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THE EFFECTS OF SELECTED MANAGEMENT SCIENCE TOOLS ON PERFORMANCE

OF TRANSPORT AND LOGISTICS SERVICE COMPANIES: A COMPARATIVE STUDY OF


DHL, G4S AND WELLS FARGO IN NAKURU MUNICIPALITY

OCHIENG JARED OPONDO

C12/60275/09

..

A RESEARCH PROPOSAL SUBMITTED IN PARTIAL FULFILLMENT OF THE


REQUIREMENTS FOR THE AWARD OF BACHELOR OF COMMERCE DEGREE IN
MANAGEMENT SCIENCE IN EGERTON UNIVERSITY

EGERON UNIVERSITY

NOVEMBER 2012

CHAPTER ONE
INTRODUCTION
1.1 Background of the study
Transportation involves the physical movement or flow of goods. The transportation system is
the physical link that connects customers, raw material, suppliers, plants, warehouses and
channel members. These are the fixed points in a logistics supply chain. The basic modes of
transportation are water, rail, motor carrier, air and pipeline (Gale, 2009). On the other hand
logistics was defined by Council of Supply Chain Management Professionals (1991) as part of
the supply chain process that plans, implements, and controls the efficient, effective forward
and reverses flow and storage of goods, services, and related information between the point of
origin and the point of consumption in order to meet customers requirements . Thus transport
and logistics service companies are companies which are involved in the movement of goods,
raw materials and parcels between customers, suppliers, plants and warehouses, while ensuring
efficiency in the process (Winston and Goldberg, 2004).
Transport and logistics services companies have been on the rise over the past decade. Peter
Drucker (1960) identified logistics as a growing concern within business operations. This may
be attributed to the continued need for transportation of materials as a result of the increase in
the number of manufacturing, wholesale and retail businesses and sending of parcels amongst
people. This has triggered stiff competition among the companies in this industry as each one of
the competitors jostle for customers with other industry players, with the objective of staying
ahead of competition (Fulani and Abumere, 1993)
Transport and logistics companies have thus been forced to be ever on the lookout for ways,
means and techniques which they could leverage on to wade off competition, and continue to
excel in their operations. Many companies are turning to the use of management science tools,
to help them have an edge over their competitors (Bowersox, Closs, & Cooper, 2010)
Management science tools are a collection of techniques and concepts, which have been
developed with an aim of improving the efficiency and effectiveness of operations in
organizations. Some of the management science tools which have been developed include: Justin-time concept, management information system, transportation models, sharing of capacity
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techniques, linear programming, dynamic programming, inventory models, Performance and


evaluation review technique (PERT), Critical path method amongst others.
In this study, we are going to investigate to what extent, management information system (MIS)
and transportation model(s), improves performance; efficiency in terms of saving cost reducing
the time taken in transit in terms of increasing reliability and dependability of the three selected
transport and logistics companies: DHL, Wells Fargo, and G4S.
Transportation model(s) is concerned with the movement of items between suppliers and
consumers so that the total cost of the transportation is minimized. It is hinged on finding and
following the route that will cost the least of all the possible routes and thus help to minimize on
the cost or routes that will take the shortest time possible to settle clients transportation services
demands.
The use of transportation model(s) to minimize the cost of shipping from a number of sources to a
number of destinations was first proposed in the 1930s. An article by Tolstoi (1930),
transportation problem was studied where a negative cycle criterion was developed and applied to
solve a large-scale transportation problem to optimality. A study by Hitchcock (1941): The
distribution of products from several sources to numerous localities was proposed to minimize
the cost of shipping. Koopmans (1949) independently produced the second major contribution in
a report entitled Optimum utilization of transportation systems (Barry, Render and Ralph M.
Stair Junior, 2002). In 1953, Charnes and Cooper developed the stepping stone method as an
algorithm for determining optimum routes. Later in 1955, Modified distribution (MODI), came
about (Barry et al., 2002).

Management Information Systems (MIS) encompass the use of computers, internet and
Database Management System (DBMS) which allows for the storage of the contacts of
customers, Customer Relationship Management (CRM) which improves communication with
customers and prompt response to their queries, Transaction Processing System (TPS) which
provides information about daily transactions in the business, Knowledge management systems
which enable organizations to better manage processes for capturing and applying knowledge and
expertise (Laudon and Laudon, 2010). Enterprise systems which are used to bridge the
communication gap between all departments and all users of information within a company.
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Decision Support System (DSS) which helps in collecting market intelligence and provide realtime data for decision making, Executive Support System (ESS) which provides all the
information needed by the top echelon of the organization to make strategic decisions regarding
the direction of the organisation. Laudon and Laudon (2010) identify five eras of MIS evolution
corresponding to five phases in the development of computing technology: mainframe and
minicomputer computing, personal computers, client/server networks, enterprise computing,
and cloud computing.
Management information systems and transportation model(s) when applied in organizations
operations have the ability to confer myriad benefits, not the least of which are improved
efficiency, reliability and saving on cost and time. The use of these tools in organizations can be
a game changer in the industry (Laudon and Laudon, 2010; Hiller and Lieberman, 2000).
However, with the high skepticism among managers regarding the use of these tools (AIBUMA
conference, 2012),

it is critical to explore the effectiveness of these tools on improving

performance in the organizations that have adopted them and help dispel this notion regarding
their viability, by bringing to light the extent to which these tools can improve performance of
organizations
It is thus against this background that we want to investigate the effectiveness of these tools in
enhancing the performance of the three organizations in this study: DHL, Wells Fargo, and G4S.

