by IS (β =0.168). Further, TC and CC(β = 0.051) and (
β=0.50 ¿ , respectively has the least influence on supply chain distribution performance.

H1: Transportation cost has negative and significant effect on supply chain distribution
performance.

39
Based on the result of the regression analysis of the above model stipulated on table 4.5,
Transportation cost (β= 0.051 with p>0.05) has a positive but have no significant effect on
supply chain distribution performance. Hence, hypothesis 1 is rejected.

H2: Lead time has negative and significant effect onsupply chain distribution performance.
Based on the result of the regression analysis of the above model stipulated on table 4.5, lead
time (β= 0.272 with p<0.01) has positive and significant effect on supply chain distribution
performance. Hence, hypothesis 2 is accepted.

H3: Information sharing has positive and significant effect on supply chain distribution
performance.
Based on the result of the regression analysis of the above model stipulated on table 4.5,
Information sharing (β= 0.168with p<0.01) has positive and significant effect on supply chain
distribution performance. Hence, hypothesis 3 is accepted.

H4: Cool supply chain has positive and significant effect on supply chain distribution
performance.
Based on the result of the regression analysis of the above model stipulated on table 4.5, Cool
supply chain (β= 0.050with p>0.05) has a positive but have no significant effect on supply chain
distribution performance. Hence, hypothesis 4 is rejected.

From table 4.5., the following mathematical relationship is derived

Y=β+0.51TC+0.27LTM+0.16IS+0.050CC+ €………………………………équation 1

Where : Y=Supply Chain distribution performance

β=constant (1.826)

TC=transportation cost

LTM=lead time

40
 IS=information sharing

CC=cool supplychain

€=errorterm

CHAPTER FIVE
5. Summery, Conclusions, and Recommendations

5.1 Summary of the Major Findings

Based on the result of regression analysis of the model stipulated in chapter 4, the study findings
have been summarized as follows.

 A Total of 85(100%) study subjects have participated in the study. Among these 77.6% were
Male, 22.4% were female workers.
 As indicated inthe table, 44.7 percent of the workers are 26- 34 years old, and 44.7% of the
total respondents have 18- 25 years old &10.60% are 35- 50 years old and the rest 8.7% are
above 50 years old. This revealed that most of the workers were in the young age with less
years of experience but with the high working energy.
 In terms of educational level the majority, i.e. 68.2% of the worker were B.A/BSC holders,
while 22.4% of the workers were diploma holders 7.1% of the workers were 10 th& 12th
certificate holders and the rest 2.4 % of the workers were MA/MSC holder.
 In relation to the worker experience of the respondents, it is clearly indicated in Table 1 that
95.5% of the workers had between 0- 5 years of service and 5% of them with only 6- 10
Years of service.
 As was found with the help of data analysis transportation cost is positively associated, but
has insignificant relationship with supply chain distribution performance at p> 0.05
Therefore H1 been rejected.
 The findings once again suggest thatLead time have a positive and significant correlation
with supply chain distribution performance. Which is p value <0.001. Therefore H2
wasaccepted.

41
 Further the results indicates that Information sharing has a positive and statistically
significant correlation with supply chain distribution performance which its p value <0.05.
Therefore H3 accepted.
 Finally it was found that Cool supply chain has a positive and insignificant correlation with
supply chain distribution performance with its p value of <0.001. Therefore H4 is rejected.

5.2. Conclusions

Based on the discovered results, different supply chain factors such as transportation cost, lead
time, cool supply chain and information sharing affects supply chain distribution performance.
Thus conclusions for the above finding are discussed as follows.

 The result of hypotheses taste indicates that there is a significant relationship between supply
chain distribution performance and two supply chain factors i.e., lead time& information
sharing, but the relationship of two factors i.e. transportation cost and cool supply chain with
supply chain distribution performance was not statistically significant (p=0.258) and
(p=0.149) respectively. Which implies that lead time and information sharing has a positive (
β=0.272 ¿ , ¿) effect on supply chain distribution performance. As indicated in the literature
review within the horticultural supply chain the extended lead time of up to ten days have
been the recorded causing massive quality deterioration and with no formal supply planning
system nor contracts specifying volume to be supplied, the buyer push the financial risk from
their end of the chain while at the same time creating inconsistencies on effective lead times
(rikken, 2011). This implies that the success of supply chain distribution depends on the
exchange and processing of information between supplier and buyer, hence communication,
a proactive integration plays important role in managing supply chain (Lamming, 2000).
Thus it can be concluded that lead time and information sharing has a strong positive effect
on supply chain distribution performance.
 The research finding also established that transportation cost and cool supply chain has
positive relationship with supply chain distribution performance, but was not significantly
(p=0.258) and (p=0.149) correlated with it. Even though past research finding prove that this
two variable factors affects supply chain distribution performance( Nyumu, G.M.,2014), due

