Research Article Supply Chain Integration in the...

Research ArticleSupply Chain Integration in the Manufacturing Firms inDeveloping Country: An Ethiopian Case Study

Fasika Bete Georgise,1,2,3 Klaus-Dieter Thoben,2 and Marcus Seifert2

1 International Graduate School for Dynamics in Logistics (IGS), University of Bremen, Hochschulring 20, 28359 Bremen, Germany2 Bremer Institut fur Produktion und Logistik GmbH-BIBA, Hochschulring 20, 28359 Bremen, Germany3 School of Industrial and Mechanical Engineering, Hawassa University, P.O. Box 05, Hawassa, Ethiopia

Correspondence should be addressed to Fasika Bete Georgise; [email protected]

Received 1 August 2014; Accepted 29 September 2014; Published 21 October 2014

Academic Editor: Eleonora Bottani

Copyright © 2014 Fasika Bete Georgise et al. This is an open access article distributed under the Creative Commons AttributionLicense, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properlycited.

With the advancement of information and communication technologies, supply chain integration has been considered a strategictool for firms to improve their competitiveness. The supply chain integration within processes and between organizations hasenhanced value creation. However, the fragmented nature of the business in developing country demonstrates a noticeable difficultyin terms of competitiveness and efficiency. Lack of a relevant literature on practical experience in supply chain integration indeveloping countries is one of the challenges. The purpose of this research is to identify the level of interorganizational andintraorganizational supply chain integration practices. It also analyzes the challenges faced in themanufacturing firms in developingcountries. The methodology followed a thorough review of literature and semistructured interviews amongst the Ethiopianmanufacturing industries. The preliminary findings of the study highlight that prevailing approach to supply chain integrationis limited to ad hoc functional based boundaries within the firm. The SC integration enablers are also restricted to the traditionalway of communications such as telephone, fax, and letters. Firms need to focus on those issues that require attention in pursuanceof greater SC integration.

1. Introduction

Recently, themanufacturing industry in developing countries(MIDC) has been facing unprecedented competitivenesspressure generated by the new business trends. To cope withthis pressure, the manufacturing industries have tried toupgrade their operations by using different manufacturingtechniques such as Total Quality Management, BusinessProcess Reengineering and Lean Technology, and others.Despite these efforts, the MIDC has not yet made theirshare of markets. This drives industry to get additionalefficiency from their production systems. Effective supplychain management and supply chain (SC) integration arebecoming increasingly critical factors for business success.The integration of SC members can significantly support theMIDC to face the constantly changing competitiveness sce-narios. Companies versus companies have been replacedwithsupply chain versus supply chain competitiveness strategy.However, the number of companies that have truly integrated

their supply chains to take advantages of this opportunityis still small [1, 2]. The effects of globalization and fiercercompetition have forced firms to focus their attention onentire supply chain integration (end-to-end) rather than oneffectiveness and efficiency of separate business functionswithin their own premises. Firms both in developed anddeveloping countries are trying to integrate more in theirproduction activities such as sourcing, manufacturing, anddelivery processes. The MIDC has been a part of the globalsupply chains for long time as a supplier of raw materialand manufacturer of finished products. Nevertheless, somesectors like textile, garment, and leather industries eventhough such cooperation and integration is at infant stage; itdoes not create value as expected. The system was inefficient.Figure 1 shows the typical leather industry supply chain thatinvolves the firms from developing and developing countries.

This paper aims to assess the supply chain integrationlevel in one of the developing countries, Ethiopia, and rec-ommends future research directions.The paper begins by (a)

Hindawi Publishing CorporationJournal of Industrial EngineeringVolume 2014, Article ID 251982, 13 pageshttp://dx.doi.org/10.1155/2014/251982

2 Journal of Industrial Engineering

Raw material producer

Collector Wholesaler Pre-processing Tanning Finishing Manufacturing

Finishing Manufacturing

Part of international supply chain in developed world

Part of international supply chain in developing world

Customers

Figure 1: Typical leather supply chain involving developing countries.

reviewing the literature on supply chain integration practicesand (b) analyzing and discussing the empirical field findings.In doing so, Section 2 of this paper focuses on the theoreticalissues of supply chain integration. Section 3 reports theresearch design and methodology. The field findings anddiscussions are described in Section 4. The conclusions andfuture research agenda are described in Section 5.

2. Supply Chain Integration

Supply chain integration is becoming one of the academicareas of interests for research and practical applications. Inother words, firms have started to question how they canintegrate and improve their material and information flowactivities and processes inside the organizations and withtheir supply chain partners. In order to fully benefit andimplement supply chain management concepts, it is impor-tant for the firms to integrate efficiently with their suppliers,customers, warehouses, and other intermediate value-addingpartners. Different research results have suggested that thehigher level of integration with suppliers and customers inthe supply chain benefits at greater extent [3–8]. Stevens wasone of the pioneer researchers on the supply chain integration(see Figure 2) [6].