1.2 Statement of the problem


The application of management science tools to managing organizations operations has been
the discourse in some of national conferences on improving efficiency in the management of
organizations (AIBUMA 2012 conference, July 12-13, held at KICC Nairobi: "Embracing the
Changing Face and Pace of Business and Management"). Nevertheless to some extent,
implementing management science tools in organizational operations and the initial cost
incurred in implementing some of these tools are conflicting objectives leading to a dilemma in
using these tools as a management strategy to improve the performance of organizations.
However previous studies conducted on the use of management science tools to improve the
performance of organizational operations have shown positive impact on the performance of the
organization (Laudon and Laudon, 2010; Fugate, Stank and Mentzer, 2009; Hunton, Lippincott
and Reck, 2003)
These management science tools do not work in isolation to cause improved performance in
transport and logistics companies. There are other factors that impinge directly on the
performance of these companies, such as security along the routes, the state of the road
networks. Poor road networks, insecurity along the roads and employee computer literacy which
could reduce the gains that the use of management science tools could have caused.
It is therefore paramount that we investigate to what extent the application of these tools has
improved the performance of transport and logistics service companies this study.

1.3 Objectives
1.3.1. Main Objective
To investigate the influence of applications of two selected management science tools: transport
models and management information systems on the performance of transportation and logistics
service companies in Nakuru municipality.
1.3.2. Specific Objectives
In respect of DHL, G4S and Wells Fargo transportation and logistics service companies.
Specific objectives are set to:
i. To characterize the transportation model(s) used by the selected transport and logistics
firms.
ii. To characterize management information systems used by the selected transport and
logistics firms.
iii. To investigate the influence of transportation model(s) on time.
iv. To investigate the influence of management information systems on time.
v. To determine the influence of transportation model(s) on cost.
vi. To determine the influence of management information systems on cost.

1.4 Research hypotheses


i. In respect of the first objective, descriptive statistics will be used.
ii. In respect of the second objective, descriptive statistics will be used.
iii. Transportation model(s) do not have a significant influence on time.
iv. Management information systems do not have a significant influence on time.
v. Transportation model(s) do not have a significant influence on cost.
vi. Management information systems do not have a significant influence on cost.

1.5. Delimitations of the study


This research is about transport and logistics service companies in Nakuru municipality.
The subject of the study will be DHL, Wells Fargo and G4S in Nakuru municipality.
The parameter to be investigated is performance operationalized in terms of cost and time.
The two management science tools to be investigated are: transportation model(s) and
management information systems.
In this study four destinations common to the three destinations for the selected transport and
logistics service companies will be considered, namely: Kisumu, Kakamega, Eldoret, and
Nairobi.
1.6. Limitations of the study
The research study was limited by time; the time available for conducting this research was only
two months.
Some respondents were unwilling to give certain information about their organizations.
Some respondents took more than a week to give us feedback.

1.7. Importance of the study.


This study will help in shedding more light on the already existing knowledge about
transportation models and management information systems and their effects on performance of
transportation and logistics service companies.

This study will be undertaken to enable those firms in transportation and logistics service
industry to decide whether or not to apply the management science tools discussed to improve
their performance by enhancing their dependability and reliability and reducing their
operational cost and the time taken.
Finally, the findings of this study will help arouse the interest of students in institutions of
higher learning to pursue Management Science especially in Transportation and Logistics by
researching more on the subject.
CHAPTER TWO
LITERATURE REVIEW
2.1. Introduction
This chapter focuses on the relevant literature to the study in order to acquaint the researcher with
results of other studies relating to this field. It includes review of historical literature and
empirical literature which help in relating the study to the larger ongoing dialogue in the literature
about the study. It highlights different authors and their perspectives in their area of research on
aspects of the effects of use of transportation model(s) and management information systems on
performance.
2.2. Historical and Empirical literature
2.2.1. Transportation model(s)
Transportation model(s) are special purpose algorithms of the linear programming. The
transportation model is concerned with selecting the routes between supply and demand points in
order to minimize costs of transportation subject to constraints of supply at any supply point and
demand at any demand point (http://www.mbaknol.com/management-science/transportation-andassignment-models-in-operations-research/).
According to Golden and Assad (1991), transportation model(s) is synonymous with vehicle
routing. Beasley and Christofides (1997), define vehicle routing as the designing routes for
delivery vehicles which are to operate from a single depot to supply a set of customers with
known locations and known demands for a certain commodity. Routes for the vehicles are
designed to minimize some objective such as cost and the total time taken.

Transportation model(s)/Vehicle routing subject is one that has a long history of systematic study,
the problem first being considered in an academic paper by Dantzig and Ramser published in the
late 1950's on Vehicle routing problem. According to Beasley and Christofides (1997), the subject
has attracted a lot of attention in the academic literature for two basic reasons:

the subject appears in a large number of practical situations; and

the subject is theoretically interesting and not at all easy to solve.

