TABLE OF CONTENTS

Chapter One: Introduction

Background of the study

Statement of the problem

Study objectives

Research Questions

Scope of study

Significance of the study

Chapter Two: Literature review

Introduction

Supply chain management

Purchases Management in Supply Chain

Logistics Management

Value Adding Activities

Distribution Management

Chapter Three: Research methodology

Chapter Four: Supply Chain Feeds Poultry Industry. Case of Hill Animals

Feeds & Agro vet Supplies Ltd

References

CHAPTER ONE: INTRODUCTION

1.1 Background of the Study

This study looked at the supply chain feeds in poultry industry, the case of Hill Animal Feeds and Agro

vet Supplies company Limited. Supply chain of poultry feeds is one of the most important factors that

determine the quality of poultry out put in a poultry farm

1.2 Statement of the Problem

Tanzanian poultry meat imports have risen rapidly over the past six years, rising 81-fold, from 6 tonnes in

1997 to nearly 500 tonnes in 2002 (Customs data, 2003) While only constituting one percent of domestic

production, poultry farmers and processors have complained that rising imports have led to stagnating

chicken prices in recent years. The domestic industry is also faced with a variety of constraints which

include high production costs, poor quality feeds and high tax (20 percent) on feed inputs. South Africa

is the major source for poultry imports to Tanzania; it’s upon this background that the researcher wants to

find out the effect of supply chain feeds on the quality of poultry output.

1.3 Study objective

The overall objective was to find out the effect of supply chain of poultry feeds on the quality of poultry

output.

Specific objective

We specifically examined how purchasing, value adding activities and distribution process are managed

at Hill Animal Feeds and Agro vet Supplies Company Limited and the effect of supply chain feeds on the

quality of poultry output in the Industry.

1.4 The Purpose of the Study

The study is meant to find out the effect of supply chain of poultry feeds on the quality of poultry output

in Tanzania.

1.5 Study research questions

How is purchasing and distribution carried out at Hill Animal Feeds & Agro vet Company Ltd

What are the value adding activities at the process of making poultry feeds

What are the effects of supply chain on the quality of poultry output?

What are social issues affecting the company and poultry industry

1.5 Scope of study

The study was carried out in only one of company producing and supplying animal feeds in Poultry

industry in Dar es Salaam area, the case study was conducted particularly at Mwenge area, Kinondoni

District in Dar es Salaam city. Therefore the study based on one company which was selected as sample

to represent the entire animal feeds industry in Dar es Salaam. This was one week study for term paper to

fulfil requirement of Masters Degree course in International Transport and Logistics. The study

conducted between 28 February and 06th March, 2011, due to limitation of time and resources the case

does not draw a satisfactory conclusion on evaluation of supply chain management and logistics to the

entire poultry industry in Tanzania.

1.6 Significance of the study

The significance of this study is to contribute knowledge in supply chain management, reveal

management practices and formulating guidance on issues of supply chain management and logistics

system in specific environment of Tanzania. The paper will stimulate interest and research studies on this

field in Tanzania

CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction

In order for the study to be successful relevant text books, reports and journals have been consulted to

check whether written theories comply with the actual practice. It has been reviewed in many Literatures

and found that the supply chain provides the focus for any organisation, whether service or product based,

seeking to improve the social, environmental and economic performance of its operations. Apart from the

moral essential, substantial business benefit can be achieved through a combination of leadership

commitment, focused and practical initiatives, and improved systems and processes.

The network of facilities that procure raw materials, transform them into intermediate goods and then

final products, and deliver the products to customers through a distribution system is very important. The

management of such a network requires mastery of optimization logistics, or the specific quantity of a

good needed at a particular time and price. Clearly, relationships with suppliers that make up these

networks are a central component of successful supply chain management.

2.2 Supply chain management

Supply chain

Supply chain is a network of partners who collectively convert a basic commodity (upstream) into a

finished product (downstream) that is valued by end customers, and who manage returns at stage

(Harrison & Van Hoek, 2008)

Supply chain management

Is management of a network of inter-connected businesses involved in the ultimate provision

of product and service packages required by end customers (Harland, 1996).Supply chain management

spans all movement and storage of raw materials, work-in-process inventory, and finished goods from

point of origin to point of consumption. (Wikipedia, the free encyclopaedia)

2.3 Procurement and Purchases Management in Supply Chain

The Supply Chain Purchasing professional needs to consider cost savings opportunities, contract and

price negotiation, lead times and vendor reliability as well as other global sourcing issues.