He has identified four stages of supply chain integration.The first stage represents the fragmented operations withinthe individual company. The characteristics of second stageare limited to integration between adjacent functions, forexample, purchasing andmaterials control. In the third stage,the integration requires the internal integration of the end-to-end planning in the individual company. Finally, the laststage represents the true supply chain integration includingupstream to suppliers and downstream to customers.

Frohlich and Westbrook have explained the importanceof strategic decision on the extent of integration with theupstream and downstream members of the supply chains inmanufacturing industries. They have introduced the concept

of “arcs of integration” which acts as a trigger point for theflourishing supply chain integration literature. Dependingon the complexity of souring and market spectrum, themanufacturing industries can decide to engage in relativelylittle or larger extent of integration with suppliers and cus-tomers. In their study, they have examined the effect of supplychain integration level on performance and classified thesupply chain integration in five classes (inward-, periphery-,supplier-, customer-, outward-facing) according to the inte-gration intensity of the company towards the customer andthe supplier directions.They have examined the performancedifferences between these five classes. As a result, it is foundthat outward-facing companies which were defined as themost comprehensive integration level of supply chains havebetter performance inmany criteria than the other companiesin other classes [7]. In the other research result, Bowersox etal. [8] have classified integration in a supply chain context insix different types. These are customer integration, internalintegration, material and service supplier integration, tech-nology and planning integration, measurement integration,and relationship integration [8].

Information and communication technology (ICT) is animportant enabler for efficient supply chain integration, andmany ICT applications have recently gained popularity. Thisis due to their ability to facilitate, coordinate, and integrate theflow of information across the supply chain. ICT is an enablerwhich helps supply chain members to establish partnershipsfor better performance. Tomention some of the ICT potentialapplications in developed country firms, these are electronicdata interchange (EDI), Internet and enterprise systems suchas enterprise resource planning (ERP) and radio frequencyidentification (RFID). Gunasekaran has explored that ICT isan essential ingredient for business survival and improves thecompetitiveness of firms [9]. Besides that, McLaughlin et al.[10] have found that the secret of success for the companiesaround the world is partly dependent on their ability toapply ICT to SCM [10]. The findings by McLaren et al. [11]

Journal of Industrial Engineering 3

Purchasing Material control

Sales Production Distribution

Stage 1: baseline

Material flow

Customer service

Material management

Manufacturing management

Distribution

Stage 2: functional integration

Material flow

Customer

Material management

Manufacturing management Distribution

Stage 3: internal integrationMaterial Customer

Suppliersmanagement

Internal supply chain Customers

Stage 4: external integration

Material Customer

flow

flow

service

service

service

Figure 2: Achieving an integrated supply chain [6].

show that operational efficiency and operational flexibilityhave direct relationship with SCM information system [11].The application of ICT enhances the service level of SCMand improves operational efficiency and information quality[12]. The multiple benefits through successful utilization ofICT deliver advantage in both tangible and intangible ways.The selection of the available ICT and cost associated withtheir implementation is still challenging tasks. Nevertheless,the manufacturing industry in developing countries needsto adopt appropriate ICT tools to leverage their businessadvantage. Effective utilization of ICT tools will provide theMIDC a better option in their global supply chain integrationefforts, where decisions concerning supply and demand arefully supported by facts.

3. Research Methodology

This study is based on the field works conducted on theEthiopian manufacturing industries. These manufacturingindustries are mainly producer of basic consumer products.By interviewing a variety of manufacturers from represen-tative domain level, enablers and challenges of supply chainintegration were identified. Therefore, the data presented inthis paper is collected and the conclusions presented here arebased on interim findings.

The primary and secondary data collection methods areemployed.The secondary data are based on existing literatureon SC integration, while primary data is collected throughsemistructured interviews. Literature review and qualitative

semistructured interviews with consenting respondents areused in data collection. Literature review was the first phaseof the research with the secondary data derived from relevantbooks, journals articles, conference proceedings, and reports.The second phase involves the collection of primary data,wherein the information is collected through semistructuredinterviews. All interviews were recorded and transcribedverbatim, each interview lasting approximately one hour.Therespondents of these qualitative semistructured interviewswere selected from the Ethiopian manufacturing industriespublished by Ethiopia Statistics Authority [13]. The respon-dents are selected on the basis of their experience on exportmarket and their interactions in global supply chain mem-ber. Letters were posted and e-mailed to the manufacturer.Then, follow-up telephone calls were made for the interviewarrangements. Accordingly, nine manufacturers are involvedin manufacturing activities for long time. The structuredquestions are attached in the Appendix.

4. Main Findings

An interview protocol containing a covering letter andsemistructured interview questions were sent to nineEthiopian manufacturing industries. The sample populationwas fairly evenly distributed between those who aremanufacturers for export market and those who are aproducer for local market. The respondents’ participationas an exporter has provided an opportunity to examine


Table 1: Profile of interviewed company.

