ABSRACT
The study examined the effect of logistics management system on marketing performance of dairy products distributors in Abia State, Nigeria. Specifically, the study ascertained the effect of warehousing, material handling, transportation and communication on sales volume, sale turnover, market share and sales level of dairy products distributors respectively. The study further examined the effect of communication, material handling, warehousing, and transportation on sales level of dairy products distributors in the study area. The study adopted survey design research. The population of the study covered 278 dairy products distributors in Aba and Umuahia, Abia State. Ratio sample size determination was adopted and two-third of the population (185) were used for the study. Probability sampling of random sampling technique was adopted. The data was sourced through administration of structured questionnaire to dairy products distributors in Aba and Umuahia, Abia State. The data was analysed with descriptive statistics and simple linear regression, multiple linear regression analysis model. The result revealed that, warehousing was found to be statistically significant at 1% probability level and positively impacts on the sales volume of the dairy products distributors. Material handling was found to be statistically significant at 1% probability level and positively affects the sales turnover of dairy products distributors. Transportation was found to be statistically significant at 1% probability level and positively related to market share of the dairy products distributors. Communication was found to be statistically significant at 1% probability level and positively affects sales level of dairy products distributors in Abia State. This result implies that as efficient communication by dairy products distributors’ increases, their overall sales level increases. In conclusion, effective management of logistics operations must be the top priority of dairy products distributors as it directly effects the relation of logistics and marketing performance. The researcher recommended that, the dairy products distributors in Abia State must devise the best means to communicate with dairy products manufacturers and make different plans with them regarding supply of different dairy products. Understanding the significance of this concept and increasing the importance of supply chain relationships will them in controlling inventory behaviour, warehousing capacity, and ensure customer satisfaction.
TABLE OF CONTENTS
Title Page i
Certification ii
Declaration iii
Dedication iv
Acknowledgement v
Table of Contents vi
List of Tables viii
List of Figures ix
Abstract x
CHAPTER 1: INTRODUCTION
1.1 Background of the Study 1
1.2 Statement of the Problem 5
1.3 Objectives of the Study 7
1.4 Research Questions 7
1.5 Research Hypotheses 8
1.6 Significance of the Study 8
1.7 Scope of the Study 9
1.8 Limitation of the Study 9
CHAPTER 2: REVIEW OF RELATED LITERATURE
2.1 Conceptual Framework 11
2.1.1 Definition of logistics and supply chain management concepts 11
2.1.2 Definition of marketing logistics 14
2.1.3 Meaning of logistics in marketing 15
2.1.4 Element of distribution 16
2.1.5 Warehousing and distribution center 21
2.1.6 Transportation and transportation management 25
2.1.7 Measurement of marketing performance 27
2.2 Theoretical Framework 30
2.2.1 The hub and spoke and direct system models - Kim (2008) 30
2.2.2 Postponement model 33
2.2.3 Optimization models 37
2.2.4 Key performance indicators (KPIS) 43
2.3 Empirical Review 44
2.4 Summary of Literature Review 47
CHAPTER 3: METHODOLOGY
3.1 Research Design 48
3.2 Study Area 48
3.3 Population of the Study 49
3.4 Determination of Sample Size 49
3.5 Sampling Technique 49
3.6 Source of Data 49
3.6.1 Primary data 50
3.6.2 Secondary information 50
3.7 Validity of the Instrument 50
3.8 Reliability of the Instrument 50
3.9 Method of Data Analysis 51
3.10 Model Specification 51
CHAPTER 4: RESULTS AND DISCUSSION
4.1 Presentation of Data 53
4.2 Analyses of Data 61
4.3 Discussion of Results 66
CHAPTER 5: SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMEMDATION
5.1 Summary of Findings 68
5.2 Conclusion 69
5.3 Recommendations 69
5.4 Contribution to Knowledge 70
5.5 Areas of Further Study 72
References 73
Appendices 80
LIST OF TABLES
2.1 Summary of empirical studies 47
4.1. Questionnaire administration 53
4.2. Frequency distribution showing the gender of respondents 53
4.3. Frequency distribution showing the marital status of respondents 54
4.4. Frequency distribution showing the educational background of
respondents 54
4.5. Frequency distribution showing respondents’ number of years as
dairy products distributors 55
4.6. Frequency distribution showing the average monthly income of
respondents 55
4.7. Frequency distribution showing responses on warehousing of the
studied dairy products distributors in Abia State of Nigeria 56
4.8. Frequency distribution showing responses on material handling of the
studied dairy products distributors in Abia State of Nigeria 57
4.9. Frequency distribution showing responses on transportation of the
studied dairy products distributors in Abia State of Nigeria 58
4.10. Frequency distribution showing responses on communication of the
studied dairy products distributors in Abia State of Nigeria 59
4.11. Frequency distribution showing responses on marketing performance of
the studied dairy products distributors in Abia State of Nigeria 60
4.12. Regression analysis showing the effect of warehousing on sales volume
of dairy products distributors in the study area 61
4.13. Regression analysis showing the effect of material handling on the sales
turnover of dairy products distributors in the study area 62