Many methods have been suggested for obtaining optimized route. Rizzoli, Montemanni,
Luceibello and Gambardella (2007) have focused on the Ant Colony Optimization (ACO) on the
Vehicle Routing problem/Transportation model(s) and its real world application. ACO simulates
the behavior of ant colonies in nature as they forage for food and find the most efficient routes
from their nests to food sources. The decision making processes of ants are embedded in the
artificial intelligence algorithm of a group of virtual ants which are used to provide solutions to
the vehicle routing problem. This approach is relevant because it provides solutions to an
important problem in transportation science and the experimental results indicate that the
performance of the technique is competitive with other techniques used to generate solutions to
the Vehicle routing problem. Potvin (1996) has worked on the survey of genetic algorithms in his
study in which he has given simple genetic algorithms and various extensions for solving
Travelling Salesman Problem (TPS). He has worked both on the random and classical problems.
Travelling Salesman Problem (TPS) is one of the most well-known difficult problems of time. A
salesperson must visit n cities, passing through each city only once, beginning from one of the
city that is considered as a base or starting city and returns to it. The cost of the transportation
among the cities is given. The problem is to find the order of minimum cost route that is, the order
of visiting the cities in such a way that the cost is the minimum.
Schabauer, Shikuta and Weishaupl (2005) have worked on to solve travelling salesman problem
heuristically by the parallelization of self-organizing maps on cluster architectures. Larsen (2000)
has worked on the dynamic factors of Vehicle Routing problem/Transportation model(s). He has
investigated the dynamics of Vehicle Routing problem/Transportation model(s) in order to
improve the performances of existing algorithms as well as develop new windows. Homberger
and Gehrig (2005) have worked on Vehicle Routing problem/Transportation models on time
windows. In this they have designed an optical set of routes that will service the entire customers

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with constraints being taken care of properly. Their objective function minimizes both the total
distance and the number of salesmen being used.
Carter and Ragsdel (2006) have developed a new approach to solve travelling sales problem in
which the method proposes set of chromosomes and related operators for the travelling salesman
problem and compares theoretical properties and computational performance of the proposed
techniques.
Mitrovic-Minic and Krishnamurti (2006) have worked on to find the lower and the upper bound
required for the number of vehicles to serve all the location for multiple salesman problem with
time windows. They have introduced two types of precedence graphs namely the Start time
precedence graphs and the End time precedent graphs. The bounds are generated by covering the
precedence graphs with minimum number of parts. The bounds which are tight and loss are
compared and closeness of such instances was discussed.
Researchers on Vehicle Routing problem/Transportation models have proved that Vehicle
Routing problem/Transportation model(s) are a NP-complete combinatorial optimization
problem. They have theorized that if an algorithm is guaranteed to find the optimal Solution in a
polynomial time for the VRP, then efficient algorithms could also be found for all other NPcomplete problems.
2.2.1.1. Practical Problem for a transportation model
In their journal, International Journal of Engineering Science and Technology, Nallusamy,
Duruiswamy, Dhanalaksmi and Parthian (2009) reviewed a Mathematical structure of Vehicle
Routing problem/Transportation model(s). They wrote that it is a graph where cities are the nodes
of the graph. The connection between pairs of cities are called edges and each edge has a cost or
distance associated with it.
The vehicle routing problem as encountered in practice involves many restrictions on the routes
that delivery vehicles can follow. We can classify these restrictions to a certain extent as relating
either to the vehicles or to the customers. Note here that in any particular case not all of these
restrictions may apply however in thinking generically about the problem it is useful to list all
restrictions that can potentially apply (Beasley, 1997).
2.2.1.1.1. Vehicles
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Each vehicle has a limit (capacity - usually weight and/or volume) on the goods carried, e.g.
tankers delivering to petrol (gasoline) stations are volume limited, buses have a limit on the
number of people legally allowed on board, etc.
Each vehicle has a total working time from departure to arrival back at the depot, typically to
comply with legal restrictions on driver working hours.
Each vehicle has a time period within which it must leave the depot, typically to ensure that space
is available for incoming vehicles to resupply the depot. Each vehicle has a number of time
periods during which it does nothing (driver rest periods). Each vehicle has a cost associated with
its use for deliveries.
2.2.1.1.2. Customers
Each customer has a certain quantity which has to be delivered,
Each customer has a number of time periods during which delivery (and/or collection) can occur
(time windows).
Each customer has an associated visit time (drop time).
Each customer has a set of vehicles which cannot be used for delivery (access restrictions).
Each customer has a priority for delivery (if the vehicles cannot deliver to all the customers).
Typically this might happen due to driver/vehicle unavailability

2.2.1.1.3. Other factors


Multiple trips by the same vehicle on a single day, where the vehicle returns to the depot and then
goes out again (e.g. post office vans)
There are trips by the same vehicle longer than one day (i.e. with overnight stops).
There are Compartmentalized vehicles with many different types of product to deliver.
2.2.1.1.4. The objectives of this design
In the design of vehicle routes to meet the above requirements there are a number of objectives
that could be adopted. Three basic objectives can be distinguished:
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i.

Minimize the number of vehicles used (vehicles, and their associated drivers, are often a
fixed cost)

ii.

Minimize the total distance (or time) travelled (this typically corresponds to variable cost)

iii.

Minimize some combination of number of vehicles used and total distance (or time)
travelled.

