ST.

MARY’S UNIVERSITY
SCHOOL OF GRADUATE STUDIES

DETERMINANT FACTORS INFLUENCING FUEL DISTRIBUTION

PERFORMANC IN THE CASE OF TOTAL ETHIOPIA S.C

BY

SAMRAWIT KASSA

JULY, 2020

ADDIS ABABA, ETHIOPIA

i
 DETERMINANT FACTORS INFLUENCING FUEL DISTRIBUTION
PERFORMANC IN THE CASE OF TOTAL ETHIOPIA S.C

By
SAMRAWIT KASSA

ID NO SGS/0352/2011A

ADVISOR: Temesgen Belayneh (PHD)

ATHESIS SUBMITTED TO ST. MARY’S UNIVERSIY, SCHOOL OF GRADUATE

STUDIES IN PARTIAL FULFIIMENT OF THE REQUIREMENT FOR THE DEGREE
OF MASTER OF MARKETING MANAGEMENT

JULY, 2020

ADDIS ABABA, ETHIOPIA

ii
 ST. MARY’S UNIVERSITY

SCHOOL OF GRADUATE STUDIES

FACULTY OF BUSSINESS

DETERMINANT FACTORS INFLUENCING FUEL DISTRIBUTION

PERFORMANCE IN THE CASE OF TOTAL ETHIOPIA S.C

BY

SAMRAWIT KASSA

APPROVED BY BOARD OF EXAMINERS

Dean, Graduate Studies signature and date

Advisor signature and date

Yibeltal Nigussie (Asst. Prof.)

External Examiner signature and date

Internal Examiner signature and date

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 DECLARATION
I, SAMRAWIT KASSA, declare that this thesis is my original work, prepared under the
guidance of Dr Temesegen Belayneh. All source of materials used for the thesis have been duly
acknowledged. I further confirm that the thesis has not been submitted either in part or in full to
any other higher learning institution for the purpose of earning any degree.

SAMRAWIT KASSA

St. Mary‟s university, Addis Ababa May, 2020

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 ENDORSEMENT
This thesis has been submitted to St. Mary‟s university, school of graduate studies for
examination with my approval as a university advisor.

Temesgen Belayneh (PHD)

Advisor signature and date

ST. MARY‟ S UNIVERSITY, ADDIS ABABA JULY, 2020

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 Acknowledgments

I am most grateful to the Almighty God for His infinite mercy and love that guided me
Throughout the duration of the program. And I would like to thank his mother Saint Mar y. Next, I
would like to thank my advisor Temesgen Belayneh (PhD) for his the useful comments, remarks
and advises. He read every word of every draft, pointing out the mistakes and helping me to
clarify my ideas. His broad and profound knowledge gave me great impression as well as great
help. Also I would like to extend my special gratitude to Mahalit Zekariyas, Workiye Assfaw
and Helen Tamiru for useful suggestion and cooperation. Many thanks also deserved for all total
Ethiopia customer respondents for their willingness to fill the questionnaires by spending their
invaluable time.
Last, but no least, I would like to grateful and give my special thanks to my beloved family one
can understand about the psychological and moral support I got from my wonderful family my
mother W/Ro Makiya Hassen for her care, love and encouragement in every phase of my life.
And my lovely husband Tilaye Wolde my son Adoniyas Tilaye for their unreserved love and
moral support to complete this post graduate program successfully.

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 Acronyms and Abbreviations

CODO-Company owned-dealer operated

DODO-Dealer owned-Dealer operated

EPSE - Ethiopian Petroleum Supply Enterprise

NPRDA-National Petroleum Reservation Depot Administration

MGR-Regular Gasoline

AGO-Gasoil

HFO- Heavy Fuel Oil

LFO- Light Fuel Oil

LPG-liquefied petroleum Gas

DP-Distribution Performance

PDM-Physical Distribution Management

SCM-Supply Chain Management

ORL-Organizational Relationship Linkage

GDP- Gross Domestic Product

Sig - Level of Significance

SPSS- Statistical Package for the social science

VIF- Variance Inflation Factor

MRM- Multiple Regression Model

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 Table of Contents
Acknowledgments............................................................................................................................ i
Acronyms and Abbreviations ......................................................................................................... ii
Table of Contents ........................................................................................................................... iii
List of Tables ................................................................................................................................ vii
List of Figure................................................................................................................................ viii
Abstract .......................................................................................................................................... vi
CHAPTER ONE ............................................................................................................................. 1
INTRODUCTION .......................................................................................................................... 1
1.1 Background of the study ....................................................................................................... 1
1.2 Background of the company ................................................................................................. 4
1.3 Statement of the Problem ...................................................................................................... 4
1.4 Research Question ................................................................................................................. 5
1.5 Research objective................................................................................................................. 6
1.5.1 General Objective ........................................................................................................... 6
1.5.2. Specific Objectives ........................................................................................................ 6
1.6 Scope of the study ................................................................................................................. 6
1.7 Significance of the Study ...................................................................................................... 6
1.8 Organization of the Study ..................................................................................................... 7
1.9 Definition of Terms ............................................................................................................... 7
1.9.1 Operational definition of terms....................................................................................... 7
1.9.2Conceptual definition of Term ........................................................................................ 8
CHAPTER TWO ............................................................................................................................ 9
REVIEW OF RELATED LITRATURE ........................................................................................ 9
2.1 Introduction ........................................................................................................................... 9
2.2 Theoretical Review ............................................................................................................... 9
2.2.1 Components, Nature and Definition of Distribution ...................................................... 9
2.2.2 Components of Distribution ......................................................................................... 10
2.2.3 Physical Distribution .................................................................................................... 10
2.2.4 Physical distribution management (PDM) ................................................................... 11

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2.2.5 Function of physical distribution .................................................................................. 11
2.2.5.1. Communications and order processing ................................................................. 11
2.2.5.2 Ware housing ......................................................................................................... 12
2.2.5.3 Inventory Control ................................................................................................... 12
2.2.5.4 Transportation ........................................................................................................ 13
2.2.5.5 Material Handling .................................................................................................. 14
2.2.6 Distribution Strategy..................................................................................................... 15
2.2.7 Fuel Distribution ........................................................................................................... 16
2.2.8 Effective Distribution System ...................................................................................... 17
2.2.9 Channel of Distribution ................................................................................................ 17
2.2.10 Evaluation of Distribution Channel Performance and Effectiveness ......................... 18
2.2.11 Measurements of Distribution Performance ............................................................... 19
2.2.12 Problems and Factors Affecting the Performances of Distribution ............................ 20
2.2.13 Distribution effectiveness and firm performance ....................................................... 21
2.2.14 Outsourcing ................................................................................................................ 22
2.2.15 Forms of Outsourcing ................................................................................................. 23
2.2.15.1Tactical outsourcing .............................................................................................. 23
2.2.15.2The Strategic Outsourcing Model ......................................................................... 23
2.2.15.3 Transformational outsourcing .............................................................................. 23
2.1.16 Transport Outsourcing .............................................................................................. 24
2.2.16.1 Integration ............................................................................................................ 25
2.2.17 Types of Integration.................................................................................................... 25
2.2.17.1 Internal Integration............................................................................................... 26
2.2.17.2 External Integration (Upstream and Downstream) .............................................. 26
2.2.18 Integration Dimensions............................................................................................... 27
2.2.18.1 Process integration ............................................................................................... 27
2.2.18.2 Collaboration and Coordination integration ........................................................ 28
2.2.18.3 Organizational Relationship Linkage(ORL) ........................................................ 28
2.2.19 Benefits of integration ................................................................................................ 29
2.2.20 Safety .......................................................................................................................... 29
2.2.21 Distribution performance ........................................................................................ 29
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 2.2 Empirical Review ................................................................................................................ 30
2.3 Conceptual frame work ....................................................................................................... 32
2.4 Hypothesis ........................................................................................................................... 32
CHAPTER THREE ...................................................................................................................... 34
RESEARCH METHODOLOGY.................................................................................................. 34
3.1. Research Approach ............................................................................................................ 34
3.2 Research Design .................................................................................................................. 35
3.3 Source of Data ..................................................................................................................... 35
3.4 Population and Sampling Technique................................................................................... 36
3.4.1 Population ..................................................................................................................... 36
3.4.2 Sampling Technique ..................................................................................................... 37
3.5 Data Collection Instrument ................................................................................................. 37
3.6 Data Analysis ...................................................................................................................... 38
3.7 Validity and Reliability ....................................................................................................... 39
3.8 Ethical Consideration .......................................................................................................... 40
CHAPTER FOUR ......................................................................................................................... 41
4. DATA PRESENTATION, ANALYSIS AND INTERPRETATION ...................................... 41
4.1 Data Cleaning and Coding .................................................................................................. 41
4.2. Demographic Analysis of Respondents ............................................................................. 41
4.3 Test of Reliability and Validity ........................................................................................... 43
4.4 Descriptive Statistics of Variables ...................................................................................... 44
4.4.1 Descriptive Statistics of Transport Outsourcing ........................................................... 46
4.4.2 Descriptive Statistics of Integration ............................................................................. 47
4.4.3 Descriptive Statistics of Safety Policy.......................................................................... 49
4.4.4 Descriptive Statistics of Distribution Performance ...................................................... 50
4.5 Inferential Statistics ............................................................................................................. 52
4.5.1 Correlation Analysis ..................................................................................................... 52
4.6 Test for Linear Regression Model Assumptions ................................................................. 53
4.6.1 Normality Assumption ................................................................................................. 53
4.6.2 Checking for Linearity.................................................................................................. 54
4.6.3 Assumption of Homoscedasticity ................................................................................. 54
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 4.6.4 Testing Multicollinearity .............................................................................................. 54
4.7 Regression Analysis ............................................................................................................ 55
4.7.1 Multiple Regressions .................................................................................................... 55
4.8 Hypothesis Testing and Interpretation of Results ............................................................... 57
CHAPTER FIVE .......................................................................................................................... 60
5. SUMMARY, CONCLUSION AND RECOMMENDATION ................................................. 60
5.1 Introduction ......................................................................................................................... 60
5.2 Summary of Finding............................................................................................................ 60
5.3 Conclusion........................................................................................................................... 61
5.4 Recommendation................................................................................................................. 62
5.5 Limitation of the study ........................................................................................................ 63
5.6 Area for Further Study ........................................................................................................ 63
REFERENCE ................................................................................................................................ 64
APPENDICES .............................................................................................................................. 72

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 List of Tables

Table 4.1 Demographic Analysis of Respondents ........................................................................ 42

Table 4.1.2. Reliability Analysis of Variables .............................................................................. 44

Table 4.1.3 Mean and standard deviation for factors affecting distribution performance ............ 45

Table 4.4.1 Descriptive Statistics of Transport Outsourcing ........................................................ 46

Table 4.4.2 Descriptive Statistics of Integration ........................................................................... 48

Table 4.4.3 Descriptive Statistics of Safety Policy ....................................................................... 49

Table 4.4.4 Descriptive Statistics of Distribution ......................................................................... 51

Table 4.7.1 Model Summary ........................................................................................................ 56

Table 4.7.2 ANOVA Analysis ...................................................................................................... 56

Table 4.7.3 Coefficient Matrix...................................................................................................... 57

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 List of Figure

Figure 1 Conceptual framework of the study ………………………………..…………32

viii
 Abstract
The purpose of this study was to assess determinant factors that influence fuel distribution
performance of Total Ethiopia S.C. The study used a convenience sampling technique on
sample respondents of customers of Total Ethiopia S.C. A structured questionnaire was
developed by the researcher and a quantitative and qualitative research approaches were used.
The study has been adopted both descriptive and explanatory research designs. From the
distributed 385questionaire, 300 of them are responded which constitute 77.9 percent of
response rate. A correlation and regression analysis was employed to explain the extent of
relationship between variables of interest. Further, statistical methods such as, descriptive
statistics (like mean, standard deviation), Statistical Package for Social Scientist (SPSS) version
20 was also used to analyze the data. Additional, tables and charts were used to present the
study results. The finding indicates that; transport outsourcing, integration and safety policy
had a significant positive impact on the distribution performance of the company. It also
indicates that; safety policy and transport outsourcing followed by integration have the greatest
influence on distribution performance respectively. The finding of the study implies that safety
policy, transport outsourcing, and integration must be given due attention if the company wants
to enhance its distribution performance.

Key Words: Transport outsourcing, integration and safety policy, distribution performance

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 CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Distribution is the shipping of company products or services from the manufacturer to the market
at the right place at the right time and in the right quantity to satisfy customer demand
(ChwenTzeng, 1999). According to Guan, W., (2010) in different times similarly they revealed
that distribution is just making a company product or service available for use or consumption by
setting a separate group of individual or organization which are taking part in process of flow of
products or services form producers to buyers.

In today‟s business era, distribution system is one of the important global aspects to distribute
products to customers in different part of the world. Distribution plays a key role within the
marketing mix, and the key to success is its successful integration within the mix, ensuring that
customers get their products at the right place and at the right time. If the product cannot reach
its chosen destination at the appropriate time, then it can erode competitive advantage and
customer retention (Yeboah, 2013).

Ethiopia is a developing nation which depends entirely on the import of fuel from the oil
producing countries. This import of fuel constitutes about 60% of the total imports with every
single year. As in the rest of the world, the rise of oil prices is increasingly becoming a big
challenge for the economy of the country. The share of fuel in import currency has been increase
steadily in recent years, and it is expected to grow even sharper following higher demand due to
economic growth. This takes up the lion share of the country‟s foreign exchange earnings.
Ethiopia‟s oil and gas industry is nascent, but it shows signs of promise (Deloitte, 2016). A
significant portion of the country is presumed to have petroleum potential and labeled into
different basins (Everette S., Yavuz 2010). Few local and a number of international companies
have been engaged in petroleum exploration in various parts of the country.

The bulk of Ethiopia's oil supply is imported by EPSE, EPSE is the sole importer and supplier of
fuel through a competitive bid on the international market. Transport to the inland demand
centers is handled largely by petroleum marketing companies, Transport Corporations and by
private truckers at a standard cost regulated by ministry of trade.

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More than 650 gas stations (dealers) found in different administrative regions and districts of the
country. The number of gas stations does not meet the rapid growth of current cities. Besides,
most of these stations have been offering services for the past 30 years and above with their
initial capacity. Due to this limitation, they fail to satisfy current fuel need of the society and in
average 50% of the fuel distributed every month for fuel stations is supplied by domestic fuel
distributors and when we compare the company's annual volume of fuel distribution about
78.92 % was distributed by only 4 oil companies (Total Ethiopia Libiaya Oil, NOC and
Yetebaberuit Beherawi petroleum) the rest 21.08 % was distributed by 23 oil companies (EPSE,
2019).

Fuel supply is a high national and governmental concern; government is searching for alternative
solution to fill gap on fuel transportation service has been carried out with limited number of
liquid transporting tankers. Fuel has a very high contribution for country's economic and social
development. However, currently fuel scarcity either due to manmade problem or certain supply
limitation causes huge damage. The country fuel supply and demand has not been balanced and
also there exists frequent distribution problems cause for scarcity and exposes the public
community for unnecessary ups and downs and cost (EEA, 2018/19).

The Ethiopian petroleum supply history goes back towards the end of Minillik II regime,
particularly in 1905 with the construction of the Addis Ababa Djibouti Railway. Foreign
Petroleum Suppliers such as Agip, Shell and Caltex were engaged in supply of fuel to Vehicles.
The suppliers Imports fuel via the port Djibouti of by locomotive. Although this Period
considered as the landmark for the beginning of fuel Supply in Ethiopia. Prior to this, the
industry characterized by monopoly market surrounded by various limiting procedures and laws
which bound the company to introduce and build their brand.

