ABSTRACT
Nigeria is the largest producer and consumer of rice in West Africa, but her local rice supply – demand deficit has persistently expanded due to losses incurred during storage and as a result of poor warehousing management. This study was therefore carried out to analyze the effect of warehousing management systems (WHS) on sales sustainability, profitability and efficiency of rice distributors in Ebonyi State, Nigeria. The respondents (120 rice distributors) for this study were selected via a multi stage random sampling method and data generated through the use of structured questionnaire. Data collected were analyzed using simple descriptive tools like tables, means, percentages and frequencies as well as econometric tools like Ordinary Least Square, ordered probit, bivariate probit and Z-test. Findings show that majority of the rice distributors (88%) are males, aged between 50 – 59 years (mean age of 54 years), married (93%) and followed by singles (7%). The monthly mean loss of about N4,000 and N2,000 for the traditional and modern warehousing system users respectively imply that the use of the traditional system of warehousing attracted more losses than the modern. Findings show that while majority (76%) of the traditional WHS users had sustainability value of 0.50 – 0.75, majority of the modern WHS users (92%) had sustainability value of 0.76 – 1.00 therefore suggesting that sales are more sustained with modern WHS. The profitability index, rate of return on investment and marketing efficiency values were higher for modern WHS users (0.380, 0.613 and 61.9 respectively) than traditional WHS users (0.369, 0.585 and 58.5 respectively). Although the market was generally inefficient at 61.3 and 58.5 for modern and traditional warehousing system respectively. The probit result of factors affecting the choice of various warehousing systems by rice distributors showed that the number of employees was positively signed and significant at 1% level while firm age, firm location, stock volume, credit, firm type and capital were negatively signed and significant at 1%, 1%, 1%, 5%, and 1% level respectively. The result also showed that number of customers, firm location, market training, and credit access positively influenced sales sustainability at 10%, 1%, 5% and 5% level respectively while number of competitors and warehouse maintenance cost negatively influenced sales sustainability at 1% and 5% level respectively. In addition, education, experience and volume of purchase were positively influenced and significant at 1%, 10% and 1% level respectively as factors influencing market efficiency while age of the respondent, household size, transportation cost, interest rate and labour cost were all statistically significant at 1% level and negatively influenced market efficiency. Z-test analysis of difference in mean sales sustainability, marketing efficiency and profit of modern and traditional WHS were all statistically significant at 1% level implying that warehousing system significantly influenced the sales sustainability, marketing efficiency and profit of rice distributors in Ebonyi state. Therefore it is recommended that provision of modern storage facilities such as warehouses in the study area and distributors should be enlighten on the use of modern warehousing system which sustain sales and enhances profitability.
TABLE OF CONTENT
Title Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgement v
Table of Content vi
List of Tables vii
Abstract ix
CHAPTER 1: INTRODUCTION
1.1 Background
of the Study 1
1.2 Problem
Statement 6
1.3 Research Questions 8
1.4 Objectives
of the Study 8
1.5 Research Hypothesis 9
1.6 Justification
of the Study 10
1.7 Scope of the Study
CHAPTER
2: LITERATURE REVIEW
2.1 Concept
of Warehousing 12
2.1.1 History of Warehousing 14
2.1.2 Warehousing
System 14
2.1.3 Changing Trends of Warehousing 15
2.1.4 Types of Warehouses