The cost of vehicles in the vehicle fleet is often regarded as a fixed cost so that the first objective
above corresponds to the minimization of fixed costs; the second objective above corresponds to
the minimization of the running (or variable) costs; and the third objective above corresponds to
the minimization of total cost (the sum of fixed plus variable cost).
The network diagram can be illustrated as shown below:

(J. E. Beasley and N. Christofides, 1997)


2.2.2. Management information systems
A management information system (MIS) provides information that is needed to manage
organizations efficiently and effectively (Laudon and Laudon, 2010). Management information
systems are regarded as a subset of the overall internal controls procedures in business, which
cover the application of people, documents, technologies and procedures used by management
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accountants to solve business problems costing a product, service or business-wide strategy.


Management information systems are distinct from regular information systems in that they are
used to analyze other information systems applied in operational activities in the organization.
Academically, the term is commonly used to refer to the group of information management
method tied to the automation or support of human decision making, e.g. Knowledge management
systems decision support systems, expert systems, and executive information

2.2.2.1. Knowledge management systems


Knowledge management system is an integral part of the overall information system of an
organization. Most of the other systems have been recognized for many years, but this one may be
thought of as relatively new.

Knowledge management systems (KMS) enable organizations to

better manage processes for capturing and applying knowledge and expertise (Laudon and
Laudon, 2010). Knowledge workers are those who promote the creation of new knowledge and
integrate it into the organization.
According to Fugate, Stank and Mentzer (2009), results collected in a logistics operations context
prove the existence of a strong positive relationship between a KMS process and operational and
organizational performance. This view is further proved by Rasula, Vuksic and Stemberger in
their research: The impact of Knowledge management systems on organizational performance.
The model was empirically tested through structural equation modeling on a sample of 329
Slovenian and Croatian companies with 50 or more employees. They concluded that Knowledge
management systems enables an organization to capture, store, distribute and apply knowledge, to
enable it leverage it for strategic benefits, in terms of making well informed decisions, which
enabled them to cut on their operation costs.
2.2.2.2. Enterprise systems
Enterprise systems (also known as enterprise resource planning (ERP) systems) are used to
bridge the communication gap between all departments and all users of information within a
company. According to Chung (2008), Enterprise Resource Planning (ERP) systems are one of
the most significant of the technological advances to emerge during the last decade. ERP provide

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organizations with a set of incorporated application modules that cover most business functions
(Davenport, 2000).
During the last decade, the adoption of ERP systems was clearly one of the most significant
factors in organizational evolution, these days accounting for about 30% of all major evolution
activities in organizations (Davenport, 2000; Herold, Fedor and Caldwell, 2007).
Olson (2004) defined ERP as an industry term for a broad set of activities supported by multimodule application software that helps a manufacturer or other business manage the important
parts of its daily operations, including product planning, purchasing parts, maintaining
inventories, interacting with suppliers, providing customer service, and tracking orders. Waxer
(2006) defined ERP as a broad term for any software application that integrates all business
processes and data into a single system.
As ERPs evolved, they have become more sophisticated in terms integrating a series of modules
in different business functions such as finance and accounting, human resource management, IT,
sales and marketing, manufacturing, and logistics (Shanks, Seddon, and Willcocks 2003; Dery
,Grant, Hall and Wailes , 2005).
The implementation of ERP has been credited, among other things, with reducing procurement
charges, creating highly efficient sales strategies, lowering administration rates, and decreasing
direct and indirect labor expenses (Hunton, Lippincott and Reck, 2003; Gefen and Ragowsky,
2004; Yen and Sheu, 2004; Bergstrm and Stehn, 2005).
Other studies show that ERP implementation has a massive effect on organizational performance
(Hall, 2002).
2.2.2.3. Customer relationship management system.
Customer relationship management (CRM) is a widely implemented model for managing a
companys interactions with customers, clients, and sales prospects. It involves using technology
to organize, automate, and synchronize business processesprincipally sales activities, but also
those for marketing, customer service, and technical support. The overall goals are to find, attract,
and win new clients, service and retain those the company already has, entice former clients to
return,

and

reduce

the

costs

of

marketing

and

client

service

(http://en.wikipedia.org/wiki/Customer_relationship_management).

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Customer relationship management (CRM) is increasingly important to firms as they seek to


improve their profits through longer-term relationships with customers. In recent years, many
have invested heavily in information technology (IT) assets to better manage their interactions
with customers before, during and after purchase (Bohling, Bowman, LaValle, Mittal,
Narayandas, Ramani, and Varadarajan, 2006).
According to Payne and Frow (2005) CRM represents a strategy for creating value for both the
firm and its customers through the appropriate use of technology, data and customer knowledge.
This strategy requires focus, training, and investment in new technology and software to aid in the
development of value adding CRM systems (Day and Van den Bulte 2001). Hence, CRM brings
together people, technology and organizational capabilities to ensure connectivity between the
company, its customers and collaborating firms.
2.2.2.4. Transaction processing systems
A transaction process system (TPS) is an information processing system for business transactions
involving collection, modification and retrieval of all transaction data. Characteristics of a TPS
include performance, reliability and consistency. According to Laudon and Laudon (2010),
transaction processing systems is used at the operational level of an organisation in order
processing, material movement control, payroll, accounts payable, and employee record keeping.
TPS combine data in various ways to fulfill the hundreds of information needs a company
requires to be successful. The data are very detailed at this level. Transaction processing systems
keep track of basic activities and transactions of organization (e.g. sales receipts, cash deposits,
and payroll). It serves operational managers by helping them to answer to routine questions and to
track the flow of transactions through the organization (Laudon and Laudon, 2010).