Company Types of industry Type of product Number of employees Production strategies Market target Position of interviewee

A Chemical Liquor drinkand alcohol 580 Mainly MTS Local with little

exportTechniques and

production manager

B Garment Differentgarments 1300 MTO Export Task force chief

C Wood Chip wood 140 MTS Local with littleexport

Techniques andproduction manager

D Textile Textile 800 MTS/MTO Export and local Planning and marketingManager

E Leather tannery Hides and skins 500 MTS/MTO Export General managerF Leather tannery Goat skins 214 MTS/MTO Export General manager

G Food Foods 300 MTS/MTO Local with littleexport Director general

H Leather garment Garment/Article 250 MTS/MTO Local with littleexport General manager

I CeramicsSanitary andhouse hold

items500 MTS/MTO Local Planning and marketing

manager

Molassesform sugar

factoryDistillation

plantDilution andbottling plant

Endcustomer

(more localand someneighborcountries)

Additivessuch as spirit

Figure 3: Liquor and alcohol industry supply chain.

level of SC integration prevalent in the organizations. In-depth interview has been conducted in nine manufacturingindustries in Ethiopia. The organizations were systematicallysampled from the initial list of survey respondents andvolunteers who send feedback for the e-mail requests.

4.1. Field Study Organizations. The organizations are system-atically sampled from the initial list of survey respondentsand volunteers who send feedback for the e-mail requests.Furthermore, deliberate effort wasmade to ensure that a widevariety of organization fromdifferent sectorswere included inthe case study (see Table 1). The data collection is conductedvia semistructured interviews along with the industrial visitwith top managers in their respective organizations.

4.2. Findings on the SC Coordination. Among the studiedcompanies, the supply chain integration especially on somefactors was unique. Based on the interviewed companies,configuration and coordination aspects of the Ethiopian firmssupply chains have been investigated, for example, sourcingprocesses from local and international suppliers, supplierselection, and price decision issues in the chain. The firstissue to be addressed is the identification of supply chainmembers and allocation of functions among the members.

These aspects are depicted as representative in Figures 3, 4,5, 6, 7, 8, and 9. The figures also show the material flow andsome aspects of coordination, which in this case refer to thepresence of formal orders, information exchange, and stan-dard procedures. Looking onFigures 3–9,we can observe thateach of the supply chains consists of different members. Thesupply chain members in the chain are wholesalers that actas their direct customers, manufacturer, and agents—whichdistribute the products to the end customers. Sometimes,the agents can also deal directly with companies withoutthe presence of wholesaler. The important major differencesin the SCs are the wholesaler participation in sourcingand delivery processes and supply chain members in suchactivities. For example, in Ethiopian context, manufacturerwholesaler and small retailers actively participated in bothsourcing and delivery processes to the suppliers and the finalcustomers.Thismakes delivery processmore challenging andunique in the developing world. The seven figures (Figures3–9) show the typical supply chain configurations in alcohol,textile, wood, food, garment, leather and leather garment, andceramics in the case studies.

FirmA (Liquor and Alcohol Factory). Factory A is a pioneer inmanufacturing liquors and alcohol products in the country.


Headquarter inUSA

Fabricmanufacturer

Wholesaler inUSA

End customer

Design team Planning andsourcing

Garment manufacturerin Ethiopia

Freightforwarder

Fabric, garmentquality tester

Information flowMaterial flow

Figure 4: Garment industry supply chain.

Forestry(lease land)

Harvesting(timber

preparationforest site)

Extraction oftimber

(powderpreparation)

Final woodforming Finishing End

customer

Chemicalinput

Figure 5: Wood industry supply chain.

Cottoncultivation

Small holderpeasant farms

Privatecommercial

farms

State farmsenterprise

Ginneries

Textileindustry

Garment andapparelindustry

Wholesaler Retailer Domesticmarket

Cottonexporter

Export market

Biological source Primarymanufacturing Distribution CustomerSecondary

manufacturing

Figure 6: Textile industry supply chain.

The factory attempts to produce and distribute alcohol andvarious liquor products based on customer demand. Figure 3demonstrates liquor and alcohol industry supply chain. Thefactory is working with its customers to meet and exceedtheir needs. It has employed different strategies to reach allpotential market areas locally and globally by building itsown capacity through the project expansion. It has started

to maximize the business opportunities over the next yearsbeing supported by the implementationQualityManagementSystem ISO 9001:2008. The company has developed differentsystems to insure the outmost satisfaction of its customers.The firm measures its customer’s satisfaction level throughmarket survey every year. It has also developed and imple-mented customer complaint handling system. The company


Butcheries,households

restaurants, ruralslaughter houses

producers

Collectors

Collectors

Collectors

Collectors

Wholesaler

Semiproductmanufacturer(developedcountries)

End customer

Final productmanufacturer(developedcountries)

Semi productmanufacturer(developingcountries)

Final productmanufacturer(developing

countries)

Figure 7: Leather industry supply chain.

Producers,farmers, andcooperatives

Collectioncenter

Wholesaler market

Wholesaler Foodindustry

Wholesaler/distributer

Endcustomer

(more localand someneighborcountries)

Chemicalinput

Figure 8: Food industry supply chain.

