THE EFFECT OF SUPPLY CHAIN INTEGRATION ON OPERATIONAL

PERFORMANCE, THE CASE OF ETHIOPIAN COMMOITY EXCHANGE

(ECX), JIMMA BRANCH.

A THESISSUBMITTED TO JIMMA UNIVERSITYBUSINESS AND

ECONOMICS COLLEGE DEPARTMENT OF MANAGEMENT IN PARTIAL
FULFILLMENT OF THE REQUIREMENTS FOR THE MASTERS OF
DEGREE LOGISTICS AND SUPPLY CHAIN MANAGEMENT

BY: SULTAN HASSAN HUSSEN

JIMMA UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTEMENT OF MANAGEMENT

MAY, 2021
JIMMA, ETHIIOPI
THE EFFECTS OF SUPPLY CHAIN INTEGRATION ON OPERATIONAL
PERFORMANCE: THE CASE OF ETHIOPIAN COMMODITY
EXCHANGE (ECX), JIMMA BRANCH

By:

SULTAN HASSEN HUSSEN

A THESIS SUBMITTED TO THE SCHOOL OF GRADUATE STUDIES,

JIMMA UNIVERSITY COLLEGE OF BUSINESS AND ECONOMICS,
DEPARTMENT OF MANAGEMENT IN PARTIAL FULFILLMENT OF
THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS IN
LOGISTICS AND SUPPLY CHAIN MANAGEMENT

MAJOR ADVISOR: Zinashbizu Lemma (PhD)

CO-ADVISOR: Mohammed

JUNE 2021
JIMMA, ETHIIOPIA
 DECLARATION

I, Sultan Hassen, the undersigned, declare that this thesis is my own original work and has not
been presented for a degree in any other university; and all sources of materials used for this
thesis have been duly acknowledged.

Name: Sultan Hassen Hussen

Signature: ----------------------
Place of submission: ------------------
Date of submission: ------------------------

I
 STATEMENT OF CERTIFICATION

This is to certify that Sultan Hassen has carried out his thesis on the topic of “THE EFFECTS
OF SUPPLY CHAIN INTEGRATION ON OPERATIONAL PERFORMANCE CASE SUDY
IN ETHIOPIAN COMMOITY EXCHANGE (ECX), JIMMA BRANCH.” under my Advisors.
This work is original in its nature and it is suitable for submission in partial fulfillment of the
requirement for the award of Masters of Arts Degree in Logistics and Supply Chain
Management.

Dr. Zinashbizu Lemma _____________________ ____________________

(Major Advisor) Signature Date

Mohammed ___________________ ______________________

(Co-Advisor) Signature Date

I
 ACKNOWLEDGEMENTS

I would like to thank my advisors, Dr. Zinashbizu Lemma and my co-advisor Mr. Mohammed
for their support in providing relevant orientation and guidance in the preparation of this research
paper. I could not have finalized this protocol without his continuous professional guidance and
constructive comments, scarifying his priceless time.

Above all, thanks to the Almighty God for the strength gave me to carry out this academic work.

Finally, I would like to express my appreciation and great honor for my family, friends and
colleagues those supported me morally with sharing ideas and facilitating the conditions/ for
their remarkable support, sharing most of the family time and continuous encouragement both
ideally and financially.

I
 ABBREVIATIONS AND ACRONYMS
CI: Customer Integration

CRM: Customer Relationship Management

ECX: Ethiopian Commodity Exchange

ERP: Enterprise Resource Planning

OP: Operational Performance

SC: Supply Chain

SCI: Supply Chain Integration

SCM: Supply Chain Management

SI: Supplier Integration

SPSS: Statistical Package for Social Scientists

II
 Table of Contents

Abstract ………………………………………………………………………………………………I
List of abbreviation…………………………………………………………………………………… II

acknowledgement......................................................................................................................................III
CHAPTER ONE..........................................................................................................................................1
INTRODUCTION.......................................................................................................................................1
1.1. BACKGROUND OF THE STUDY............................................................................................1
1.2. Background of the Organization..................................................................................................3
1.3. Statement of the problem.............................................................................................................4
1.4. Objective of the Study.................................................................................................................6
1.4.1. General Objective................................................................................................................6
1.4.2. Specific Objectives..............................................................................................................6
1.5. Research Hypothesis....................................................................................................................6
1.6. Significance of the study..............................................................................................................7
1.7. Scope of the Study.......................................................................................................................7
1.8. Limitation of the study.................................................................................................................8
1.9. Organization of the Study............................................................................................................8
CHAPTER TWO.........................................................................................................................................9
REVIEW OF RELATED LITERATURE...................................................................................................9
2.1. Theoretical Review......................................................................................................................9
2.1.1. The Concepts of Supply chain integration...........................................................................9
2.1.2. The Concepts of Operational performance.........................................................................11
2.1.3. The concepts on Relationship of SCI to OP.......................................................................12
2.2. Empirical Review......................................................................................................................13
2.2.1. Review of Empirical Studies on Supply Chain Integration................................................13
2.2.2. Review of Empirical Studies on Operational Performances...............................................14
2.2.3. Review of Empirical Studies on the Associations between Supply chain integration and
Operational Performances..................................................................................................................15
2.3. Conceptual framework...............................................................................................................19
CHAPTER THREE...................................................................................................................................20
RESEARCH METHODOLOGY...............................................................................................................20
3.1. Description of the Study Area....................................................................................................20

III
 3.2. Research Approach....................................................................................................................21
3.3. Research Design........................................................................................................................21
3.4. Unit of analysis..........................................................................................................................22
3.5. Population of the Study..............................................................................................................22
3.6. Sampling Design........................................................................................................................22
3.6.1. Sample Size Determination................................................................................................22
3.6.2. Sampling Technique..........................................................................................................23
3.7. Data Sources, Types and Collection Procedures........................................................................24
3.8. Methods of Data Analysis..........................................................................................................24
3.9. Variables of the study................................................................................................................25
3.10. Measurement and instrumentation.........................................................................................26
3.10.1. Model Specification...........................................................................................................27
Multiple regression models.............................................................................................................27
3.11. Reliability and Validity of Data.............................................................................................28
3.12. Ethical Consideration.............................................................................................................29
CHAPTER FOUR.....................................................................................................................................30
DATA PRESENTE0TION, ANALYSIS AND DISCUSSIONS...............................................................30
4.1. Findings of Demographic Analysis............................................................................................30
4.2. Descriptive Findings of Supply Chain Integration of ECX Jimma Branch................................32
4.2.1. Internal integration.............................................................................................................34
4.2.2. Information Integration......................................................................................................35
4.2.3. Supplier Integration...........................................................................................................36
4.2.4. Customer integration..........................................................................................................37
4.2.5. External Integration...........................................................................................................39
4.2.6. Operational performance....................................................................................................40
4.3. Result of Inferential Statistics....................................................................................................42
4.3.1. Regression assumption testing (Residual analysis)............................................................42
4.3.2. Result of Goodness of fit test.............................................................................................45
4.3.3. Result of first hypothesis testing (Supplier Integration).....................................................50
4.3.4. Result of Second hypothesis testing (Internal Integration).................................................51
4.3.5. Result of third hypothesis testing (Customer Integration)..................................................52
4.3.6. Result of fourth hypothesis testing (Information Integration)............................................52
4.3.7. Result of fourth hypothesis testing (External Integration)..................................................53

IV
CHAPTER FIVE.......................................................................................................................................54
SUMMARY, CONCLUSIONS& RECOMMENDATIONS.....................................................................54
5.1. Summary of Major findings.......................................................................................................54
5.2. Conclusions...............................................................................................................................57
5.3. RECOMMENDATIONS...........................................................................................................58
5.4. Suggestion for further study.......................................................................................................59
References.................................................................................................................................................60
jimma University...................................................................................................................................63
college Of Business And Economics.....................................................................................................63
department Of Management..................................................................................................................63

V
 LIST OF TABLES

Table 1 Sample size determination from each stratum

Table 2 Respondents’ background information
Table 3 Mean and Standard deviation of supply chain integration of ECX as perceived by the
employees of Jimma branch
Table 4 Mean and Standard deviation of operational performance of ECX Jimma branch
Table 5 Summary of regression output on the effects of SCI on operational performance

1
 LIST OF FIGURES

Figure 1 Conceptual framework of SCI

2
 ABSTRACT

Effective supply chain integration (SCI) has become a potentially valuable way of securing
competitive advantage through enhancing organizational performances. The objective of this
study was to assess the current level of SCI and its effect on operational performance of the
Ethiopian Commodity Exchange (ECX). This research focuses on five dimensions of SCI (i.e.,
supplier integration, internal integration, information integration, customer integration and
external integration) and examines their causal relationships with operational performance
(OP). Data for this study were collected with a questionnaire which was administrated to a total
of 147 employees of ECX sampled using stratified random sampling techniques from Jimma
branch. Data were analyzed using descriptive statistics, and the effect of SCI on operational
performance was also examined using regression analysis. Based on the results of the analysis of
variance, the five independent variables explained 89.7% of the total variation in the current OP
of the market place. While the remaining 10.3% variation could be explained by other
determinant factors/other supply chain integration which were not considered in this study.
Measured from the dimensions of SCI, it can be concluded that the current level of SCI of the
market place is moderate. The results of the analysis proved that there is strong and significant
relationship between SCI and OP. Our results also indicated that supplier integration had the
strongest effect on operational performance, followed by information integration and external
integration. However, customer integration had no significant effect (p = 0.57) on OP.
Therefore, for improving OP, the current study recommends improving the components of SCI
together as they are strongly interrelated.