4.14. Regression analysis showing the effect of transportation on the market
share of dairy products distributors in the study area 63
4.15. Regression analysis showing the effect of communication on the
sales level of dairy products distributors in the study area 64
4.16. Multiple regression analysis showing the effect of communication,
material handling, warehousing, and transportation on sales level
of dairy products distributors in the study area 65
LIST OF FIGURES
2.1 Channel of distribution for commodity goods and services 21
2.2 Operational conceptual model 30
5.1 Heuristic framework 71
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Globalization and competitiveness of markets have brought a lot of changes mainly due to the development of the new commercial and financial technologies implemented by the companies. The logistics activities of movement and storage have been used by companies for many years. The current innovation is on coordination of the inter-related activities which have developed from the traditional management format to the integrated management or inter functional coordination responsible for processing incoming products to the plants and distributing the final products to the consumers (encompassing all activities that support production such as purchasing, warehousing, transportation, insurance banking, packing and packaging, exporting and customer services) and place where they have been requested at least possible stock (Ballou, 2004).
Logistics encompasses information and material flows throughout an organization. With the growing significance of logistics among the activities of the firm, research has been conducted over a broad front to support and enhance logistics management. Research has ranged from quantitative modelling for decision making to philosophical works that set the tone for good logistics management (Melnyk, Lummus, Vokurka, Burns, and Sandor, 2009). The efficiency and effectiveness of the logistics operation has a considerable influence, not only on the marketing performance of firms but also on the customer’s perception of the quality of the products and services provided by the firm. If inbound material flows from the supplier are erratic, the firm’s internal operation will not be able to sustain their production strategies without a high level of safety stock. Similarly, if the flows of finished goods to the customer are unreliable, the firm’s customer base will be unsatisfied. At present, logistics plays a very important role in organizations. Due to the highly competitive business environment, organizations have tried with their utmost endeavour to deploy brand new strategic approach within their own organizations so as to generate a higher competitive edge (Ellinger, Daugherty and Keller, 2000).
Logistics plays key role in supporting organizations as they strive for more efficient management systems. The management of logistics activities has become a valuable way of securing competitive advantage and improving organizational performance (Li, 2006). Logistics is the management of the flow of goods between the point of origin and the point of consumption in order to meet requirements of some customers or corporations. Sources managed in logistics include physical items, such as food, materials, animals, equipment and liquids, as well as abstract items, such as time, information, particles and energy. The logistic of physical items usually involves the integration of information flow, material handling, production, packaging, inventory, transportation, warehousing, and often security. Logistics management refers to the process of overseeing the movement of goods from supplier or manufacturer to point of sale. It is an overarching term that refers to numerous activities and processes such as packaging, inventory, warehousing, supply chain. Logistics management is an important part of the business cycle for distributors and wholesalers. The profit margins of businesses depend on how quickly they can turn over their goods. The more they sell, the more they earn, which means a better future for the business. Having a successful logistics management system is also important for businesses to remain competitive and to keep customers satisfied (Ballou, 2004).
Logistics service performance refers to the degree of efficiency achieved by companies in making their products available to consumers punctually and adequately. As industries engage in production of goods and services, the company needs to make them available to consumers at the right time right place and at the least cost (price). All these cannot be without effective and efficient logistics system put in place. Logistics management strategy is the transfer of products from one place to another or from one manufacturer such as wholesaler, retailer, agents and other means such as transportation, communication warehousing etc (Bell, 2009). The importance of logistics management system to target customers can never be over-emphasized. Effective and prompt distribution of product to target customers contributes to the profit of the companies account. Logistics network ensure that companies coordinate and monitor the entire transportation process to ensure goods are delivered to right destinations. Most cement companies utilize distributor networks because they facilitate formation of partnerships that enable them effectively connect and get in touch with potential customers for their products. Another advantage of logistics networks is that distributors have enough storage facilities where products can be kept safely. Due to this, they can easily control the supply chain because they get orders directly from the clients. They in a way influence the manufacturer’s business.