(www.supplychainpurchasing.com)

The fundamental goal of the procurement or purchasing function is to acquire optimum quality and

quantity of goods and services for the company in a timely manner, and at the lowest total cost. (Rahul V.

Ateker, 2005)

2.4 Logistics Management

It is the management of the flow of goods and services between the point of origin and the point of

consumption in order to meet the requirements of customers. Logistics involves the integration of

information, transportation, inventory, warehousing, material handling, and packaging, and often security.

Logistics is a channel of the supply chain which adds the value of time and place utility. (Wikipedia, the

free encyclopaedia)

Logistics is the task of coordinating material flow and information flow across the supply chain.

(Harrison & Van Hoek, 2008)

2.5 Value Adding Activities

Value Added

Value added is the amount by which the value of an article is increased at each stage of its production,

exclusive of initial costs. (Oxford English Dictionary, 11th edition)

Value added can be defined as difference between the purchase price of raw materials or finished parts

and the scale price of the product. (NEEMERS Dictionary of Economics and business)

In supply Chain Management valued added can be defined as the enhancement added to a product or

service by a firm before the product is offered to customer. That is the increase to the value of a product

at each stage in a production cycle or supply chain. (Rahul V. Ateker, 2005)

Each partner in a supply chain is responsible directly for a process that adds value to a product. A process

transforms inputs in the form of materials and information into outputs in form of goods and services.

(Harrison & Van Hoek, 2008)

Value stream

The value stream includes all the actions required to bring a physical product through the manufacturing

and business process from acceptance of raw materials or components to delivery of the completed item.

These actions would include

The delivery of the raw materials

The quality procedure to be followed to accept the material.

The loading of the raw material on the production line.

The manufacturing of tools for the production of the finished product

The set up required for manufacturing a particular product.

The removal of the finished product from the production line and its packaging

The value stream is mapped out to analyse all steps from start to finish, and redesign them to

ensure that they add value to the final product.

(Rahul V. Altekar, 2005)

Value Adding Activities

The value chain, also known as value chain analysis, is a concept from business management that was

first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage:

Creating and Sustaining Superior Performance.

Source www.12manage.com

Activities

The value chain categorizes the generic value-adding activities of an organization. The "primary

activities" include: inbound logistics, operations (production), outbound logistics, marketing and sales

(demand), and services (maintenance). The "support activities" include: administrative infrastructure

management, human resource management, technology (R&D), and procurement. The costs and value

drivers are identified for each value activity. (Wikipedia, The free encyclopaedia)

Packaging for logistics

Packaging can be defined as an art, science and technology to protect. Preserve and present the product

effectively to satisfy the consumers. In terms of logistics it is explained as the technique of preparing

goods for transport, while in industry terms, packaging is design for packing. Packaging serves as a link

between production and consumption. It contributes in minimizing losses and damages to the product at

various stages of distribution. The basic role of packaging in any industrial organization is to carry the

goods safely through a distribution system to the customer. Primarily the package must identify the

product, contain, protect, preserve, and communicate the product and contribute to physical distribution

efficiency. The package should also be easy to handle, store, open, inspect, dispose, reuse and recycle

(Rahul V. Altekar, 2005)

2.6 Distribution Management

Distribution can be defined as the channel structure used to transfer products from organization to its

customer. Distribution organizations manage the activities associated with the movement of materials,

usually finished goods or parts, from the supplier to the customer. All activities related to physical

distribution need to be managed. Distribution decisions have significant implications on product margins

and profits, Marketing budgets, Final retail pricing and sales management practices. (Rahul V. Altekar,

2005)

CHAPTER THREE: RESEARCH METHODOLOGY

Data was collected by the use of descriptive research design; main source of information was Hill

Animals feeds Managing Director and other staff who were so helpful to our case study by providing

information categorized as primary data. The collection of primary data was done through personal

interview with managing director and staff Issues concerning case study were discussed in details.

Together with primary data also the secondary data were obtained from various relevant literatures

addressing the case. Examples of the secondary source were the Internet website and Textbooks.