Extractingraw materialfrom local

miningProcurement Manufacturing Distribution

Importedraw material

Imported rawmaterial

Figure 9: Ceramic industry supply chain.

market is segmented geographically. The firm has domesticand international market. In domestic market, the firm isselling its products throughout the country. Currently, thecompany has faced higher challenges in their raw materialsourcing because its raw material has strategically divertedto the production of ethanol alcohol by policy maker forblended kerosene production. Therefore, the firm needs tofind the new raw material resources for the future purpose.

Firm B (Garment Industry). This firm is a foreign companyin the garment products in USA market. It has a turnover ofover $143 million with over 1,300 employees and customerssituated in USA market. An interview was conducted witha senior member of staff in the department responsible

for development and legal issues. Textile sewing has beenin the business of cotton spinning factory. Company B isan apparel manufacturer of students and medical uniformfor the ready to wear apparel mass market. It is producing460,000 pieces for school uniforms and 60,000 garmentsfor medical uniforms designed for the USA market. Thecompany is part of a group of firms operating at differentpoints of the garment supply chain, namely, a fabric producer,an apparel manufacturer, and a wholesaler, respectively. Thecompany’s success primarily relies on cost efficiency thatenables it to compete very aggressively on price in USAmarket.The company’s supply chain is illustrated in Figure 4.

The company purchases most of its textile fabrics fromthe group’s fabric producer and relies for its delivery on theheadquarter office. It delivers its products by retailer sales.The company sources its major raw material from Chinesefabric manufacturer and delivers their readymade garment toUSAmarket. In this supply chain, their geographical locationand distance between customers, producers, and supplierscreate its own unique features and challenges as global supplychain. The main challenges for such a supply chain wereinformation exchange and planning activities to fulfil theappropriate delivery lead time. From the challenges of on-time delivery, the company lost a large amount of money.The company has been also challenged in delivery quality


product to the retailer because the end customers are far fromthe manufacturing place. For transportation and distributionof finished products, the company adopted two differentprocedures. Transport of products to large distribution chainsis outsourced to wholesaler and the logistical requirements ofthe consignments.The degree of satisfaction of the customersis monitored through a formal program based on monthlyreports. By contrast, transport of finished products to inde-pendent retailers is carried out by company B with its ownlogistical resources so as to guarantee flexible deliveries.

Firm C (Wood Factory). The factory is finalizing its construc-tion and starting production and sales of particle board in thelast two years. The factory is designed to produce 40,000m3of chipboard annually for local and export markets. Figure 5illustrates chip wood supply chain. This process begins withlogging operations; logs are then sent to the sawmill wherecrushing woods are sent to the chip woodmanufacturer (chipwood operations). Lastly, once chip woods aremanufactured,they have to reduce appropriate size and send to salesdepartment to a wholesaler or directly to the final customer.The factory lies in an area of 69,000 square meters withintegrated forestry development on 985 hectares of woodland.

Firm D (Textile). The textile is one of the potential areas forfurther development and job opportunities in the developingcountries at present and in the near future. Because of thelarge agricultural land for production of cotton as the rawmaterial source, the developing countries should take advan-tages for further processing their raw material to finishedproduct garment. The main challenges in this industry werelack of technology know-how and high competition fromglobal markets.The company needs to upgrade its capacity tocompete in the global supply chain. The firm manufacturestextile mostly for local market. The company operates asa textile mill. The company has around 1000 employees. Ituses local wool producer from local supply. However, itsproduction activities still depend on imported chemicals andspare parts. Figure 6 shows the textile supply chain industry.The supply chain starts from cotton cultivation from localsuppliers and ends with the final customers both to local andforeign materials.

Firm E (Tannery). The leather industries are other potentialareas for the developing countries. The sector is trying to getadvantages from large livestock potential and promisingmar-ket for leather products. However, the industry is highly frag-mented.The presence of a large number of chain participantsis creating high price fluctuation and unstable market. Theindustry is operating in production of the gloves and hides.The company produces finished sports gloves leather fromsheepskin. While employing conventional tanning process,the factory has installed an exemplary Effluent TreatmentPlant, an environmentally compliant project. The factoryhas achieved process management standards and receivedISO Certification. The factory has produced finished dress

and sports leather gloves from sheep have penetrated theinternational market. Company has more than 500 workers.

Firm F (Tannery). This tannery is dedicated in productionof goat suede and shoe leather. This firm is producing rawleather for foreign market export which is mainly locatedin Italy. The company produces finished goat suede for shoeupper, finished cowhide for shoe upper, and finished crustlining leather. A chrome-recovery project has been put inplace at the goat suede and shoe leather. The factory hasachieved process management standards and received ISOCertification.The company earned annual revenue around 43million dollar before tax.The firmhas around 200 employees.Figure 6 demonstrates the leather industry supply chaininvolving different players.

FirmG (Food Industry).This firm is a pioneer of food process-ing industry in Ethiopia. The current capacity had reached21,600MT/annum. The factory has been reestablished as ashare company in 1999 by transforming the previous publicenterprise. It had also undergone rigorous expansion andinnovation works to satisfy the ever-growing demand of thesociety. Currently, the capital has grown up and also hasimplemented integrated food safety and quality managementsystem (ISO 22000-2005), certified by Republic of Southcompany called SABS. Figure 8 demonstrates the food supplychain.