Keywords: supply chain Integration, Operational performance, Ethiopian commodity exchange

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 CHAPTER ONE

INTRODUCTION
1.1 Background of the study

Businesses today operate in a market-driven, customer-oriented era and to survive in such a

competitive environment, they have to be flexible, adaptable and above all provide superior
service. Supply chain management, customer driven corporate policy, and other elements of
supply chain management are frequently cited as strategic options to achieve competitive
success. Relating with this intensified competition organizations began to realize that it is not
enough to improve efficiencies within an organization, but their whole supply chain has to be
made competitive (Childhouse and Towill, 2003). These were seen in the last few years and the
focus has shifted from the factory level management of supply chains to enterprise level
management of supply chains (Gunasekaran et al., 2005). To make the whole supply chain
competitive and enhance their performance, coordination of the supply chain has become
strategically important (Puigjaner and Lainez, 2008). Moslem et al. (2013) also stated as
understanding and implementation of supply chain management (SCM) is a necessary condition
to remain competitive in the global competition and improving profitability.

Supply chain consists of the whole activities associated with products and services movement
from raw material stage to final products which are consumable by customers. This movement
includes financial and information flow as well as material flow. In other words, supply chain is
a network consisting of downstream and upstream organizations which are involved in different
processes and activities that create value for end customers in the form of products or services
(Christopher, 1998).

The performance of the supply chain is affected by different factors. One of the most important
factors influencing the performance of supply chain is strategic integration and coordination for
satisfying and responding to changes in consumer demand (Lambert and Cooper (2000).
Integration has the characteristics of cooperation that happened among groups to accomplish a
task effectively and jointly. Due to globalization the advanced customers’ needs and

4
requirements have been changed and developed. Customers’ requires for a suitable product in
suitable place at suitable time with high quality and suitable cost. Any organization would like to
compete in recent hyper-market should match with the above mentioned customers’
requirements. These customers need and requirements needs supply chain integration to be
fulfilled. Therefore, adopting a more integrated approach to supply chain is for customer
satisfaction (Eyong, 2009).

A greater level of interaction among supply chain members can be described in terms of building
close and long-term relationships based on common understanding. Hence collaboration among
them is needed in order to compete in today‘s business environments. Long-term relationships
that are created between supply chain partners based on collaboration have to be underpinned by
mutual understanding and willingness to maintain it (Abushaikha, 2014). As supply chain
integration is the extent to which service giving organizations strategically collaborates with its
supply chain partners and collaboratively manage different types of processes. The main target of
integration is to achieve effective and efficient flow of products and services, information,
money and decisions, so as to provide the greatest value for customers Flynn, Huo and Zhao
(2010). Supply chain integration affects business performance (Flynn et a.l, 2010 and Huo,
2012). Supply chain integration (SCI) is the extent to which service giving organizations
strategically collaborates with its supply chain partners and collaboratively manage different
types of processes. The main target of integration is to achieve effective and efficient flow of
products and services, information, money and decisions, so as to provide the greatest value for
customers Flynn, Huo and Zhao (2010). Supply chain integration affects business performance
(Flynn et al, 2010 and Huo, 2012). According to Didia and Nwokah (2015), supply chain
integration will increase market share and business performance if properly worked on it.

Operational performance is a source of competitive advantage for the enterprise to differentiate

itself in the eyes of the customers from its competitors by operating at a lower cost and hence at
a greater profit (Christopher, 1992). Competitive priorities are conceptualized to measure
operational performance by using price/ cost, quality, delivery, flexibility and time to market.
Whereas, organizational performance refers to how well an organization achieves its market-
oriented goals as well as its financial goals (Yamin et al., 1999). The short-term objectives of

5
SCM are primarily to enhance production performance, while long-term objectives are to
increase market share and profits for all members of the supply chain (Tan et al., 1998). Li et al.
(2006) stated that any organizational initiative, including supply chain management, should
ultimately lead to enhanced operational performance.

A commodity exchange is simply a central place where sellers and buyers meet to transact in an
organized fashion, with certain clearly specified and transparent ―rules of the game.‖ In its
wider sense, a commodity exchange is any organized market place where trade, with or without
the physical commodities, is funneled through a single mechanism, allowing for maximum
effective competition among buyers and among sellers. The fact of having a single market
mechanism to bring together the myriad buyers and sellers at any point in time effectively results
in the greatest concentration of trading for a given good

The Ethiopian Commodity Exchange (ECX) from the beginning of its establishment has joined
the commodity supply chain to integrate with all of its supply chain members. The business type
by itself a risk-full and requires an institutional response, at a basic level to cope with the
fundamental problems of achieving self-coordinating market order in the trade of agricultural
products (Eleni et al, 2005). The Ethiopian commodity exchange (ECX), Jimma branch
comprises 23 ECX warehouses in the Southwestern parts of the country. It is located 350
kilometers from the capital city of Ethiopia, Addis Ababa. The Jimma ECX branch is among the
first established coffee storing warehouses and has 2 warehouses that have a capacity of
accommodating 8,000 tonnes at a time. The branch has a total of 201 employees including 42
permanent employees, 73 outsourced supportive employees, and 86 temporary workers (i.e., for
loading and unloading works). The branch renders all ECX services including cupping, grading,
weighing, storing, and certifying services for more than 200 suppliers in Jimma zone. In addition
to these, individuals, private limited companies, investors and cooperative union suppliers can
also get the above services with little service charges. Furthermore, clearing and settlement
services are given for buyers/exporters as per the pick-up notice (PUN) they brought from the
central ECX office located in Addis Ababa. In 2018, 230,764,419 metric tonnes of coffee were
transacted through ECX market, of which 29,183 metric tonnes has been transacted through the
Jimma ECX branch (www.ecx.com.et).

6
1.2Statement of the problem

Flynn et al. (2010) argued that supply chain integration implies collaboration among
industrialists and other supply chain partners in order to develop an effective and efficient
movement of materials, resources, parts, and information to produce products and services that
are valuable to the customer quickly and at low cost.

The authors’ motivation for this topic is that the literature does not deal with the topic in detail;
in fact, previous studies have not well addressed the importance of supply chain integration in
the Ethiopian Commodity Exchange (ECX). According to the researcher’s informal assessment
of the study area, he identified significant challenges through the organization supply chain
operation. First, different departments are concerned with achieving their own objectives
separately. Second, supply chain activities and processes are performed by different departments
without specialized people. Third, continuous changes in rules and regulation which imposed by
ECX and other universal regulations associations which lead to delay in supplier selection and
delay in preparation of the inputs to agricultural products. Finally, continuous changing in
customer needs and requirements due to strong competitions among the organizations.
Consequently, this lead to difficulties in integrating supply chain activities and processes, which
delay providing products and services to customers in suitable place at suitable time and losing
of competitive advantage.

In the year 2017, the amount of listed commodities at ECX had shown a 6% decline from a
similar amount of 2016 year (The Ethiopian communicator, 2017). In 2019, ECX planned to
exchange a complete of 290,640 tonnes of agricultural commodities however only 255,763
tonnes have been exchanged (The communicator, 2019). Such problems happened due to poor
supply chain management in general and supply chain integration problems in particular. So
through analyzing the level of supply chain integration, this study will help to identify
improvement areas that can solve operational performance problems (Yaregal, 2017).

7
Therefore, this study explored the extent of supply chain integration dimensions practices, the
relationship between supply chain integration and the organizational performance, and the roles
of supply chain integration for the organizational performance in the ECX and respectively to
bridge those gaps of the supply chain integration in this organization.

1.3Objective of the Study

1.3.1 General Objective

The general of the study is to assess the level of supply chain integration and its effects on the
operational performance of ECX, Jimma branch.

1.3.2 Specific Objectives

[

 To investigate the effect of supplier integration on the operational performance of ECX in

Jimma branch,
 To examine the effect of Information integration on the operational performance of ECX
in Jimma branch,
 To investigate the effect of internal integration on the operational performance of ECX in
Jimma branch,
 To examine the effect of integration with customer on the operational performance of
ECX in Jimma branch,.
 To investigate the effect of external integration on the operational performance of ECX.
in Jimma branch,

1.4Research Hypothesis
The research has the following hypothesis.

 Ho: Supply chain integration does not have effect on operational performance of ECX in
Jimma branch

The main hypothesis has the following sub-hypotheses:

 Ho.1: Supplier integration does not have effect on operational performance of ECX

8
  Ho.2: Internal integration does not have effect operational performance of ECX in Jimma
branch,
 Ho.3: Customer integration does not have effect on operational performance of ECX in
Jimma branch
 Ho.4: Information integration does not have effect on operational performance of ECX
in Jimma branch
 Ho.5: External integration does not have effect on operational performance of ECX in
Jimma branch

1.5Significance of the study

The problem stated above is that current performance of supply chain is not yielding the planned
results in terms of cost, quality, and time and flexibility level in the desired level. Hence,
studying supply chain integration and its effects on organizations performance is crucial topic for
both the organizations and for academicians. This study can be taken as an initiative that explains
the effects of supply chain integration on operational performance of ECX. The study is believed
to its contribution for a better understanding of the role of supply chain integration in operational
performance of commodity exchange to improve performance. Results of this study are expected
to be important for future research, service industries, decision makers and academic
contribution.

