The Effect of Supply Chain Management on the Financial Performance of the Sugar Manufacturing Sector in Ethiopia

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Addis Ababa University


Supply chain management has become a potentially valuable way of securing competitive advantage and improving organizational performance since competition is no longer between organizations, but among supply chains. This is essentially due to the fact that supply chains account for as much as 70% of the product’s cost, which by any measure speaks volumes about its significance. In Ethiopia the importance of supply chains in the manufacturing sector will continue receiving increased attention as the on-going industrialization in the country, the sugar manufacturing sector being one, would inevitably be facing a reality check in the form of competition from its global counterparts that by far have the competitive edge in embracing supply chain. The objectives of the study were 1) to identify the supply chain management practices being put in use by the selected three sugar manufacturing industries in Ethiopia; and 2) to determine the extent to which supply chain management practices are influencing the financial performance of the three sugar manufacturing companies (Metehara, Wonji and Fincha). The research design adopted was descriptive research design. Two sets of data – primary and secondary- were gathered. Primary data was collected using a questionnaire that consisted of both open and closed ended questions while secondary data was collected from the factories’ financial records covering a period of seven years (2010-2016). The data collected was analyzed using descriptive statistics and also an inferential analysis involving multiple regressions was performed. The findings of the study were that supply chain across the three factories on average account for 55.1% of their annual cost entailing its worth to successful performance; that some of the supply chain management practices (knowledge management and information technology) had a positive effect on various parameters of financial performance of the factories while others (strategic supplier partnership and logistics outsourcing) do have a negative effect; and that effective implementation of supply chain management practices led to decrease in the operational cost of the factories, reduction on the response time for product design change, increased accuracy of order processing for customers which leads to improved profitability. The range of supply chain management practices embraced by the factories were found to be very limited to strategic supplier partnership, logistics outsourcing and IT infrastructure (accounting for 55.1% of the factories’ cost, which is quite lower than the 70% in other countries). The study recommends that the management of the sugar factories should consider implementing various supply chain practices as appropriate. Key words: supply chain management, financial performance, financial measures



supply chain management, financial performance, financial measures