16
2.1.5 Why
have a Warehouse 17
2.1.6 Functions
and Benefits from Warehouses 17
2.2 Rice
Production and Storage System in Nigeria . 19
2.2.1 Rice
Production (Trending issues in Nigeria). 20
2.2.2 Sectorial
Policies Aimed at Boosting Rice Production over the years in Nigeria 23
2.2.2.1 Presidential Initiative on Increased Rice
Production (2002-2007) 23
2.2.2.2 Nigerian National Rice Development Strategy
(NRDS) (2009-2018) 24
2.2.2.3 President Transformation Agenda (2011) 24
2.2.2.4 Cross-Commodity Input Support: Fertilizer Policy 25
2.2.2.5 Cross-Commodity Price Support Measures:
Guaranteed Minimum Price 25
2.2.2.6 Dry
Season Farming Policy 25
2.2.2.7 Dangote
Rice Production Strategy 26
2.2.3 Rice
Production Ecologies and their Potentials 27
2.2.4 Rice Production Constraints in Nigeria . 28
2.2.5 Rice Storage 30
2.2.6 Storage
Equipments for Preserving Rice 31
2.3 Concept
of PostHarvest Loss in Rice Production 34
2.3.1
Storage Losses and Factors Affecting
Storage of Grain 35
2.4 Concept
of Profitability 37
2.4.1 Determinants
of Profitability 37
2.5 Concept
of Distribution 38
2.5.1 The
Distribution Channel 39
2.5.2 Channel
Strategy 41
2.6 Concept of Efficiency 41
2.6.1 Types of Market Efficiency 43
2.6.2 Indicators
of Market Efficiency 44
2.7 Theoritical Framework 46
2.7.1 Profitability Theory 46
2.7.2 Warehouse
Management Theory 48
2.7.3 Role of Warehouse in Supply Chain 49
2.7.4 Inventory Control Theory 49
2.7.5 Logistics
Theory 50
2.7.6 Supply Chain Management 51
2.7.7 Distribution
Theory 52
2.7 Emperical
Review 54
CHAPTER 3: RESEARCH METHODOLOGY
3.1 Study
Area 64
3.2 Sampling
Technique 64
3.3
Method of Data Collection 65
3.4 Method of Data Analysis 65
3.5 Model Specification 65
CHAPTER 4: RESULTS
AND DISCUSSION
4.1: Socio-economic
characteristics of respondents 74
4.3: Warehousing
systems by rice distributors 79
4.4: Monthly
losses incurred by rice distributors
80
4.5: Sales
sustainability by rice distributors 81
4.6: Categorising Sales
sustainability by rice distributors 82
4.7: Cost and returns analysis of rice
distributors in Ebonyi state 83
4.8: Probit
estimates of warehousing system determinants 85
4.9: Factors
affecting sales sustainability 88
4.10: Factors
affecting marketing efficiency of rice distributors
92
4.11: Factors
affecting profit performance of rice distributors in Ebonyi state 96
4.12: Paired sample statistic 103
4.13: Z-test
analysis of difference in sales sustainability, profit and marketing
efficiency 104
CHAPTER
5:
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary 106
5.2 Conclusion 107
5.3 Recommendations 108
REFERENCES
APPENDIX
LIST OF
TABLES
TABLES PAGES
4.1: Socio-economic
characteristics of respondents 74
4.3: Warehousing
systems by rice distributors 79
4.4: Monthly
losses incurred by rice distributors
80
4.5: Sales
sustainability by rice distributors 81
4.6: Categorising Sales
sustainability by rice distributors 82
4.7: Cost and returns analysis of rice
distributors in Ebonyi state 83
4.8: Probit
estimates of warehousing system determinants 85
4.9: Factors
affecting sales sustainability 89
4.10: Factors
affecting marketing efficiency of rice distributors
93
4.11: Factors
affecting profit performance of rice distributors in Ebonyi state 97
4.12: Paired sample statistic 103
4.13: Z-test
analysis of difference in sales sustainability, profit and marketing
efficiency 104
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
Rice is one of the fundamental food vegetation grown in the
world. Being a cereal crop, rice is bumped- up as an essential staple food for
the human race (Imolehim and Wada, 2000). Globally, over half of the world’s
population consumes rice (West Africa Rice Development Agency, WARDA, 2005).
The world production for rice in 2017 was estimated at of 501.9million tonnes,
while consumption was 503.7 million tones, having a gap of 1.8% (Food and
Agriculture Organization, FAO, 2017).
