| Small and medium enterprises (SMEs) food processing sector in Tanzania has beacome a focus of sector faced with the need to survive in a highly uncertain business environment. Even though there have been a number of researches on food supply chain, the focus of these studies have been on the supply chain of agricultural produces leaving out the food processing sector. This sector not only plays a significant role in adding value to agricultural produces but also has a great contribution to the country’s economy.Drawing upon supply chain management literature, companies with successful stories today are those which run their business with efficiently managed supply chain. Therefore, supply chain management (SCM) practices are not only meant for large scale firms but also for SMEs in this case, the food processing firms. This thesis, empirically investigated on what is going on in food processors’supply chain with emphasis being on SMEs and their business challenges. This thesis also proposed a new supply chain model in which partners along the supply chain adopts and implements supply chain contracts as a business selling strategy. The contracts are revenue sharing, rebate, ABD program and VMI. Mathematical equations and description were used to show the significance performance of the new supply chain model.A total of 950 questionnaires were distributed to consumers located in different geographical areas. A total of 833 usable questionnaires were returned,41.01%, 33.01% and 25.93% being from major cities, small cities and rural areas respectively. The consumers were responding to criteria that lead them when making decision on purchase and also their perception on ABD program. Respondents from the consumer group comprised employees, businessmen/women, students and farmers. As for the food processors,52 usable questionnaires out of 100 questionnaires distributed to owners, production managers, sales managers and marketing managers were returned. The processors responded to questions intended to investigate their knowledge and practice of SCM concepts.In exploring the understand level of SCM concepts, SMEs food processors were far less knowledgeable when compared with their counterpart, large food processors. The study revealed that SMEs food processors run their business in a traditional way dominated by buy-sell relationship. In such operation, it is inevitable to have inefficient supply chain and dissatisfied customers.Despite of available user friendly technologies, few SMEs food processors are slow in adopting these technological innovations largely contributed by resource constraints. Though not all, some of the SMEs food processors are using mobile phones or internet and related services to transfer information across the supply chain at low cost. However, the processors are paying less attention on inventories available at downstream partners’stores. In addition to numerous advantages that supply chain contracts offers, the processors favored contracts that do not allow returns, simply because it is hard to recover any cost when the product expires. Also these contracts were believed to motivate partners to create more effort in expectation of more return or profit. The favored contracts were revenue sharing, rebate and ABD program.On marketing and distribution strategies, most of food processors use similar or same strategies when executing market activities. Due to financial constraints, SMEs use promotion through trade shows using mobile vans. The approach was considered to be more cost effective than other means of promotion. On the other hand, wholesalers and retailers have great freedom to set their selling price. SMEs food processors cater a narrow marketing segment because of poor distribution network and financial constraints.The processors experience demand fluctuation. The fluctuation is influenced by season of the year or climatec condition. Due to lack of coordination, the processors have failed to capitalize and harmonize the demand and supply during these seasons.On purchasing criteria, sensory quality (39.98%) was an important criterion when consumers make decision towards purchase. The second most important criterion was the price (36.37%). Nutritional factor as a motive force for food purchase was given last priority (23.65%). However, purchasing decision criteria differed across the locations and a significant difference observed in rural areas.Whilst criteria determining decision towards food purchase (analyzed by Kruskal-Wallis AN OVA test) differed across the location, the level of ABD program acceptance was high in all locations. Despite of high acceptance, not all processed food products were preferred in this program. The consumers preferred those products which are daily consumed as they take large share of the food budget.The processors identified several challenges that are facing this sector. The challenges were categorized into five groups which are technological and technical know how, research and development, capital investment and managerial skills, infrastructure and power supply, and last was storage facilities.By analysis of the new proposed business model and compare on what is happening in the traditional supply chain; the new model seems to place SMEs food processors in a better situation to have efficient and improved supply chain performance. The efficiency is simply because, the new model allow partners along the supply chain to coordinate. As demonstrated by equations and illustrative examples, partners can attain not only win-win situation, reduced demand uncertainty but also improved profits at certain contracting parameters.Introduction of revenue sharing provides incentive to the wholesaler to order more in expectation of high revenue. The wholesaler’s expectation is only realized if the retailer orders more as well. The rebate incentive given by the wholesaler motivates the retailer to create efforts to sell above the threshold quantity. The retailer’s objective is attained if large number of end user turns out to buy the product. The strategy of implementing ABD program showed to attract more customers as reilected by a huge acceptance of the program in all geographical locations. This indicates the possibility of the retailer to meet the rebate requirement criterion. Nevertheless, the processor as the producer of the product going down the stream, it is obvious that accurate market demand data is extremely important. One of the best ways to capture accurate data is through VMI partnership. In this partnership the retailer’s inventory is made known to the processor, which means it provides condition for feasibility of the entire supply chain to work. The processor is able to make plans on production planning and periodic replenishment decisions in terms of quantity and frequency in each season. As the results of partnership, the processor can obtain additional information for analysis, customer preferences and sales performance. Thus, VMI partnership facilitates smooth movement of the product and the effectiveness of the new business model. This is because the processor will be able to track the current level and customer demand, either physically or electronically, so that he can determine when to replenish the wholesaler to avoid stock outs for the retailer.The innovation part pertaining to this research work is explained as follows:1. This research, empirically investigates the application and implementation status of SCM concepts in SMEs food processors’supply chain in Tanzania, In additional to the challenges facing this sector, the study also explores why SMEs food processors are still using a traditional supply chain pattern as the leading model of their business operations. This model maybe one of the root cause for their inefficient supply chain, hence, the less significant contribution of SMEs food processors in economic development. Futhermore, the study proposes a new supply chain model for SMEs food processors which incorporates SCM concepts. The use of SCM concepts can not only offer positive impact in SMEs food processors in Tanzania but also in other less or developed countries.2. For the typical problem facing SMEs food processors in Tanzania, this study proposes a new supply chain model which incorporates revenues sharing, rebate, advanced booking discount and VMI. The revenue sharing act as an incentive for the wholesaler to order more which inturn increases sales volume for both participants. The rebate given by the wholesaler insipires the retailer to sale above the threshold quantities. The retailer’s goal is achieved through ABD program because huge number of consumers will turn to buy the product at a discount price. Consequently, as the result of coordination the demand uncertainties are reduced. This will help the processor to make decision more accurately on production planning and delivery schedule. The new supply chain model not only allows both partners to achieve a win-win situation but also to share risks encountered in the supply chain.3. Integration of VMI in the supply chain allows the processor to access inventory information at the retail level. The processor-retailer VMI partnership facilitates the efficiency of the supply chain. To sum up, this study analysed the state of SMEs food processors SCM in Tanzania. The study also has proposed a new supply chain model suitable for Tanzania SMEs food processors. By comparison with the trdational supply chain, it can be seen that the new supply chain model can increase efficiency in SMEs food processors supply chain. Through mathematical analysis and real life examples presented, supply chain participants can realize reduced demand uncertainties and also improved profit when setting appropriately the contracting parameters. |
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