42
data gathered from the field in this research, it is found that transportation cost and cool
supply chain do have positive relationship, but doesn’t have statistically significant
relationship with supply chain distribution performance. Thusfrom this we can conclude that
transportation cost and cool supply chain are not the critical factor that affect supply chain
distribution performance of the company, but the company can reduce their transportation
cost by delivering full truck load, and improve their capacity to export sufficient amount of
flowers that is a base to justify cargo charters. And also since the inherent characteristics of
cut-flowers need cool supply chain that match the flower type being shipped and length of
transportation to ensure highest quality on arrival, the company need to take this two factors
in to consideration in order to succeed in their business. So insignificant relationship of
transportation cost and cool supply chain implies that these two factors have no statistically
significant relationship with supply chain distribution performance.

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5.3. Recommendations

For the research findings, the student researchers has discussed the factors that affect or do not
affect supply chain distribution performance at Tana flora PLC with the finding that lead time
and information sharing are the most important supply chain distribution performance
determinants and it’s against this background that the following recommendations are made.
Since the study has helped to consider that not all assumed supply chain factors are considered
critical at Tana flora company level, these most important supply chain factorsthe company need
to have focus on

 This study has a crucial important practical finding for the company. Needs and interests of
every human being demand many materials which have been produce somewhere and
distributed far from the production areas. These activities needed more care and system. This
system is currently takes place in supply chain distribution. Any company that produces
materials need to address the customers’ interest on the product in terms of quality and
quantity. Every producers need to follow the scientific approaches to win the market by
providing high quality and adequate amount of product. To do so, the supply chain
management plays a great role. In this chain the time from order placements up to receiving
of the product (lead time), especially perishable products like flower need a special
consideration. So the use of electronically data interchange (EDI) and other advanced web
technology are very important to shorten order processing time and communication time for
the company. A more effective use of( electronic) information throughout the supply chain
will reduce time to market and handling expense, increasing supply chain efficiency (Risley,
T., 2013). So Tana Flora as one of the perishable product (flowers) exporter need to have
taken in to account the delivery lead time.

44
 As it was found information sharing is one the very important factor that affect supply chain
distribution performance of the company. Information sharing is the very powerful weapons
that its small change leads to demand variation in supply chain partners (bullwhip effect). In
order to fully respond to the needs of customers the company need to have full information
about needs and wants of the customers. So Tan Flora as one of the flower exporter need to
have exact and actual customers demand before making any form of decision.
 Even if transportation cost and cool supply chain are not as much critical factors in
determining the supply chain distribution performance of the company, the company can use
them in order to succeed in their business. this can be done by delivering full truck load
rather than less truck load, improving their capacity to justify regular cargo charter that
reduce transportation cost, packing under temperature and humidity controlled condition
before they are dispatched from the company, using refrigerated truck and inspecting the
product after arrival. The absence of adequate standards and protocols in the cold chain, most
noticeably, directly affect the quality and vase life of the flowers. Temperatures right through
the supply chain vary sustainably and are often far higher than necessary (Risley, T., 2013).
 Finally, Tana flora PLC need to have taken in to account lead time and information sharing
as the vital factors in order to determine their supply chain distribution performance. The
manager and other corporate executives of the company are expected to know about their
supply chain environment to become more efficient. They should carefully evaluate such
factors from time to time to have a competitive advantage over their competitors.

5.4. Suggestion for Future Research

Based on the limitations that have been encountered in this study, certain points have been
suggested for future researchers. It will be considered worthwhile if it can be included whether
effectiveness of floricultural supply chain distribution has any impact on business performance
and competitive advantage of this company. Furthermore this research might be sound ifother
factors like availability of raw material, governmental policy framework and infrastructural
impact on the performance of floricultural supply chain distributions are areas worth researching
on in terms of how they impact on the supply chain performance within this very important
division of the Ethiopian floricultural sector. Finally the conceptual framework that has been
developed in this study may need further testing because this study was restricted on one

45
organization (Tana floricultural PLC). Thus future researchers will conduct more sound research
by overcoming these limitations

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