Concerning the distribution and dispatching of fuel in the country (before and after establishment
of the enterprise) was run by privately owned distribution companies. The fuel distribution
receives fuel as per their order and distribute to the Fuel privately owned fuel station. At the
beginning there were four external companies named Shell Ethiopia Limited, Total Ethiopia
Share company, Mobil Oil East Africa Limited and Agip Ethiopia Share Association.

At first Agip withdrawn from Africa in 2001 and Shell took Agip place and stayed up to 2008
only and replaced by oil Libya. Similarly when Mobil from Africa in 2006, Total have took over

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the business. And until September 2005 when the first domestic oil company National Oil
Company (NOC) joined the sector, it was dominated by only the foreign companies. (Ethiopian
petroleum supply Enterprise Special edition magazine, 2019).

As per the current regulation the fuel companies are not allowed to own stations and their work
limited only receiving fuel from the enterprise and supply to the gas station. Currently in the
country there are above 650 stations and until end of December 2019. There are 23 registered oil
distribution companies named .

1 Total Ethiopia Sh.Co.

2 National Oil Company Ethiopia PLC
3 Libya Oil Ethiopia Ltd.
4 Yetebaberut Beharawi Petroleum Sh.Co.
5 Kobil Ethiopia PLC
6 Nile Petroleum Co.Ltd. Ethiopia Branch
7 Wadi Al-Sundus Petroleum Co.Ltd.
8 TAF Oil PLC
9 Dalol Oil Sh.Co.
10 Olway Petroleum distributor PLC
11 Yeshi Petroleum PLC
12 Gomeju Oil Ethiopia PLC
13 Genet Petroleum
14 Bilen Petroleum
15 JR Petroleum PLC
16 Habesha Petroleum PLC
17 Calub Ethiopia Oil PLC
18 Zagol Oil Ethiopia PL
19 Mulag Oil Importer PLC
20 Erta-ale Oil Ethiopia
21 Halefay Petroleum Trading PLC
22 Tabarak Oil PLC
23 Kernel Trading PLC

Source (Ethiopian petroleum supply Enterprise website).

Based on observational study the researcher assess how transport outsourcing, integrations,
safety policy influence the distribution performance of a firm by taking Total Ethiopia S.C

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1.2 Background of the company

Total Ethiopia was established in 1950 as a petroleum product distribution company, developed
its Activities by acquiring the Mobil Oil East Africa assets in 2006. Today, the company operates
134 retail outlet Network Stations operational service stations 66 CODO station and 68 DODO,
station from them 38 stations are located in Addis Ababa the rest 96 station where located in
upcountry and about 800 general trade and specialties customers 3 aviation depots throughout
the country and the new state of the art Fuels and of Liquefied Petroleum Gas (LPG) Dukam
depot. Total Ethiopia is also a responsible citizen company who is actively promoting road safety,
fighting against malaria, ensuring product quality and developing renewable energies such as
solar energy. In addition to exploration and production and renewable energies, Total is active
across the entire petroleum product distribution the main product and service that the company
provide Gasoline, Kerosene, Gasoil, Light fuel oil(LFO) ,heavy fuel oil(HFO) jet-a1 Lubricants
and LPG (www.totalethiopia.com).

1.3 Statement of the Problem

According to Philip kotler & Armstrong 2001, Distribution is the process of planning,
implementing and controlling the physical flow of materials, final goods and related information
from point of origin to points of consumption to meet customer requirements at a profit. Schewe
and Smith (1980) defined distribution as the physical movement of products to the ultimate
consumers. Production is not complete until goods reach the final consumers and products are
worthless until they are made available to those who need them. It is this process of making
goods available to those that need them that gives rise to distribution basis in a marketing
strategy.

Marketing researchers are more concerned with management issues like power, conflict,
satisfaction and performance (Gaski 1996). Few empirical studies were conducted to study
distribution intensity and structure. Most of ideas concerning channel design issues are
underlying and theoretical that predicts the choice of channel based on some factors. Although
these constructs have been well accepted by marketing scholars, empirical research has to be
done to confirm these assumptions and to find new factors determining the distribution
performance.

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Recently it has been common to see a long queue of vehicles around petrol stations in Addis
Ababa searching for fuel. People, drivers and private vehicle owners run here and there filling up
their tanks if they get lucky. When the shortage occurs, customers suffer since at present there is
no other substitutes that serve the same purpose. It touches on people‟s everyday lives with
services ranging from transportation, electricity, heating, etc. (Richard & Francis 2014) and
construction works which involve heavy machineries such as construction of dams and road. As
soon as motorists notice there is no fuel in one of the stations or there is queue of cars in stations,
they will get panic, join the line and purchase more fuel than they usually purchase, thinking the
shortage will continue for some time.

EPSE mentions there is adequate product, but Oil Companies and fuel stations are hoarding the
product or not uplifting adequately from the supply points speculating price decrease
respectively. Or there was shortage of product just for few days and now we have adequate
supply, but it is vague why still there is shortage of product in the cities. On the other hand, Oil
Companies states there was shortage of supply at the main supply points and still the problem
persist or stabilizing the supply needs more time. Whereas, fuel stations mention that they have
placed orders but are not supplied by Oil Companies and there is no product that we hoard from
our customer. Furthermore, as mentioned the above gaps lead the researcher to study determinant
factors that Influence the fuel distribution performance of Total Ethiopia S.C.

1.4 Research Question

1. To what extent does transport outsourcing, impact the fuel distribution performance of
total Ethiopia S.C?

2. To what extent does integration impact the fuel distribution performance of total Ethiopia
S.C?

3. To what extent does safety policy impact the fuel distribution performance of total
Ethiopia S.C?

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1.5 Research objective

1.5.1 General Objective

The main objective of this research paper was to make an assessment on factors influencing the
fuel distribution performance by taking total Ethiopia S.C as a case study.

1.5.2. Specific Objectives

1. To assess the extent of transport outsourcing influence on fuel distribution

performance

2. To assess the extent of integration influence on fuel distribution performance.

3. To assess the extent of safety policy influence on fuel distribution performance.

1.6 Scope of the study

Geographical scope: -the company operates 134 retail outlet Network service Stations from
them 38 stations are located in Addis Ababa the rest 96 station where located in upcountry the
researcher delimit the scope on retail outlet Network service Stations located in Addis Ababa
were used in this research work due to finance and time constraint to include upcountry network
outlet service stations.

Product scope: Generally, the study is limited to two products, MGR (regular gasoline) and
AGO (gasoil).

1.7 Significance of the Study

 Since the study was not done before that reviews factors influencing fuel distribution
performance in Total Ethiopia S.Co. And distribution today is the back bone of many
companies in any operation for delivering products to customers.
 The other significance of This research work is very crucial for the management of total
Ethiopia s.c as it will make management to device by ensuring product availability to
customers across the country It will serve as a knowledge base for management to
employ.

6
  It will enable the management to provide consumers with the right products at the right
time and right place which result to a substantial percentage of sales for the company.
 Therefore, Total Ethiopia S. Co will be benefited from the study to overcome the
distribution challenges in petroleum marketing.
 This study can also serve as reference for further studies that will be conducted in the Oil
Industry of Ethiopia with particular emphasis on factors influencing fuel distribution
performance for policy makers; this study is expected to give a clue in order to improve
the fuel distribution activity of the country and Total Ethiopia S. Co also.

1.8 Organization of the Study

The study has five sections; the first part contains the problem and its approaches i.e.
Background of the study, problem of statement, research Question objective of the study,
significance of the study, scope and limitation of the study, organization of the study, as part of it.
The second part is discussed about review of related literature The third part is discussed about
research methodology, the fourth part is discussed all about data presentation and analysis by
using all the techniques mentioned in the methodology. The fifth part, which is, the final section
was contained summary of finding, conclusion and recommendation.

1.9 Definition of Terms

1.9.1 Operational definition of terms

 Distribution: According to Philip kotler & Armstrong 2001, Distribution is the

process of planning, implementing and controlling the physical flow of materials,
final goods and related information from point of origin to points of consumption to
meet customer requirements at a profit.
 Outsourcing: as defined by Lysons, K. and Farrington, B. (2006) „‟is a management
strategy by which major non-core functions are transferred to specialist, efficient,
external providers‟‟. Stated differently, it refers to the process by which a company
contracts another company to provide services that might otherwise be performed by
in house employees.

7
 Transportation: Transportation is defined as the activities involved in shipping any
goods or finished products from suppliers to a facility or to warehouses and sales
locations (Kenyon & Meixell, 2011).
 Firm Performance: An assessment of how performance is on three specific areas of
firm outcomes: financial performance, market performance, and customer value
added (Richard, Devinney, Yip, & Johnson, 2009).
 Performance Measurement: (Tuttle & Heap, 2008) defined the performance
measurement as the process of quantifying action, where measurement is the process
of quantification and action leads to performance.
 Integration: Lambert and Cooper (2000 cited in Dannis & Kampton 2010) is it
involves collaborative work between buyers and suppliers, joint product development,
common systems and shared information support the idea that optimizing the product
flows cannot be accomplished without implementing a process approach to the
business.

1.9.2Conceptual definition of Term

 Oil Industry: Oil Industry in Ethiopia is a sector engaged in petroleum product

distribution.
 Service station: is a facility that sells fuel and engine lubricants for motor vehicles
 Fuel: is any material that can be made to react with other substances so that it releases
energy as heat energy or to be used for work. The concept was originally applied
solely to those materials capable of releasing chemical energy but has since also been
applied to other sources of heat energy such as nuclear energy
 Dealer: They procure oil from Oil Companies and sell to bulk consumers and the
general public through fuel stations
 Depot: premises used for the storage and sale in bulk of solid or liquid or gaseous
fuel ,but does not include a service station and specifically exclude the sale by retail
in to vehicle for final use of such fuel from the premises
 Network retail outlet :a set of sales outlets and a network head company, which
maintain lasting relationships and establish common interest

8
 CHAPTER TWO

REVIEW OF RELATED LITRATURE

2.1 Introduction

This chapter has presented a review of relevant theoretical and empirical literature on factors that
influence distribution performance such as transport outsourcing,integration and safety policy in
relation to the research questions: To what extent does transport outsourcing, Integration and
safety policy impact distribution performance.

2.2 Theoretical Review

2.2.1 Components, Nature and Definition of Distribution

Distribution is the process of planning, implementing and controlling the physical flow of
materials, final goods and related information from point of origin to points of consumption to
meet customer requirements at a profit (Kotler and Armstrong, 2001). Schewe and Smith (1980)
defined distribution as the physical movement of products to the ultimate consumers. Production
is not complete until goods reach the final consumers and products are worthless until they are
made available to those who need them. It is this process of making goods available to those that
need them that gives rise to distribution basis in a marketing strategy.

Achison (2000) denoted that unless products are distributed and delivered in the right quality, at
the right time, in proper condition and at the right price; buyers may be reluctant to buy. He
stressed further that distribution is regarded as a major consideration in strategic planning
because it is an important marketing function that is responsible for making goods and services
available to the consumers.

According to John O‟ Shaughnessy (1992) in his book competitive marketing: A Strategic

Approach denoted that a distribution system is the network of people, institutions or agencies
involved in the flow of a product to the consumers, together with the informational, financial,
promotional and other services associated with making the product convenient and attractive to
buy and re-buy.

9
Physical distribution is often regarded as “logistics”, logistics refers to the interrelation and
management of all the key element or activities involved in providing both raw materials and
finished products to customers. According to Kotler & Armstrong (2001) Physical distribution is
the task involved in planning, implementing and controlling the physical flow of materials, final
goods and related information from point of origin to points of consumption to meet customer
requirements at a profit.

Traditionally, Physical Distribution typically started with products at the plant and then tried to
find low-cost solutions to get them to customers. However, today‟s marketers prefer market
logistics thinking, which starts with the marketplace and works backward to the factory.

2.2.2 Components of Distribution

Distribution is made up of two components channels and physical distribution or logistics

distribution system refer to that complex of agent‟s whole seller‟s through which manufacturers
move products and services such add life insurance to their intended markets.

2.2.3 Physical Distribution

Physical distribution is defined as a set of activates concerned with the physical flows of
materials, components and finished goods from producer to channel intermediaries and
consumers (David jobber, 2001:537). Physical distribution activities have been a subject of
managerial attention for some time because of the potential for cost savings and improving
customer service levels.

Cost savings can be achieved by reducing inventory levels, using cheaper forms of transport and
shipping in bulk rather than small quantities. Customer service levels can be improved by fast
and reliable delivery including just- in time delivery, holding high inventory levels so that
customers have a wide choice and the chances of stock- outs are reduced, fast order processing,
and ensuring products arrive in the right quantities and quality. Physical distribution
management concerns the balance between cost reduction and meeting customer service
requirement. Trade- offs are often necessary.

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 2.2.4 Physical distribution management (PDM)

Physical distribution management (PDM) is the term used to describe the management of every
part of the distribution process. PDM can be contracted out to a specialist or is best developed as
a specialist function within the organization. It is the process which ensure that the correct
customer within a given timescale, as cost-effectively as possible (Little and Marandi, 2003).

Part of PDM would include being aware of what your competitors are offering, as suggested
above. Elements for consideration would include:

Costs involved Methods of transport – road, rail, plane, shipping, etc. Routes used, Stock,
storage and stock control, Protection and delivery of stock, Timing key element evaluating the
effectiveness of methods of distribution and being aware of other alternatives. Distribution is an
integral part of the marketing mix. With the right distribution strategy in place that is with the
right mode of delivery the right speed of delivery to the appropriate place of purchase, customer
satisfaction can be significantly increased. Failure to deliver these practical points will result in
the loss of orders and income to the company and long-term customer loyalty will decline
(Drummond and Ensor 2001) the key objective of PDM is to find the most cost-effective way of
meeting customer needs in relation to purchasing their product, whoever they are and wherever
they are. Physical distribution management includes the following functions: Customer services,
Order processing, Materials handling, Warehousing, Stock/inventory management,
Transportation.

2.2.5 Function of physical distribution

2.2.5.1. Communications and order processing

Basically the physical distribution process starts with the company receiving an order. The
starting point in a physical distribution system is order processing, which is a set of procedures
for receiving, handling and filling orders promptly and accurately. Physical distribution begins
with a customer orders. The order department prepares invoices and sends them to various
departments. Items out of stock are back ordered shipped items are accomplice by shipping and
billing documents with copies going to various‟ departments (Palmer, A., (2001), Reducing time
between a customer placing an order and receiving the goods may be achieved through careful

11
analysis of the components that make up order processing time. A computer link between sales
person and the order department may be effective. Electronic data inter change can also speed
order processing time by checking the customer‟s credit rating, and whether the goods are in
stock, issuing an order to the ware house, involving the customer and updating the inventory
records (David jobber, 2001:537).

Both Palmer and Jobber have explained their thoughts with similar underlying assumptions. For
a company which is producing uniform consumer products like soft drinks order processing
rarely takes place.

2.2.5.2 Ware housing

Every company must store its goods while they wait to be sold a storage function is needed
because production and consumption cycle rarely match. For example, snapper, Toro, and other
lawn mower manufactures must produce all year long and store up their product for the heavy
spring and summer buying seasons. The storage function overcomes different in needed
quantities and timing. A company must decide on how many and what types of ware houses it
needs, where they will be located. The more ware houses the company uses, the more quickly
goods can be delivered to customers. However, more location means higher ware housing costs.
The company therefore, must balance the level of customer service against distribution costs
(Kotler, P. and Armstrong, G. (2001).