1.6 Scope and limitation of the Study

This study attempted to examine the effects of supply chain integration in Ethiopian Commodity
Exchange (ECX) service at Jimma branch, hence the scope was the organization in Jimma
branch and its stakeholders that operate within this ECX‘s market place in the fiscal year of
2020/21. The geographical scope of the study covers the city of Jimma because the departments
covered under the study are found in Jimma town.

This study assessed the effects of supply chain integration on operational performance from the
perspective of employees of jimma branch which could be deemed as a limitation. Furthermore,
since Ethiopia has wide range of institutional capacities, organizations and environmental
conditions, the result of the study may have limitations to make generalizations and make them

9
applicable to the country as a whole. However, it may be useful for areas with similar context
with the study areas

1.7 Structure of the thesis

With the above brief introduction, the remaining part of the thesis is organized as follows.
Chapter 2 presents review of literature on supply chain integration from different sources.
Subsequently, description of the study area and methodologies are presented in Chapter 3. In
Chapter 4, both descriptive and regression results are presented and discussed in detail. Chapter 5
summarizes the main findings of the study and draws conclusion and appropriate
recommendations.

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 CHAPTER TWO

REVIEW OF RELATED LITERATURE

This chapter explains past relevant literature from other researchers who have conducted
research in the same field. It contains opinions, attributes, research outcomes and conclusions
thereon from previous research work done by other people and organizations. Section 2.1
discusses the theoretical literature/ general overview of the subject matter. Section 2.2 presents
the empirical literature. Section 2.3 presents Summary of empirical literature. Section 2.4
presents the framework of the study.

2.1 Theoretical Review

2.1.1 The Concepts of Supply chain integration

According to Omta O. et al(2013)supply chain integration is a process of collaboration in which

companies work together in a cooperative manner to arrive at mutually acceptable outcomes.
Zhao et al(2008)described supply chain integration as ―the degree to which an organization
strategically collaborates with its supply chain partners and manages intra- and inter-organization
processes to achieve effective and efficient flows of products, services, information, money and
decisions, with the objective of providing maximum value to its customers‖. Supply chain
integration is a key to the success of companies and supply chains (Jahre M., 2008).

According to Zailani and Rajagopal(2005) supply chain integration a set of practices aimed to
place coordination within the supply chain from raw material suppliers to the final user-
customer to gain win-win situation. Trkman and Groznik(2006) asserted that coordination of any
supply chain components is vital for the success of each chain. Li (2006) mentioned thatsupply
chain management challenges is produce a product to the right place at the right time at the
lowest cost. Awad and Nassar(2010)declared firms must manage and control the integration of
business, technology, people, and processes not only within the firm but with business partners.

Saleh(2015)reported a positive effect of the integrated supply chain elements (supplier, internal
processes, and customer) on the operating performance components (cost, quality, time, and
flexibility).

11
Internal integration had powerful impact on operational performance in the past, as it ―helped
to prioritize best practices depending on potential impact and advantages (Chaturvedi and Dutta,
2005).Internal integration is the degree to which a manufacturer structures its own strategies,
practices and processes into synchronized, collaborative processes to fulfill its customers'
requirements and efficiently interact with suppliers Flynn, et al. (2010). Zhao, et.al. (2011) said
that ―internal integration stresses organizational structure, procedures, and practices, so it must
be collaborative and synchronized to fulfill customer requirements‖.

Supplier integration facilitates understanding and anticipation of the service provider‘s needs to
better cope up with changing requirements and the mutual exchange of information helps service
providers to enhance operational performance (Zhao et al., 2010).

Efficient integration with suppliers allows manufacturers to speed up product delivery processes,
improve production planning and reduce inventory obsolescence using accurate information
about customer demands and preferences (Swink, 2007)

Supplier integration helps manufacturers reduce mistakes and enhance product quality through
information sharing and joint planning, which are directly related to the operational performance
of manufacturers (Petersen, 2005).

Customer integration is referred to as the most important competency for achieving high-level
firm performance Closs andSavitskie(2003).

Customer integration improved an organization‘s ability to link customers within the supply
chain effectively Udin, et al. (2008).Customer integration is directly related to operational
performance Biniyam (2016) and Otchere,et al. (2013).

According to Koufteros(2007) Product integration with suppliers and customers can enhance
production capability of manufacturers by promoting product quality, flexibility and innovation
in addition to product competitive advantage. According to Fuentes, Jurado, Marín, and Cámara
(2012), the operational benefit of a company is ensured by integrating Information
integration .Devaraj, et al. (2007), and Zailani,et al. (2012) mentioned that ICT\Information
integration enhances the operational performance of the company by helping to reduce costs, to

12
deliver complete information rotation, and control of inventories, to maintain flexibility in
shipping orders, and to have a quality service for customers.

External Integration:

Related to external integration, the previous literature acknowledges two directions of

integration: downstream integration (also referred to as forward integration) with customers and
upstream integration with suppliers (also referred to as backward integration). Despite of the
advantages acknowledged by many authors that as well as many tiers into the integrative
relationships encompasses a positive result on performance of all concerned partners (i.e.
increased quality and repair level, lower costs), in point of fact the two relationships are the
foremost prevailing (Hulthen, 2016).

2.1.2 The Concepts of Operational performance

According to Chopra and Meindl (2007) supply chain concepts and operational performance
emerged from supply chain strategy which derived from overall business strategy. Every
organization attempts to adopt different competitive strategy that fit to its strategy, then it seeks
to afford the suitable capabilities and resources that help to achieve it (Chopra, 2007).

Every organization exists to achieve a particular goal. Organizational operational performance is

the final achievement of an organization and contains a few things, such as the existence of
certain targets, has a period of time in achieving these targets and the realization of efficiency
and effectiveness (Blowfield and Dolan, 2010). Thus, organizational operational performance
refers to ability of an enterprise to achieve such objectives as high profit, quality product, large
market share, good financial results, and survival at pre-determined time using relevant strategy
for action (Koontz and Donnell, 2003).

Neely et al. (1995) enlisted cost, time, quality, delivery and flexibility as the basic measures of
operational performance.

Cost

There are many indexes for improving operational performance of an organization one of the
basic is reduction of its cost. The basic reason behind is to minimize the cost for the purpose of

13
efficiency and effectiveness of strategies and policies. Proper cost management implies the
optimal use of resources for the efficiency of organization in order to create value for customers.
Due to this rationale the satisfaction of customer's and loyalty and long lasting wealth for the
organization will be created. Effective way of managing cost is the result of managing decisions
(Patterson & Anders, 2013).

Flexibility

Flexibility is the ability of the firm to develop flexible operations in hypercompetitive

environment to meet the frequent changes in volume, product mix and schedules occur
Rosenzweig, et al. (2002)

Speed/time

The traditional dimensions to measures performance are expressed by delivery time and lead
time. Different scholars defined time, lead time, and cycle time. Cycle time is the time between
one completion jobs or tasks to another, i.e. from starting one process or task to start the same
process or task again. Lead time is the time that is required from setting the order by customer to
deliver the product or service (company and supplier) including manufacture, transportation,
processing, warehousing, and delivering the product or service to the final customer (Gimenez, et
al., 2011)

2.1.3 The concepts on Relationship of SCI to OP

Cao et al. (2015) suggests that how successful the patterns of SCIwould be related to the
operational performance in different configurations. It argues thatorganizations perform better
when they develop better configurations of interconnected elements (Sinha and Van deVen,
2005). It is therefore suggested that a highly integrated supply chain in this sense is likely to
perform well in the market place. Configuration theory underlines the necessity for a supply
chain to be well integrated in order to deliver high operational performance. It is thus reasonable
to extrapolate that the configuration theory provides a theoretical support for the causality from
SCI to OP.

Broad range of literatures, which discuss an impact of SCI on such operational performance
measures, such as operational costs and customer service (Chen,et al., 2004; Droge,et al., 2004;

14
Vickery,et al., 2003), level of service to customer and quality (Stanley et al. 2001), financial
performance measures of ROI, profits, and net income (Chen et al., 2004; Dixon et al., 1990),
operational-oriented performance (Neely,et al., 1995), product development performance
(Petersen et al. 2005); The operational performance measures of flexibility and delivery, which
are deemed to be important elements for responsiveness capability of a firm (Danese, 2013;
Hallgren,et al., 2009).

Supply chain integration has been regarded as having effect to supply chain management
excellence due to its importance in achieving better Organizational operational Performance as a
result of holistic and synergistic effect of the system (Childerhouse&Towill, 2011;
Derwik&Hellström, 2017; Turkulainen, Roh,Whipple, &Swink, 2017). According to
Alfallaluque&Dey (2012);Gorane& Kant (2017), it's theoretically true that, the higher the level
of SCI of an organization the greater the performance of such organization.

