Factors Affecting Demand Management in the Supply Chain (Case Study: Kermanshah Province's manufacturing and distributing companies)

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1 International Journal of Agriculture and Crop Sciences. Available online at IJACS/2013/6-14/ ISSN X 2013 IJACS Journal Factors Affecting Demand Management in the Supply Chain (Case Study: Kermanshah Province's manufacturing and distributing companies) Yazdan Mansuri *1, Sayed Reza Hashemi 2, Fakhroldin Maroofi 3 Faculty of complementary education, Islamic Azad university Kermanshah branch Corresponding Authors ABSTRACT: One of the major concerns for all industries in the today's competitive world especially after taking into consideration the of demand since entering many companies into the competition arena in the last decade is the ability of receiving and delivering of customers demand timely. Demand is a supplement of the distributing which its purpose is to deliver goods to the final consumer - "client"- according to the conditions of time, quality and lowest cost. Therefore aim of present research is study of factors affecting demand in the supply chain among Kermanshah province's manufacturing and distributing companies. Research population was all of the companies (N=795), of which were selected using Cochran s formula. The instrument for data collection was a questionnaire which its validity was confirmed by a panel of experts. Its reliability was calculated by Cronbach's alpha coefficients. Data were analyzed by SPSS and AMOS software. Results showed that the following factors including: segmenting, supporting of, forecasting, planning of operations and selling have the greatest effect on demand respectively. The results can provide useful and applicable suggestions for the supply chain participants. Keywords: supply chain, demand, support, sales and operations planning. INTRODUCTION Today, business enterprises are forced to focus on the supply chain and investment due to the supplying of new products in the market presently, unremitting competition in the global markets and rising the customer expectations. In fact in the today s world, there is no competition among companies any more, but it is raised into its supply chain. Therefore, Supply Chain Management becomes a strategic tool for companies so that they can remain competitively in market besides satisfaction of customers and quality. So in recent years, Supply Chain Management has been suggested as an infrastructural source for E- businesses (Behnam ajdari and ekhtyarzadh, 2010). In this regard, Supply Chain Management highlights the integration of the supply chain activities and the associated information flows through improvement of existing links in the chain to achieve a reliability and ongoing competitive advantage (Lavdon, 2002). Supply chain also includes all activities associated with the flow and transformation of goods from the raw material stage (extraction) to delivery to the final consumer (Bopp, 2011). Therefore it can be concluded that the factors such as: increasing competition, rising customer expectations and rapid technological changes caused the companies enable to identify customers expectations appropriately and respond them be more success than the other ones (wang, 2007). In fact in the past customers rarely were able to relinquish their desired brands, but today, this subject is changed. In today s market companies and brands compete with each other hostility, as far as the "maintain market share" has been very difficult and "taking more share" seems to be unimaginable (Keiningham, Vavra, Aksoy & Henri, 2005). The intensification of the global competition in a constantly changing business environment raises the need of appropriate reaction of industrial-manufacturing companies and emphasizes on the companies flexibility in an uncertain external environment. So today's organizations in line with their customers' expectations as well as the competitive advantage need to an appropriate model like Supply Chain Management to obtain and maintain the suitable status. In today's organizations, customers are along with the