2.2.5.3 Inventory Control

Inventory levels also affect customer satisfaction. The major problem is to maintain the delicate
balance between carrying too much inventory and carrying too little. Carrying too much
inventory results in higher- than- necessary inventory- charring costs and stock obsolescence.
Charring too little may result in stock- outs, costly emergency shipments or production, and
customer dissatisfaction in making inventory decisions, management must balance the costs of
caring larger inventories against resulting sales and profits. Inventory decision involves knowing
both when to order and how much to order.

In deciding when to order, the company balances the risks of running out of stock against the
costs of carrying too much in deciding how much to order, the company needs to balance order-

12
processing costs against inventory caring costs. Larger average order size results in fewer orders
and lower order- processing costs, but it also means larger inventory- caring costs (Kotler, P. and
Armstrong, G. (2001).

2.2.5.4 Transportation

The appropriate choice of transportation made is a key part of physical distribution management.
This is especially important in markets where just in time delivery is the norm. A number of
criteria should be used to select transport: costs, transit time, reliability, capability (important if
goods required special handling, such as chilled temperatures), security, and traceability each
major mode of transport has its own cost and service out comes that must be considered by the
marketing logistics manager. These are described in turn below (Adrianpalmer, 2000:397-398).

Road: Road haulage has the key advantage of flexibility due to national road networks
providing direct access to production facilities, ware houses, and customers. This allows Lorries
to transport goods from supplier to end user without unloading in route.

Rail: Rail ways tend to be used for carrying large, bulky freight ever long distances. Goods
commonly carried by trains include cool, chemicals, and building aggregates. The longer the
journey, the more economically competitive rail transport become, as can be seen in North-
America. A significant problem for railways, however, is its lack of flexibility.

Air: This is both the fastest and most expensive made of transport its great speed over long
distance means that it is often used to carry perishable goods and emergency deliveries. As
international t r a de continues to grow, air freight should likewise grow in importance,
especially in global just in- time systems. Like rail, though, companies must still transport goods
to and from air terminals. Air freight is eminently suited to valuable, relatively light goods such
as fresh flowers, jeweler, and electronic components.

Water: This can be divided in to sea and inland water ways, both of which are slow but fairly
in expensive. Ocean- going vessels carry a large variety of goods, for example oil from the Far
East to be refined in British petroleum‟s Farley coastal terminal, or basic consumer goods to
small islands like gram can aria. In land water transportation, like rail, is associated with low-
value, bulky commodities such as coal or steel.

13
 Pipeline: Pipelines are dependable and low maintenance form of transportation for liquids and
gas. They normally belong to the shipper and carry the shipper‟s products. The down side of this
transport mode is the major investment involved in the construction of pipeline. A good example
of a logistics tradeoff is given by the use of pipelines in the North Sea as opposed to oil tankers.
Most of the ideas stated above usually work for companies which produce variety of products
which are highly demanded by the general public such goods maybe oil, sugar and the like.

2.2.5.5 Material Handling

This essentially concerned with the movement of goods with the producers factory, ware houses,
and transportation deports. Due to the complex of handling the proliferation of consumer product
lines that now exists, mechanization of procedures is becoming increasingly common. An
important development in materials handling is containerization. The combining of large
quantities of goods in to a single large container avoids the need to handle individual items
during transit. Once containers are sealed, they can relatively easily be transferred from one
mode of transport to another. This allows the distributor to handle the product as few times as
possible, in as large a quantity as possible, and with as much automation as can be achieved. In
this way stock losses and damage are reduced.

Product packaging can also play a part in facilitating materials handling. Goods must be capable
of withstanding regular loading and UN loading as well as stacking tin manufacturers‟ and
customers ware houses. You will probably have noticed how some goods are displayed on
supermarket shelves: often they are either still in large cared board boxes, designed to show off
their contents, or in conveniently shaped individual containers to ensure maximum use of shelf
space. At the same time, as Joelr.evans and Barry (1992) remind us, packaging must be as
environmentally friendly as possible in terms of its capacity for recycling (Adrialpalmer, 2000:
398). In this case whatever the product maybe material handling is very essential and basically
unavoidable. I can say it‟s the most common thing to all companies as far as distribution is
concerned.

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 2.2.6 Distribution Strategy

Distribution strategy is the method a firm uses to get products and services to different channels
and networks with objective to reach the end customer, either directly or indirectly. The
intermediaries include the agents, wholesalers, distributors and also retailers. These elements
help in ensuring that a firm has provided the customers with quality customer service that has an
influence on the level of customer satisfaction (Palmer, 2001). Customers require convenience
for the product offering such as the physical access. Distribution channels are important in a
firm‟s level of competitiveness. This is because they affect the time when the product reaches
the customer as well as final price of the product. Through distribution strategy, an organization
gets to understand the sales channels through enhanced knowledge, better segmentation on the
distribution within the sales channels, the roles played by the intermediaries on the sales process,
getting to understand centers of influence on the sales channel as well as the position of a firm in
relation to the sales channel (Whetton, 2011).

Achison (2000) stated that before a decision about the distribution to be adopted for efficient
channels network, company should identify the target consumer it intends to reach with its
products. This is because distribution network can vary among companies, however for more
narratives the following scope of the strategic alternatives companies could pursue include:

A. Exclusive distribution

B. Intensive distribution and

C. Selective distribution

A. EXCLUSIVE DISTRIBUTION

Suggest that one particular dealer serving a given area is granted sole right to sell a product and it
is usually associated with products that the targeted customer would not mind to seek out for.
Again by contrast, some producers purposely limit the number of intermediaries handling their
products; availability and accessibility are deliberately restricted. Exclusive distribution often is
found in the distribution of new automobile and prestige products which need to protect their
image up market exclusivity and allows for higher- mark up.

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B. INTENSIVE DISTRIBUTION

The aim of intensive distribution strategy is to secure as many outlets as possible in order to
maximize availability and accessibility to potential buyers. This type of distribution is most
suited to products where convenience of purchase and impulse buying are important factors
influencing sales. Examples of product requiring intensive distribution are: cigarette, candies,
cookies, soft drink, ice cream, tooth paste, petrol and other similar items are sold in many of
outlets to provide maximum brand exposure and consumer convenience.

C. SELECTIVE DISTRIBUTION

This involves were a few selected distribution outlets are given the opportunity/right to distribute
the company‟s goods. The manufacturer may want the distribution of the product to be as
intensive as possible but may also want to protect the image of the company and its brands by
exercising some control over the type of retailers selling it. Most televisions, furniture and small
appliance brands are distributed in this manner. By using selective distribution they do not have
to spread their efforts over many outlets, including many marginal ones. They can develop good
working relationships with selected channel members and expect a better- than average with
more control and less cost than does intensive distribution.

2.2.7 Fuel Distribution

Commodities such as oil, gas, and petrochemicals are transported using different mode of
transportation such as pipe-lines, vessels or tankers, roads, and railroads. These commodities are
produced in limited places of the world, yet they are demanded all over the globe since they are
an essential source of energy and raw material for many other industries (Raed, Tiravat, &
Basheer, 2006). The boom in global demand of oil along with the ease of international trade and
the inflexibility involved in the petroleum industry‟s fuel distribution has made its management
more complex and more challenging (Coia 1999, as cited in Barua, 2010).

A fuel distribution consists of all stages involved, either directly or indirectly, in fulfilling a
customer‟s request (Chopra & Meindl, 2001). As John etal. (2013) described fuel distribution as
an extended enterprise that crosses the boundaries of individual firms to span the related
activities of all the companies involved in the distribution of fuel. There is a tremendous need to
get everyone to pull together in the same direction (Handfield, 2016).
16
 2.2.8 Effective Distribution System

Strategy in sales and marketing is a collection of processes that firms utilize before selling their
goods and/or services. The aim of a good strategy in selling is that one can meet a proper person
at the proper time and location using the best technique in order to influence that person. The real
meaning of strategy is doing all things needed to do in the best situation and achieving goals
(Ghazaleh Moghareh Abed, Mohammad Haghighi, 2009).

In today‟s environment, strong distribution strategy is crucially important for the success of
many manufacturing firms in the world. According to Christopher & Towill, (2002), the ability
to plan and execute the movement of the right product to the right place at the right time can also
make the supply chain more efficient by significantly reducing expedited freight and the
production and repositioning of unneeded inventory. Moreover, George & Iravo, (2014), stated
that the effective distribution strategy is paramount to be able to deliver quality products to its
customers. Meeting specific customer service requirements around products and services can
help grow market share by maintaining strong existing relationships and growing new ones. The
efficiency and effectiveness of the logistics operation has a considerable influence not only on
the business performance of manufacturers but also on the customer‟s perception of the quality
of the products and services provided by the plant.

Many manufacturing firms have best distribution structure and logistic strategy while many
others still fall to deliver the right quantity of products in time, in the right condition at the
minimum cost. Therefore; to meet the customer expectation, designing the best distribution
network system by controlling and properly managing various factors that affect the efficiency of
delivering products from the point of production to the point of final consumption is crucially
important.

2.2.9 Channel of Distribution

Every finished product can only get to the consumers through an effective and efficient channel
of distribution. The term channel of distribution refers to the systems of marketing institution
through which goods and services are transferred from original producers to the ultimate
consumers.

17
Linus & Emola, (1998) define Channel of distribution as a series of marketing institutions
through which title to or control of a product, service or idea is transferred from producer to
customer, clients or business users. The key element in this definition is the passage of title or
control over goods, services or idea and not necessarily their physical movement. Kotler &
Armstrong (2001) view it as a set of interdependent organization involved in the process of
making a product or service available for use or consumption by the consumer.

2.2.10 Evaluation of Distribution Channel Performance and Effectiveness

The modernization of business activities, increasing level of competition and globalization in the
world economy has a great impact on distribution channels management and performance and on
the success of any business. Manufacturers‟ success cannot be reached from their own effort
alone; their success or failure is determined and increasingly reliant upon their marketing
channel members or distributors‟ (e.g., agents, wholesalers and retailers etc.) performance and
how effectively and efficiently their products are reaching to the intended consumers or sold
(Singh & Imran, 2014).That means performance of distribution channel and effectiveness
determines competitiveness and successes of the company. The level of performance attained by
distribution channel members is pivotal for a firm‟s achieving a competitive advantage. Hence in
order to survive and thrive in a highly competitive manufacturer companies have to have a
distribution channels which have good performance and have no problem at any point of the
distribution channel (Hanaa, 2013).

In the distribution channel or distribution network context the main task of distribution channels
is placing the goods in hand of potential customers at the right time and place. Therefore, in
products distribution delivery time has major significance. Delivering products in shortest
feasible time is one of the criteria for measuring performance of distributors (Kiumars Sharifi.
Nazanin Zandi, and Roshanak Rezvani (2013). scheme, storing and depot facilities,
transportation and orders management are of top priorities (Koshy, 2014). Whenever, such
services are offered by distribution channels properly and in harmony with quality products for
the consumers or users, positive performance and effects on profitability of the company are
expected, otherwise profit crises are expected (Kiumars, Nazanin & Roshanak, 2013).

18
By evaluating and measuring distribution performance manufacturers and businesses can see
what they achieve, quantify ad qualify their effectiveness, identify opportunities for
improvement and compare their performance against competitors (Ibid). Therefore,
intermediaries/distribution channels that want to be successful and survive in competitive
marketing environment should have to strive to properly perform the large number of
distribution activities to achieve the set goal of the marketing and should evaluate and measure
their distribution performance regularly (Salih and Emel, 2013).

The manufacturer who also sells all of its output through intermediaries/distribution channels is
likely to evaluate its channel members‟ performance more comprehensively, because the firm‟s
success is so directly dependent upon the channel members‟ performance.

To evaluate and identify the performance of distribution channels in delivering quality services
in the process of distribution of products, we need to measure different indicators and analyze
them (Hanaa,2013). Traditionally, distribution channels performance is measured by financial
aspects or minimum logistic costs. But with the increase of competitiveness in the global market
performance of distribution networks along with SCM start to be measured by non-financial
aspects as well, such as customer service level and satisfaction or how to improve customer
value and to decrease expenditures at the same time (Wihdat, Yousef & Sang-Heon, 2013).

Most of the current distribution network studies (Koshy, 2014, Kiumars, Nazanin, &Roshanak
2013, Wihdat, Yousef and Sang- Heon, 2013, Salih and Emel, 2013 etc.) have emphasized on the
importance to use some non-financial parameters (such as customer service level and satisfaction,
service coverage area, inventory level, delivery or lead time and costs) as well for evaluation of
effectiveness of performance of distribution channels that companies used for distributing their
products to the end users.

2.2.11 Measurements of Distribution Performance

Distribution refers to the steps taken to move and store a product from the supplier stage to a
customer stage in the supply chain. Distribution occurs between every pair of stages in the
supply chain. Performance measurement is defined as the process of quantifying the
effectiveness and efficiency of action Lancaster & Reynolds, (2004) Furthermore, performance
measurement provides an approach to identifying the success and potential management

19
strategies, and facilitating the understanding of the situation. Henceforth, accurate performance
measurement is helpful in the improvement of SCM. Many firms look to continuous
improvement as a tool to enhance their core competitiveness using SCM. Many companies have
not succeeded in maximizing their supply chains potential, because they have often failed to
develop the performance measures and metrics needed to fully integrate their supply chain to
maximize effectiveness and efficiency.

Lee and Billington (1993), observed that the discrete sites in a supply chain do not maximize
efficiency, if each pursues goals independently. Distribution performance can be measured
through delivery schedule of the Distribution Company,

2.2.12 Problems and Factors Affecting the Performances of Distribution

Marketing channels develop and operate in complex environment that is continually changing.
The changes have major effects on the marketing channels. According to Salih,y and Emely
(2013). every channel is influenced by macro environmental forces or variables such as
consumer buying behavior, economic, political and legal factors, technological changes,
international macro influences and channel member preferences. Due to the dynamics nature of
these factors, companies must frequently evaluate and monitor the performance of their
distribution channels. The evaluation and monitoring has to be done regularly for better results.

The fundamental challenge confronting channel managers in the face of these economic
developments is to help channel managers weather difficult economic conditions. The
competitive environment must include not only domestic but also global competition as well.
The socio cultural environment has a significant impact on marketing channels because the
structure of marketing channels reflects the socio cultural environment within which they exist.
The technological environment must be monitored carefully to evaluate the effects of
technological changes on marketing channels. Such developments as the internet, computerized
inventory management, computer shopping etc. have had, and will continue to have, profound
effects on marketing channel strategy. Also channel managers cannot ignore the political-legal
environment, with its complex laws and continually changing precedents. Distribution strategy
and its performance can also be shaped by how decisions are made in other marketing areas such
as the product, price and promotion elements. The idea behind the channel in the distribution

20
area is that a channel concept highlights the efficiency and effectiveness aspects of distributing
goods and services (Wihdat D, Yousef A, & Sang-Heon L. (2013).

Traditionally, distribution network performance is measured by financial aspects or minimum

logistic costs, yet with the increase of competitiveness in the global market; distribution
networks along with SCM performance are measured by nonfinancial aspects as well, such as
customer service level (Gunasekaran and B. Kobu, 2004) or how to improve customer value and
to decrease expenditures at the same time (M. Kärkkäinen, T. A. Risku, and J. Holmström, 2003).
Most of the current distribution network studies use parameters based on the customer service
level, which is service coverage area such as the number of distribution centers and the inventory
Level with minimum total costs (A. Amiri, 2006), (F. Altiparmak, M. Gen, L. Lin, and T. Paksoy,
2006), and (H. Selim and I. Ozkarahan, 2008). However, only a limited number of researchers
consider delivery time with minimum total costs or consider all parameters such as inventory
level, lead time, service coverage areas, and costs simultaneously (F. Altiparmak, M. Gen, L. Lin,
and T. Paksoy, 2006).