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2.3. Conceptual Framework


Dependent variable
Independent variable

Selected management science


tools
1.Transportation models

Performance
1. Cost
2. Time: (i) Reliability

2. MIS

(ii) Dependability

(i) State of the road


networks
(ii) Security on the roads
(iii) Employee IT literacy

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Moderating variable

Source: Researcher.

CHAPTER THREE

RESEARCH METHODOLOGY
3.1 .Research design
The research adopted descriptive approach. This is because, the study aim to describe the effect of
transportation model(s) and Management information systems on performance of the selected
transport and logistics service companies. Descriptive research is used to obtain information
concerning the current status of the phenomena to describe what exists, with respect to variables
or conditions in a situation (Mugenda and Mugenda, 1999).
3.2. Target Population
The study focused on DHL, Wells Fargo and G4S transport and logistics service companies in
Nakuru Municipality. The study population was respective employees of DHL, Wells Fargo and
G4S companies. A target population is the total collection of elements about which one wishes to
make some inferences (Mugenda and Mugenda, 1999).

3.3. Sampling Design and size


Random sampling was used to select an initial sample sizes from G4S, wells Fargo and DHL
which have population of 35, 40 and 20 employees respectively. Employees to be interviewed
include the functional managers and lower level employees. At 95% confidence level, the actual
sample size is calculated as follows:
na =
Where n is 30% of the population (which is a good
representation of the population
and confidence level = 95%

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Sample size for Wells Fargo:


n = 30% of 40 = 12
= 12 employees
na =

Sample size of DHL:


n = 30% of 20
= 6 employees
na =

n ==30% of 35

= 6 employees

= 10 employees
Sample size for G4S:
na =

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3.5. Data Collection


3.5.1. Data collection method
Preliminary data was obtained through a well-structured questionnaire with both closed and openended questions which we prepared and administered.
3.5.2. Quantification of variables
Costs:
Cost was measured in terms of amount in shillings, saved on transportation of goods when
transportation model(s) are used. This will also be quantified in terms of amounts, in shillings,
saved on quarterly basis when management information system (s) is used in operations.
Dependability:
This was measured in terms of the number of times that timely deliveries of goods and services
are made.
Reliability:
This was measured in terms of the number of hours taken to deliver before the deadline and the
number of hours saved in service delivery in a day.
State of the road network:
This was measured in terms the extra amounts in shillings, spent on fuel and repairs when bad
road stretches are plied.
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Security on the roads:


This was measured in terms the value of goods lost as a result of insecurity along the routes plied.
Employee IT literacy:
This was rated in terms of the efficiency of employees in handling computer hardware and
software in operations. This will be rated using a likert scale of 1 to 5 as shown:
5 represent Very efficient
4 represent Efficient
3 represent No impact
2 represent Inefficient
1 represents Very inefficient
The network for the selected routes plied by the companies of interest is as shown below:
Nairobi

Nakuru
i.

DHL

ii.

Wells Fargo

iii.

G4S

Eldoret

Kisumu

KEY

20

21

DHL
G4S
Wells Fargo

Source: Researcher

3.6. Data Analysis and Presentation


Descriptive statistics was used to analyze the data.
A t-test for two samples was used to compare the impact of the selected Management Science
tools on any two firms. The formula is as follows

Source: (Siegel, 2002)

Standard deviation (s) =

x - ) 2
n 1

Source: (Siegel, 2002)

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CHAPTER FOUR

DATA ANALYSIS AND PRESENTATION OF THE FINDINGS


4.1. Response rate
Table 1: DHL
RESPONSES

NUMBER

OF PERCENTAGE (%)

RESPONDENTS
Expected Responses

100

Received Responses

50

Source: Research Data (2012)


Table 2: WELLS FARGO
RESPONSES

NUMBER

OF PERCENTAGE (%)

RESPONDENTS
Expected Responses

12

100

Received Responses

50

Table 3: G4S
RESPONSES

NUMBER

OF PERCENTAGE (%)

RESPONDENTS
Expected Responses

10

100

Received Responses

80

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4.2. Presentation of Findings


Table 4: Gender representation of Respondents
Male

Female

DHL

Wells Fargo

G4S

Total

Figure 1: Gender representation of Respondents


6
5
4
Male

Female
2
1
0
DHL

G4S

Wells Fargo

Source: Research Data 2012


In DHL, most respondents were female, while G4S and Wells Fargo recorded a higher number of
male respondents.

Table 5: Age of Respondents


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Company

20-24

25-29

30-34

35 and above

DHL

Wells Fargo

G4S

Total

10

Figure 2: Age of Respondents

Source: Research Data (2012)


All respondents from DHL were below 30 years. Wells Fargo showed a distribution of
respondents ages of between 20 and 37 years. G4S showed respondents of ages between 25 and
35 years.