2 organizations members in the production of goods and service delivery, procedures of doing things and processes, knowledge development and competitive advantage. Today based on this evidence and other facts, it is not surprising that demand programs and even distribution be considered as a priority. In this regard, many companies came into competition with the Kermanshah Province's manufacturing and distributing companies in recent years. With the advent of new technology and equipment the companies also faced with new challenge not only to attract new customers but also to keep their loyal and current customers. Kermanshah Province's manufacturing and distributing companies not only are looking for customers in the province but also are looking for ones from outside the province. So we can say that the demand has a broad role which after examining the demands creates the strategies and delivers goods and final services to consumers with a lower cost and better quality eventually. Unfortunately, despite the mentioned importance of supply chain, conducted studies generally are low in the world. Therefore it is necessary to address the topic as a useful research. Thus, the findings of this study will be useful to the understanding factors influencing demand in Supply Chain Management in the Kermanshah Province's manufacturing and distributing companies. It also leads to develop of the previous studies in order to achieve the optimal of demand. Given the importance of customers present study attempts to investigate concept of the "demand in the supply chain". In other words, aim of the study is investigation the factors lead to performance improvement of demand in the Kermanshah Province's manufacturing and distributing companies. As mentioned above, conducted studies in the field of demand in the supply chain generally are low and many existing studies are only related to the "supply chain". Results some of them are explained in the following. Asadollah, et al (2004), in their study named value chain modeling in the Iran s Car Industry to achieve the cost leadership strategy", showed that use of the model can lead to the improvement in the cost of resources, maintenance costs, optimal allocation of funds, supply costs of raw materials and transportation costs. Focus of the paper is to achieve advantage of cost leadership through focusing on the internal resources of organization. Ameli (2003), also in a study investigate operations designing of reengineering of the order. He achieved an optimal model for this process by studying supply chain processes and considering the process of "Order Management" in a manufacturing company which not only improved efficiency of the accounting system of order but also reduced the costs. In fact, future ordering can be estimated and the time be shorted between order and delivery by the proposed model. Many other studies also have been done in the field of information technology and its role in supply chain which for example one of the results is the advent of smart system of supply chain. Zand Hesami et al (2008), in a study named investigation the factors affecting agile supply chain and design a conceptual model of agile supply chain, investigate the ways of new product development and supply and production directly and indirectly. They also investigate role of the factor of time in production in the supply chain and difference between direct and indirect stages of products. Their results showed that the delivery affects agility of supply chain only indirectly. Pibernik & Kaiser (2012), also in their study investigate factors affecting success of demand and distribution with the customer-oriented approach. Their results showed that type of individuals attitude and economic and educational levels affect demand. The results also indicate that there is specific effective relationship between demand and distribution and no difference between their performances. To investigate factors affecting demand in supply chain in the Kermanshah Province's manufacturing and distributing companies we used a conceptual model (Figure 1), using overall studies in this area. According to the conceptual model and review of the available literature in this field, the following assumptions are raised: Hypothesis 1: there is direct and significant relationship between demand and supply chain performance. Hypothesis 2: there is direct and significant relationship between forecasting and demand. Hypothesis 3: there is direct and significant relationship between segmenting and demand. Hypothesis 4: there is direct and significant relationship between sales and operations planning and demand. Hypothesis 5: there is direct and significant relationship between support and demand. 995

3 Forecasting Demand Supply Chain Segmenting Sales and operations planning Management support Figure 1. Conceptual model of the research MATERIALS AND METHODS This descriptive-survey research was conducted in the Kermanshah Province. Research population was consists of manufacturing and distributing companies (23 industrial groups and 795 companies), of which were selected by the stratified sampling method, based on the Cochran s formula. Research tool was a researcher-made questionnaire which includes the following seven parts: personal characteristics, demand segmenting, demand forecasting, sales and operations planning, support of demand, demand performance and supply chain performance. This questionnaire measure factors affecting demand in supply chain using 14 items on a five-point likert scale which ranged from 1(completely disagree) to 5 (completely agree). Validity of the questionnaire was confirmed by a panel of experts. Its reliability was calculated by Cronbach's alpha coefficients (>0.07). Data were analyzed (descriptive and inferential statistics) by SPSS and AMOS software. RESULTS AND DISCUSSION Demographic characteristics of participations Based on the results, most of the participations (69.5%) were males and only 30.5% of whom were women. Frequency distribution by age also showed that 46.8% (180 ones) have less than 30 years, 39.8% have between and 13.4% have more than 50. Based on the results, the majority of them (85.9%) have BA degrees and only 54 (14.1%) of whom have MA and PHD degrees. Assessing data normality First, statistical distribution of the given variable should be considered in order to choose a correct test to analyze hypothesizes. For this purpose to check normality of data the Kolmogrov Smirnof s (ks) test was used. Null hypothesis in this test is showing the normality of distribution of given variable. If the significant level of the test was less than 0.05, therefor the null hypothesis is rejected and it is concluded that distribution of the assumed variable is not normal. Given the significant levels (table 2), we concluded that none of variables have normal distribution. Therefore, as the result of it, we used the Spearman correlation coefficient s test to investigate correlation between the independent and the dependent variables. 996