In Nigeria, rice is being fed on by each household in a
first-rate volume (Godwin, 2012). Rice is cultivated in actually all the
agro-ecological zones of Nigeria and is being produced with the aid of Nigeria
farmers (Kano State Agricultural and Rural Development Authority, KNARDA,
2007). Nigeria has experienced a surge in domestic demand for rice since1970
(Odusina, 2008). And
as a result, rice has become a strategic staple dietary household item in
Nigeria, especially among high-income groups (Kanu and Ugwu, 2012). In 2009, Nigeria’s estimated annual
rice demand was once put at 5 million metric tonnes while annual supply on
the average was about 2.21 million tonnes of
milled rice product, leaving a deficit of 2.79 million tones which was bridged
by means of importation (National Rice Development Strategy, NRDS, 2009). Even
with a populace estimate of 174,507,539 individuals and populace growth charge
of 2.54% Nigeria is amongst the main importers of rice (Boansi, 2014). About
₦1billion is spent each day on importation of rice even being endowed with a
robust agricultural and natural sources base as nicely as favorable climatic
conditions for agricultural production (Abubakar, 2013). Local rice production
in Nigeria has failed to capture up with the growing pace of consumption due to
inconsistent insurance policies on rice, fallacious methods of production,
excessive charges and scarcity of vital inputs for production, inadequate
warehousing (Boansi, 2014). One of the predominant things that increases rice production
in Nigeria is population growth. About 3.2 Million hectares have been beneath
rice cultivation in Nigeria with an estimated country wide production of 3.7
million metric heaps in 2017 (Grain Report, 2017). Nwiliene et al. (2012), noted that rice farmers
in Nigeria bear storage loss specifically from insect pest infestation. They
mentioned that storage damage induced with the aid of insect pests has begun to
pose a serious hazard to reserves stored by using rice farmers and
distributors. Similarly, Togola et al.(2010),
reported infestations by insect pests in many rice-producing zones in the
country, causing estimated 3-18% damage
to grain, relying on the region and length of storage. Patrick (2013) stated
that Nigeria records over 40 percentage put up harvest losses, which has led to
hike in rice importation in the country. Up to 50% - 60% cereal grains are lost
all through storage due to use of nearby storage facilities, there is need for
the use of scientific way of storage such as warehousing (Deepak and Prasanta,
2017). The use of modern storage facility in storing grain is therefore
important to prevent mould spoilage, pest infestation, and grain germination of
dry rice (Brigid, 2004). Rice grains after
harvest are typically stored for the next harvest season, for selling and
domestic consumption (Pamma and Vimala, 2000). Since rice production is usually
seasonal and consumption is ordinary and non-stop at some stage in the year,
fantastic storage is therefore required by rice farmers and distributors, and
when rice is stored in good extent it is called warehousing (Nwele, 2016).
Warehousing is considered as one of the main spheres of
logistics. The broad meaning is the storage of finished goods or materials for
manufacturing, agricultural or commercial purposes. Warehouses
are crucial components of most modern supply chains. They are likely to be
involved in various stages of the sourcing, production and distribution of
goods. At the dispatch point serving the next customer in the chain,
warehousing is critical to the provision of high customer service levels (Sakil, 2013). Modern warehousing and traditional
warehousing are the two sorts of warehousing. Some of the practices in the
modern warehouse encompass the use of automated storage, systematic storage,
just–in-time delivery, appropriate record of inventory etc. Modern warehousing management system performs an
imperative role in the success of businesses these days such as growing market
volatility, product range proliferation and shortening client lead times,
promoting off season, bulk storage and distribution, normal delivery which enhances sales sustainability and
profitability and leads to efficiency (Frazelle, 2002).
Sales sustainability is described as the approach used to
produce super sales performance by business enterprises. Sale sustainability is
the index used to measure sales performance. Such indices are: potential to
keep customer (customer retention), repeated purchase, stock
ratio, competitive strength, turn over, earning market share, availability of
stock etc. Firm
location, number of customers, market training and access to credit are the
main factors that determine sales sustainability. Also, the capacity of rice distributors to maintain precise patron
service and relationship contributes to sustainable sales. This results in
growing predictable sales with an expanding customer base, and profitability
(Sustainable Packaging Coalition International, SPC International, 2014).
On the different hand, Profitability is the ability of a
business enterprise to make earnings from all enterprise activities and stages.
It refers to the potential of any given investment to earn a return (Harward
and Upto, 1961). Proper management of accounting do increases sales
sustainability, and enhances the profit of the organization which leads to
efficiency in the use of resources. Efficiency means producing something with a
minimum quantity of effort. It is the potential to do something well, successfully
and without waste. Bdour and Al-khoury (2010), defined efficiency as the
allocation of scarce resources that maximizes the fulfillment of targets in a
business enterprise. Igboji et al.
(2015), in their study on rice profitability and efficiency in Ebonyi State
suggested that rice manufacturing is surprisingly worthwhile and efficient.
Rice production and distribution has a great contribution to the nation gross domestic product and income of the producers and distributors. Ekpe and Alimba (2013) noted that
rice production in Ebonyi State has a positive gross margin and if producers
will increase their inputs in production, the profitability of rice enterprise
will increase more. Therefore warehousing managers need to apply sales
sustainability strategies such as knowing, understanding, satisfying and
maintaining good customer service and relationship with their target customers which
help to build trust, encourage customers loyalty and also build the type of
long-term relationships necessary to helping the business (rice production and
distribution) become sustainable, profitable and efficient( Wagner, 1998).
Warehousing system refers to the aggregate of tools and
operational methods used in the storage surroundings (Berg and Zijm,1999).