Table 6: Respondents Level of Education


Company

Certificate

Diploma

Degree

DHL

Wells Fargo

G4S

1
24

25

Total

Figure 3: Respondents level of Education


4.5
4
3.5
3
2.5

Certificate
Diploma

Degree

1.5
1
0.5
0
DHL

Wells Fargo

G4S

Source: Research Data (2012)


DHL had only degree and diploma holders respondents. Wells Fargo had respondents with nearly
normally distributed level of Education. Most respondents from G4S had attained certificate level
of Education.

4.2.1. Transportation model(s)


Table 7: The duration of application of transportation model(s)
COMPANY

DURATION IN YEARS

DHL

WELLS FARGO

25

26

G4S

10

Source: Research data (2012)


4.2.1.1. Means and standard deviations of number of hours by which the firms exceed
deadline
Table 8: DHL
(x-

0.17

0.17-0.25

-0.08

0.0064

0.25

0.25-0.25

0.33

0.33-0.25

0.08

0.0064

(x-

Mean=0.25

(x-

)2

X in hours

0.0128

Standard Deviation= 0.0800


Source: Research data (2012)
DHL exceeds the deadline set by customers by an average of 15 minutes with a standard deviation
of 4.8 minutes. This can be attributed the moderating variables such as the state of the roads.

Table 9: Wells Fargo


(x-

2-1.58

0.42

0.1764

2-1.58

0.42

0.1764

1-1.58

0.58

0.3364

0.5

0.5-1.58

-1.08

1.1664

2-1.58

0.42

0.1764

2-1.58

0.42

0.1764

(x-

(x-

)2

X in hours

26

27

Mean=1.58

2.2084

Standard Deviation= 0.6646


Source: Research data (2012)
Wells Fargo exceeds the deadline set by customers by an average of 1hour 34.8 minutes with a
standard deviation of 39.9 minutes. This can be attributed the moderating variables such as the
state of the roads.

Table 9: G4S
X in hours

(x-

(x-

(x-

)2

1-0.97

0.03

0.0009

1-0.97

0.03

0.0009

0.75

0.75-

-0.22

0.0484

0.97
1

1-0.97

0.03

0.0009

0.5

0.5-0.97

-0.47

0.2209

1.5

1.5-0.97

0.53

0.2809

1-0.97

0.03

0.0009
27

28

1-0.97

0.03

Mean=0.97

0.0009
0.5547

Standard Deviation= 0.2815


Source: Research Data (2012)
G4S exceeds the deadline set by customers by an average of 58.2 minutes with a standard
deviation of 16.9 minutes. This can be attributed the moderating variables such as the state of the
roads.

4.2.1.2. Comparative analysis of cost saved


4.2.1.2.1 Means and standard deviations of cost saved by the firms when they used
transportation model(s)
Table 10: DHL
Cost Saved

Total

To Kisumu in 000 To Eldoret in 000 (X)

(x-

(x-

000

000,000

)2

000
600

300

900

116.6667

13611.1189

400

250

650

17777.76889
28

29

133.3333
450

350

800

MEAN

166.6667

27777.78889

783.3333

59166.67668

Standard Deviation= 171,998.08


Source: Research data (2012)
DHL saves an average of ksh.783333.30 with a standard deviation of Ksh. 171,998.08.06when
they use transportation model(s).

Table 11: Wells Fargo


Cost Saved

Total (x)

(x-

(x-

To Kisumu in

To Eldoret

000

in 000

150

80

230

15

225

140

70

210

-5

25

120

100

220

25

130

90

220

25

)2

29

30

100

80

180

-35

1225

150

80

230

15

225

MEAN

215

1750

Standard Deviation= Ksh 18708.30


Source: Research data (2012)
Wells Fargo saves an average of ksh.215,000 with a standard deviation of ksh.18708.30 when
they use transportation model(s).

Table 12: G4S


Cost Saved

Total (x)

(x-

(x-

)2

To Kisumu in

To Eldoret

000

in 000

80

70

150

-8.75

76.5625

90

70

160

1.25

1.5625

100

65

165

6.25

39.0625

95

60

155

-3.75

14.0625

80

70

150

-8.75

76.5625

100

65

165

6.25

39.0625

90

70

160

1.25

1.5625
30

31

100

65

165

MEAN

158.75

6.25

39.0625
287.5

Standard Deviation= 6408.70


Source: Research data
G4S saves an average of ksh.1587500 with a standard deviation of ksh.6408.70 when they use
transportation model(s).

4.2.1.2.2. t-test for the difference in cost saved:


Between G4S and Wells Fargo:
Ho: There is no significant difference between the cost saved by G4S and that saved by
Wells Fargo when they use transportation model(s)
H1: There is a significant difference between the cost saved by G4S and that saved by
Wells Fargo when they use transportation model(s)

Significance level= 5%=0.05


n=n1+n2 = 6+8 =14, hence t-test is used.
Two- tail test
t0.025 = 2.179
x1 = 158750

n1 = 8

S1=6408.70

x 2 = 215000

n2 =6

S2=18708.30

31

32

(158750 - 215000)

tc =

(6408.70) 2 (18708.30) 2
+
8
6

tc = -7.06069356
Rejection region (-7.06)
Rejection region

-2.179

2.179

Decision: We reject the null hypothesis.


Conclusion: There is a significant difference between the cost saved by G4S and that saved by
Wells Fargo when they use transportation model(s)

Between G4S and DHL:


Ho: There is no significant difference between the cost saved by G4S and that saved by
DHL when they use transportation model(s)
H1: There is a significant difference between the cost saved by G4S and that saved by
DHL when they use transportation model(s).