CHAPTER FOUR: SUPPLY CHAIN FEEDS POULTRY INDUSTRY. CASE STUDY OF HILL

ANIMALS FEEDS & AGRO VET SUPPLIES LTD

Background

Hill Animal Feeds & Agro vet Supplies Company Ltd is the private owned entity which was established

in 1998. The company is located at Mwenge Sam Nujoma Road in Dar es-salaam and basically deals with

production of poultry feeds and distribution of agro veterinary products. The company supplies its

products in Dar es Salaam city area and its neighboring regions such as Morogoro, Tanga and Dodoma. It

started business by distributing poultry feed products produced by other companies such as Azam and

IGO. In year 1999 to 2000 the company, after acquiring its own milling and mixing machines, started

production of its own products in small scale. The company used a pickup truck car with a capacity of

one tone to distribute the products to the market. In year 2000 the company expanded its business to a

poultry farm which was producing chickens meat and eggs. The company has employed seventy two

permanent staff twelve skilled labour and sixty unskilled

Supply Chain Management at Hill Animal Feeds & Agro vet Supplies Company Ltd

Our focus in this case study is to discuss the supply chain management practices at Hill Animal Feeds &

Agro vet Supplies Company Ltd. How the Company conducts its purchases of raw materials, logistics,

and distribution of the finished products to poultry industry.

Purchases

The company depends on supply of raw materials from local market sources and imported raw materials

from abroad, materials such as addictive substance and nutritious chemical ingredients like calcium

phosphate, all comes from dealers who imports raw materials abroad mostly from countries such as

Holland, Kenya and China.

Local material purchases

The company uses 80% of raw materials which are produced locally in Tanzania, and are available in the

market. Maize, fish mill, cotton cake, sunflower cake, born mill, wheat gravelly and maize gravelly are

main raw materials used to produce animal feeds. Maize supply comes from Mbeya, Dodoma,

Sumbawanga, and Songea. The daily purchase volume of maize is twenty tones; the company has an

agreement with local agents who supply and delivers materials directly to the company. Secondly it

sources directly from the local commodity market at Manzese and Tandika,

Fish mill comes from Mwanza, Tanga, and Dar es Salaam. Cotton cake and sunflower cake comes from

Mwanza, Shinyanga, Singida and Dodoma. Born mill, wheat and maize gravelly are available in Dar es

Salaam. The company does not purchase raw materials directly from farmers but through the agent who

purchases the materials direct from farmers and transports them to Dar es Salaam and directly delivers to

Hill Animal Feeds & Agro vet Supplies Ltd.

However the supply of maize is not consistent throughout the whole year it’s usually seasonal and during

the low seasonal there scarcity of maize supply, therefore the company buys materials direct from

Manzese and Tandika the major two commodities market in the city, where agent’s supplies for the city

consumption. The other source of maize is from the big wholesaler such as Mohamed Enterprises and

Bakhresa Company.

The company has no procurement policy or procedures to be followed, purchases are typically done by

businesses owners’ who are also directors to the company. However the company has entered into an

agreement with some few agents to supply the company with some material such as maize, fish mill,

cotton cake and sunflower cake. The company usually purchases materials on credit bases and the

payment policy is ranging from fourteen to thirty days.

When materials are delivered to the company, during receiving process they undergo quality assurance

procedures. The procedure used by Hill Animal Feeds & Agro vet Supplies Company Ltd are basically

physical inspection whereby raw materials quality are checked before are accepted for processing, each

type of raw materials have different procedure and method to be followed when are checked for the

quality. Most of the methods are primitive such that they use more experienced staff to inspect and

examine moisture content in maize without using any measuring equipment. They rely on experience of

the person by seeing physically the material and making personal judgment. In case of cotton cake and

sunflower cake they check for fibers content by looking by eyes anything with high quantity of fibers are

rejected.After inspection of all materials received; raw materials are moved into main store for storage

ready for production processes

Value Adding Activities

The raw materials from farmers which are used to make poultry feed includes maize, fish mill, cotton

cake, sunflower cake, born mill, wheat gravelly and maize gravelly. When materials are issued from

stores to production unit they undergo again second quality assurance procedures before are accepted for

production process, each type of raw materials have different procedure and method to be followed when

are checked for the quality. Most of the methods are primitive such as physical inspection and

examination on moisture content in maize is checked without using any measuring equipment. They rely

on a personal judgment. In case of cotton cake and sunflower cake fibers content is checked by seeing

anything with high quantity of fibers are rejected.

When the process of inspection of material is completed each type of material are prepared separately and

are loaded into first process in the grinding mill machine based on batch type of the product. Here six

different sizes of small particle of grains are set based on the type of product of animal feeds expected.