Firm H (Leather Garment and Article). This factory is pro-ducing leather goods and garment article products mainlyfor local markets. The company produces finished leathergarments for men and women. During the interview time,the company are mainly produced for local market focusingon jackets, bags, and some leather article. The factory hasachieved process management standards and received ISOCertification. The firm has around 250 employees. The firmhas planned to enter aggressively to export markets.The firmalso has introduced new fashion design cloth for the markets.

Firm I (Ceramics Products). Company is producing ceramicand sanitary products. The company earned the profit fromsale of more than 6,000 tons of various ceramics products. Itwas established before twenty years and has more than 600workers. Figure 9 shows the ceramics supply chain. Ceramicindustry generally occurs near the source—opencast miningswith special requirements—mixture of mineral resources(raw materials) with the necessity of energy infrastructureand water. The raw material is relatively inexpensive. Devel-opment of ceramic products manufacturers was followed bydevelopment of the technology for their production, design,and industry of additives for the production that mainlycame from foreign companies. Apart from the manufacturer,main members of ceramic tiles supply chains or networks areretailers, wholesalers, and carriers. On the other hand, thereare a relatively small number of stores that operate exclusively.Usually, the company has its own distribution centres; it alsoorganizes part of retail supply through its own fleet.


Table 2: Summary of integration within the firm activities.

Firm Integration within the firmInformation exchangebetween functions

Information storage andsharing

Collaboration(cross functional team) Inventory management

ALetter and phone stilldominant but local areanetwork has startedthrough

Manual and paper basedand beginsmodern-managementinformation system

Cross cooperation highlymanifested in planning

Utilized inventorymanagement systemsoftware

B Letter and verbalinstruction

Manual and paper basedhowever started datastorage with computerizedsystem

Group work for piece ratepayment

One-month finished goodsand 3-month stoke level

C Letter, phone Manual and paper based Silos mentality Two-month stock level

D Letter are dominantManual and paper basedbut started use of sharedserver

Silos mentality One-year seasonal stock

E Letters are still dominantbut local area network

Computerized commondata base Ad hoc based integration

Six-month stock and largecollection seasonal rawmaterial

F Letter, telephone, e-mail Computerized commondata base Ad hoc based integration


G Letters are still dominantbut local area network

Computerized commondata base

Team work less frequentlypractice


H Letter, phone, mobile,e-mail Manual and paper based Quota based production Just in time inventory

supplies

I Letter, phone, mobile Manual and paper based Rarely practicedSix-month stock and largecollection imported rawmaterial

4.3. Findings on the SC Integration. Supply chain integrationplays an important role in achieving the firm’s goals. Therelationship and integration of activities with suppliers andunderstanding of customer’s needs result in greater benefitsfor companies. Supply chain practices are directly relatedto the firm internal integration, relationship management,which includes suppliers and customers. Currently, the com-pany supply chain integration within the organization and itssuppliers and customers are becoming the basis for companysuccess. For this research we have investigated the companyrelationship with their customers, supplier, and within thecompany itself. To further investigate this integration, theinformation exchange, handling, and storage activities havebeen examined with encountered challenges.

Integration within the Firm. The details of supply chainintegration practices inside the firm for each company’scase study are discussed in Table 2. In order to investigatefirms’ levels of integration within the organizations, we haveexamined the information exchanges between departments,information storage and sharing, cross functional collabo-rations, and inventory management practices. The resultsshow that the intervieweed firms still practice the traditionalinformation exchanges between the different functions suchas telephone, letter, and verbal instructions. Data collection,storage, and handling mechanisms were highly manual and

paper based. However, firms have started to collect data inthe formof soft copywith help of computer. Some of the firmshave started also to use information management system forthe same purpose. This practice was just at infant and pilotstage.

The inventory management policy was governed by highstock level for long period of time to control supply anddemand uncertainty. In particular for imported items somefirms kept up to maximum of one-year stock level. Thispractice has created financial constraints and storage prob-lems.These challenges were true also for seasonal agriculturalproducts such food, wood, textile, and leather manufacturersalso.

Supplier Relationship and Integration. Companies in devel-oping countries were searching for sustainable raw materialsuppliers for their competitive position for manufacturingsector. For the objective of improving their competitiveadvantage, firms depend both on local and imported rawmaterial. Table 3 shows the current supplier relationshippractices of the interviewed firms. In the interview questions,we have found that the main raw material for the companieswas sourced mainly from agricultural product. However,some companies’ production activities were still dependenton imported inputs such as plastics and beverages.Most firmsdepend highly on the local rawmaterial but some of the firms


Table 3: Summary of firm and supplier integration.