The need to evaluate performance level of distribution channels is just as important as the
evaluation of other marketing functions. Clearly, the marketing mix is quite interdependent and
the failure of one component can cause failure of the whole (Michael, 2012). Therefore in
evaluating the performance and efficiency of distribution of products; it is very essential to
identify what factors affect or challenge the performance and effectiveness of the distributors.

2.2.13 Distribution effectiveness and firm performance

Effectiveness as non-economic performance or non-financial measure has been concerned by

Kaplan, and Norton (1992) long term firm orientation. Meanwhile, measured non-financial
performance based on complement financial statements, such as “effective operational measures
on customer satisfaction, internal business processes, and the organization‟s innovation and
improvement activities” .Effectiveness had been known as indicators for customer satisfaction,
conventionally considered to be an essential determinant factor for long term customer behaviors
(Oliver,1980) and a significant predictor of positive performance in inter-organizational
relationship Furthermore, according to(Inkpen, & Curral, 2004). non-financial indicators are
likely to be used for identifying the best practices within cooperative relationships. This has also

21
been emphasized clearly by Johnson, L.K. (2006),that non-economic instrument could be
significantly used as an expansion indication of a firm's long term goals. According to Kaplan,
and Norton (1992), profitability and other financial measures actually occur due to non-financial
activities and accomplishments. On economic measures- improvement of effectiveness activities
are considered to be the trigger of future financial utility and non-financial performance is crucial
to foresee the company‟s future performance as it could offer extra and increased data,
separately from economic one, in which could be used for users „decision making. In distribution
channel, according to Sherlekar (2004), suppliers are effective if they deliver what was asked for,
no matter if they are bound to filthier warehouses to manage-if they managed the task
inefficiently. Meanwhile, Rhea et al.,(1987) gave some examples of distribution effectiveness
referring to customers‟ satisfaction in that if customer expected delivery order in two weeks and
the firm can fulfill less or punctual than in two weeks, meaning the customers‟ satisfaction is
fulfilled. On the contrary, it is ineffective if customers expect delivery order in two weeks, but
the firm could not fulfill the demand in less than in two weeks or punctually.

2.2.14 Outsourcing

Outsourcing as defined by Lysons, K. and Farrington, B. (2006) „‟is a management strategy by

which major non-core functions are transferred to specialist, efficient, external providers‟‟.
Stated differently, it refers to the process by which a company contracts another company to
provide services that might otherwise be performed by in house employees. Outsourcing is being
employed to achieve performance improvements across the entire business. Accordingly, usually
firms have outsourced their non-core activities. However, outsourcing does not necessary mean
that the outsourced function is less important to company‟s performance. In recent years, many
other functions in all industries has been actively outsourced, though, outsourcing of entire
processes however has not been prevalent.

In recent years the traditional paradigm of owning factors of operations to achieve competitive
advantage is challenged by cost saving motive. There is also other factors to go for outsourcing
including achieving competitiveness as supported by Greaver, (1999). In addition, the sourcing
concept of moving activities out of the organization to where the experts and their resources exist
has challenged owning all of the resources as most traditional firms by the strategy for
outsourcing. Outsourcing is simply the transferring of an internal service function to an external

22
organization that otherwise would be difficult to acquire, or costly to have in-house Outsourcing
is one of these business practices that can lead to greater competitiveness Embleton and Wright
(1998)

2.2.15 Forms of Outsourcing

2.2.15.1Tactical outsourcing

it is that a company will get a better service for less investment and management time from an
outsource provider. It focuses on constructing the right contract and making the vendors stick to
that contract. Reasons for tactical outsourcing are for example immediate cost savings. Quite
often, the company is already in trouble and uses tactical outsourcing as a direct way to address
problems.

2.2.15.2The Strategic Outsourcing Model

as a strategy, holding stock or inventory in warehouses just in case it is needed is a highly costly
activity. The stock itself is expensive and might not sell or could become obsolete. Warehouses
and distribution centers generally are expensive to build, operate and maintain, acquiring
transportation is also becoming very expensive, therefore strategies to curve up this situation is
imperative. According to Visagie (2003), there are a number of critical issues to be taken into
account when outsourcing becomes an improvement initiative. Strategic decision making in
terms of what is to be outsourced and what not to outsource is essential. Strategic outsourcing is
about outsourcing a certain function of a company to be able to focus on core businesses. It
requires a strong secure relationship between the vendor and the company. This means a
strategic long-term partnership with the emphasis of mutual benefit, instead of a pure vendor –
buyer relation, which is quite often adversarial.

2.2.15.3 Transformational outsourcing

in transformational outsourcing the decision might be doing all or none. It refers to outsourcing
everything the company does not do well, including core businesses. Therefore, the purpose of
outsourcing is redefining the business. This might be quite questionable since core business is
usually the most important part of a company.

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 2.1.16 Transport Outsourcing

For many companies cost of transport is the highest logistical cost. Transport cost is usually
defined only as freight charges. Apart from freight charges, costs arise from carrying inventory
in-transit, from numerous operations connected with frequent and small deliveries resulted from
just in time deliveries. During a production plan preparation, it is vital to know exactly when
material will be delivered. Focus on customer needs‟ satisfaction, order fulfillment, short transit
time, on-time delivery; gives transport costs a new dimension. Unless considerable buffer stocks
are kept, the production plan relies on accurate estimated delivery dates. Delays, lacking or
inaccurate delivery information can be extremely costly as the consequence could be production
down-time (Greaver, M. F. (1999).Risk is connected with a basic assumption in the resource-
based perspective that a company is highly dependent on resources controlled by others
(Embleton, P.R., and Wright, C.P. (1998).Transit times affect the cash-to-cash cycle for most
companies. Long transit times means later payment and negatively affects the cash flow. Cash is
tied up in inventory in transit that could otherwise have been employed elsewhere, contributing
to further revenue generation

Transport is needed throughout the whole supply chain being the link between supply chain
members. Because demand and supplies have become international processes short lead time is
especially important for companies that operate in international or global environment.
Consequently quality of transport service affects the competitiveness of the entire supply chain.
The challenge is to achieve competitive advantage in the context of rapid and unpredictable
changes of markets. Over the past years it had place a growing focus on service quality
improvement and reduction of inventory. The highly competitive environment along with
customers‟ demands for tailored products and services has forced companies to continuously
evaluate, improve and reengineer their logistics operations. These operations have a noticeable
contribution in companies‟ efforts to meet customers‟‟ expectations (Jiang, B. and Qureshi, A.
(2006).

Managing companies in this increasingly demanding environment has made many firms to look
for logistics service provider. They are used for many logistics functions, such as transport or
warehousing. Logistics activity (purchasing, warehousing, transport and distribution, inventory
management) can be realized more efficient than by manufacturing companies. The source of

24
competitive advantage is the capability to adapt, integrate, and reconfigure internal and external
organizational skills, resources, and functional competences to match the requirements of a
changing environment (Teeceet al. 1997). Manufacturing is the industry with the highest
demands regarding logistics services and consequently it is judged as the most appropriate
industry for comparisons within the logistics context

2.2.16.1 Integration

Integration in different functions within companies allows companies to increase productivity,

customer satisfaction, and financial performance. Characteristics that show an integration
successfully carried out can be seen from the increasing performance of Griffin (1992), while
Ellinger et al (2000), argues that Performance cannot be improved without integration in the
organization. Paiva et al (2010), examined the integration of two departments namely
manufacturing and marketing and found that companies achieved better performance when
manufacturing and marketing worked together.

Integration is very useful for the company, especially in improving the performance of the
company. Research on integration has been widely carried out, in each of these studies found
various limitations. This paper is a literature study to explore the limitations of research that has
been carried out by several integration studies. This limitation is a research opportunity that can
be done by researchers who are interested in conducting research to fill the limitations of
previous research.

2.2.17 Types of Integration

According to (Flynn, Huo and Zhao 2010) integration is the extent in which the manufacturer
(Internal integration) and the extended forms in both directions external integration (Upstream
and downstream) strategically collaborate for achieving mutual beneficial goals (Barbara et al.,
2010). On this definition they highlighted importance of strategic collaboration as an ongoing
partnership to achieve mutually beneficial strategic goals. It provokes mutual trust, increases
contract duration and encourages efficient conflict resolution and sharing of information, rewards
and risks.

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 2.2.17.1 Internal Integration

Internal integration is the creating coordination among functional departments within an

organization. The internal integration, the function to function integration within the business
organization can be considered as the first step of operational integration as the bases of effective
integration as the benefits of external integration (Harrison & Hoek, 2008).

Identify fundamental information requirement of each functional department and creating an

access of information among these department is the process of creating internal integration.

Harrison et al, (2008) demonstrated the impact of internal integration on external integration as;
“high internal integration can reach a level of collaborative internal operation‖, with which the
whole firm works like an integrated system that results in better performance and better
interdepartmental effectiveness, such as cycle time reduction, better in-stock performance,
increased product availability levels, and improvement in order-to delivery lead times (Harrison
& Hoek, 2008).”

2.2.17.2 External Integration (Upstream and Downstream)

“The supplier base is really an extension of the enterprise. As such, supplier relationships (face-
to-face, telecommunications, or the Internet) need to be developed as aggressively and
strategically as customer relationships (Frazelle, 2002)”. This implies that the upstream
integration which give high emphasize to the supplier should be equal to downstream integration.

External integration also refers to the systems that coordinates and crates collaboration among all
stakeholders with on the value chain (the supplier, manufacturer and the customer). External
integration allows all partners to share critical information such as forecast demand, actual orders,
and inventory levels

Award,H.A.H and Nasar,Mo.,(2010) demonstrate external integration as “Downstream

integration involves core competencies derived from coordination with critical customers,
whereas supplier integration involves core competencies related to coordination with critical
suppliers” (Donal & Edward, 1989).

26
High level of collaboration and information sharing activities with key customers in the
downstream integration, providing the business entity with strategic insights into market
expectations and business opportunities, and enabling a more efficient and effective response to
the end customer. Argue that downstream integration reduces unpredictable demand and leads to
better financial performance Grham, C.S. & Mark, J. (2016.)

Effective external integration with customers may enable organizations to reduce demand side
risks, and to minimize potential occurrences of anything that may affect the business firm ability
to meet the requirements of customers and end-users. Through integration with customers,
companies can better understand customer needs and respond more quickly to them. Integration
with consumers contributes to demand planning, greater visibility in sharing information, and a
consequent increase in the level of service (Thomas & Alcantra, 2013).

2.2.18 Integration Dimensions

2.2.18.1 Process integration

It involves collaborative work between buyers and suppliers, joint product development,
common systems and shared information. Lambert and Cooper (2000 cited in Dannis &
Kampton 2010) support the idea that optimizing the product flows cannot be accomplished
without implementing a process approach to the business. Viewing as a set of integrated process
capabilities can be used to improve performance; complex activities can be coordinated to great
advantage between functions and redundant or non-value-added activities.

The oil industry is one of the largest and most complex industries in the world that encompasses
many stakeholders, involves huge investment and touches on peoples‟ everyday lives with
services ranging from transportation, electricity, heating, etc. (Richard & Francis 2014), using
integrated process across the network will enhance the overall process.

Shared information between partners can only be fully leveraged through process integration. By
connecting the business process both within the enterprise and between enterprises, the network
moves the information and intelligence by extending the reach and richness of the information
Raed, AL-H., Tiravat, A. & Basheer, K., 2006, He continued and emphasizes that information

27
can be available through a collaborative process and the logistics of making, distributing and
delivering good become more efficient.

Regardless of the petroleum sector existed for decades and the essential role it plays in fulfilling
most transportation needs, literature related to supply chain of oil, in particular on challenges of
integration of oil supply are very few.

2.2.18.2 Collaboration and Coordination integration

A common feature of these approaches was recognition that „the whole is greater than the sum of
the parts‟. Amarpreet, S. & John, B., 2010) states that collaboration allows companies to
“leverage each other on an operational basis so that together they perform better than they did
separately”. Collaborative relationships internally and externally are necessary ingredient for
success (John, C. John, Rober, Brain 2013).identified a dynamic collaboration capability should
help a company access, shift and leverage resources to rapidly respond to a changing
competitive environment. For cooperation to exist, channel members must agree that they have
concerns of mutual interest, must work together toward the achievement of those goals, and must
collectively have the ability to create logistical and transactional channels that will enable the
channel as a whole to be competitive in the market places Coia, A., 1999,

2.2.18.3 Organizational Relationship Linkage(ORL)

Inter organization relations defined as formal arrangements that bring together tangible and
intangible assets different legally independent organizations with the aim to produce joint value
added to the ultimate customers (Benchmann & Witteloostuijn, 2006). Organizational Relation
Linkage ORL involves well established relations and transparent interactions members, which
demands common visions and objectives, ideas and organizational culture and integrated
performance measures, incentive schemes and sharing of skills (Rafaela et al., 2012).

Organizational relationships are networks of resource interdependencies. The organizational

relation linkage includes all participants in the supply chain including manufactures, buyers,
suppliers, customers, government agencies, and other external organizations like third party
logistics service providers that are critical to the success of the supply chain (Tillquist, 2002).
Organizations relation linkage is the key instrument to share critical resources like inputs, skill

28
and knowledge, idea, information, technology and logistical equipment. Information and
Information Technology is a key component for the successful implementation and management
of organizational linkage in the supply chain (Pfeffer, 1992; Tillquist, 2002)

2.2.19 Benefits of integration

According to National Research Council (2000) & Katunzi (2010), potential benefits of
integration are:

 Reduction in transaction costs through information sharing

 Increased competitiveness and profitability
 Improved delivery performance
 Increased forecast accuracy

2.2.20 Safety

Safety refers to the common beliefs, attitudes, and values surrounding safety that exist within an
organization. While there are no OSHA standards or regulations that pertain specifically to safety
culture, a strong culture of safety can offer myriad organizational benefits companies with a
strong culture of safety have integrated safety throughout their operations and view a safe
operation as a core organizational value. In order for a strong safety culture to take hold, safety
efforts must be valued and supported throughout an organization Source:
(www//safety.BLR.COM).

2.2.21 Distribution performance

Due to global competition, organizations have been forced to improve their distribution. Instead
of competing as individual entities they prefer competing as demand chains as it gives them an
upper hand against their rivals through provision of high customer service levels by forging
relationships with customers and suppliers while ensuring that ordering costs are minimized.
Another strategic measure taken by distributors and manufacturers is the establishment of
holistic cooperation between themselves and transportation organizations to facilitate effective
communication, alignment of incentives and synchronization of decisions in order to enhance
distribution service performance and gain competitive advantage in the global market. (Venus, et

29
al. 2009). According to Rabinovich and Bailey, (2004), Distributon Service Quality comprises
of an array of logistics that ranges from customer needs and marketing to delivery of finished
products to customers. They claim that an effective physical distribution system is that which is
reliable and ensures that products reach customers in a timely manner. Sherlekar, S.A.
(2004).resolved that the poor road network in Uganda has created more challenges in the
transport and warehousing segment. They show that ineffectiveness of Distribution Service
performance can be minimized or eliminated through vertical collaboration. This is where
manufacturers and the distributors downstream collaborate for common good. Service
performance helps in evaluating the ability of the provider to unfailingly deliver products within
the stipulated time frame at a cost that is acceptable. Factors such as product quality, product
availability, reliable delivery and other elements like timely responsiveness and effective
communication have a positive relationship with customer satisfaction. Recurring purchases of
products that represent augmented expenditure between business partners come as a result of
customer‟s burning desire to maintain a healthy and constructive relationship with the supplier
(Bowersox, et.al, 2002).