Nonetheless, as more players enter the industry competition continues to increase and everyone wants to get large market share. As a result, may diary product manufacturers in Nigeria are currently implementing innovative strategies that are likely to transform the way diary products are distributed in the country and the entire region. Effective distribution management involves selling your product while assuring sufficient stocks in channels while managing promotions in those channels and their varying requirements. It also involves making sure a supply chain is efficient enough that distribution costs are low enough to allow a product to be sold at the right price, thus supporting your marketing strategy and maximizing profit (Clark, 2000).
However, poor or unsatisfactory logistic management system could drastically lead to over stock, due to low sales or patronage of consumers and redundancy in production due to shortage of raw material. Companies need to distribute their market offerings across the entire nation to ensure they fully exploit target market. The companies may also decide to distribute its products to some regions more than others. An expansive dealer and retailer network is also necessary to support and empower the trade partnership so as to cover the potential market fully. A two-layered logistics chain concept that incorporates dealers and manufacturers is more effective. It is a well-articulated mechanism because dealers easily buy cement from manufacturers. The responsibility then lies with the dealers who link up with contractors, institutional and government buyers as well as retailers. The agents can be hired by companies to transport cement to warehouses for distribution to various clients. Road and rail are the common forms of transport (Ehikwe, 2002).
More so, marketing performance has become an important tool globally, for any organization to remain in competitive market environment and wax stronger. Aremu and Lawal (2012) see performance as a pattern of resource allocation decisions made throughout an organization. This encapsulates both desired goals and beliefs about what are acceptable and most critically unacceptable means for achieving them. Marketing performance must focus on delivering greater value to customers and the firm at a lower cost. Owomoyela, Oyeniyi, and Ola (2013) also see marketing performance as a way of providing quality product that satisfies customers’ needs, offering affordable price and engaging in wider distribution and back it up with effective promotion performance. Marketing performance is a prerequisite of industry’s ability to strengthen its market share and minimize the impact of the competition. Effective marketing performance ensures; customer loyalty, customer satisfaction, customer retention, increased market share, increased sales volume and profitability.
The diary company’s supply chain is a complex one. The distribution and collection of milk products pose great challenge to diary companies, especially when considering transportation (Bowersox and Closs, 1996). Its supply chain includes carrier companies which allows the transportation of raw materials and final products, other companies which supply products to support the production such as packaging and other raw materials required to produce dairy products as well as machines, and the final member of the chain is the final consumers or another company that is going to use the diary material to produce another product (Ballou, 2004). Success and competitiveness of diary companies in the market deeply depend on transportation cost which is strongly linked to the companies’ logistics infrastructure. Many of the problems can be seen during the transportation of milk from farms to the factories and from there to the final consumer, where road conditions and trucks used to transport the milk are important parts of this issue. For some companies, logistics cost can represent the 2nd highest cost of the product among others, surpassed only by the cost of the products sold.
1.2 STATEMENT OF THE PROBLEM
Milk distribution has become one of the major challenges the diary companies are facing, especially when it comes to transporting the milk. Milk collection, its transportation to the diary plants and its cost depend in the logistics infrastructure of the diary company. Therefore, it is necessary to implement a good logistic management system in order to obtain an efficient system that avoids building up cost. Many problems can occur during the transportation of dairy products from the farms, to the factories and to the final consumer. These problems are not only related to the road infrastructure, which is a government responsibility, but also by the trucks used for the transportation of these dairy products and the storage system used to keep the milk in acceptable condition.
One of the major functions of logistic management syatem in marketing performance is to effectively plan for distribution of goods and services delivery to the consumption point (customers) and at the right time. However, the state of infrastructure and bad logistic management of some dairy enterprises in Nigeria has caused a serious challenge to the enterprise. Due to the poor condition of our major roads, the cost of moving our goods to different parts of Abia State, especially in Umuahia municipal and Aba regions becomes very high. Another problem is the difficulty in measuring logistics success, and another difficulty in showing the contributions of logistics to the company and the value-added created by logistics. We have to take into consideration many different data, sources and measures. But logistics effectiveness is more than costs and cost reduction. According to Bhagwat and Sharma (2009), analysis of logistics performance is among the main challenges faced by today's companies. Other challenges include, for example, customer service, strategic partnerships, inventory management and logistics flow management, reducing cycle times and geographical coverage along with flexibility (Li, et al, 2006). These challenges arise mostly from the decentralization of production systems, leading companies to move towards the development of basic skills and the need to implement efficient and effective management of logistic activities.
The aforementioned have resulted in low performance and high rate of business failure among the diary distributors in Abia State and Nigeria. Hence it is imperative that diary products distributors need to develop strategies and operate with strategic logistic management system that promote effective and efficient use of limited fund given the dynamic nature of Nigerian macroeconomic atmospheres.