Modern warehousing system in supply chain attributes to
general sales growth by potential improvements in productivity, order accuracy,
reduced space requirements, increased volume capacity, control of inventory and
increased customer service (Adams et al.,1996; Allen, 2003; Fernie et al., 2000; Rushton et al.,2000; Harrison and Hoek, 2002;
Tarn et al., 2003; Marvick and White,
1998; Naish and Baker, 2004 and Christopher and Towill, 2000). Both Okoruwa and
Ogundele (2008) cited that rice farmers and distributors in Nigeria lose
sources committed into their enterprise due to losses incurred as a result of
using traditional storage (warehousing) device which affects their sales
sustainability, profitability and efficiency. Therefore, business enterprises
requires use of modern warehousing system, which paves way for elevated
profitability, proper storage and protection of goods, meeting timely demand of
the market, ensuring unremitting supply of goods, developing goodwill of the
producers, coping with multi stock room inventories and improves competitive
electricity etc. Ineffective management of warehousing systems leads to storage
loss (Vipul, 2013).
To prevent losses the post-harvest system of rice requires enhancement
in the use of resources. Nigeria losses about ₦ 2.7 trillion annually as an end
result of post-harvest food losses (Nigeria Stored Products Research Institute,
NSPRI, 2017). FOA( 2018), stated that the estimated post- harvest loss of rice
in Nigeria is 24.9 percent resulting in a notable loss of income for farmers.
Ohagwu, Akubuo and Agu (2013), in their study on submit harvest losses of rice
at Ebonyi mentioned that 1000kg/ ton of rice are loss throughout post harvest
operation. Thus, losses associated with these plants restrict the profits of
all farmers, threaten food safety and will increase stipulations of poverty
among rural households, whose income stream relies upon on the capability to
store excess farm produce for a later date (Thamaga–Chitja et al., 2004). Abedin, Rahman, Mia and Rahman, (2012) cited that
stored rice grain is subjected to damages through the various biotic and
abiotic factors. The biotic elements includes fungi, mites, insect, pest,
rodent, birds, and many others and the abiotic elements includes temperature,
moisture content, relative humidity, storage structure, natural calamities like
heavy rain and floods, etc. If the damages of these biotic and abiotic factors
are not observed on time, losses will be a whole lot greater. As a result, many
distributors will sell right now in order to mitigate loss. Consequently,
receive low market prices for any surplus grain they may additionally save
(Kimenju et al., 2009). Therefore,
they forgo potential profits that they would have earned had they held stocks
longer and sell later in the marketing year when prices are usually a great
deal greater (Stephens and Barrett, 2011). In different words, storage loss and
forced early income create a state of affairs that undermines family food
security. Early income due to storage loss decrease profits which in turn
decrease profitability (Didier et al.,
2013). Hence, this study was aimed to examine the effect of warehousing system
on sales sustainability, profitability and efficiency of rice distributors in
Ebonyi state, Nigeria.
1.2 PROBLEM
STATEMENT
Nigeria is the greatest producer and consumer of rice in West
Africa, but its local rice supply – demand deficit has persistently multiplied
due to so many factors, amongst which are losses incurred during storage of
rice as a end result of poor warehousing management and use of local storage
devices (Samuel, 2016). Inadequate warehousing leads to irregular delivery,
order inaccuracy, decreased volume capacity, reduced customer provider and
limited efficient distribution network which impacts performance, out-rich to
customer, distribution network, sales sustainability and profitability which
consequences to inefficiency. Although local rice manufacturing has accelerated
during the 1990’s but the expanded is no longer ample to fulfill nearby rice demand
by Nigerians (Johnson et al., 2013).
This has resulted in a big home supply-demand gap, leading to importation of
rice (Aminu et al., 2012).
Poor warehousing management leads to storage loss. Coker and
Ninalowo (2015), mentioned that Nigeria has been unable to reach self-sufficiency
in rice production, partly due to large post-harvest losses in particular at
some stage in storage of rice. Nwosun and Esekahagbe (2008), noted more than a
few storage problems encountered by using farmers ranging from losses of
product during duration of storage, ailment and insect attacks, inadequate
drying, rodent attack, mishandling and use of poor containers, use of
traditional warehouse system which results in serious post-harvest losses.
Ebewore, Achoja and Felix (2013) also mentioned most of the storage issues
which covered lack of capital, poor storage facilities, biotic and abiotic
factors. They
also noted that poor and inadequate storage facilities have been identified
with food shortage, loss of income by farmers, scarcity of food and food
wastage during harvest period leading to food insecurity.