There is a relationship between service performance and customer satisfaction and the intention
to buy again. Customer satisfaction may be evaluated depending on the consumption experience
and total purchase of a given commodity or service over a period of time. The assessment may
be performed based on confirmation or disconfirmation of purchase of commodity or service.
Increased customer satisfaction has been associated with improvement in economic returns of a
company, including profitability and market share. Customer satisfaction can be increased by
improving the quality of service (Zeithaml, 2000).

2.2 Empirical Review

This section reviews literature from studies carried out related to fuel distribution and
determinate factors influencing of fuel distribution performance in petroleum marketing that
support the study.

The existing body of knowledge on distribution strategies is vast and suggests several techniques
and management skills. Only some aspects relating to performance, something of fundamental
importance, will be highlighted here. A good starting point is the research done by Doney and

30
Cannon (1997), which stressed several contributions in the field. Kozak and Cohen (1997)
created a list of statements for companies to use to achieve the level of trust and commitment
with suppliers, which can be adapted in this case Distribution builds stable competitive
advantages,

A variety of approaches has been taken to distribution channels, but distribution performance and
intensity has received little attention in academic research (Frazier and Lassar, 1996 ).Marketing
researchers are more concerned with management issues like power, conflict, satisfaction and
performance (Gaski 1996). Few empirical studies were conducted to study distribution
performance and intensity. Most of ideas concerning channel design issues are underlying and
theoretical that predicts the choice of channel based on some factors. Although these constructs
have been well accepted by marketing scholars, empirical research has to be done to confirm
these assumptions and to find new factors determining the channel choice.

Wick (2000) The impact of transport outsourcing in the distribution performance in business
outside suppliers. Results of this study indicate that success or failure in distribution depends on
care and caution in continuous management of outsourcing function to ensure the job being done
by distribution partners as expected. if the third-party distributor's procedures and performance
are not carefully monitored, there is the risk of permanently alienating the existing customers,
who have been attracted through much hard effort. wick, observes that the key to a successful
outsourcing relationship includes understanding the process specifying objectives, establishing
internal procedures for evaluating performance against objectives, and deploying systems that
help to manage the function effectively.

31
 2.3 Conceptual frame work

Determinants of distribution performance are congregated into three constructs of transport

outsourcing, integration and safety policy, Angelmar, Reinhard and Louis, (1998)

The relationship between these constructs with distribution performance is conceptualized as

follows.

Independent Variables Dependent variables

Transport
outsourcing

H1
Integration
H2
Distribution
H3 Performance

safety policy

Source: Figure 1.1Conceptual Framework adapted from (Angelmar, Reinhard and Louis, 1998)
and modified by the researcher.

2.4 Hypothesis

The conceptual framework model shows the level of influence of three different factors on the
factors influencing fuel distribution performance of the company. Those factors are transport
outsourcing, integration and safety policy the level of influences between the factors and the
effect of distribution performance was tested by hypothesis. There are three hypotheses in order
to test to what extent the independent variables (factors) that affect the distribution performance.
Such as:

32
Hypothesis 1: transport outsourcing has a positive and significant effect on the distribution
performance of Total Ethiopia S.C.

Hypothesis 2: integration has a positive and significant effect on the distribution performance of
Total Ethiopia S.C.

Hypothesis 3: safety policy has a positive and significant effect on the distribution performance
of Total Ethiopia S.C.

33
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1. Research Approach

According to Creswell, John W. (2005) there are three basic types of research approaches
including quantitative, qualitative, and mixed approach.

Qualitative research is an approach for exploring and understanding the meaning individuals or
groups ascribe to a social or human problem. The process of research involves emerging
questions and procedures, data typically collected in the participant„s setting, data analysis
inductively building from particulars to general themes, and the researcher making
interpretations of the meaning of the data (Creswell, John W. (2005).

Quantitative research is an approach for testing objective theories by examining the relationship
among variables. These variables, in turn, can be measured, typically on instruments, so that
numbered data can be analyzed using statistical procedures (Creswell, John W. (2005).

Mixed methods research is an approach to inquiry involving collecting both quantitative and
qualitative data, integrating the two forms of data, and using distinct designs that may involve
philosophical assumptions and theoretical frameworks. The core assumption of this form of
inquiry is that the combination of qualitative and quantitative approaches provides a more
complete understanding of a research problem than either approach alone (Creswell, John W.
(2005).Thus, in order to achieve the objective of this study and answer the research questions
mixed approach were used.

34
 3.2 Research Design

A research design is a set of advance decisions that makes up the master plan specifying the
methods and procedures for collecting and analyzing the needed information (Burns & Bush,
2003). Saunders et al., 2009 also indicate that research design is the general planning about how
the researcher will go about answering his or her research questions.

According to Burns & Bush (2003) research designs are classified into three categories:
exploratory, descriptive, and explanatory. The choice of the most appropriate design depends
largely on the objectives of the research. Exploratory research is most commonly unstructured,
informal research that is undertaken to gain background information about the general nature of
the research problem. Accordingly, exploratory research does not have a formalized set of
objectives, sample plan, or questionnaire. In contrast to explanatory designs, descriptive research
is undertaken to describe answers to questions of who, what, where, when, and how. The third
one is explanatory, studying a problem with the purpose to explain the relationships or
dependencies between variables. However, sometimes a research can be both descriptive and
explanatory (Saunders et al., 2009).

The study has been adopted both descriptive and explanatory research designs. On one hand,
descriptive research design was used to describe and summarize the characteristics of
respondents. On the other hand, explanatory research design is used to establish the magnitude,
direction and significance of various factors affecting the distribution performance of a firm in
this case Total Ethiopia S.C .

3.3 Source of Data

Basically, there are two types of sources of data: Primary and secondary sources of data.
According to Malhotra (2005), primary data are originated by the researcher for the specific
purpose of addressing the problem at hand. Secondary data are data that are collected for some
purpose other than the problem at hand.

In order to answer raised research questions, both primary and secondary data sources was used
in this study. The primary data collection method was performed using the use of structured
questionnaire, it will be distributed to customers of fuel service station. Questionnaire is one of

35
the most important research instruments and for collecting primary data, a structured close ended
questionnaire used as a primary source of data in this study. It is recommended to keep the
questionnaire as short as possible and give it a logical and sequential structure so that the
respondent can easily see what the questionnaire is about and can follow its themes as they go
through them (Fisher, 2007). Secondary data were collected from books, journals, articles,
websites, Prior research works and Companies written documents.

3.4 Population and Sampling Technique

3.4.1 Population

Target population is defined as the entire aggregation of respondents that meet the designated set
of criteria (Kothari, 2004).The populations of this study is customers of network retail out let
service station In different base towns of Ethiopia market And geographic location As per the
data obtained from the company profile there is 134 retail outlet Network service Stations
among them 38 service stations are located in Addis Ababa the rest 96 station where located in
upcountry Therefore, customers of 38 network service station are the total population of the
study.

According to Davis (2000) as cited by Israel (2009), a large population's sample size can be
calculated by using the formula

n=stands for the sample size which is drawn

e = level of precision or sometimes called sampling error (is ranges in which the true value of the
population would be estimated.
p= population proportion
Z= level of confidence
The sample have been drawn from maximum variability of the population (P=0.5) with 95%
level of confidence with 5% precision level.

36
 3.4.2 Sampling Technique

Sampling is the selection of a fraction of the total number of units of interest for the ultimate
purpose of being able to draw general conclusions about the entire body of unit (Parasurman,
2004). There are two types of sampling techniques divided as probability and non-probability.

Probability sample is a sampling procedure in which each element of the population has a fixed
probabilistic chance of being selected for the sampling. This requires not only a precise
definition of the target population, but, also a general specification of the sampling frame
(Malhotra 2005). It includes samples based on simple random sampling, systematic sampling,
stratified sampling, cluster/area sampling (Kothari, 2004).

In contrast, non-probability does not use chance selection procedure, but rather rely on the
personal judgment of the researcher. As to Kothari (2004, p.15), “non-probability samples are
those based on convenience sampling, judgmental sampling and quota sampling techniques.
Convenience sampling is technique in which a sample is drawn from that part of the population
that is close to hand, readily available, or convenient (Anol 2012) Thus, the study used non
probability sampling technique which is convenience sampling technique because the population
is too large and it is impossible to include every individual and the respondents are included
based on their convenient accessibility and proximity to the researcher.

3.5 Data Collection Instrument

Questionnaire is one of the most important research instruments and for collecting primary data,
a structured close ended questionnaire will be used as a primary source of data in this study.

The questionnaire is made up of five parts. the first part comprises the demographic information
of respondents, the second part questions related to transport outsourcing, the third part is
questions related to integration, the fourth part question related to safety policy, finally the fifth
part question related to distribution performance constructed into a five point Likert scale
ranging from 1 for “Strongly Disagreed” to 5 for “Strongly Agreed”.

37
The questionnaires drafted in English language was translated into Amharic language by one of
legally operating translation offices since they have the experience and proficiency in translation.
The Amharic version of the questionnaire was intended for those respondents who have low
proficiency in the English language. Voluntary respondents were asked with which version of the
questionnaire they would be at ease to fill; the English or the Amharic version and then given the
questionnaire accordingly.

3.6 Data Analysis

Data analysis essentially consists of applying statistical techniques to a data base to make
inferences about variables or study objects; data analysis consists of a series of activities that can
involve the application of several different statistical techniques in a variety of different ways.
These activities must be closely coordinated so that all the information necessary for decision
making is extracted from a data base.

There are several steps which are required to prepare the data ready for analysis and the steps
generally involve data editing, coding, data entry and data cleaning (Shukla, 2008). To test and
analyzing the role of independent variable – transport outsourcing, integration and safety policy
on dependent variable- distribution performance , the researcher used Multiple Regression
Analysis (MRA) and multivariate linear regression analysis to be conducted. Pearson correlation
coefficient would also be used to show the interdependence between the independent and
dependent variables.

The regression equation is stated below:

+ +

Where,

yi=Distribution performance

= y intercept/constant

β1= the beta weight or regression coefficient of transport outsource

β2= the beta weight or regression coefficient of integration

38
β3= the beta weight or regression coefficient of safety policy

x1= transport outsource

x2= integration

x3 = company safety policy

3.7 Validity and Reliability

Validity is the extent to which differences found with a measuring instrument reflect true
differences among those being tested or it refers to the extent to which a test measures what we
wish to measure (Kothari, 2004). Shukla (2008) defined as validity is the extent to which
differences in observed scale scores reflect the true difference among objects on the
characteristics being measured.

As per Kothari (2004), content validity is the extent to which a measuring instrument provides
adequate coverage of the topic under study. If the instrument contains a representative sample of
the universe, the content validity is good. Its determination is primarily judgmental and intuitive.
It can also be determined by using a panel of persons who shall judge how well the measuring
instrument meets the standards, but there is no numerical way to express it. Therefore, the
researcher will apply a consistent and valid sampling procedure to achieve the validity of the
research work.

Reliability has to do with the accuracy and precision of a measurement procedure and reliable
measuring instrument does contribute to validity, but a reliable instrument need not be a valid
instrument. Two aspects of reliability exist and namely stability and equivalence deserve special
mention. The stability aspect is concerned with securing consistent results with repeated
measurements of the same person and with the same instrument and the degree of stability
determined by comparing the results of repeated measurements. The equivalence aspect
considers how much error may get introduced by different investigators or different samples of
the items being studied. A good way to test for the equivalence of measurements by two
investigators is to compare their observations of the same events. (Kothari, 2004).

39
For this study Cronbach‟s alpha will be used to assess the internal consistency of variables in the
research instrument. Cronbach‟s alpha is a coefficient of reliability used to measure the internal
consistency of the scale; it represents number between 0 and 1.

3.8 Ethical Consideration

Research, however novel its discoveries, is only of any value if it is carried out honestly. There
are two aspects of ethical issues in research:
The individual values of the researcher relating to honesty and frankness and personal integrity.
The researcher‟s treatments of other people involved in the research, relating to informed consent,
confidentiality, anonymity and courtesy.

Hence, the researcher was conduct the research in ethical manner that the thoughts, ideas and
works of others acknowledged accordingly and the sources of the data are credited with a proper
citation. Accordingly, the researcher will treat participants with due ethical consideration and
follow proper way to inform respondents with full consent and inform to respond for
questionnaires with confidence and understanding the purpose of the thesis, follow ethical way to
record, analyze and present the findings of the research work.

40
 CHAPTER FOUR

4. DATA PRESENTATION, ANALYSIS AND INTERPRETATION

In this chapter the data collected from respondents were analyzed and interpreted using
quantitative analysis which involves analysis of the demographical information of respondents
and the descriptive and inferential statistics employed to test the hypothesis and to investigate the
influence of the independent variables on the dependent variable. To analyze the collected data
in line with the overall objective of the research undertaking, statistical procedures were carried
out using SPSS version 20.

4.1 Data Cleaning and Coding

To address the research objective, data were collected from customers of the Total Ethiopia S.C.
The data was cleaned and coded in order to make the collected data‟s suitable for the analysis; all
questionnaires were screened to be complete. All returned incomplete questionnaires were
therefore considered as errors and removed from the survey data. Out of the 385 distributed
questionnaires, 85 were incomplete. Hence, a total of 300 complete questionnaires were being
used for the study with 77.9 % response rate. Coding of data is necessary for transferring and
editing data in SPSS. The questions and possible answers were corresponded in the order of the
actual questionnaire and coded for further analysis using SPSS.

4.2. Demographic Analysis of Respondents

This part elaborate the characteristics of the respondents (customers) in terms of gender, age,
educational status, occupation and usage. Accordingly, the respondents were summarized and
described in the subsequent part.

41
Table 4.1 Demographic Analysis of Respondents

Frequency Percent Valid Cumulative

Percent Percent
Gender Female 91 30.3 30.3 30.3
Male 209 69.7 69.7 100.0
18- 30 58 19.3 19.3 19.3
Age 31- 43 118 39.3 39.3 58.7
44-56 94 31.3 31.3 90.0
57 and above 30 10.0 10.0 100.0
Primary education 8 2.7 2.7 2.7
Secondary education 34 11.3 11.3 11.3
Education Diploma 96 32.0 32.0 14.0
background First Degree 132 44.0 44.0 46.0
Master‟s and above 30 10.0 10.0 100.0
Government Employee 92 30.7 92 30.7
Private Employee 136 45.3 136 76.0
Occupation NGO 57 19.0 57 85.0
Self-Employed 15 5.0 5.0 100.0
Daily 32 10.7 10.7 10.7
Usage Weekly 66 22.0 22.0 32.7
Monthly 177 59.0 59.0 91.7
Occasional 25 8.3 8.3 100.0
Source: Survey Result, (2020)

Table 4.1 shows the information of 300 usable respondents of this research by dividing from
gender. Accordingly, from the total respondents, male respondents constituted 69.7 % (209)
whereas female respondents constituted the remaining 30.3 % (91). That means in this
investigation the number of male customers who used the company service has highest
percentage than that of female customers.

And the second table shows the age of the respondents (19.3 %) of them were between 18 and 30
years; (39.3%) of them were between 31 & 43 years, (31.3%) of them were between 44 & 56
years and (10.0%) of them were greater or equal to 57.

In terms of educational classification, the above table 4.1 indicated that, almost all of the
respondents‟ educational level is above high school complete. Out of the 346 respondents, 44.0%
(132) of them were first degree holders, 32.0 % (96) of the respondents were diploma holders,
11.3% (34) of them were secondary education holders and 10.0 % (30) of the respondents were

42
master‟s holders, 2.7 % (8) of the respondents were primary education holders. This implies that,
the majority of customers have first degree.

