CHAPTER ONE

GENERAL INTRODUCTION

1.1. Background of the Study

The study is about the effects of physical distribution on customer service level. Physical distribution is the transporting, storing and handling of goods to match customer’s needs, Kotler (2005). Physical distribution refers to the activities used to move finished goods from manufactures to final consumers including order processing, warehousing, material handling and inventory control, Michael R. (2003). According to Boon and Kurtz (2003) “physical distribution 1s an organized group of components linked according to a plan for achieving specific objectives.

 with the components of customer service, transportation, inventory control that is how much inventory a firm should maintain at each location, protective packaging and material handling that is how the firm can efficiently handle goods in the factory, warehouse and transport terminals, order processing, warehousing that is where the distribution system will locate stock of goods, the number of warehouses the firm should maintain”. Rodrigue and Hosse defines physical distribution as ” physical distribution includes all the functions of movement and handling of goods, particularly transportation services (trucking, freight rail, air freight, inland waterways, marine shipping and pipelines), transshipment and warehousing services, trade, wholesale and in principle, retail”.

Physical distribution is significant in a dynamic global market characterized by intensifying competition because to achieve comparative advantage, producers are required to shift the company’s focus to that of customer prospective with servicing the need of downstream channel members (claycomb, Dròge and Germain, 1999). The Practices of Just-in-time over the last 30years companies seek to attain and sustain competitive advantages (Fullerton, 2003). With the idea of Just-in-time in physical distribution, it will ensure customers satisfaction and their reliability as well.

 According to McGraw (2005), “customer service level on the other hand refers to how rapidly and dependably a firm can deliver what its customers want”.

A significant percentage of the African population resides in rural areas. Subsequently, a larger proportion of the market activity happens through street hawkers, vendors, and mom and pop shops. Approximately 80% – 90% of the retail market is informal (Hugo 2016:2; Meacham et al. 2012:4). This is a big adjustment for a multinational organization    , which predominately operates through formal structures. Companies such as Unilever, Coca-Cola and third-party logistics (3PL) providers like DHL have had to establish unique ways of distributing their products. For example, DHL has an unusual distribution model in which they collaborate with laundromats and travel agencies to distribute products (Hugo 2016:13). Distributing products in the informal market through a seller with a backpack or bicycle is a norm in Nigeria (Vögel 2014). To operate successfully, an organization needs to understand the differences in market nuances, unlike a market such as India or China, where organizations could access a sizeable market with the same market dynamics, mostly because of higher population levels (Vögel 2014). Despite the commonalities that exist in these markets, it is essential to understand the degree of their differences.

In Cameroon, the North West Cooperative Association limited (NWCA) Bamenda organization was formed in 1950 with a single Cooperative Society.  The number increased in 1953 to five and was called the Bamenda Provincial Cooperative Produce Marketing Union. It continued evolving until 1978 when the North West Cooperative Association Limited was formed with eleven Affiliated Unions involving over thirty-five-thousand farmers producing mainly coffee among other crops for export. After the restructuring of the Organization in 2005, the structure now has 7 Unions and 43 primary Societies and the main activity remains the collection, processing and marketing of coffee and cocoa. NWCA Ltd recently complied with the requirements of OHADA by revising its bye – laws and that of its tiers. WWW.nwcaonline.com   

North West Cooperative Association limited (NWCA) was under the control of the Government until 1992 when it obtained full autonomy under the liberalization process. NWCA has over 20 years’ experience in coffee exportation. Historically, NWCA Ltd was used to producing 11,000 tons of Arabica annually. However, with the fall of commodities prices in the eighties and with the subsequent fall of the national coffee sinking fund; production in the area has dropped considerably. Today NWCA has a capacity of 5,000 tons of Arabica and 1,000 tons of Robusta coffee. We estimate that in 2 years’ time we will record a two digits’ yearly growth rate in coffee production and a significant diversification into other activities based on the renewed interest with support from the authorities on the one hand and the push through the present strategic development plan. The coffee and cocoa production is carried out on the rich and fertile soils of the Volcanic Mountains (1,200 – 2,200 m above sea level) of the North West Region of Cameroon, which is generally favored by good climatic conditions of the Region. www.nwcaonline.com.  

The main activity of NWCA Ltd is the Production, Collection, Processing (Hulling) and Marketing of Members’ Produce to both local and international markets at the best possible prices. About 85% of NWCA Ltd Coffee is sold to the international market (with buyers mainly from Europe) and 15% is sold locally. The North West Cooperative Association (NWCA) Ltd. It’s made up of 13 unions which includes Awing, Bali, Bamenda, Belo, Donga Mantung, Fundong, Momo, Ndop, Njinikom, Noni, Nso, Oku and Santa/pinyin. From CIREX. (20015-2019) “five-year strategic development plan”. international consulting service.