Significance level= 5%=0.05


n=n1+n2 = 8+3 =11, hence t-test is used.
Two- tail test
t0.025 = 2.179
x1 = 158750

n1 = 8

S1=6408.7

32

33

x 2 = 783333.3

n2 =3

S2= 171998.08

(158750 - 783333.3)

tc =

(6408.7) 2 (171998.08) 2
+
8
3

= -6.288
Rejection region (-6.288)
Rejection region

-2.179

2.179

Decision: We reject the null hypothesis.


Conclusion: There is a significant difference between the cost saved by G4S and that saved by
DHL when they use transportation model(s).

Between DHL and Wells Fargo:


Ho: There is no significant difference between the cost saved by DHL and that saved by
Wells Fargo when they use transportation model(s)
H1: There is a significant difference between the cost saved by DHL and that saved by
Wells Fargo when they use transportation model(s)
Significance level= 5%=0.05
n=n1+n2 = 3+6 =9, hence t-test is used.
Two- tail test
t0.025 = 2.179
x1 =783333.3

n2 =3

S1= 171998.08

33

34

x 2 = 215000

n2 =6

S2=18708.3

(783333.3 - 215000)

tc =

(171998.08) 2 (18708.3) 2
+
3
6

=5.706

Rejection region
Rejection region(5.706)

-2.179

2.179

Decision: We reject the null hypothesis.


Conclusion: There is a significant difference between the cost saved by DHL and that saved
by Wells Fargo when they use transportation model(s).
Extra average cost incurred by the companies in the following poor road stretches
Table 13

Total-Kisumu:

Burnt forest-

G4S

Wells Fargo

DHL

Fuel:

70,000

60,000

53,333.30

Repair:

105,625

48,333.30

20,000

Fuel:

30,000

32,500

21,666.70

Repair:

47500

24,166.70

18,333.30

Total

253,125

165,000

113,333.30

Eldoret

Figure 4

34

35

Average extra cost incurred by the


companiesalong poor raod stretches
DHL
21%

G4S
48%

Wells Fargo
31%

Average value of goods lost as a result of insecurity along the roads plied.
Table 14
G4S

Wells Fargo

DHL

Nakuru-Kisumu

55,625

59,166.70

16,666.70

Nakuru-Eldoret

23125

27,500

18,333.30

Total

78,750

86,666.70

35000

Figure 5.

35

36

Average value of goods lost as a result of


insecurity along the roadsplied.
Wells Fargo
18%

G4S
39%

DHL
43%

4.2.2. Management Information Systems


4.2.2.1. Duration for which the MIS tools have been put to use by the firms in years
Table 15
Information

G4S

DHL

Wells Fargo

Systems
Transaction
Processing System
Knowledge
management
System
Customer
relationship System

36

37

Database

15

Management
System

4.2.2.2. Means and standard deviations of cost saved when MIS is used in the operations

Table 16: DHL


X in 000 ksh

(x-

450

450-450

400

400-450

-50

2500

500

500-450

50

2500

(x-

Mean=450

(x-

5000

Standard Deviation= Ksh 50000

Source: Research data (2012)

DHL saves an average of ksh. 450,000 with a standard deviation of ksh. 50000 when they use
MIS.
Table 17: Wells Fargo
X in 000 ksh

(x-

400

400-425

-25

625

450

450-425

25

625

500

500-425

75

5625

450

450-425

25

625

350

350-425

-75

5625

400

400-425

-25

625

Mean=425

(x-

(x-

)2

13750

Standard Deviation= 52440.40


37

38

Source: Research data (2012)


Wells Fargo saves an average of ksh. 425,000 with a standard deviation of ksh. 52440.40 when
they use MIS.

Table 18: G4S


(x-

500

500-512.5

-12.5

156.25

500

500-512.5

-12.5

156.25

400

400-512.5

-112.5

12656.25

600

600-512.5

112.5

12656.25

500

500-512.5

-12.5

156.25

650

650-512.5

137.5

18906.25

450

450-512.5

-62.5

3906.25

500

500-512.5

-12.5

156.25

(x-

Mean=512.5

(x-

)2

X in 000 ksh

48,750

Standard Deviation=83452.30
Source: Research Data (2012)
G4S saves an average of ksh. 521500 with a standard deviation of ksh. 83452.30
when they use MIS.
.

4.2.2.3. t-test for the difference in cost saved when MIS is used operations:
Between G4S and Wells Fargo:
Ho: There is no significant difference between the cost saved by G4S and that saved by
Wells Fargo when they use MIS in their operations.
38

39

H1: There is a significant difference between the cost saved by G4S and that saved by
Wells Fargo when they use MIS in their operations.

Significance level= 5%=0.05


n=n1+n2 = 6+8 =14, hence t-test is used.
Two- tail test
t0.025 = 2.179
x1 = 512500

n1 = 8

S1=83452.30

x 2 = 425000

n2 =6

S2=52440.40

(512500 425000)

tc =

(83452.3) 2 (52440.40) 2
+
8
6

tc = 2.400

Rejection region (2.400)


Rejection region

-2.179

2.179

Decision: We reject the null hypothesis.