The small particles of grains are moved into second process of mixing where they are mixed with other

materials called chemical ingredients or addictive substance at prescribed ratios to make different types of

products. In this process the value of different materials will be added by changing from small particles of

grains into a mixture which is now animal feeds

The final process is parking, before fished products are parked sample from all batches of type products

of poultry feeds produced are taken and sent to TBS Laboratory to be tested if the quality of the mixture

produced has no harm to poultry and have the standard required. Then the products are parked in

50kilogram bags with batch tracer placed inside each bag. After that process all bags are branded

according to the type of product and labelled name of product and expiry date. In this process the value of

product is added when it’s parked in small quantity for different use of nutrition and for different breed of

poultry such as layers, broiler and for specific need during the growing process from chicks to chicken

There six types of animal feeds products made at Hill Animal Feeds & Agro vet Company Limited. The

first product is called Starter it has high content of proteins and for a 50kg bag it sales at Tanzania

shillings 30,000.00 in the market. Second product it’s known as Finisher which has balanced ratio of

nutritious component sales at Tzs. 29,000.00 in the Market others are layer mash and Grower layer sales

at Tzs. 25,000.00 the fifth and sixth product are Broiler pullets and mixture all sales at TZS. 19,000.00

Per 50kg bag. W hen the process is complete all parked finished products moved to warehouses

ready for distribution and sale to the market. The company own two ware house facilities

Distribution of Finished product

The company uses two channel of distribution the zero channel level and one level channel of

distribution.

Zero Channel level

One level Channel

The company sales its finished products (poultry feeds) direct to customer’s .i.e. poultry farmers, for any

buying more than ten tones and is located within periphery of 10kilometer from Dar es Salaam centre the

company offers transportation service free of charge.

The company also has entered into contract agreement with some retailers suppliers who they enjoy credit

facilities from Hill Animal Feeds & Agro vet Supplies Ltd of up to fourteen days. These are their main

business partners in distributing Hill products to the market. The marketing of product is done by

company’s directors themselves Mr Hillary Shoo and his wife Mrs. Theodora H. Shoo

Producer Consumer

Producer Retailer Consumer

Social issues

The main issues which we found was environmental problem, the factory is located in residential area at

Mwenge this is causing complains from neighbours due to bad smell and dust coming out from factory.

The employees do not stay long in the company because the working environment is no conducive

despite effort of company to improve the situation the big challenge remains in controlling smell and dust

in the mixing process when making poultry feeds. There are big turnover of employee in the company.

However the company have secured a big land recently near Bagamoyo and have planned to relocate it

plant and install new high tech machines in factory.

Findings

On our case study at Hill Animals Feeds & Agro vet Supplies Ltd we have come up with following

findings which we thing are very important to highlight. The main hindrance to the supply chain

management at Hill Animals Feeds & Company Ltd related to its organizational structure framework. It

was found that only two directors are directly involved in the daily process of logistics, procurement and

purchasing, the process is highly depending on them. The company has no procurement policy or laid

down procedure to be followed. That makes company at high risk of operating at very high cost which it

could have reduced if it had a structured system.

It was learned that in value adding activities it’s not easy to inspect the quality of raw materials due to

poor technology used; this may lead to poor quality of finished goods. This proves the claim of that the

quality of poultry meet in Tanzania is poor and that is why there high level import from outside the

country. “Poor quality is an issue for commercial farming in Tanzania. The quality of almost all the feeds

manufactured in Tanzania was lower than the requirements of chickens. Crude protein and metabolisable

energy contents of feeds were below the recommended level and this contributed to the low performance

of the chickens”. Shayo et al (2005)

We found out that there more employees turnover due to difficulty environment in manufacturing process

the company is using very old technology which is not environmental friendly bad smell and dust during

mixing process is very big challenge in this company to its employee and surrounding neighbour.

Conclusion

Despite the fact that there impediment in proper function of the supply chain management at Hill Animals

Feeds & Agro vet Supplies Company Ltd. The company remains the key important partner in supply

chain of poultry feeds in poultry Industry in Dar es Salaam. Through purchasing of raw materials and

activities of converting them to finished goods by adding value, the quality have always been observed

using whatever means the company can afford. It has packed the product in small bag of 50kg which are

easily to be handled and delivered in the market. The company it can improve and do better if it organises

in group or consortium purchasing to reduce high cost of materials. Through outsourcing company can

improve its supply chain management by using professionals who can set up a well structure system. The

company management need to have effective planning and enter into long term contracts with suppliers.

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PHI Learning Private Limited, New Delhi, India.

Concise Oxford English Dictionary, 11thEdition, Published by Oxford University Press, U.K.

Neemers Dictionary of Economics and Business

Wikipedia, The free encyclopaedia, Google.com

Supplychainpurchasing.com

Nyange et al,(2005) The Impact of Import Surge: Country Case Study result for Senegal and Tanzania, FAO

Commodity and trade policy research working paper No 11,2005

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