In terms of occupation, 30.7% of respondents were government employees, 45.3 % were private
employee, 19.0% were NGO, and 5.0% were self-employed.

Furthermore, the last item in the above table presents frequency of usage. 10.7%, 22.0%,
59.0% and 8.3% of respondents use the company service daily, weekly, monthly and
occasionally respectively. This implies that occasional customers have high percentage value.

4.3 Test of Reliability and Validity

The reliability test is an important instrument to measure the degree of consistency of an attribute
which it is supposed to measure. As stated by (Anol, B., 2012). Social Science Research:
Principles, Methods, and Practices. 2nd ed. Florida: University of South Florida Tampa the less
variation of the instrument produces in repeated measurements of an attribute, the higher its
reliability. Reliability can be equated with the stability, consistency, or dependability of a
measuring tool. Cronbach's alpha is one of the most commonly accepted measures of reliability.
It measures the internal consistency of the items in a scale. It indicates that the extent to which
the items in a questionnaire are related to each other. It also indicates that whether a scale is one-
dimensional or multidimensional. The normal range of Cronbach‟s coefficient alpha value ranges
between 0-1 and the higher values reflects a higher degree of internal consistency. Different
authors accept different values of this test in order to achieve internal reliability, but the most
commonly accepted value is 0.70 as it should be equal to or higher than to reach internal
reliability (Hair et al., 1998).

The table below shows the value of alpha for each dimension as a whole. which shows the
measure has internal consistency.

43
Table 4.1.2. Reliability Analysis of Variables

Measurement Number of items Cronbach's alpha

Transport outsourcing 7 .833
Integration 7 .749
Safety policy 7 .830
Distribution Performance 5 .803
Reliability of all items 26 .907
Source: Survey Result, SPSS (2020)

As shown in the table 4.1.2 above, all the constructs were fulfilled the recommended cut-off
point of the alpha, which Cronbach‟s Alpha .833 for Transport outsourcing, .749 for
Integration,830 for Safety policy and. 803 for Distribution Performance. The overall Cronbach
Alpha Coefficient for all items is also. 907. To sum up, all the constructs have confirmed as
reliable variables that can be taken as an indication of acceptability of the scale for further
analysis.

4.4 Descriptive Statistics of Variables

In this part descriptive statistics in the form of mean and standard deviation were presented to
illustrate the level of agreement of the respondents. The main objective of the study is to identify
factors influencing fuel distribution performance in Total Ethiopia S.C. To do so, customers of
the Total Ethiopia were asked to rate the level of agreement to each question under the four
attributes namely: Transport outsourcing, Integration related, Safety policy and Distribution
Performance on a five point Likert scale with: 1= strongly disagree, 2= disagree, 3 = neutral, 4=
agree and 5= strongly agree.

44
Table 4.1.3 Mean and standard deviation for factors affecting distribution
performance

Descriptive Statistics
N Mean Std. Deviation

TRO 300 3.5181 .82568

LI 300 3.5867 .80493
SP 300 3.6876 .77119
DP 300 3.6820 .74318
Valid N (listwise) 300
Source: Survey Result, SPSS (2020)

As it can be seen from table 4.1.3 above, the mean score values ranges between 3.51 (mean score
value of Transport outsourcing) with standard deviation of .825 and 3.687 (mean score value of
Safety policy) with standard deviation of .771.

In order to assess factors influencing fuel distribution performance of Total Ethiopia S.C, a total
of 26 questions were grouped into four which were: Transport outsourcing, integration, Safety
policy and Distribution performance which is the dependent variable. In order to compare the
respondents, descriptive statistics of mean and standard deviation were used. The mean indicates
to what extent the sample group averagely agrees or disagrees with the different statements. The
higher the mean the more the respondents agree with the statement while the lower the mean the
more the respondents disagree with the statement. In addition, standard deviation shows the
variability of an observed response. Descriptive statistics of each variables has been discussed
one by one in the following section. According to Zaidatol and Bagheri(2009)

Mean Score Description

<3.39 Low
3.40-3.79 Moderate
>3.80 High

45
 4.4.1 Descriptive Statistics of Transport Outsourcing

According to (Teeceet al.1997) Transport Outsourcing is Managing companies in this

increasingly demanding environment has made many firms to look for logistics service provider.
They are used for many logistics functions, such as transport or warehousing. Logistics activity
(purchasing, warehousing, transport and distribution, inventory management) can be realized
more efficient than by manufacturing companies. The source of competitive advantage is the
capability to adapt, integrate, and reconfigure internal and external organizational skills,
resources, and functional competences to match the requirements of a changing environment
Accordingly, the respondents were asked 7 questions related to transport outsourcing. The Table
4.4.1 below presents respondents result of transport outsourcing with mean and standard
deviation values for each item.

Table 4.4.1 Descriptive Statistics of Transport Outsourcing

N Mean Std. Deviation

The company has good and sufficient Transport
300 3.32 .899
out sourcing
Total Ethiopia current arrangement of transport
300 3.37 1.191
ensure its fuel distribution
The current condition of the company truck
300 3.39 1.066
availability can ensure its fuel distribution
The company has sufficient truck to distribute
300 3.36 1.141
fuel to the service station and client efficiently
Out sourced transport perform better in the
300 3.70 .808
company‟s and enhance the fuel distribution
Outsourced transportation provides on-time
300 3.77 1.313
delivery
Outsourced transport enhance delivery schedule
300 3.71 1.584
to the company
Valid N (listwise) 300
Source: Survey Result, SPSS (2020)

46
The average mean for transport outsourcing question that says “The company has good and
sufficient Transport out sourcing” is 3.32 which is below 3.39 this shows that the most
respondents do not believe that there is sufficient outsourcing. Transport outsourcing questions
number two that says “Total Ethiopia current arrangement of transport ensure its fuel
distribution.” is also categorized in this class which shows low transport outsourcing that means
the arrangement did not ensure the distribution.

Transport outsourcing questions number three that says “The current condition of the company
truck availability can ensure its fuel distribution.” is also categorized in this class which shows
low transport outsourcing that means the truck did not ensure the distribution. The average mean
for transport outsourcing question four that says “The company has sufficient truck to distribute
fuel to the service station and client efficiently” is 3.36 which is below 3.39 this shows that the
most respondents believe that the company has no sufficient truck.

Among the seven means “Out sourced transport perform better in the company‟s and enhance the
fuel distribution,”, “Outsourced transportation provides on-time delivery, ” and “Outsourced
transport enhance delivery schedule to the company” questions are in moderate class those
means value is greater than 3.39 that most respondents agree that there is on time delivery .

4.4.2 Descriptive Statistics of Integration

According to Lambert and Cooper (2000 cited in Dannis & Kampton 2010) Integration is it
involves collaborative work between buyers and suppliers, joint product development, common
systems and shared information, support the idea that optimizing the product flows cannot be
accomplished without implementing a process approach to the business. Accordingly, the
respondents were asked 7 questions related to integration. The Table 4.4.2 below presents
respondents result of Integration with mean and standard deviation values for each item.

47
Table 4.4.2 Descriptive Statistics of Integration

N Mean Std.
Deviation
The company has good and effective integration 300 3.62 1.507
Integration on Information on product shortage and
300 3.56 1.224
shipment delay shared to you Promptly
There is good coordination between Total Ethiopia,
300 3.36 1.212
EPSE & Horizon Terminal Limited
Good coordination between EPSE and NPRAD
300 3.81 1.232
depot enhance the company 0n fuel distribution
Process and activity integration of Total Ethiopia on
300 3.98 1.294
placing fuel order is easy and not time taking.
Process and activity integration with NPRDA depots
location has an influence on company fuel 300 3.39 1.190
distribution to supply to customers
NPRDA depots have adequate resource to supply the
300 3.38 1.233
company requirements

Valid N (listwise) 300

Source: Survey Result, SPSS (2020)

The average mean for integration question that says “There is good coordination between Total
Ethiopia, EPSE & Horizon Terminal Limited” is 3.36 which is below 3.39 that shows most
respondents do not believe that there is no good coordination. integration related questions
number six that says “Process and activity integration with NPRDA depots location has an
influence on company fuel distribution to supply to customers.” is also categorized in this class.
And also “NPRDA depots have adequate resource to supply the company requirements” has low
mean value which indicates that there is gap in resource.

Among the seven means “The company has good and effective integration” and “integration on
Information on product shortage and shipment delay shared to you Promptly,” questions are in
moderate class those means value of 3.62 and 3.56 respectively. On the other hand, “Good
coordination between EPSE and NPRAD depot enhance the company on fuel distribution ” and
“Process and activity integration of Total Ethiopia on placing fuel order is easy and not time
taking. ” questions are in high mean value of 3.81 and 3.98 respectively.

48
 4.4.3 Descriptive Statistics of Safety Policy

Safety refers to the common beliefs, attitudes, and values surrounding safety that exist within an
organization. While there are no OSHA standards or regulations that pertain specifically to
safety culture, a strong culture of safety can offer myriad organizational benefits companies with
a strong culture of safety have integrated safety throughout their operations and view a safe
operation as a core organizational value. In order for a strong safety culture to take hold, safety
efforts must be valued and supported throughout an organization Source:
(www//safety.BLR.COM), Accordingly, the respondents were asked 7 questions related to
Safety policy. The Table 4.4.3 below presents respondents result of security policy with mean
and standard deviation values for each item.

Table 4.4.3 Descriptive Statistics of Safety Policy

N Mean Std.
Deviation
The company has good and sufficient level of
300 4.04 .769
safety procedures
The company stringent safety procedures have
300 3.54 1.222
influence on fuel distribution system
As an international company the safety procedures
300 4.09 .995
should be applied for all the stakeholders
Safety cannot be compromised to get financial and
300 4.04 1.052
market share benefit
The company safety procedures of fuel truck has
300 3.37 1.051
an influence on decreasing of no of truck
Stations are dry out stock due to shortage of truck 300 3.38 1.302
The safety culture of Total Ethiopia has good and
efficient on fuel distribution compared to other 300 3.35 1.200
petroleum company
Valid N (listwise) 300
Source: Survey Result, SPSS (2020)

49
The average mean for Safety policy question that says “The company safety procedures of fuel
truck has an influence on decreasing of no of truck” is 3.37 which is below 3.39 that shows most
respondents do not believe that there is good and efficient truck safety procedure. Safety policy
questions number six that says “stations are dry out stock due to shortage of truck.” is also
categorized in this class. And also “The safety culture of Total Ethiopia has good and efficient on
fuel distribution compared to other petroleum company” has low mean value which indicates
that there is gap in the safety culture of the company.

Among the seven means “The company stringent safety procedures have influence on fuel
distribution system” question is in moderate class with means value of 3.54 .

On the other hand , “As an international company the safety procedures should be applied for all
the stakeholders” , “The company has good and sufficient level of safety procedures” and
“Safety cannot be compromised to get financial and market share benefit” questions are in high
mean value of 4.09, 4.04 and 4.04 respectively.

4.4.4 Descriptive Statistics of Distribution Performance

According to (Cooper ,2006) Shifting business environments are causing a growing number of
IT managers to rethink how they handle distribution management. Growing dependence on
extended and diffuse partner networks, for instance, is creating new operational complexities that
have put a strain on traditional management practices IT managers are wrestling with how to
integrate distribution management operations in new geographical areas with a wide range of
systems; from ERP (enterprise resource planning) applications to inventory management and
supply chain management packages. Pulling together information from a variety of sources also
carries with it security concerns, including access control Accordingly, the respondents were
asked 5 questions related to distribution performance. The Table 4.4.4 below presents
respondents result of distribution performance with mean and standard deviation values for each
item.

50
 Table 4.4.4 Descriptive Statistics of Distribution Performance

N Mean Std.
Deviation
The distribution of fuel is
flexible enough to alter
delivery schedules 300 4.02 .918
depending on customer
demand
Total Ethiopia s.c deliver the
required amount of fuel 300 3.37 .895
timely to customer
The distribution of fuel is
dependent on availability of 300 3.81 1.011
trucks
The distribution of fuel in
the company is fair to ensure
300 3.37 1.100
product availability at all
service stations
The distribution network of
the company helps to ensure
300 3.84 1.029
fair distribution of fuel to
the service stations

Valid N (listwise) 300

Source: Survey Result, SPSS (2020)
.

The average mean for distribution performance question that says “Total Ethiopia S.C deliver the
required amount of fuel timely to customer” is 3.37 which is below 3.39 that shows most
respondents do not believe that there is a gap in on time delivery to customers. And also “The
distribution of fuel in the company is fair to ensure product availability at all service stations”
has low mean value which indicates that there is low distribution of fuel regarding to the
availability.

On the other hand, “The distribution of fuel is flexible enough to alter delivery schedules
depending on customer demand”, “The distribution of fuel is dependent on availability of trucks”

51
and “The distribution network of the company helps to ensure fair distribution of fuel to the
service stations” questions are in high mean value of 4.02, 3.81 and 3.84 respectively

4.5 Inferential Statistics

4.5.1 Correlation Analysis

A correlation is a measure of how strongly two variables relate to each other. Correlation
coefficients are frequently used to describe data because they are relatively easy to use and
provide a great deal of information in just a single value (Akroush, N. (2003).

Karl Pearson‟s coefficient of correlation or simple correlation is the most widely used Method of
measuring the degree of relationship between two variables (Kothari, 2004). The calculated
value of the correlation coefficient ranges from -1 to 1, where -1 indicates a perfect negative
relation (the relationship is perfectly linear) and 1 indicates a perfectly positive relationship. A
correlation coefficient of 0 indicates that there is no correlation Akroush, N. (2003).
Correlations
TRO LI SP DP
Pearson
1 .312** .588** .623**
Correlation
TRO
Sig. (2-tailed) .000 .000 .000
N 300 300 300 300
Pearson
.312** 1 .432** .549**
Correlation
LI
Sig. (2-tailed) .000 .000 .000
N 300 300 300 300
Pearson
.588** .432** 1 .689**
Correlation
SP
Sig. (2-tailed) .000 .000 .000
N 300 300 300 300
Pearson
.623** .549** .689** 1
Correlation
DP
Sig. (2-tailed) .000 .000 .000
N 300 300 300 300
**. Correlation is significant at the 0.01 level (2-tailed).
Source: Survey Result, SPSS (2020)

52
The table shows the Pearson correlation result with its significant level. When we see the
correlation of Transport Outsourcing with Distribution Performance it has a significant positive
Pearson correlation of 0.623 at 0.01 level of confidence interval. With regard to Integration it has
a significant positive Pearson correlation of 0.549 at 0.01 level of confidence interval. The third
variable which is Safety Policy has a significant Pearson correlation of 0.689 at 0.01 level of
confidence interval. This implies that transport outsourcing, Integration and
Safety policy are the factors that are directly and positively impacting the distribution
performance and the extent of impact is also great as the indicates a significant person
correlation coefficients of 0.623, 0.549 and 0.689 for transport outsourcing, integration and
Safety policy respectively implying that the factors under consideration are significant in
affecting the firms distribution performance.

4.6 Test for Linear Regression Model Assumptions

4.6.1 Normality Assumption

Normality of distribution can be tested by using histogram with a normal curve. As shown in the
Figures from the Appendixes 3 and 4 residuals were normally distributed around its mean of zero
which indicates that the data were normally distributed and it was consistent with a normal
distribution assumption. As the figures confirmed the normality assumption of the data, this
implies that the inferences made about the population parameters from the sample statistics tend
to be valid.