Although, the diary products industry has grown exponentially, it is yet to fully maximize it potentials in terms of effective distribution to the customers as at when due. These among other have caused low sales volume, market share and increases both fixed and variable cost of production. Only in a simplest marketing system will a producer sell directly to the final consumer. It is in view of this that this study considers it imperative to look at the effect of logistic management system on the marketing performance of dairy products distributors in Abia State.
1.3 OBJECTIVES OF THE STUDY
The broad objective of this study was to examine the effect of logistics management system on marketing performance of dairy products distributors in Abia State, Nigeria. Hoever, the specific objectives were to:
i. ascertain the effect of warehousing on sales volume of dairy products among distributors.
ii. evaluate the effect of material handling on the sales turnover of dairy products among distributors in the study area.
iii. analyse the effect of transportation on the market share of dairy products among distributors in the study area.
iv. ascertain the effect of communication on the sales level of dairy products among distributors in the study area.
v. examine the effect of communication, material handling, warehousing, and transportation on sales level of dairy products among distributors in the study area.
1.4 RESEARCH QUESTIONS
The following research questions guided the study:
i. what are the effect of warehousing on sales volume of dairy products distributors?
ii. how does material handling affect sales turnover of dairy products distributors?
iii. does transportation have any effect on the market share of dairy products distributors in the study area?
iv. what are the effect of communication on the sales level of dairy products distributors in the study area?
v. how does communication, material handling, warehousing, and transportation affect sales level of dairy products distributors in the study area?
1.5 RESEARCH HYPOTHESES
The following hypotheses stated in their null were tested in this study:
H01: warehousing does not have significant effect on the sales level of dairy products distributors in the study area
H02: there is no significant effect of material handling on the sales level of dairy products distributors in the study area
H03: transportation does not have significant effect on the sales level of dairy products distributors in the study area
H04: there is no significant effect of communication on the sales level of dairy products distributors in the study area
H05: communication, material handling, warehousing, and transportation do not have significant effect on the sales level of dairy products distributors in the study area
1.6 SIGNIFICANCE OF THE STUDY
This study would assist in addressing issues relating to logistics management adopted by diary product distributors. The empirical evidence from the study will be of immense benefit particularly in the following;
Academic scholars and researchers would be able to borrow from the findings of this research to support research citations as well as develop theme for further research. Specifically, the study would make theoretical, practical and methodological contributions. The findings would contribute to professional extension of existing knowledge in business logistics management by helping to understand the current challenges for adopting these strategies and their effects on marketing response in various manufacturing industries in general.
This research study will be of great benefit to marketing personnel’s, heads of logistics department and stakeholders, also other manufacturing industries as it will unravel (expose) the benefit and challenges of efficient and effective logistics management. Also it will be a great value to students of marketing, who will adopt or improve on the recommendations/findings of this study, also use it as a basis for future research study. The finding through this project would contribute immensely to the existing knowledge in the field. Lastly, the research would undoubtedly equip the researcher with improved knowledge on logistics management and marketing performance of manufacturing industries operating in Nigeria and beyond.
1.7 SCOPE OF THE STUDY
This research capitalized on the relevance of logistics management on the marketing performance of dairy products distributors in Abia state, Nigeria. However, the subject scope of this study covered tha effect of logistic management system on marketing performance of dairy products distributors in Abia State, Nigeria. The content scope captured the effect of warehousing, material handling, transportation and communication on the sales level of dairy products among distributors in the study area. Geographically, the study was conducted in two major cities (Aba and Umuahia) in Abia State. Level / unit of analysis, the distributors of dairy products were used as the respondents of the study.
1.8 LIMITATION OF THE STUDY
There were some limitations to a study of this magnitude. There has been only a modest amount of studies focusing on the effect of logistics management on the marketing performance of selected dairy products distributors in Abia State, Nigeria. This made the review of related lietrature difficult. An additional possible limitation is sampling of the population. First of all, the research will be conducted using only accessible dairy products distributors in Aba and Umuahia, Abia State. This was majorly as a result of the inherent difficulty that will be encountered in carrying out such a wide survey across the entire State. This is a major limitation to this study. Thus, making a generalization based on the result or finding is a challenge in this study.
Perspectives of the logistics management and its effect on marketing performance can be dissimilar based on some factors which may include location. For example, dairy products distributors in Aba may be technologically equipped than those in Umuahia, Ohafia and elsewhere. Finally, due to extraneous variables that may influence the dairy products distributors in Abia State, it is impossible to draw one absolute conclusion. However, it is the belief of the researcher that these constraints do not overturn the findings of this study.
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