2.2 Empirical Review

2.2.1 Review of Empirical Studies on Supply Chain Integration

Baharanchi (2009) investigated the relationship between different aspects of supply chain
integration and some characteristics of the product (quality and innovation) in the automotive
industry of Iran. Integration is measured by internal integration, integration with suppliers,
andintegration with customers and product characteristics are measured in two aspects of quality
and innovation. Findings showed that integration with suppliers and customers influences on
products quality and innovation positively. Internal integration has the weakest relationship
compared to other aspects of integration with product quality and has very weak relationship
with product innovation.

Stanleyand Gregory (2002) tried to investigate supply chain integration by taking multi-method
empirical approach survey and case study. The findings relabeled that supply chain integration
practice seldom resembles the theoretical ideal and recognized that tensions existed between
SCM‘s competitive potential and the inherent difficulty of SCI. Togar, et.al. (2002) studied by
stressing on the agenda of collaboration in supply chain integration. The study promoted the
notion of mutuality and the focus of coordination in order to establish a comprehensive
taxonomy of coordination modes. In the study, different modes of integration had been

15
identified: logistics synchronization, information sharing, incentive alignment, and collective
learning. The findings of the study knowledge of coordination was then proposed as an explicit
understanding about key drivers of coordination modes that have positive impacts on supply
chain integration

In line with a configurationally perspective, Pamela and Thomas (2013) investigated whether
plants adopting multiple integration practices (i.e. full SCI adopters) performed better than plants
implementing only some selected SCI practices (i.e. partial adopters) and plants which did not
implement any SCI practice (i.e. non-adopters). In addition, the study analyzed whether partial
adopters showed a superior performance compared to non-adopters based on a sample of 317
manufacturing plants reveal that full adopters perform better than non-adopters, in terms of
quality, delivery, flexibility and efficiency. The study revealed that among partial adopters, a
particular SCI pattern, characterized by a high level of internal integration and supply chain
planning, differs from non-adopters in terms of delivery, and shows results similar to full
adopters in terms of quality and efficiency. More surprisingly, the other patterns of partial
adopters did not significantly differ from non-adopters in any performance dimensions, and
underperform full adopters in each performance. The study suggests that in order to
maximizeSCI benefits companies should lever on multiple integration practices, and that in some
cases focusing only on selected integration activities can be useless.

Prabir, et al.(2005) studied supply chain integration in European firms. The core of the study was
to identify the underlying factors of supply chain integration in European firms with particular
emphasis on the role of information sharing and interorganizational collaboration. The findings
of the study were European firms were starting to be aware of the strategic importance of
integration across theboundaries of the supply chain and most companies were quite cautious
when it comes to sharing sensitive data.

2.2.2 Review of Empirical Studies on Operational Performances

Mark (2017) investigated on operational performance. The study examined two alternative views
—universal and contingency—of the human resources (HR)-performance relationship in
manufacturing settings. The survey included 97 plants primarily support a contingency approach
to human resource management (HRM). An HR system focused on human capital enhancement

16
was directly related to multiple dimensions of operational performance (i.e., employee
productivity, machine efficiency, and customer alignment), but subsequent analysis revealed that
this main effect was predominately the result of linking human-capital-enhancing HR systems
with a quality manufacturing strategy. Other manufacturing strategies alsomoderated the
operational performance relationship.

Segura and Cirtita(2012) studied on measuring downstream operational performance. The study
aimed at determining if performance metric systems would improve inter-firm performance. The
survey completed by 73 members of the council of supply chain management professionals
consisting of high-level managers representing US companies by questionnaire. Mean, standard
deviation, validity, reliability, factor analyses were applied. It found that downstream supply
chain integration does not affect positively by downstream supply chain metrics. While it
positively affected inter-firm operational performance.

Luthje and Arlbjorn(2012) studied global operations and their interaction with operational
performance. The study was aiming at: exploring whether operational performance affected
differently depending on the choice of globalization strategy. Based on in-depth literature
reviews and explorative case studies – two off shoring and two outsourcing projects. A model
explaining the choice of localization and globalization strategy (the OLI model) was applied as a
basic framework. Data collected through in-depth interviews with persons responsible for the off
shoring and outsourcing projects. It addressed that different practice of managing operational
performance in off shoring and outsourcing strategies. The OLI model provides an increased
consciousness of the managerial challenges related to operational performance based on the
chosen globalization strategy

2.2.3 Review of Empirical Studies on the Associations between Supply chain integration
and Operational Performances

Wantao, Mark A.Jacobs ,David and Harvey (2013) conducted a study to test the concept of
supply chain integration on firm‘s performance by investigating the relationships among internal
integration, external integration (i.e. with customers and suppliers), customer satisfaction, and
financial performance using survey data collected from 214 manufacturing firms in China. The
results suggested that internal integration significantly influences both dimensions of external
integration, customer and supplier integration; and that supplier integration is significantly and

17
positively related to performance. The study shows that internal integration is an enabler for
external integration which suggests that companies need to progress from good internal practices
and processes to effective management of external processes. Particularly this study position the
benefits of integration as accruing from learning and performance being correlated to
information flows.

Huo (2012) study entitled ―The impact of supply chain integration on company performance:
an organizational capability perspective‖. The study simultaneously examined the impact of three
types of supply chain integration (SCI) on three types of company performance from the
perspective of organizational capability using data collected from 617 companies in China. The
result showed that internal and external integration directly and indirectly enhances company
performance.

After surveying 251 manufacturers in Hong Kong, Yam,et al. (2010) tested the relationships
among information sharing, product co-development, product innovativeness, and performance.
The findings indicated a direct, positive relationship between supplier and customer integration
and product performance. The study verified that sharing information with suppliers and product
co-development with customers directly improves product performance and suggested by the
study, extensive effort on supplier and customer integration should be made to directly augment
current product performance and product innovation at the same time.

Daniel and Jan (2012) investigated the integrations of both information and material flows
between supply chain partners and their effect on operational performance. They used data from
232 Australian firms and found that logistics integration has a significant effect on operations
performance. In their study, they concluded that information technology capabilities and
information sharing both have significant effects on logistics integration. Thestudy argued with
effect of long-term supplier relationships has both direct and indirect significant effects on
performance.

Zelbst, et al. (2009) studied the impact of supply chain linkages on operational performance in
the study, a total of 145 manufacturing and services sector managers were surveyed. The
measurement scales were assessed for reliability and validity and further assessed within a
measurement model context. Study hypotheses were then tested using a multiple regression

18
approach. It found that power, benefits, and risk reduction linkages were positively and
significantly impact operational performance. Power identified as the dominant linkage for
manufacturers, and risk reduction as the most important within the services sector.

Dametew(2016) studied supply chain linkage on Production, knowledge, Technology and

Resource integration using secondary data from articles and websites (analyzed using AHP). The
result indicates that SCI has also positively linkage on Production, knowledge, Technology and
Resource integration so as to improve quality performance in a supply chain.

Daniel,Mesbahuddin , Andy, Yeung, and Cheng (2011) conducted a study by taking collected
from 232 manufacturing firms in Australia. The results showed that different supplier
management practices have different unique effects on different operations performance
measures. The study arrived at a conclusion that supplier integration has a positive relationship
with quality performance. Long-term relationship and integration have positive relationships
with delivery, flexibility, and cost performance.

According to the study by Kim,et al. (2002) on SCI, they concluded that supply chain strategies
and practices depend on not only the nature of the business, the competitive environment, and
technological intensity of the product, but also on product and market characteristics. The study
paper examined the effect of SCI on the relationship between diversification and a firm‘s
competitive performance. The research result argued that coordinated use of SCI and
diversification strategies has a significant effect on firm performance.

Chin, et al. (2013) study titled: ―Mediating Effect of Operational Cooperation between Supply
Chain Practices and Firm Performance‖ aimed that the operational cooperation reinforces the
strength of firms to overcome with uncertainty and solid competition through supply chain
collaboration. The data were collected from 201 small manufacturing firms. The findings showed
that the relationship between supply chain practices and firm performance were intermediate
through the operational cooperation.

The study paper by Vickery,et al. (2004) examined the effects of integration practices on time-
based performance and on overall firm performance (financial and market share). On the study,
integration practices are grouped into two categories: external integration, which reaches across
firm boundaries to involve suppliers and customers and internal integration, which comprises

19
more tactically oriented, integration practices that match design requirements and process
capabilities. The researchers found that the internal and external integration were significantly
related to both market share and firm‘s performance (after controlling for all other effects). Thus
the study suggested that the use of external and internal integration practices has a synergistic
effect on firm performance.

Zelbst, et al. (2009) study titled: "Impact of supply chain linkages on operational performance",
aimed at examining the impact of supply chain linkages on operational performance. A total of
145 manufacturing and services sector managers were surveyed. It found that power, benefits,
and risk reduction linkages were positively and significantly impact operational performance.

Germain,et al. (2011) studied how internal and downstream integration and their interaction
affect performance within a firm. The results indicated that internal and downstream integration
and their interaction affect performance — that is, the higher the internal integration, the stronger
the relationship of downstream integration with performance. The results suggested that superior
performance derives from the firm simultaneously integrating functions, decision‐making, and
processes both within the firm and across the supply chain.