Descriptive Statistics
N Skewness Kurtosis
Statistic Statistic Std. Statistic Std.
Error Error
TRO 300 .041 .141 -1.103 .281
LI 300 -.337 .141 -.908 .281
SP 300 .256 .141 -1.111 .281
DP 300 -.492 .141 .105 .281
Valid N (listwise) 300
Source: Survey Result, SPSS (2020)

53
According to Yi ( 1988) one of the first thing that should be taken care of before proceeding in to
the main part of the analysis, is to check whether the data are normally distributed or not. For this
checking, Yi (1988) suggests that, the standardized skewness distribution result and Kurtosis
result must be between the ranges of +- 2.58. According to the above table, both the standardized
skewness and kurtosis results fall in the given range. So this was a good signal to start with the
subsequent analyses since the data are normally distributed (see the detail graphical presentation
in Appendix).

4.6.2 Checking for Linearity

The linearity of the relationship between the dependent and independent variable represented the
degree to which the change in the dependent variable is associated with the independent variable
(Hair et al., 1998). In a simple sense, linear models predict values falling in a straight line by
having a constant unit change (slope) of the dependent variable for a constant unit change of the
independent variable (Hair et al., 1998). The regression model can be expressed in a linear way.
Checking the linearity between y and x variables can be done by plotting the independent
variables against the dependent variable Akroush, N. (2003) (see Appendix 4).

4.6.3 Assumption of Homoscedasticity

The variability in scores for independent variables should be similar at all values of the
dependent variable. The scatter plot should show a fairly even rectangular shape along its length.
There should be homoscedasticity before running multiple regression analysis. This means that
the residuals (the differences between the values of the observed and predicted dependent
variable) are normally distributed, and that the residuals have constant variance .Which indicates
the assumption of Homoscedasticity was met (see Appendix 5).

4.6.4 Testing Multicollinearity

Multicollinearity refers to the situation in which the independent variables are highly correlated.
When the independent variables are multi-co linearity, there is overlap or sharing of predictive
power. When the predictor variables are correlated among themselves, the unique contribution of
each predictor variable is difficult to assess. One should check for the problem of
multicollinearity which is present if there are high correlations between some of the independent

54
variables. The study checks this with the Variance Inflation Factor (VIF) which calculates the
influence of correlations among independent variables on the precision of regression estimates.
The VIF factor should not exceed 10, and should ideally be close to one. Tolerance is an
indicator of how much of the variability of the specified independent variable is not explained by
the other independent variables in the model and is calculated using the formula 1–R2 for each
variable. If this value is very small (less than 0.10), it indicates that the multiple correlation with
other variables is high, suggesting the possibility of multicollinearity.
Coefficientsa
Model Collinearity
Statistics
Tolerance VIF
TRO .650 1.538
1 LI .808 1.238
SP .586 1.707
a. Dependent Variable: DP
Source: Survey Result, SPSS (2020)

As can be seen from table 4.2.2.2 above, regarding this study the tolerance level of all
independent variables are greater than 0.1 and the VIF value of all the independent variables are
also less than 10. This confirms the absence of multicollinearity.

4.7 Regression Analysis

4.7.1 Multiple Regressions

In its simplest form, regression analysis allows market researchers to analyse relationships
between one independent and one dependent variable. In marketing applications, the dependent
variable is usually the outcome we care about, while the independent variables are the
instruments we have to achieve those outcomes with. Distribution Performance was used as the
dependent variable while (transport outsourcing, integration and Safety policy) were used as the
independent variables.

55
Table 4.7.1 Model Summary

Model Summary
Mode R R Square Adjusted R Std. Error of
l Square the Estimate
1 .783a .614 .610 .46422
a. Predictors: (Constant), SP, LI, TRO
Source: Survey Result, SPSS (2020)

The model summary table shows an Adjusted R-Square value is 0.610 which means that 61.0%
of the distribution performance was explained by the variation of the three variables. Namely
(Transport outsourcing, integration and Safety policy) In other words, this means that 39.0% of
the dependent variable i.e. distribution performance cannot be explained by these the three
variables and that there must be other variables that have an influence on the outcome.

Table 4.7.2 ANOVA Analysis

ANOVAa
Model Sum of df Mean F Sig.
Squares Square
Regression 101.356 3 33.785 156.779 .000b
1 Residual 63.787 296 .215
Total 165.143 299
a. Dependent Variable: DP
b. Predictors: (Constant), SP, LI, TRO
Source: Survey Result, SPSS (2020)

From the ANOVA table, it is possible to see the overall significant of the model. The mean
squares can be calculated by dividing the sums of squares by the associated degrees of freedom.
F-ratio is a test of the null hypothesis that the regression coefficients are all equal to zero. The
table shows that the F-value (156.779) is significant at 0.01 level of significant (P value that
corresponds to F statistics is significant). The result of the study indicated that regression model
significantly predicts distribution performance of the Total Ethiopia S.C.

56
Table 4.7.3 Coefficient Matrix
Coefficientsa
Model Unstandardized Standardized T Sig.
Coefficients Coefficients
B Std. Error Beta
(Constant) .393 .155 2.535 .012
TRO .277 .040 .308 6.868 .000
1
LI .264 .037 .286 7.128 .000
SP .370 .045 .384 8.142 .000
a. Dependent Variable: DP
Source: Survey Result, SPSS (2020)

The table below shows the constant, beta, and significance level of each variable. It indicates that
the three variable which are Transportation Outsourcing, integration and Safety policy influence
Distribution Performance significantly at 95% confidence interval with a sig. level of 0.000,
0.000, and 0.000 respectively.

The regression model of this study can now be properly written in an equation as follows:

Y1 = 0.393 + 0.277X1 + 0.264X2 + 0.370X3+ 0.05.

The regression model from table 4.3.3 above result shows that keeping other variables constant,
a one unit increase in Transportation Outsourcing will bring a 0.277 unit increase in Distribution
Performance, a one unit increase in Integration will bring a 0.264 unit increase in Distribution
Performance and a one unit increase in Safety Policy will bring a 0.370 unit increase Distribution
Performance.

4.8 Hypothesis Testing and Interpretation of Results

Hypothesis Result Reason

H1: Transport Outsourcing has a positive and significant Accepted β=0.277,
effect on the distribution performance of Total Ethiopia S.C. p<0.05
H2: Integration has a positive and significant effect on the Accepted β = 0.264,
distribution performance of Total Ethiopia S.C. p<0.05
H3: Safety Policy has a positive and significant effect on the Accepted β =0.370,
distribution performance of Total Ethiopia S.C. p<0.05

57
Hypotheses (H1)

Transport Outsourcing has a positive and significant effect on the distribution performance of
Total Ethiopia S.C. Transport Outsourcing has a positive and significant effect on the distribution
performance of the company. As observed from correlation matrix table 4.2.1 transport
outsourcing and distribution performance of the company were positively correlated with
correlation coefficient of 0.623 significant at p-value equal to zero. Provided that accept alternative
hypothesis H1. According to (Teeceet al. 1997). Transport outsourcing Managing companies in this
increasingly demanding environment has made many firms to look for logistics service provider.
They are used for many logistics functions, such as transport or warehousing. Logistics activity
(purchasing, warehousing, transport and distribution, inventory management) can be realized more
efficient than by manufacturing companies. The source of competitive advantage is the capability to
adapt, integrate, and reconfigure internal and external organizational skills, resources, and functional
competences to match the requirements of a changing environment In addition to this transport
outsourcing has positive and significant effect on distribution performance. The result of correlation
of the above researcher are related with my research hypothesis. Accordingly, increasing transport
outsourcing of the company will increase distribution performance.

Hypotheses (H2)

Integration has a positive and significant effect on the distribution performance of Total Ethiopia
S.C. Integration has a positive and significant effect on the distribution performance of the
company. As observed `from correlation matrix table 4.2.1 Integration and distribution
performance of the company were positively correlated with correlation coefficient of 0.549
significant at p-value equal to zero. Provided that accept alternative hypothesis H2. According to
Lambert and Cooper (2000 cited in Dannis & Kampton 2010) Integration is it involves collaborative
work between buyers and suppliers, joint product development, common systems and shared
information .support the idea that optimizing the product flows cannot be accomplished without
implementing a process approach to the business The result of correlation of the above researches are
related with my research hypothesis. Accordingly, increasing integration of the company will
increase distribution performance.

58
Hypotheses (H3)

Safety policy has a positive and significant effect on the distribution performance of Total
Ethiopia S.C. Safety policy has a positive and significant effect on the distribution performance of
the company. As observed from correlation matrix table 4.2.1 Safety policy and distribution
performance of the company were positively correlated with correlation coefficient of 0.689
significant at p-value equal to zero. Provided that accept alternative hypothesis H3. Safety refers to
the common beliefs, attitudes, and values surrounding safety that exist within an organization.
While there are no OSHA standards or regulations that pertain specifically to safety culture, a
strong culture of safety can offer myriad organizational benefits companies with a strong culture
of safety have integrated safety throughout their operations and view a safe operation as a core
organizational value. In order for a strong safety culture to take hold, safety efforts must be
valued and supported throughout an organization Source: (www//safety.BLR.COM), The result
of correlation of the above researches are related with my research hypothesis. Accordingly,
increasing creating awareness on Safety policy of the company will increase distribution
performance.

59
 CHAPTER FIVE

5. SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 Introduction

This chapter is based on the analysis and interpretation given in chapter four. Sequel to
presentation of data, summary, conclusions, recommendations and highlighting future research
areas.

5.2 Summary of Finding

Based on the analysis and interpretation of data in chapter four of this research work, the
following summary of findings was made:

 The correlation results indicate that, there is positive and substantial relationship between
transport outsourcing and distribution performance (r = 0.623, < 0.01), safety policy and
distribution performance (r = 0.689, P < 0.01) and Integration and distribution
performance (r = 0.549, p < 0.01).

 The effect of each independent variable on distribution performance service are, 0.277,
0.264, 0.370 respectively. In general distribution performance is primarily predicted by
higher level of safety policy and transport outsourcing, and to a lesser extent by
Integration in Total Ethiopia S.C.

 Independent variables (Transport outsourcing, Integration and Safety Policy) have a

positive and significant impact in the company distribution performance. As a result, the
hypothesis drawn at the beginning stating that transport outsourcing, Integration and
Safety policy had a positive influence on distribution performance has been accepted.

 Finally, from the regression model drawn we have seen that the independent variables
explain the dependent variable with a percentage of 61.0% of the variance in distribution
performance and the remaining 39.0 % is explained by extraneous variables.

60
 5.3 Conclusion

The main purpose of the study was to assess factors influencing fuel distribution performance in
the case of Total Ethiopia S.C. Questionnaire were distributed to customers of Total Ethiopia S.C.

The result of correlation between dependent and independent variables shows, there is positive
correlation. Transport outsourcing, Integration and safety policy are positively and significantly
correlated with distribution performance. From the result, the highest positive correlation exists
in safety policy followed by transport outsourcing and integration. The other issue is test of
significance which indicates the level of significance effect of one independent variable to the
dependent variable. As a result, all independent variables are significant effect on the dependent
variable.

Based on the data analysis the entire hypotheses were tested all stated variables have a
significant effect and an impact on distribution performance so the hypotheses are accepted. The
output of multiple linear regression indicates that the variation in the distribution performance
Total Ethiopia S.C is explained by the independent variables such as transport outsourcing,
integration and safety policy.

61
 5.4 Recommendation

Based on the results of the analysis and conclusion made the following recommendations are
forwarded by the researcher.

From items of transport outsourcing total Ethiopia has good and sufficient Transport out
sourcing which is below 3.39 this shows that the most respondents do not believe that there is
sufficient outsourcing. So The company should provide sufficient Transport out sourcing in
order to solve the problem. Total Ethiopia current arrangement of transport ensure its fuel
distribution is also categorized in this class which shows the arrangement did not ensure the
distribution. so the company should improve the current arrangement of transport. And also
current condition of the company truck availability can ensure its fuel distribution score low
mean. In order to improve this problem, the company should improve truck availability to
distribute fuel to the service station and client efficiently in order to ensure the fuel distribution.

From items of integration related There is good coordination between Total Ethiopia, EPSE &
Horizon Terminal Limited, Process and activity integration with NPRDA depots location has an
influence on company fuel distribution to supply to customers, NPRDA depots have adequate
resource to supply the company requirements scored low mean value so the company should
create good coordination between Total Ethiopia, EPSE & Horizon Terminal Limited in order to
ensure the distribution. Process and activity integration with NPRDA depots location has an
influence on company fuel distribution to supply to customers. NPRDA should have adequate
resource to supply the company requirements.

From items of safety policy, the company safety procedures of fuel truck have an influence on
decreasing of no of truck, stations are dry out stock due to shortage of truck, The safety culture
of Total Ethiopia has good and efficient on fuel distribution compared to other petroleum
company has low mean value which indicates that there is gap in the safety culture of the
company. In order to solve this problem, the company should improve the fleet size of truck,
increase the number of the truck to decrease dry out of stocks on the service station, hardly work
in creating awareness on the safety culture of Total Ethiopia in order to competitive to other
petroleum companies.

62
From items of distribution performance Total Ethiopia S.C deliver the required amount of fuel
timely to customer, The distribution of fuel in the company is fair to ensure product availability
at all service stations scored low mean value which indicates that there is low distribution of fuel
regarding to the availability so the company should deliver the required amount of fuel timely to
customer in order to increase performance and The distribution of fuel in the company is needed
to be fair to ensure product availability at all service stations.

5.5 Limitation of the study

This study has some limitation:

First, the study was focused mainly on the network retail service station and partially on Addis
Ababa service station‟ point of views due to some constraints. The opinion of up country service
station was not incorporated. It is very important to consider opinion up country service station
for further research.

Secondly, the research was limited to Total Ethiopia S.C not included other domestic fuel
company‟s in Ethiopia. Hence, the research findings may not be generalized to the entire Fuel
industry in Ethiopia. There by it is recommended for further research to incorporate the private
and other organization to expand the scope and acceptance of determinants factors influencing
distribution performance of different industries in fuel sectors in Ethiopia as well.

5.6 Area for Further Study

It would also be interesting to expand this study to other petroleum companies. In addition, there
is a need to study additional factors other than considered in this study in an organization`s
context that influence distribution performance. Again it would be very interesting to expand this
study by considering sample respondents other than indicated in this study and applying the
respective analysis technique for that matter weather for the same business indicated in this study
or some other business.

63
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Internet Documents

(www.totalethiopia.com)

(www//safety.BLR.COM)

71
 APPENDICES

St. Mary’s University College

School of Business

Department of Marketing Management

Dear respondent,

My name is samrawit Kassa.I am currently conducting a research as part of a partial fulfillment

of the requirements for the degree of Masters in Marketing Management.The purpose of the
research is Assessing on factors infulncing fuel distribution performance in the case of Total
Ethiopia S.C. All information obtained will be used for academic purpose only. Hence be
assured that your responses will not be revealed to anyone. Please answer all the questions as
they are vital for the success of this research

Your co-operation and assistance will be highly appreciated. If you need any clarification or
information: Mob.0911-23-68-69 [email protected]

Part I General information

Instruction: Please put Mark “√” before your Choice for Each Question.