Integrationfirms

Supplier relationshipLocal Foreign

% share onraw material

Information exchange(phone, fax, mobile,

e-mail)

Purchasingactivities % share

Information exchange(phone, fax, mobile,

e-mail)Purchasing activities

A 65 Phone, letter Direct inpurchase 35 Telephone, e-mail International bidding

B — — — 25 Telephone, e-mail Partner supplierC 70 Phone, letter Own site 30 Fax, e-mail International tender

D 75 Performa, phone, letter Directpurchase 25 Phone, e-mail Through agents

E 95 Phone, letterDirect

negotiationwith supplier

5 E-mail, fax, telephone Central office handlesthe purchasing functions

F 95 Phone, letterDirect

negotiationwith supplier

5 E-mail, fax, telephone Central office handlesthe purchasing functions

G 95 Phone, letter Directpurchase 5 E-mail, fax, telephone Online bidding

H 95 Phone, letter SisterCompany 5 E-mail, fax, telephone International tender

I 90 Phone, letter Directpurchase 10 E-mail, fax, telephone International tender

are still importing resources and technologies to remain incompetitive advantages, such as machinery, chemicals, andspare parts. There are also some disadvantages that compa-nies have to take into accountwhen evaluatingwhether or notto work with offshore companies. Importing raw materials,technologies, and spare parts increase the dependence onsuppliers and the need for further improvement in thisrelationship.

However, there are challenges and barriers identified intheir sourcing activities such as foreign exchange rate, reg-ulations, quality, and transportation delays to improve sup-plier and buyer relationship. The interviewed firms followeddifferent purchasing strategies. Because of the internationalbidding requirement for international purchases companiesare inclined to work with different suppliers in different ways.It would be difficult also to create long term partnership. It isimportant to recognize that such relationship with suppliersdid not satisfy their company need.

For the local purchase, it is common practice that pur-chasing activities is based on negotiation between buyersand suppliers. This type of relationship with suppliers wasa challenge for further improvement in the supply chain. Itmay be advantageous to have a close relation with supplier,to develop partnerships and alliances that will benefit bothpartners.There is some pilot collaboration in leather industrywith financial loan and chemical input such as salt for pre-serving and processing raw leather to obtain mutual benefitsand coordinating plans, permitting the improvement of thesupply chain. The means of communication and interactionwithin and outside companies mainly depend on telephoneand faxmachines. Some of the companies have started e-mailcommunication for their international purchase activities.The main challenges encountered in their relationship were

inconsistency in rawmaterial quality, late deliver, loyalty, andprice fluctuation.

Customers’ Relationship. The customers for manufacturingcompanies were mixture of local and international markets.Those companies were targeted for international marketsof textile, garment, and leather industries. With regard tocustomer relationship, the researcher found that most firmsrelied on walk-in customers who had little interaction to theimprovement of the product. Even though most firms relyon their local customers, there are firms which are workingfor export markets especially leather, garment, and textilemarkets. The interviewed firms were actively participatedin distribution function either in their shop or deliverydoor to door to their customers. The information exchangesare still limited to traditional one like letter, telephone,and fax. However, some firms have started to use e-mailconnection especially with foreign customers. The globalmarkets offer a variety of products of different quality andcost. As a result, companies are always competing and tryingto reduce costs and improve quality. The relationship withcustomers has turned a strategic issue for today’s companies.The interviewed firms need to change their relationshipwith customers and understand their customers more formarket success.The details of the firms’ customer integrationpractices for each company are discussed in Table 4.

4.4. Findings on the Existing Enablers and Challenges. Someof the interviewed companies used different types of informa-tion and communication technologies enablers.Most of themused traditional communicationmeans such as letter, fax, andtelephone dominant ones. However, during foreign sourcingprocess, most companies use fax, telephone, and e-mail to


Table 4: Summary of firm customer integration activities.

FirmCustomer relationship

Local Foreign

Marketshare, %

Informationexchange

Deliveryactivities

Participationlevel in

production

Marketshare, %

Informationexchange

Delivery functionactivities

Participation levelin production

A 97 Phone, letter,visit

Own deliveryand agents Product Taste 3 E-mail,

phoneWholesaler and

agents None

B None — — — 100 E-mail, fax 3PL and wholesaler Product design

C 100Phone, letter,in person

visitOwn shop

Sometimes inproductdesign

— — — —

D 100 Letter, fax Wholesaler Productdesign — — — —

E 5 Phone, letter,fax

Own deliveryand

wholesalerNone 95 E-mail, fax 3PL and wholesaler None

F — — — — 100 E-mail, fax 3PL and wholesaler Product design

G 98 Phone, letter,fax

Own deliveryand

wholesaler

Productdesign 2 E-mail, fax 3PL and wholesaler Product design

H 100 Phone, letter,fax Own shop None — — — —

H 97 Phone, letter,fax Own shop None 3 E-mail,

phoneWholesaler and

agents Product design

contact with suppliers and send purchasing order (PO) toconfirm the order. Types of ICT enablers and challengeswithin the firm for each company’s case study are discussedin Table 5. Generally, simple communication system such astelephone, fax, and e-mail is used for communicating withsuppliers. State-of-the-art electronic business (e-Business)was not started yet in any place. Most of the companies haveno company website even with primary information abouttheir product information. Three companies out of twelvehave a plan to use ERP system in the future to create e-Business via Internet. Furthermore, the current informationexchange system uses paper which is commonly used andlarger space is needed for keeping the record because thereare many copies of purchasing orders for each order. Mostcompanies plan to develop the paperless system by workingwith networked computer and link the departments’ processvia local network and Internet. Thus, the use of informationtechnology among the company, customers, and suppliers isthe issue that has to be improved.