Most of SCI studies hold the same view that SC integration level has a positive influence on
performance outcomes (Frohlich,et al., 2002; Vickery,et al., 2003; Ganesan and Saumen, 2005).
Armistead and Mapes (1993) indicate that the level of SC integration improves quality and
operating performance through a field study of 38 firms‘ managers in the UK. Narasimhan and
Jayaram (1998) propose that SC integration impacts customer responsiveness and manufacturing
performance via the key linkage between sourcing and degree of manufacturing goal
achievement through empirical validation of key causal linkages in a supply chain. Johnson
(1999) shows, through a survey of industrial equipment distributors, that strategic integration
results in enhanced economic reward for the firm. Frohlich and Westbrook (2001) empirically
identified that manufacturers with the broadest arcs of SC integration should have the highest
levels of performance improvements. Specifically, they found a strong relationship from the
largest arcs of supplier and customer integration to market share and profitability. Braganza
(2002) suggests that integration of several functions at different organizational levels achieve
above average financial and performance results.

20
The above empirical studies and reviews show that SCI is positively related to firm‘s
performance but Nathalie and Marianne (2008) concluded that more SCI does not always
improve performance.

2.3 Conceptual framework

Among the different authors who proposed a framework relating supply chain integration and
operational performance, this study adapted the works of Bete-Georgise et al., (2014); Kumar.et
al, (2017); Mose(2015), Hussein et al., (2014) and Mansoori.et al, (2014) and drawn it as
follows.

Independent Variables Dependent Variable

Internal

Customer Operational
Integration Performance:

Information  Cost
 Quality
 Flexibility
Supplier  Speed\Time
Integration

External

Figure 1 Conceptual framework of SCI

21
 CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

3.1 Description of the Study Area

This study was undertaken in one selected area of the Ethiopian Commodity Exchange (ECX),
Jimma branch which is found in Jimma town. The ECX Jimma branch is one of the 23 ECX
warehouses in the country. It is located 350km from the capital Addis Ababa. It is among the
first established coffee storing warehouses and has 2 warehouses that have a capacity of
accommodating 15,000 tonnes at a time. The branch has a total of 201 workforces comprising 42
permanent employees, 73 outsourced supportive employees, and 86 temporary workers (i.e., for
loading and unloading works). The branch renders all ECX services including cupping, grading,
weighing, storing, and certifying services for more than 200 suppliers in Jimma zone ( ).

3.2Research Design

This study used a Casual research design/approach because it aimed at investigating the
cause/effect relationship between SCI elements and Operational performance of ECX. The
Causal research is quantitative in nature as well as preplanned and structured in design.
Quantitative approach is one in which the investigator primarily uses postpositive claims for
developing knowledge, i.e., cause and effect relationship between known variables of interest
(Creswell, 2009). Therefore, in terms of methods, this research employed quantitative method
while conducting the study. This research design was chosen because it helped to see the
relationships between the dependent and independent variables and it also allowed measuring the
effect of SCI on operational performance

3.3Source and Type of Data

Generally, the data sources would be either primary, secondary data sources or both. In this study,
the primary source of data was used to meet the objectives of the study. As a primary data collection
method, the research used standard self-administered and close ended questionnaire that were filled
by employees. For the purpose of facilitation of the study and to get pertinent information from the
survey, the researcher had distributed the questionnaires to the target employees and collected them

22
3.4 Sampling design and sampling techniques

3.4.1 Target population

As discussed above, this research is aimed at assessing the effects of SCI on the operational
performance ECX in Jimma branch. So, the total population of the study was employees of the
branch found in Jimma city which is 201 as of April 2020. Though, incorporating all employees’
idea on the analysis would have been better for conclusion and generalization, economically and
operationally it would be very difficult to contact all employees in the research. Therefore, taking
a respective sample of the population of the employees’ has found to be feasible.

3.4.1 Sample size determination

Yamane (1967) provided a simplified formula to calculate sample sizes at 95% confidence level
as shown below

n=
Where n is the sample size, N is the population size and e is the level of precision.
As it is given above that the population size is 201.

The total sample size of this study was, therefore n = =133.78 = 134

As Tanburn (2015) described, likely inaccuracies in the assumptions, it may be wise to sample more
than the minimum and to be safe, add 10-15% to a sample. Hence, we added 10% to the computed
result so as to get greater precision and power for drawing meaningful conclusion.

Thus the sample size of this study would be: 134+13 = 147

3.4.2 Sampling technique

For the purpose of this study, the researcher used probability sampling particularly stratified
sampling technique. The target population for the study was classified into three strata based on
the employees’ recruitment status/job category in the company which is directly related with the

23
operations of ECX. Then the samples were selected from each stratum according to their
proportion to the total population (Table 1).

Table 1 Sample size determination from each stratum

Division/Department Total population Sample size
Permanent Employees 42 31
Outsourced Supportive 73 53
Temporary Workers 86 63
Total 201 147

Since the information required for the study needs different people who have knowledge and
awareness about different supply chain management practices/dimensions, operational
performance of the firm, stratified sampling technique were used to have the right proportion of
people from every concerned department or section. The departments considered as strata, from
which data were collected, are: Permanent employees, outsourced supportive and temporary
workers

3.5 Methods of Data Analysis

The data obtained through questionnaire was first edited for their completeness, categorized,
registered. Different statistical methods were employed to analyze the data of this study. First,
the demographic background information of the respondents in ECX was analyzed and presented
in the form of frequency and percentage. Measures of central tendency such as mean and
standard deviation were also used to assess the practice of supply chain integration. For the
purpose of investigating the effect of supply chain integration on operational performance,
regression analysis was used to observe the influence of independent variables on a dependent
variable, operational performance. The regression model was checked for normality and fit for
the analysis. All analyses were carried out using the SPSS computer program (Statistical Package
for Social Sciences).

24
3.6 Description of variables, reliability and validity of data

3.6.1 Variables of the study

Based on theoretical literature and related studies in the area of supply chain integration on
firms’ performance, the researcher identified the following independent and dependent variables.

Five independent variables that are expected to contribute to ECX‘s operational performance
were included in the questionnaire and defined as follows.

Information integration: the sharing of accurate information across members of supply chain,
the timely sharing of information across supply chain, coordination in the flow of information
among partners and level of utilization of information among supply chain partners
(Investopedia, 2016).

Internal integration: defined as integration among internal functions, periodic

interdepartmental meetings among internal functions, use of cross functional teams and
integrative inventory management Narasimhan& Kim (2002). Flynn, et al. (2010) defined
internal integration as "the degree to which a manufacturer structures its own strategies, practices
and processes into synchronized, collaborative processes to fulfill its customers' requirements
and efficiently interact with suppliers".

Supplier integration: defined as the level of information exchange with suppliers through
internet, establishment of quick ordering system with major supplier, level of strategic
partnership with major supplier and stable procurement through network with major supplier
Narasimhan& Kim (2002); Morash& Clinton (1998).

External integration: defined as integration of an organization with key suppliers and

customers (Lambert et al. 2006, p. 54). External integration with suppliers is defined by many
researchers as the degree of co-ordination between manufacturer and its upstream partners (e.g.,
Peterson et al. 2005; kim 2002; Frohlich 2002).

25
Customer integration: defined as the follow-up with customer for feedback, level of
computerization for customer ordering, frequency of periodic contact with customer and level of
linkage with customer through information network Narasimhan& Kim (2002); Morash&
Clinton (1998).

The researcher identified operational performance as dependent variable.

Operational performance: defined as the speed of response by the company to changes in

market demand, on time delivery of products by the company to customer, the level of customer
service by the company and level of lead time for fulfilling customer order
(Frohlich&Westbrook, 2001; Beamon, 1999; Vickey, 2003). Based on literatures, operational
performance has dimensions of flexibility, quality, cost and time/speed.

3.6.2 Reliability and validity of the data

Validity refers to the strength of our conclusions, inferences or propositions. It involves the
degree to which you are measuring what you are supposed to, more simply, the accuracy of your
measurement Adams et al, (2007). To raise the validity of the research, questionnaires have
distributed and collected by the researcher himself in order to maintain its validity

Reliability estimates the consistency of the measurement or more simply, the degree to which an
instrument measures the same way each time it is used under the same conditions with the same
subjects. Reliability is essentially about consistency Adams et al, (2007). To make sure that the
data collection methods were error free and to minimize the instruments’ biases the researcher
undertook the following:

 The researcher has made a pilot test on 15 employees and got results of Cronbach’s Alpha for
each variable. According to Sekaran 2001 Alpha value for each variable under study should
not be less than 0.6 for the statements in the instruments to be deemed reliable.
Consequently, all the statements under each variable were subjected to this test and proved to
be above 0.6. The reliability test results obtained in this study has been presented in
Appendix Table 1

 Some important questions have re-asked in different place in a different order.

26
 The researcher, when collecting the questionnaires, has tried to make sure that it is the
respondents who have complete the questionnaire through making the distribution and
collection time gap short an as much as possible.

3.7 Model specification

The effect of the independent variables on the dependent variable in the study was tested using a
multiple regression model. In brief, the effect of supply chain integration on the operational
performance of ECX was tested using the following regression model to explain how much the
independent variables explain the dependent variable (OP):

Y= α + β1x1 + β2x2 + ... βkxk + e

Where; x is independent variable (i.e., elements of supply chain integration)

Y is the dependent variable (i.e., operational performance of ECX)
Ais the constant value
β is the coefficient of each independent variable
e is the error term

It is to be noted that before the application of the regression model, the classical assumptions of
regression (i.e., normality, multi-co linearity and goodness of fit) weretested through residuals
analysis method.