1. Age:

18- 30 31- 43 4 44-56 57 and above

2. Gender:

Female Male

3. Highest educational level obtained:

Primary education Secondary education

Diploma First Degree Master‟s and above

4. What is your occupation?

Government Employee Private Employee NGO

Self-Employed

72
5. How often do you use Total Ethiopia product?
Daily Weekly Monthly Occasional
Part Two: Statement of Survey
 Transport outsourcing related question
Direction: Please indicate your degree of agreement/disagreement with the following statements
by circling the appropriate number. (1-Strongly disagree; 2-Disagree; 3- Neutral; 4-Agree and 5-
Strongly agree) Key: TO=Transport outsourcing, LI=Lack of integration, SP= Safety policy
DP=Distribution performance

Strongly Dis
Code Questions Neutral Agree Strongly
Disagree Agree
Agree

1 2 3 4 5

The company has good and sufficient

TO1
Transport out sourcing

Total Ethiopia current arrangement of

TO2
transport ensure its fuel distribution

The current condition of the company truck

TO3
availability can ensure its fuel distribution

The company has sufficient truck to distribute

TO4
fuel to the service station and client efficiently

Out sourced transport perform better in the

TO5
company‟s and enhance the fuel distribution

Outsourced transportation provides on-time

TO6
delivery

Outsourced transport enhance delivery

TO7 schedule to the company

73
Part Three: Statement of Survey

 Integration Related question

Strongly Dis
Code Questions Neutral Agree Strongly
Disagree Agree
Agree

1 2 3 4 5

LI1 The company has good and effective

integration

integration on Information on product

LI2 shortage and shipment delay shared to you
Promptly

There is good coordination between Total

LI3 Ethiopia, EPSE & Horizon Terminal Limited

Good coordination between EPSE and

LI4 NPRAD depot enhance the company 0n fuel
distribution

Process and activity integration of Total

Ethiopia on placing fuel order is easy and not
LI5 time taking.

Process and activity integration with NPRDA

depots location has an influence on company
LI6
fuel distribution to supply to customers

NPRDA depots have adequate resource to

LI7 supply
the company requirement

74
Part Four: Statement of Survey
 Safety policy Related question

Strongly Dis
Code Questions Neutral Agree Strongly
Disagree Agree
Agree

1 2 3 4 5

The company has good and sufficient level of

SP1
safety procedures

The company stringent safety procedures have

SP2
influence on fuel distribution system

As an international company the safety

SP3 procedures should be applied for all the
stakeholders

Safety cannot be compromised to get financial

SP4
and market share benefit

The company safety procedures of fuel truck

SP5
has an influence on decreasing of no of truck

stations are dry out stock due to shortage of

SP6
truck

The safety culture of Total Ethiopia has good

SP7
and efficient on fuel distribution compared to
other petroleum company

75
Part Five: Statement of Survey

 Distribution Performance related questions

Strongly Dis
Code Questions Neutral Agree Strongly
Disagree Agree
Agree

1 2 3 4 5

The distribution of fuel is flexible enough to

DP1 alter delivery schedules depending on
customer demand

Total Ethiopia s.c deliver the required amount

DP2
of fuel timely to customer

The distribution of fuel is dependent on

DP3
availability of trucks

The distribution of fuel in the company is fair

DP4 to ensure product availability at all service
stations

The distribution network of the company

DP5 helps to ensure fair distribution of fuel to the
service stations

76
 ቅድስተ ማርያም ዩኒቨርስቲ ኮላጅ

ስኩሌ ኦፍ ቢዝነስ

የማርኬቲንግ ማኔጅመንት ትምህርት ክፍሌ

ሇተከበሩ መሌስ ሰጪ

ሳምራዊት ካሳ እባሊሇሁ፡፡ በቅድስተ ማርያም ኮላጅ የድህረ ምረቃ ተማሪ ስሆን በአሁኑ ጊዜ በማርኬቲንግ ማኔጅመንት
ሇሁሇተኛ ዱግሪ የመመረቂያ ጽኁፍ ማሟያ ጥናት በማድረግ ሊይ እገኛሇሁ፡፡ የዚህ ጥናት አሊማ ቶታሌ ኢትዮጵያ አ.ማ
የሚሰጠው የነዲጅ ስርጭት አገሌግልት ሊይ ተጽእኖ የሚፈጥሩ ተግዲሮቶችን ሇይቶ መተንተን ነው፡፡ ሇዚህ ጥናት አሊማ
የሚሰበሰቡ መረጃዎች በሙለ ሇትምህርታዊ አሊማ ብቻ የሚውለ ስሇሆነ የሚሰጡት ምሊሽ ምስጢራዊነት የተጠበቀ ነው፤
ሇላሊ ወገን አይገሇጽም፡፡ ስሇሆነም የእርስዎ መሌስ ሇጥናቱ አሊማ መሳካት ከፍተኛ ሚና አሇው፡፡

ሇሚዯረግሌኝ ቀና ትብብር ከወዱሁ የሊቀ ምስጋናዬን እያቀረብኩ ተጨማሪ መረጃ ወይም ማብራሪያ ከፈሇጉ በስሌክ ቁጥር
0911-23-68-69 ወይም [email protected] ሉያገኙኝ ይችሊለ፡፡

ክፍሌ I ጠቅሊሊ መረጃ

መመሪያ: እባክዎን ሇእያንዲንደ የመረጡት መሌስ ሊይ የ“√” ምሌክት ያድርጉ

2. እድሜ:
18- 30 31- 43 44-56 57 እና ከዚያ በሊይ

2. ጾታ:

ሴት ወንድ

3. የትምህርት ዯረጃ:

የመጀመሪያ ዯረጃ ሁሇተኛ ዯረጃ

ዱፕልማ የመጀመሪያ ዱግሪ ሁሇተኛ ዱግሪ እና ከዚያ በሊይ

4. ስራ/ሙያ?

የመንግስት ሰራተኛ የግል ሰራተኛ መ.ያ.ድ (NGO)

የግል ሙያ

77
5. የቶታሌ ኢትዮጵያ ምርቶችን በምን ያህሌ ጊዜ ይጠቀማለ?

በየእሇቱ በየሳምንቱ በየወሩ አሌፎ አሌፎ

ክፍሌ ሁሇት : የጥናቱ ሐሳብ መግሇጫ

 ከትራንስፖርት አገሌግልት አቅርቦት ጋር ተያያዥነት ያሊቸው ጥያቄዎች

መመሪያ: እባክዎን ከታች በተመሇከቱት ዓረፍተነገሮች ውስጥ በትክክሌ አመሇካከትዎን ወይም ሐሳብዎን የሚገሌጽ አማራጭ
ሊይ ያክብቡ፡፡(1-በጣም አሌስማማም; 2-አሌስማማም; 3-ገሇሌተኛ; 4-እስማማሇሁ እና 5-በጣም እስማማሇሁ) ቁሌፍ
ሐሳቦች: TO= ትራንስፖርት አውትሶርሲንግ/የመጓጓዣ አገሌግልት አቅራቢዎች፣ LI= የቅንጅት እጥረት፣ SP= የዯህንነት
ፖሉሲ ፣ DP= የስርጭት አፈጻጸም

-በጣም በጣም
ኮድ ጥያቄዎች አሌስማማም ገሇሌተኛ እስማማሇሁ
አሌስማማም እስማማሇሁ

1 2 3 4 5

ኩባንያው ጥሩ እና በቂ የትራንስፖርት አገሌግልት

TO1
አቅራቢዎች/ሰጪዎች አለት

የቶታሌ ኢትዮጵያ ወቅታዊ የትራንስፖርት ስምሪት

TO2
የነዲጅ ስርጭትን አስተማማኝነት የሚያረጋግጥ ነው

ኩባንያው በአሁኑ ጊዜ ያሇው የነዲጅ ጫኝ ቦቴዎች

TO3 አቅርቦት አስተማማኝ የነዲጅ ስርጭትን
የሚያረጋግጥ ነው

ኩባንያው ሇነዲጅ ማዱያዎች እና ሇዯንበኞቹ የነዲጅ

TO4 ስርጭት አገሌግልትን በተቀሊጠፈ ሁኔታ ሇመስጠት
በቂ ነዲጅ ጫኝ ተሽከርካሪዎች አለት

የትራንስፖርት አገሌግልት ሰጪዎች ኩባንያው

TO5 የነዲጅ ስርጭት አገሌግልቱን በተሻሇ ሁኔታ
እንዱሰጥ እያስቻለት ነው

የትራንስፖርት አገሌግልት ሰጪዎች የነዲጅ

TO6 አቅርቦትን በተፈሇገበት ትክክሇኛ ጊዜ ማድረስ
ይችሊለ

የትራንስፖርት አገሌግልት ሰጪዎች ኩባንያው ነዲጅ

TO7
በሰዓቱ ሇተጠቃሚዎች እንዱያዯርስ ያስችለታሌ

78
ክፍሌ ሶስት: የጥናቱ ሐሳብ መግሇጫ

 ከቅንጅት አሰራር ጋር ተያያዥነት ያሊቸው ጥያቄዎች

-በጣም በጣም
ኮድ ጥያቄዎች አሌስማማም ገሇሌተኛ እስማማሇሁ
አሌስማማም እስማማሇሁ

1 2 3 4 5

LI1 የኩባንያው የአሰራር ቅንጅት ጥሩ እና ውጤታማ ነው

የምርት እጥረት እና የነዲጅ ጭነት መዘግየትን/በጊዜው

LI2 አሇመድረስ መረጃዎች በፍጥነት ሇኩባንያው
ይዯርሳለ

በቶታሌ ኢትዮጵያ አክስዮን ማሕበር ፣ የኢትዮጵያ

የነዲጅ አቅራቢ ድርጅት እና ሆራይዘን ተርሚናሌ
LI3
ሉሚትድ መካከሌ ጥሩ እና ውጤታማ የአሰራር
ቅንጅት አሇ

የኢትዮጵያ ነዲጅ አቅራቢ ድርጅት እና ብሔራዊ

የመጠባበቂያ ነዲጅ ክምችት ዱፖ ድርጅት መካከሌ
LI4
ጥሩ የአሰራር ቅንጅት መኖሩ ሇኪባንያው የነዲጅ
ስርጭቱን ውጤታማ ያዯርገዋሌ

የቶታሌ ኢትዮጰያ የነዲጅ ትእዛዞችን

LI5 የሚያስተናግድበት የቅንጅት አሰራር ፋጣን እና
ቀሌጣፋ ነው

የብሔራዊ የመጠባበቂያ ነዲጅ ክምችት ዱፖ ያሇበት

LI6 ቦታ ኩባንያው ሇዯንበኞቹ የሚያቀርበው የነዲጅ
አቅርቦት እና ስርጭት አገሌግልት ሊይ ተጽእኖ አሇው

የብሄራዊ የመጠባበቂያ ነዲጅ ክምችት ዱፖዎች

LI7 ሇኩባንያው የነዲጅ ፍሊጎትን ሇማማሊት የሚያስችለ
በቂ ግብአቶች አለት

79
 ክፍሌ አራት፡ የጥናቱ ሐሳብ መግሇጫ

 የዯህንነት/ሴፍቲ ፖሉሲ ጋር ተያያዥነት ያሊቸው ጥያቄዎች

-በጣም በጣም
ኮድ ጥያቄዎች አሌስማማም ገሇሌተኛ እስማማሇሁ
አሌስማማም እስማማሇሁ

1 2 3 4 5

ኩባንያው የሚተገብራቸው የዯህንነት/ሴፍቲ ፖሉሲ ጥሩ እና

SP1 አስተማማኝ ነው

ኩባንያው የሚከተሇው ጥብቅ የሆነ የዯህንነት/ሴፍቲ

SP2 ፖሉሲዎች የነዲጅ ስርጭቱ ሊይ ተፅእኖ አሇው

ቶታሌ አሇምአቀፍ ኩባንያ እንዯመሆኑ መጠን ኩባንያው

SP3 የሚከተሊቸው የዯህንነት/ሴፍቲ ፖሉሲዎች በሁለም
ባሇድርሻዎች ሊይ ተፈጻሚነት ሉኖረው ይገባሌ

ከዯህንነት/ሴፍቲ ጋር ተያያዥነት ያሊቸው ጉዲዮች ከገንዘብ

SP4 ጥቅም ወይም ከገበያ ድርሻ ጉዲዮች ጋር ሇድርድር ሉቀርብ
አይገባም

ኩባንያው የሚከተሊቸው/የሚተገብራቸው የዯህንነት/ሴፍቲ

ፖሉሲ መስፈርቶች የትራንስፖርት አገሌግልት ሉሰጡ
SP5 የሚችለ ነዲጅ ጫኝ ቦቴዎች ቁጥር እንዱቀነስ አስተዋጽኦ
አድርጓሌ

በነዲጅ ጫኝ ቦቴዎች እጥረት ምክንያት የነዲጅ ማድያዎች

SP6 ባዶ እንዱሆኑ እና ምንምአይነት የነዲጅ ክምችት
እንዲይኖራቸው አስተዋጽኦ አድርጓሌ

ከላልች ኩባንያዎች በተሇየ ሁኔታ የቶታሌ ኢትዮጵያ

የሚከተሊቸው እና የሚተገብራቸው ሇተጠቃሚዎች የተሻሇ
SP7 አገሌግልት እና የነዲጅ የዯህንነት/ሴፍቲ ፖሉሲዎች ስርጭት
እንዱያቀርብ አስችልታሌ

80
ክፍሌ አምስት፡ የጥናቱ ሐሳብ መግሇጫ

 ከነዲጅ ስርጭት ሒዯት ጋር ተያያዥነት ያሊቸው ጥያቄዎች

-በጣም በጣም
ኮድ ጥያቄዎች አሌስማማም ገሇሌተኛ እስማማሇሁ
አሌስማማም እስማማሇሁ

1 2 3 4 5

በዯንበኞች ፋሊጎት ሊይ በመመርኮዝ የነዲጅ

DP1
አቅርቦት ስርጭት ተሇዋዋጭ ነው

ቶታሌ ኢትዮጵያ አክስዮን ማህበር ተጠቃሚዎች

DP2 የሚፈሌጉትን የነዲጅ መጠን በተፈሇገው ሰዓት
ማቅረብ ይችሊሌ

የነዲጅ ስርጭት የነዲጅ ጫኝ ቦቴዎች አቅርቦት ሊይ

DP3
የተመሰረተ ነው

ኩባንያው የሚከተሇው የነዲጅ ስርጭት አሰራር

DP4 በሁለም የነዲጅ ማድያዎች በቂ የምርት አቅርቦት
እንዱኖር የሚያስችሌ ነው

የኩባንያው የነዲጅ ስርጭት ኔትወርክ/ትስስር

DP5 ሁለም የነዲጅ ማድያዎች በቂ ምርት እንዱኖራቸው
የሚያስችሌ ነው

81
APPENDIX 2: Reliability Statistics and Tests

Scale: Transport Outsourcing Reliability Statistics

Case Processing Summary

N %

Valid 300 100.0

Cases Excludeda 0 .0

Total 300 100.0

a. Listwise deletion based on all variables in the

procedure.

Reliability Statistics
Cronbach's Alpha N of Items

.833 7

Scale: Integration Reliability Statistics

Case Processing Summary

N %

Valid 300 100.0

Cases Excludeda 0 .0
Total 300 100.0

a. Listwise deletion based on all variables in the

procedure.

Reliability Statistics
Cronbach's Alpha N of Items

.749 7

82
Scale: Safety Policy Reliability Statistics

Case Processing Summary

N %

Valid 300 100.0

Cases Excludeda 0 .0

Total 300 100.0

a. Listwise deletion based on all variables in the

procedure.

Reliability Statistics
Cronbach's Alpha N of Items

.830 7

Scale: Distribution Performance Reliability Statistics

Case Processing Summary

N %

Valid 300 100.0

Cases Excludeda 0 .0

Total 300 100.0

a. Listwise deletion based on all variables in the

procedure.

Reliability Statistics
Cronbach's Alpha N of Items

.803 5

83
APPENDIX 3: Histogram for Normality Test of the Data

84
APPENDIX 4: Normal P- P Plot to Test Normality of the Data

85
APPENDIX 5: Homoscedasticity Test

86