Model Development of Supply Chain Management System: A Case Study on Mesfin Industrial Engineering Plc
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Date
2007-06
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Addis Ababa University
Abstract
Supply chain is the interconnected set of linkages between suppliers of materials and
services that spans the transformation of raw materials into products and services and
delivers them to a firm’s customers.
Supply chain is highly recognized in developed countries for it is estimated to consume
10% of their Gross National Product (GNP). It is therefore projected to be of a greater
proportion in the developing countries like Ethiopia, where a large amount of capital is
tied up in inventories and in transportation systems for moving materials.
Thus, a supply chain must be managed by controlling inventories. Developing a supply
chain management system (SCMS) requires the analysis of the flow of materials from the
initial sourcing to the final end customers. SCM has become a universal approach to cost
effectiveness, timely delivery and the creation of growth oriented exchange system in
goods and services. Accordingly, different researchers have made supply chain
management studies in different Ethiopian process industries and have developed models
capable of solving supply chain associated problems if implemented properly. And this
thesis is done with the purpose of assessing the existing supply chain environment in one
of the Ethiopian discrete manufacturing industries, the Mesfin Industrial Engineering
PLC (MIE), and solving the associated problems.
Mesfin Industrial Engineering (MIE), being one of the Endowment Fund for the
Rehabilitation of Tigrai (EFFORT) companies, is a privately owned company
located at the northern part of Ethiopia, in the Tigrai provincial capital, Mekelle.
MIE, is the leading equipment manufacturing and industrial engineering
company in East Africa. It designs and installs equipments & components for the
energy, mining, manufacturing, construction, transportation, and agricultural
sectors.
Because of the inherent complexity of decision making in supply chains, there is
a growing need for modeling supply chain system with different methodologies.
With a focus on SCM in which cost, inventory and time are the key challenges, this thesis
develops a model to aid the improvement of performance of the supply chain of MIE. The
model is developed based on existing SCM knowledge (Initiated or adopted from
literature review and pervious research works of Vikas Chandra (India-IIT, 1999)[30],
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Ato Abreham Debebe (Ethiopia-AAU, 2004)[8], and others recently done on similar area
and as result of the circulated questionnaires, interviews made, and the results of an
assessment or observations of supply chain management in the Mesfin Industrial
Engineering PLC.
While the case study was conducted, MIE’s awareness of SCMS, existing measurement
of costs, all the inputs from the supply side, the production process and the out puts were
assessed. Consequently, a supply chain model is developed with modifications on the
existing model in such a way that non-value adding activities are avoided to reduce the
supply chain cost. Thus, based on the new model, supply chain cost analysis is done and
when compared to the traditional accounting system cost analysis there is a reduction
(saving) of about Birr 1,235,743.80 (1.06%) in the annual production cost when
supply chain cost analysis is used.
Finally, the researcher has made conclusions of the study and put recommendations to
the industry, MIE, on how to use the concept of SCMS for creating satisfied customer
and enhancing its profit margin.
Keywords: Supply Chain Management System (SCMS), Supply Chain Cost Analysis,
Supply System (direct and indirect materials), Manufacturing System, Distribution
System (Dealer & Branch Warehouse), Modeling, and Material Flow System.
Description
Keywords
Supply Chain Management System (SCMS); Supply Chain Cost Analysis; Supply System (direct and indirect materials); Manufacturing System; Distribution System (Dealer & Branch Warehouse); Modeling; and Material Flow System