5. Conclusion

The semistructured interviews are conducted to examinethe experience of representative manufacturing industries.Semistructured interviews were conducted in the selectedfirms to better understand their practices on intra- andinterorganizational supply chain integration. In summary,through a review of previous research we have examinedthe practices of supply chain integration, benefits, and chal-lenges associated with them. Based upon the findings of theresearch, the companies investigated seem to be orientedtowards interorganization integration. The results revealed

that degree of integration is low when it comes to Ethiopianfirms but there were some promising initiatives undergoing.The existing practices have shown that firms manage theinformation flows in a number of ways, mainly telephone,mobile, letters, and faxes over the years. Recently, firmshave started using the Internet to create connections withimportedmaterial suppliers in foreign purchase, even thoughtelephone and fax are also still dominant ways for integratingtheir supply chains. In contrast to the current dominantmanual paper based interactions, the current supply chainintegration requires an information and communicationtechnologies that enhance data management in great wayboth from automated sources such software applications andRFID technologies. Actually, one of the major obstacles tofully integratematerials and information flows across the sup-ply chain lies in the inadequacy of the Internal managementsystems of the individual firms—for example, fragmentedinformation flows, lack of integration amongst different com-pany’s departments/functions, low level of rationalization,and standardization in operational processes. In addition,the findings have shown that the firms have limited under-standing and awareness of the importance about externalintegration with suppliers and customers. The ICT systemimplementation is a main key factor in developing countrythat is trying to penetrate the export market so that theycan have a fast and reliable interaction with suppliers andcustomers. Therefore, ICT system is very important stepin order to gain competitive advantage in their planning,sourcing, production, and distribution activities.

Several research agendas can be raised to advance theunderstanding of supply chain integration. One of the areasto examine involves how effectively and efficiently the firms


Table 5: Types of ICT enablers and challenges.

Company Types of IT enablers Challenges

A

Wide area network (WAN) with shared server, Internetservice for employees, ongoing task for development ofmanagement information system that comprisesdifferent packages

Lack of expertise and know-how in ICT especiallysoftware programming and application

B E-mail connection with suppliers and head office but inpoor connection

Lack of professionals and expertise in ICTinfrastructure and software and application

CThe organization is locally connected and Internetservices except production and technical departmentwhich has its dial up connection

Organizational structure and building have notfacilitated the connection works

D Only financial department has been computerized anduse software Financial constraint

E Company is not internally networked, but planning toimplement MIS with company specific ERP

Financial constraint for big investment in IT, poorintegration from end-to-end, low level of vertical andhorizontal integration, low awareness as advantagesintegration

FFirm is not networked but dial up e-mail is used forcommunications, company planning to implement MISwith company specific ERP

Lack of expertise and know-how in IT application

G

Internal and Intranet connections with data sharing incompany common folder, the company has started toimplement locally prepared software for integrationsuch as inventory information management,procurement information system, finance informationsystem

Lack of expertise, experience, and exposure in relatedtopics from developed world and outside Ethiopia. Itwas hard to convince board of directors to implementthe new system with considerable investment, financialand other human related thinking and mentality factorsconstraints

HNot networked but e-mail is used for communications,company planning to implement MIS with companyspecific ERP

Lack of expertise and know-how in uses and advantageof IT application

I Only financial department has been computerized anduse software

Lack of expertise and know-how in uses and advantageof IT application, financial constraint

in developing countries integrated within the organizationand with their suppliers and customers even with existingresource constraints. Since global supply chain is trying tointegrate the entire supply chain that involves developingcountries in the existing enablers and capabilities, futureresearch should identify the factors that facilitate the successof integrated supply chain. It is also important to identifythe most appropriate techniques that facilitate the modellingand improvement of the process of integration. Accordinglyresearchers need to address how to model a supply chaininvolving developing firms and the influencing factors shouldbe considered in such a model.

Appendix

A. Interview Questions for SupplyChain Integration and Coordination inthe Manufacturing Industry inDeveloping Countries

A.1. What Are Current Practices and Characteristics of SupplyChain in Your Company?

A.1.1. Supply Chain Configuration and Coordination

(i) Who are your customers (local, international)?

(ii) Where are your products sold (market: local cus-tomer, worldwide)?

(iii) Who are your suppliers (local, international)?(iv) Where are your suppliers located?(v) What is the type of strategic formanaging the business

processes in the supply chain?

(a) Processes tend to be managed within discretedepartments, cross functional or interenterpriseprocess management.

(b) Processes are often company-wide and areman-aged at both the functional and cross functionalprocess levels, interenterprise supply chain part-ners.

(c) Core processes are managed internally or viaoutsourcing. Information is frequently sharedwith external partners.