3.8 Ethical Consideration

The researcher has obtained the consent of the organization for the study. Employees who have
completed the questionnaire were informed about the purpose of data collection, analysis and the
covenant to maintain privacy of their responses.

27
 CHAPTER FOUR

RESULTS AND DISCUSSION

This chapter contains the presentation and interpretations of results. The first part describes the
respondents’ background information in terms of age group, education level, job position,
working department, and service years. The second part examines the level of supply chain
integration and its effect on operational performance of the Ethiopian Commodity Exchange
(ECX), Jimma branch. The questionnaire is distributed to 147 employees and out of these 136
employees (i.e. 92%) returned the questionnaire. Therefore the analysis is made based on the 136
respondents’ data.

4.1 Respondents’ background information

Before going to the main parts of the study it was logical to present the demographic status of the
study participants in terms of age group, education level, job position, working department,
branch employer and service years. As shown in figure 1 below, 29% (n = 39) of the total
respondents are females working in the ECX, Jimma branch. The number of male respondents (n
= 97) constitutes the largest percentage (71%) of the total sample. Indeed, the number of female
respondents’ participated in the study is almost proportional, given the total number of female
employees in the Ethiopian Commodity Exchange organization. As the agency renders a 6-days-
regular service (except Sundays) to its clients the whole year, the less number of female staff
may favor it to minimize maternity day-offs impact on the service.

Regarding their service year in the organization, 37% of the total respondents have served the
organization between six to ten years, 26% of them were between three to five years, and 20% has
served the for more than ten years in the organization. Fortunately, there is no employees participated
in the study who is below one service year. This indicates that the majority of the respondents have
good experience regarding the company and their response can be considered genuine which has
direct relation with data quality.

28
 Table 2 Respondent’s background information

Variable Variable categories No Percentage (%)

Gender/Sex Male 97 71.32
Female 39 28.68
Total 136 100
Age (in Years) <25 13 9.56
26 -30 23 16.91
31 – 35 46 33.82
36 – 40 32 23.53
41-45 14 10.29
>45 8 5.88
Total 136 100
Work experience in <3 21 15.44
the organization (in 3-5 36 26.47
years) 6-10 51 37.50
>10 28 20.59
Total 136 100
Educational level Diploma 31 22.79
1st Degree 63 46.32
2nd Degree 9 6.62
Others 33 24.26
Total 136 100
Department you CEO 6 4.41
work in the agency Compliance 9 6.62
Facilities Management 25 18.38
Finance 13 9.56
Human Resource 6 4.41
IT 11 8.09
Auditor 2 1.47
Market Operation 16 11.76
Quality Operation 8 5.88
Strategic Communication 10 7.35
Warehouse Operation 30 22.06
Total 136 100

29
Further, among the respondents larger groups (46%) are first degree holders followed by diploma
holders (23%). This shows that most of the respondents have good academic qualification so as to
understand the concepts of the variables and answer the research questionnaire which has positive
effect on quality of data collected.

4.2 Supply chain integration of ECX as perceived by the respondents from Jimma branch

Table 3 presents the supply chain integration of ECX as perceived by the respondent employees,
using means and standard deviations. Based on the results the overall mean of the variables is
3.48 with standard deviation 1.33, which mean there is an agreement among Jimma branch
employees on moderate implementation of supply chain integration in the ECX. Based on the
Means of independent variables, information integration is relatively highly implemented with
mean value of 3.63, followed by internal integration (Table 3). Customer integration shows the
least implemented integration dimension with mean value of 3.07.

Table 3 Mean and Standard deviation of supply chain integration of ECX as perceived by
the employees of Jimma branch

Items N Mean Std. Deviation

Internal integration 136 3.60 1.38
Information Integration 136 3.63 1.28
Supplier Integration 136 3.54 1.38
Customer integration 136 3.07 1.39
External Integration 136 3.55 1.22
Overall Supply Chain Integration 136 3.48 1.33

According to Flynn, et al. (2010) any supply chain with lower customer integration cannot have
a higher supply chain integration. Customer integration is referred to as the most important
competency for achieving high-level firm performance (Closs and Savitskie, 2003). Although the
company‘s supply chain integration is lower in general, the company has a good position for
improving its integration as it has a relatively better internal integration. Therefore, ECX should
make a lot of effort to address its customer integration of the supply chain in order to improve
the operation performance of the organization. The detailed survey results of the five dimensions
of supply chain integration have been presented in Appendix Tables 2 to 6.

30
4.3 Operational performance of ECX as perceived by the respondents of Jimma branch

This section describes information on the measures that were used to measure operational
performance of ECX. Table 4 presents summary results that were derived from survey results
indicated in Appendix Table 7. According to the mean analysis of operational performance the
respondents accepts with agreement for the effective practices of cost, quality, speed/time and
flexibility (M=3.65 and SD=1.319), (M=3.62 and SD=1.224) and (M=3.64 and SD=1.280)
respectively (Table 4).

Table 4 Mean and Standard deviation of operational performance of ECX Jimma branch

Measures N Mean Std. Dev.

Cost 136 3.60 1.319
Quality 136 3.65 1.319
Speed/Time 136 3.62 1.224
Flexibility 136 3.64 1.280
Overall Operational Performance 136 3.63 1.28

The overall mean score was (M = 3.63 and SD=1.28), implying that the respondents were
convinced on all dimensions of the operational performance of ECX. As shown on table, the
overall mean value of the four measures of operational performance is 3.63 with standard
deviation 1.28, which indicate that there is an agreement among ECX employees of Jimma
branch that there is a moderate operational performance. As shown on the table above there is a
relatively higher operational performance regarding quality measure with mean value of 3.65.
With a mean value of 3.60 the company has the lowest operational performance measure
regarding cost.

Concerning the quality concern towards the operational performance of ECX the result showed
that the mean values which identified on this study respondents were agreed on ECX is
committed to provide exchange service according to local and international standards, ECX
produces various forms of services to suit customers’ needs, ECX is committed to proper storage
conditions according to the standardized specifications to maintain the quality of received
commodities and ECX chooses commodity suppliers on the basis of high quality. This implies

31
that focus of quality at ECX was high enough. For this purpose the organization could practice
activities with exchange service according to international standards, produce various form of
service through concerning customers, committed to proper storage with standard specification,
and chooses commodity suppliers on the basis of high quality. The above findings indicated that
the organization had established strong quality management strategies to strengthen the
operational performance of the organization.

Regarding the cost practice of ECX respondents were agreed on the fact that ECX needs to
reduce the wasteful use of resources. This implies that consideration of cost at ECX was high
enough. For this purpose the organization could practice activities with reducing wasteful
resource uses, reduce defective commodities, perform internal process with a short path, and
working to reduce inventory at minimum level without hindering continues work. According to
the respondents perception the operational performance dimensions are accepted by the sector
organization. Consequently, their impacts on the commodities market are significant. Flexibility
has the next higher value and comes in the second level, which means that the organization has
the ability to match the fluctuation in demand customer's requirements. At the end, time is
ranked the in third level and this indicated that considerable emphasis has been given for time
dimension by the organization. This implies that consideration of speed/time at ECX was high
enough. This suggests the organization is committed to provide fast service to its customers,
committed to supply orders by the agreed timetables, bears the differences in transportation costs
in order to meet the deadlines and characterized by quick exchange of information with
stakeholders. These could have a significant contribution on the operational performance of the
organization.

4.4 The effects of supply chain integration on operational performance of ECX

To assess the effect of Supply chain integration on operational performance of Jimma branch ECX,
the study applied regression analysis. For the parameter estimates to be efficient, unbiased and
consistent the classical assumptions of regression (i.e., normality, multi-co linearity and
goodness of fit) weretested using appropriate test statistics.

32
According to results of normality tests the value of asymptotic significance for internal
integration was 0.593, for information integration was 0.492, for supplier integration 0.486, for
customer integration 0.513, for external integration 0.543 and for operational performance 0.573,
suggesting that the variables are normally distributed with values of asymptotic significance
greater than than alpha (α = 0.05). In addition, there is no multi-collinearity problem since VIF
values obtained from the multi-collinearity test results are less than 10 (Appendix Table 8).
Further test of the goodness of fit of the model in this research showed negative results. From the
results (Appendix Table 9), the F-statistic is 225.406 which is higher than the critical value 4.141
(from F-table) and the p value is 0.000, which is smaller than (α = 0.05). Therefore, the model is
fit. The third confirmatory test is looking at the R 2 value of the model summary which is .897> 0.
As this value gets approach to +1, the better the model is. Overall, the above assumption tests
showed that the regression model used was fit for the study and the tests for hypotheses and
results were discussed below.

The results in the table 5 below shows positive coefficient (i.e., intercept = 0.253) implies that
SCI has a positive influence on operational performance. Hence there is no evidence to accept
the null hypothesis. The result leads to a conclusion that supply chain integration has direct effect
on operational performance of ECX

Table 5 Summary of regression output on effects of SCI on operational performance

Model Unstandardized Standardized t Sig.