Hindered by inconsistent policies on
rice, improper methods of production used by farmers, high costs and scarcity
of vital inputs of production, etc, local rice production for Nigeria has
failed to catch up with the increasing pace of consumption (Boansi, 2014). Presently,
Nigerian rice sub-sector is dominated by weak and inefficient producer-market
linkages due to poor infrastructure including lack of improved processing
facilities, low rice productivity, poor postharvest handling and storage,
expensive and poor access to inputs (High quality seed, fertilizing and crop
protection products), inadequate market information, and low capacity to meet
quality standards. This has declined the rice
productiveness and effects to low earnings for the rice farmers in Nigeria,
especially in Ebonyi State. In Ebonyi State, it has resulted in huge loss of
man power through the abandonment of the farmers and the migration of rural
youths to cities in search of white collar jobs (Igboji, Anozie and Nneji,
2015). Due to insufficient warehousing in Ebonyi State, rice producers and
distributors are not getting maximum return. Okoruwa, Ogundele and Oyewusi
(2006) have noted that rice farmers in Ebonyi State are not getting
maximum returns from the resources committed into their enterprises due to
losses, leading to a decline in per capital food production. This situation
manifests in low output per area which no doubt lead to low profitability.
1.3 RESEARCH
QUESTIONS
This
study is aimed at providing useful answers to the following research questions
regarding effect of warehousing systems on sales sustainability, profitability
and efficiency of rice distributors in Ebonyi state, Nigeria:
i)
what are the categories of the
respondents according to the warehousing systems?
ii)
what are the losses as a result
of the warehousing system used?
iii)
what is the level of sales
sustainability by warehousing system of the respondents?
iv)
how does warehousing system
affect the profit performance and marketing efficiency of the respondents?
v)
what are the determinants of
choice of various warehousing systems by the respondents?
vi)
what are the factors
influencing sales sustainability, profit performance and marketing efficiency
of the respondents?
vii) what is the difference between warehousing systems on sales
sustainability, profitability and efficiency?
1.4 OBJECTIVES OF THE STUDY
The
broad objective of the study is to analyse the effects of warehousing systems
on sales sustainability, profitability and efficiency of rice distributors in
Ebonyi State, Nigeria.
The specific objectives are to:
i)
categorize the respondents
according to the warehouse systems.
ii)
examine the losses incurred by
the warehousing system used.
iii)
ascertain the level of sales
sustainability of rice by warehousing system.
iv)
examine the profit performance
and marketing efficiency of rice based on warehousing system.
v)
analyse the determinants of
choice of various warehousing system by
the respondents.
vi)
examine the factors influencing
sales sustainability, profit performance
and marketing efficiency of rice bases on the warehousing system.
vii)
ascertain which is to examine the difference
between warehousing systems on sales sustainability, profitability and
efficiency .
1.5 RESEARCH HYPOTHESES
Ho1:
There is no significant relationship
between warehousing systems and losses incurred.
Ho2:
There
is no significant relationship between sales sustainability, profit performance
and efficiency of rice marketing.
Ho3:
There
is no significant relationship between warehousing systems and sales
sustainability.
1.6
JUSTIFICATION OF THE STUDY
The economic survival of Nigeria substantially depends on her
ability to feed the citizens and also export the surpluses to earn foreign
change (Epundu, 2010). The International Rice Research Institute (IRRI) in 1995
made a projection indicating a world rice want of 758 million tons in the year
2025, which used to be 70% of more rice than was bumped up in 1995. According
to Panhwar (2006), discount of losses reduces cost of production, lowers the
expenses for consumers and at the same time extend profitability. It is from
the foregoing backdrop that this study is justified and will be beneficial in numerous
ways.
The study will be of benefit to rice distributors in the
warehousing system of rice due to the fact the overall performance of
warehousing of rice has effect on the sales sustainability, profitability and
efficiency of rice distributors. It will enlighten distributors on the use of
modern-day warehousing system which sustain income and leads to profitability
and efficiency.
The study will also be of important to producers, consumers,
investors, distributors and others who need the data for their respective works
in the aspect of warehousing system.
The findings from this study will make Nigerian Government to
admire the contribution of rice distributors and will guide policy that will
encourage them to perform their role more efficiently in rice distribution.
Apart from contributing to the existing physique of know-how
in the study area, this research will influence the
success of individual distributors to achieve maximum profitability in
production.
It is finally hoped that information
from the study will provide a reference
materials to students, establishments and researchers for future studies on
associated issues.
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