4 Table 1. results of Kolmogorov Smirnoff s test in the check of the normality of the data Variable demand segmenting demand forecasting sales and operations planning supporting of demand demand performance supply chain performance Number z Value Significant Testing hypotheses Hypothesis 1: there is direct and significant relationship between demand and supply chain performance According to the Non-normal data, the Spearman correlation coefficient s test was used to test the hypothesis. As it is shown in table 2, the correlation coefficient between these two variables is and significant level is. It could be concluded that there is positive and significant relationship between demand and supply chain performance. Therefore the hypothesis is confirmed. Hypothesis 2: there is direct and significant relationship between forecasting and demand According to the table 2, the correlation coefficient between these two variables is and the significance level is. There is positive and significant relationship between forecasting and demand. Therefore, the hypothesis is confirmed. Hypothesis 3: there is direct and significant relationship between segmenting and demand According to the table 2, correlation coefficient between these two variables is This relationship is significant at the level Thus it can be said that there is positive and significant relationship between segmenting and demand. Therefore, the hypothesis is confirmed. Hypothesis 4: there is direct and significant relationship between sales and operations planning and demand. Correlation coefficient between these two variables is which is indicating that correlation is significant at the level It can be said that there is positive and significant relationship between sales and operations planning and demand. Therefore, the hypothesis is confirmed. Hypothesis 5: there is direct and significant relationship between support and demand According to the table 2, the correlation coefficient between these two variables is and significance level is. It can be said that there is positive and significant relationship between support and demand. Therefore, the hypothesis is confirmed. Table 2. Test of research hypotheses Variables correlation coefficient supply chain performance forecasting segmenting sales and executive operations planning support significant RESULTS OF THE PATH ANALYSIS Maximum likelihood procedure was used to estimate the model. Indicators of chi-square (χ 2 ), X 2.df ratio, comparative fit index (CFI), normalized fit index (NFI), root mean square error of approximation (RMSEA) and standard root mean square residual (SRMR) were used to evaluate goodness-of-fit. If the values of CFI & NFI, be greater than 0.90, and RMSEA & SRMR, be less than 0.05, therefore they are indicating optimal fit of the model and the value less than 0.08 implies the optimal fit. As it is shown in table 4, indicators of CFI & NFI, are 0.99 and 0.97 respectively. Both are closed to the threshold point of optimal fit. Indicators of RMSEA & SRMR are 0.01, 0.01 respectively. Both are indicating the goodness of fit of the model. Goodness of fit index X 2.df CFI NFI RMSEA SRMR GFI AGFI Table 4. Fitness indicators of the model Value Standard values > >

5 Segmenting /0 Supply chain Demand 0+/9 Management support 4/63 5/ /0 Sales & executive operations planning 8/12 Error 4/1 Forecasting 3/21 Figure 2. Path analysis Table 5. Path coefficients in the structural model path Path coefficient Significant segmenting, demand, supply chain >P supply chain, demand, forecasting >P supply chain, demand, Sales & executive operations >P planning supply chain, support >P Result CONCLUSIONS AND SUGGESTIONS The results showed that there is significant relationship between demand and performance of supply chain. Thus, based on this, it was achieved to examine factors affecting performance of demand such as forecasting, segmenting, sales and operations planning and support by researcher. There is also significant positive relationship between forecasting and performance of demand. In fact, results of the study showed that despite the point of view of some scholars who believe in the direct relationship, there is indirect relationship between forecasting variable and supply chain through performance of variable of demand. The results also showed that there is positive relationship between segmenting factor and performance of demand and this factor has the greatest impact on performance of demand among the various investigated factors. One of the other results of this study is direct and significant relationship between sales and operations planning and demand. However it should be noted that this factor has the lowest impact on the demand among the investigated factors. Management support also is another factor that has direct and significant relationship with demand. Although factor of support has been studied in many researches and program planning, it has had low status among supply chain s studies. 998

6 Suggestions The results can provide useful and applicable suggestions for the supply chain participants. Some of the most important suggestions are: It is suggested that if there demand is on different levels of supply chain, its be divided into upstream and downstream ones in order to prevent from imposed overload on demand. Companies can design product packages with regard to the income or other characteristics of clients. Of course it requires careful analysis of information obtained from the customer s database Companies should have comprehensive understanding of demographic groups. Customers who have long-term relationship with companies should be identified. Because it is easy to understand about needs and desires of older clients. Appropriate forecasting of sales will be possible with study of the annual sales of companies and also seasonal sales and even the days like annual celebrations. REFERENCES Bopp KD How Patients Evaluate the Quality of Ambulatory Medical Encounters: A Marketing Perspective, Journal of Health-Care Marketing, 10(3), Keiningham TL, Vavra TG, Aksoy L, Henri W Loyalty Mynths: Hyped Strategies that will put you out of business and proven tactics that really work, New Jersey: John Wiley & Sons. Ozhdari B, Ekhtyarzadeh A From Concept to Application. First Publication: Tehran Wang GG, Rothwell WJ, Sun JY Management development in China: A policy analysis. International Journal of Training and Development, 13(4),

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