(d) End-to-endprocessmanagement, coordination,and collaboration with strategic partners areused for most processes.

A.1.2. Collaboration: Of the Various Forms of CollaborationStated below, Indicate Which One Was Practiced withYour Various Clients?

(i) Controlling the stock of our client in their company.


(ii) Carrying out a joint plan demand, production, andsupply.

(iii) Exchanging information on stocks, order, availableresource.

(iv) Sending order confirmation.

(v) Shipping order information with advance (reference,quantity, date, etc.).

(vi) Having agreed requirements delivery (packaging,identification, time delivery, etc.).

(vii) Having a system of traceability order (via Internet,telephone).

A.2. Enablers, Barriers, and Challenges

A.2.1. Enablers: Do You Use Enablers for Successful Function-ing of Your Company Supply Chain?

(i) Does the company use online technologies other thane-mail, like, for example, the Internet or an Extranet,to facilitate the following business activities?

(a) Collaborate with business partners in the designof new products.

(b) Collaborate with business partners to forecastproduct demand.

(c) Manage capacity or inventories.(d) Exchange documents electronically with your

suppliers.(e) Purchase direct production goods.(f) Sell goods domestically.(g) Sell goods internationally.(h) Manage supplier relationships.(i) Manage the logistics.

(ii) What kind of software/IT tools is used?

(iii) Do you use computer applications in any departmentor processes (sales planning, planning of production,materials and capacity, warehouse management, andtransport management)?

(iv) Do you use a computer system communicationbetween suppliers and customers, such as EDI, Inter-net, and Intranet?

(v) Is there traceability of products along the supplychain? If there is some kind of traceability, by whatsystem is it done?

(vi) Do you share information, apart from orders, includ-ing its network of agents supply?

(vii) How do you share data (demand and work flow data)with suppliers in the supply chain?

A.2.2. Challenges and Barriers: Which of the Following DoesYour Company View as Barriers in Integrating the Firmsin Developing Countries?

(i) Physical infrastructure, skilled staff and professionalknowledge, information and communication tech-nologies, technical standards, business messaging ortransaction processing, investment cost, time, readi-ness of business partners, support from upper man-agement, lack of proven business benefits, lack ofdirect customer contact, and so forth.

Conflict of Interests

The authors declare that there is no conflict of interestsregarding the publication of this paper.

Acknowledgments

The authors would like to thank Engineering Capacity Build-ing Program (ecbp), Ethiopia, for its financial support.

References

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[2] A. I. Ozdemir and E. Aslan, “Supply chain integration, compe-tition, capability and business performance: a study on TurkishSMEs,”Asian of BusinessManagement, vol. 3, no. 4, pp. 325–332,2011.

[3] M. J. Naude and J. A. Badenhorst-Weiss, “Supply chain man-agement problems at South African automotive componentmanufacturers,” Southern African Business Review, vol. 15, no.1, pp. 70–99, 2011.

[4] N.Kureshi, “Supply chain integration ofmanufacturing SMEs—the logic and need in developing economies,” in Proceedings ofthe 4th ScientificQuality CongressMiddle East Proceedings, 2010.

[5] S. Jharkharia and R. Shankar, “IT-enablement of supply chains:understanding the barriers,” Journal of Enterprise InformationManagement, vol. 18, no. 1, pp. 11–27, 2005.

[6] G. C. Stevens, “Integrating the supply chain,” InternationalJournal of Physical Distribution andMaterials Management, vol.19, no. 8, pp. 3–8, 1989.

[7] M. T. Frohlich and R. Westbrook, “Arcs of integration: an inter-national study of supply chain strategies,” Journal of OperationsManagement, vol. 19, no. 2, pp. 185–200, 2001.

[8] D. J. Bowersox, D. Closs, and T. P. Stank, 21st Century Logistics:Making Supply Chain and Integration, Harvard Business SchoolPress, Boston, Mass, USA, 2nd edition, 2001.

[9] A. Gunasekaran, “Editorial: supply chain management: theoryand applications,” European Journal of Operational Research,vol. 159, no. 2, pp. 265–268, 2004.

[10] J. McLaughlin, J. Motwani, M. S. Madan, and A. Gunasekaran,“Using information technology to improve downstream supplychain operations: a case study,” Business Process ManagementJournal, vol. 9, no. 1, pp. 69–80, 2003.


[11] T. S. McLaren, M. M. Head, and Y. Yuan, “Supply chainmanagement information systems capabilities: an exploratorystudy of electronics manufacturers,” Information Systems an e-Business Management, vol. 2, pp. 207–222, 2004.

[12] J. Auramo, J. Kauremaa, and K. Tanskanen, “Benefits of IT insupply chain management: an explorative study of progressivecompanies,” International Journal of Physical Distribution andLogistics Management, vol. 35, no. 2, pp. 82–100, 2005.

[13] ECSA, “Report on Large and Medium Scale Manufacturingand electricity Industries Survey, Ethiopian central statisticalauthority,” Addis Ababa, Ethiopia, October 2010.

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