Coefficients Coefficients

B Std. Error Beta

1 (Constant) .253 .125 2.024 .034
Internal integration .159 .070 .163 2.271 .025
Information Integration .222 .075 .223 2.976 .003
Supplier Integration .326 .075 .360 4.373 .000
Customer integration .033 .058 .037 .576 .566
External Integration .225 .061 .215 3.714 .000

33
An examination of these five independent variables indicated that the supplier integration
represented the strongest effect on operational performance as with the standard beta of 0.360
followed by the information integration on Operational performance as it interacted with
independent variables with beta of 0.223, external integration with standard beta 0.215, internal
integration 0.163 and customer integration with β of .037. Thus the statistical results prove that
positive and significant relationships exist between the dependent and independent variables
except insignificant relationship between customer integration with ECX Operational
performance. Overall, our findings are in line with previous studies, such as Barbara, et.al.
(2009), Chavez et al. (2015) and Huo (2012) who found that supply chain integration had a
significant impact on business and organizational performance.

In the following sub-sections, the hypothesis for each SCI items were tested and discussed

4.4.1 The effect of supplier integration on the operational performance of ECX

H0.1 Supplier integration doesn‘t have direct effect on operational performance of ECX (α _> 0.05).

Table 5 shows that there is a positive and significant effect of supplier integration on operational
performance, since (Beta= 0.360, t=4.373 sig. 0.000, p<0.05). Therefore, the null hypothesis is
rejected and the alternative hypothesis is accepted, which indicates that supplier integration has
positive and significant effect on operational performance of ECX Jimma branch at (α≤0.05).
Thus, supplier integration has direct effect on operational performance of ECX that goes in line
with previous researches for example (Kumar,et al.,2017) studied effect of SCI on operational
performance and concluded that supplier integration directly affects operational performance.
Nevertheless, others have reported no direct association between supplier integration and
operational performance (e.g., Stank et al. 2001; Flynn et al. 2010) or supplier integration and
business performance (e.g., Flynn et al. 2010), and yet others find a negative association (e.g.,
Stank et al. 2001; Swink et al. 2007) between supplier integration and operational performance.
The reason for this result variation might be the difference on the service provision in the
organization and also might be the supply chain efficiency of the organization.

34
4.4.2 The effect of internal integration on the operational performance of ECX

H0.2 Internal integration doesn‘t have direct effect on operational performance of ECX (α _> 0.05).

Table 5 shows that there is a positive significant effect of internal integration on operational
performance, since (Beta= 0.163, t=2.271, sig. 0.025, p<0.05). Therefore, the null hypothesis is
rejected and the alternative hypothesis is accepted, which indicates that internal integration has
positive significant effect on operational performance of ECX Jimma branch at (α≤0.05).

Thus, internal integration has direct effect on the operational performance of ECX. The result is
consistent with the research of Ellinger (2000) proclaimed that reward system and the
departmental internal relations influenced positively on the organization's performance. Similar
results of research by (O‘Leary-Kelly and Flores, 2002; Rosenzweig,et al., 2003; Vickery,et al.,
2003) reveals that internal integration directly affects operational performance. Additionally, the
result is consistent with Previous studies conducted by Alexis Uwamahoro (2018, p.81) indicates
that there is a direct relationship between internal integration and a firm’s operational
performance and stated that there is a relationship between internal integration and performance
of manufacturing firms in Rwanda.

4.4.3 The effect of customer integration on the operational performance of ECX

H0.3 Customer integration doesn‘t have direct effect on operational performance of ECX (α _> 0.05).

Table 5 shows that there is no positive and significant effect of customer integration on
operational performance, since (Beta= 0.037, t=.576, sig.566, p>0.05). Therefore, the null
hypothesis is accepted implies that customer integration doesn‘t have positive significant effect
on operational performance of ECX at (α>0.05).
Hence, customer integration has no direct effect on operational performance of ECX that
contradicts against most studies that recommends and concludes that customer integration has
direct effect on operational performance. The contradiction comes from the socioeconomic
behavior of the country that customers are not considered very important by most firms. The
perception of employees at ECX in the HQ may arise from the fact that most business firms in
Ethiopia don‘t care about customer integration. Refuting a theory of customer integration has

35
direct impact on performance is difficult one at this level but the researchers believed that the
above reason may be a cause of it. The researches of Wantao,et al. (2015), Cousins and
Menguc(2006); Homburg and Stock (2004); Koufteros, et al.(2007),for instance contradicts with
the above one concluded that customer integration has direct effect on operational performance.

4.4.4 The effect of information integration on the operational performance of ECX

H0.4 Information integration doesn‘t have direct effect on operational performance of ECX(α _>0.05).

Table 5 shows that there is a positive significant effect of Information integration on operational
performance, since (Beta= .223, t=2.976, sig. 0.003, p<0.05). Therefore, the null hypothesis is
rejected and the alternative hypothesis is accepted, which indicates that Information integration
has positive significant effect on operational performance of ECX at (α≤0.05). Frohlich and
Westbrook (2002, p.69) reported that firms that embrace high levels of internet-based supply
integration and demand integration experience the highest levels of performance. The result was
identical with that of made by Ketokivi and Schroeder (2004); Vehovar (2007); SanJose, et al.
(2009) and Campo, et al.(2011) who arrived on conclusion that ICT impacts directly on firm
performance.

4.4.5 The effect of external integration on the operational performance of ECX

H0.5 External integration doesn‘t have direct effect on operational performance of ECX (α _> 0.05).

Table 5 shows that there is a positive significant of external integration on operational

performance, since (Beta= .215, t=3.714, sig. 0. .000, p<0.05), the null hypothesis is rejected and
the alternative hypothesis is accepted, which indicates that the external integration has a positive
significant effect on operational performance at (α≤0.05). Similarly, Peterson (2005) found that
supplier involvement has a positive impact in new product development and made significant
improvements in financial returns as well). The organizational learning theory also suggests that
firms seek to establish a competitive advantage by acquiring external knowledge. According to
empirical study results, such as Frohlich and Westbrook (2001) and Lau et al. (2010), external
integration positive results in the operational performance of suppliers and customers.

36
 CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Summary of major findings

According to the collected data from the study population, after the study was processed and
analyzed this raw data in order to present relevant result of the study with full of interpretation
and discussion. The findings on the result part of the study were sorted with descriptive and
inferential statistics presentation. Therefore, based on the identified result of the study, the
researcher could able to summarize the major findings of the study and present as shown below.

 The study sought to collect data from 147 employees from ECX Jimma branch but the
researcher managed to collect 136 questionnaires. This represents a response rate of
92.52 percent which is very good for analysis. According to Babbie (2004) a response
rate of 60 percent is good and that of 92.52 percent is very good.

 Out of the total 136 of the respondents, 97 (71.32 %) were male. 78 (57.35 %) were
found between 31 and 41 years old which is productive and age and mature enough to
understand and measure the supply chain integration of the organization.

 All the measures of internal integration were accepted by most of the study participants
since their mean values were found in the ranges of 3.41-4.2 which indicated that the
organization had implemented acceptable level of internal integration practices to
enhance the operational performance of the organization. This implies that ECX at Jimma
branch could be aligned effective communications between different departments
regarding a new commodity introduction or new process, departments have intra linked
transparent information about the operational status and collaborate with the company
development program (s), different departments were share technical information with
each other quickly if required, and the organization utilizes periodic interdepartmental
meetings among internal functions.

37
  Overall, the findings of the study indicate that supplier integration had the strongest effect
on operational performance, followed by information integration and external integration.
However, customer integration had no significant effect on OP of the organization

5.2Conclusions
The organization is implementing customer integration ineffectively. Without customer
integration it is impossible to survive in the market. Linking the customer through information
network with the company to measure customer satisfaction and creating an access of
information sharing is crucial even if the result shows no direct effect of operational performance
and customer integration.

5.3Recommendations

On the basis of the findings this study, the following recommendations are forwarded

 It is better for the organization to give due attention on all aspects of SCI practices for
more improvement of their operational performance.

 In order to achieve advancement in marketing, it is better for the organization to give due
emphasis on customer integration

 In order to foster organizational performance, it is also better for the organization to give
due emphasis to operational performance measures.

 Supplier integration a major point for supply chain firms. ECX should have to give
critical emphasis on designing effective communications with suppliers on research
activities and new service development in order to achieve operational advancement.

38
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APPENDIX_I

Appendix Table1 Reliability Test

S/No Variables N of items Cronbach's Cronbach's Alpha

Alpha Based on
Standardized Items
1 Internal integration 6 .823 .825
2 Information Integration 6 .837 .839
3 Supplier Integration 6 .954 .959
4 Customer integration 6 .788 .788
5 External Integration 4 .879 .882
6 Operational Performance 16 .728 .731

Appendix Table 2 Internal Integration of ECX Jimma brannch

N Mea Std. Dev.
n
There are effective communications between different departments 136 3.54 1.392
regarding a new commodity introduction or new process.

Departments have transparent information about the operational status 136 3.60 1.335
of each other
Different departments in your company collaborate with the company 136 3.51 1.456
development program (s).
Different departments in your company share technical information 136 3.73 1.273
with each other quickly if required
Departments at ECX collaborate with the company development 136 3.51 1.430
programs
ECX utilizes periodic interdepartmental meetings among internal 136 3.99 1.158
functions

42
Appendix Table 3 Information integration of ECX Jimma Branch
N Mean Std. Dev.
Due to information and technology integration, there are accesses 136 3.70 1.237
of tracking performances of SC partners.

With an integrated information and measurement SC, supply 136 3.60 1.244
chain analysis has been done.
With an integrated suppliers supply chain, logistics services are 136 3.68 1.275
improved.
There are external SC integration that fastens flows such as, 136 3.85 1.293
physical and funds.
There is quick ordering system with major suppliers and exporters 136 3.43 1.343

Exporters can collect their contracts from regional warehouses 136 3.60 1.319
without facing communication problems.

Appendix Table 4 Supplier Integration of ECX Jimma branch

N Mean Std. Dev.
ECX has effective communications with suppliers on research 136 3.15 1.419
activities and new service development.
ECX and its suppliers have transparent information about each 136 3.64 1.280
other’s inventory status.
ECX and its suppliers provide each other with each other‘s 136 3.57 1.370
plan.
ECX and its suppliers share technical information with each 136 3.91 1.220
other if required
ECX has long-term relationships with its suppliers 136 3.41 1.406
ECX shares demand forecasts with major suppliers 136 3.74 1.259

43
Appendix Table 5 Customer Integration of ECX Jimma branch
N Mean Std. Dev.
ECX has effective communication with its customers on research 136 3.19 1.353
and development activities
ECX and its customers have transparent information about each 136 2.91 1.458
other‘s‘ policies and strategies
ECX shares its plan with its customers. 136 3.02 1.411
ECX and its customers share technical information with each other 136 3.47 1.294
if required.
ECX has a systematic way to constantly measure customer 136 3.03 1.403
satisfaction
ECX has high level of linkage with customers through information 136 3.27 1.401
networks

Appendix Table 6 External Integration of ECX Jimma branch

N Mean Std. Dev.
Sourcing and tendering decisions are easily made due to SC 136 3.61 1.230
Integration and information sharing.
There are external SC integration that fastens flows such as, 136 3.88 1.112
physical and funds.
Distribution and delivery is made at the right time and place due 136 3.75 1.153
to SC integration, information sharing and coordination.
There are integration of objectives, planning, and resources with 136 3.64 1.209
external organizations.

44
Appendix Table 7 Mean and STD of Operational performance of ECX
N Mean Std. Dev.
Cost: 136 3.60 1.319
ECX is seeking to reduce the wasteful use of resources 136 3.75 1.153
ECX is working to reduce defective commodities 136 3.64 1.209
ECX is arranging its internal processes in a manner to shorten 136 3.48 1.293
performing activities
ECX is working to reduce inventory to minimum level to the extent 136 3.53 1.264
that does not hinder the continuation of work
Quality: 136 3.65 1.319
ECX is committed to provide exchange service according to local and 136 3.64 1.280
international standards
ECX produces various forms of services to suit customers‘ needs 136 3.57 1.370
ECX is committed to proper storage conditions according to the 136 3.91 1.220
standardized specifications to maintain the quality of received
commodities.
ECX chooses commodity suppliers on the basis of high quality 136 3.46 1.297
Speed/Time 136 3.62 1.224
ECX is committed to provide fast service to its customers 136 3.60 1.335
Suppliers are committed to supply orders by the agreed timetables 136 3.51 1.456
ECX bears the differences in transportation costs in order to meet the 136 3.73 1.273
deadlines
ECX is characterized by quick exchange of information with 136 3.64 1.294
stakeholders
Flexibility 136 3.64 1.280
ECX chooses suppliers who are flexible in responding to requests of 136 3.60 1.335
the company when needed
ECX is characterized by openness to new ideas at work 136 3.51 1.456
ECX gives its customers pay facilities after checking their financial 136 3.72 1.274
status
ECX has the ability to respond to and accommodate periods of poor 136 3.71 1.276
supplier performance

45
Appendix Table 8 Multi-Collinearity test results
Variables Tolerance VIF
Internal integration .154 6.495
Information Integration .142 7.036
Supplier Integration .117 8.531
Customer integration .190 5.275
External Integration .238 4.195

Appendix Table 9 Model summary results from regression analysis

Mo R R Adjus Std. Change Statistics

del Squar ted R Error of R F Change df1 df2 Sig. F
e Squar the Square Change
e Estimate Change
1 .947a .897 .893 .409 .897 225.406 5 130 .000
a. Predictors: (Constant), External Integration , Customer integration, Internal integration,
Information Integration , Supplier Integration
b. Dependent Variable: Operational performance

46
 Appendix II

Questionnaire

JIMMA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT
Dear respondents

My name is Sultan Hassan conducting a study on the effect of Supply chain Integration on the
Operational performance of ECX Jimma branch for the partial fulfillment of master’s degree in
logistics and supply chain management in Jimma University, college of business and economics
department of management. I would like to extend my deep appreciation to your organization and
you for the willingness and cooperation in undertaking this valuable research. Taking part in this
study you will contribute towards alleviating the problem of coffee delivery and order fulfillment on
the supply chain of your branch. I request your cooperation to fill and respond truthfully for the
asked Questions. If you have any question, you can contact me through my mobile
number0917069570 and also e-mail: sulhas1990@gmail.com. Finally, I would like to appreciate
and thank you in advance for your dedication, time and genuine response to the questions.

47
PART I: GENERAL INFORMATION AND DEMOGRAPHIC BACKGROUND OF
RESPONDENTS

Please tick (✓) or provide your own answers where applicable.

1. Sex: Male Female

2. Age: ______________

3. Work experience in the agency (in years)?

<3years 3-5years 6-10 years >10years

4. Educational level

Diploma 1st degree 2nd degree Others,_______________

5. Department of Respondents:
CEO Compliance Facilities Management  Finance
HR IT Audit Market Operations Quality Operations  Strategy corporate communication
Warehouse Operation

48
 Part II: THE EFFECT OF SUPPLY CHAIN INTEGRATION ON OPERATIONAL
PERFORMANCE IN ETHIOPIAN COMMODITYEXCHANGE OF JIMMA BRANCH

This part of the questionnaire consists of forty six (46) questions. The main purpose of this
instrument is to examine “The effect of Supply chain Integration on operationalperformance”.Judge
how frequently each statement fits the situation of your organization. Use the following rating scale,
and put “✓” mark for each rating.

Key: Strongly agree (5), Agree (4), Neutral (3), Disagree (2), and strongly disagree (1).

Rating
Statement 5 4 3 2 1

A. Supply Chain Integration (SCI)

A.1 Internal integration (II)
There are effective communications between different departments regarding a new
commodity introduction or new process.
Departments have transparent information about the operational status of each other
Different departments in your company collaborate with the company development
program (s).
Different departments in your company share technical information with each other
quickly if required
Departments at ECX collaborate with the company development programs
ECX utilizes periodic interdepartmental meetings among internal functions
A.2 Information Integration (InfI)
Due to information and technology integration, there are accesses of tracking
performances of SC partners.
With an integrated information and measurement SC, supply chain analysis has been
done.
With an integrated suppliers supply chain, logistics services are improved.
There are external SC integration that fastens flows such as, physical and funds.

49
There is quick ordering system with major suppliers and exporters
Exporters can collect their contracts from regional warehouses without facing
communication problems.
A.3 Supplier Integration (SI)
ECX has effective communications with suppliers on research activities and new service
development.
ECX and its suppliers have transparent information about each other’s inventory status.
ECX and its suppliers provide each other with each other‘s plan.
ECX and its suppliers share technical information with each other if required
ECX has long-term relationships with its suppliers
ECX shares demand forecasts with major suppliers
A.4 Customer integration
ECX has effective communication with its customers on research and development
activities
ECX and its customers have transparent information about each other‘s‘ policies and
strategies
ECX shares its plan with its customers.
ECX and its customers share technical information with each other if required.
ECX has a systematic way to constantly measure customer satisfaction
ECX has high level of linkage with customers through information networks
A.5 External Integration (EI)
Sourcing and tendering decisions are easily made due to SC Integration and
information sharing.
There are external SC integration that fastens flows such as, physical and funds.
Distribution and delivery is made at the right time and place due to SC integration,
information sharing and coordination.
There are integration of objectives, planning, and resources with external organizations.
B. Operational performance
B.1 Cost
ECX is seeking to reduce the wasteful use of resources
ECX is working to reduce defective commodities
ECX is arranging its internal processes in a manner to shorten performing activities
ECX is working to reduce inventory to minimum level to the extent that does not
hinder the continuation of work

50
B.2 Quality
ECX is committed to provide exchange service according to local and international
standards
ECX produces various forms of services to suit customers‘ needs
ECX is committed to proper storage conditions according to the standardized
specifications to maintain the quality of received commodities.
ECX chooses commodity suppliers on the basis of high quality
B.3 Speed/Time
ECX is committed to provide fast service to its customers
Suppliers are committed to supply orders by the agreed timetables
ECX bears the differences in transportation costs in order to meet the deadlines
ECX is characterized by quick exchange of information with stakeholders
B.4 Flexibility
ECX chooses suppliers who are flexible in responding to requests of the company when
needed
ECX is characterized by openness to new ideas at work
ECX gives its customers pay facilities after checking their financial status
ECX has the ability to respond to and accommodate periods of poor supplier
performance
Thank you for your time and Response!!!

51