Conclusion: There is a significant difference between the cost saved by G4S and that saved by
Wells Fargo when they MIS in their operations.
Between G4S and DHL:

39

40

Ho: There is no significant difference between the cost saved by G4S and that saved by
DHL when they use MIS in their operations.
H1: There is a significant difference between the cost saved by G4S and that saved by
DHL when they use MIS in their operations.

Significance level= 5%=0.05


n=n1+n2 = 8+3 =11, hence t-test is used.
Two- tail test
t0.025 = 2.179
x1 = 512500

n1 = 8

x 2 = 450000

n2 =3

S1=83452.30
S2= 50000

(512500 - 450000)

tc =

(83452.30) 2 (50000) 2
+
8
3

= 1.514

Rejection region

Acceptance region
1.514

-2.179

Rejection region

2.179

Decision: We accept the null hypothesis.


Conclusion: There is no significant difference between the cost saved by G4S and that saved
by DHL when they use MIS in their operations.

40

41

4.2.2.4. Means and standard deviations of time saved when MIS is used operations:
Table 8: DHL
(x-

2-2.33

-0.33

0.1089

2-2.33

-0.33

0.1089

3-2.33

0.67

0.4489

(x-

Mean=2.33

(x-

)2

X in hours

0.6667

Standard Deviation= 0.5774


Source: Research data (2012)
DHL saves an average of 2hours 19.8minutes with a standard deviation of 34.6 minutes when
they use MIS.
Table 9: Wells Fargo
(x-

2-2.67

-0.67

0.4489

2-2.67

-0.67

0.4489

3-2.67

0.33

0.1089

4-2.67

1.33

1.7689

3-2.67

0.33

0.1089

2-2.67

-0.67

0.4489

Mean=2.67

(x-

(x-

)2

X in hours

3.3334

Standard Deviation= 0.8165


41

42

Source: Research data (2012)

Wells Fargo saves an average of 2hours 40.2minutes with a standard deviation of 49 minutes
when they use
Table 9: G4S
X in hours

(x-)

(x- )

(x- )2

3-3.94

-0.94

0.8836

3-3.94

-0.94

0.8836

4.5

4.5-3.94

0.56

0.3136

4-3.94

0.06

0.0036

5-3.94

1.06

1.1236

5-3.94

1.06

1.1236

3-3.94

-0.94

0.8836

4-3.94

0.06

0.0036

Mean=3.94

5.2188

Standard Deviation= 0.8634


Source: Research Data (2012)
G4S saves an average of 3hours 56.4minutes with a standard deviation of 51.8 minutes when they
use MIS.

4.2.2.5. t-test for the difference in time saved when MIS is used in operations:
Between G4S and Wells Fargo:
Ho: There is no significant difference between the time saved by G4S and that saved by
Wells Fargo when they use MIS in their operations.
42

43

H1: There is a significant difference between the time saved by G4S and that saved by
Wells Fargo when they use MIS in their operations.

Significance level= 5%=0.05


n=n1+n2 = 6+8 =14, hence t-test is used.
Two- tail test
t0.025 = 2.179
x1 = 3.94

n1 = 8

x 2 = 2.67

n2 =6

S1=0.8634
S2=0.8165

(3.94 - 2.67)

tc =

(0.8634) 2 (0.8165) 2
+
8
6

tc = 2.810
Rejection region (2.810)
Rejection region

-2.179

2.179

Decision: We reject the null hypothesis.


Conclusion: There is a significant difference between the time saved by G4S and that saved by
Wells Fargo when they MIS in their operations.
Between G4S and DHL:
Ho: There is no significant difference between the time saved by G4S and that saved by
DHL when they use MIS in their operations.

43

44

H1: There is a significant difference between the time saved by G4S and that saved by
DHL when they use MIS in their operations.

Significance level= 5%=0.05


n=n1+n2 = 8+3 =11, hence t-test is used.
Two- tail test
t0.025 = 2.179
x1 = 3.94

n1 = 8

x 2 = 2.33

n2 =3

S1=0.8634
S2= 0.5774

(3.94 2.33)

tc =

(0.8634) 2 (0.5774) 2
+
8
3

= 3.562
Rejection region
Rejection region (3.562)

-2.179

2.179

Decision: We reject the null hypothesis.


Conclusion: There is a significant difference between the time saved by G4S and that saved by
DHL when they use MIS in their operations.

44

45

4.2.2.6. Representation of the effect of employees IT literacy on their efficiency in


operations:
DHL

G4S

Wells Fargo

Very Efficient

Efficient

Table 6

CHAPTER FIVE
45

46

CONCLUSIONS AND RECOMMENDATIONS


5.1. Summary of Major Findings
From this research study it was established that the use of transportation model(s) in determining
shortest routes, reduces transportation cost significantly. DHL saves an average of ksh.783333.30
with a standard deviation of Ksh. 171,998.08 when they use transportation model(s). Wells Fargo
saves an average of ksh.215,000 with a standard deviation of ksh.18708.30, while G4S saves an
average of ksh.1587500 with a standard deviation of ksh.6408.70. However, these gains could
have been more, were it not for the effects of moderating variable; insecurity along the routes.
DHL loses on average goods worth Ksh. 78,750, Wells Fargo loses on average goods worth Ksh
86,666.70 and DHL worth Ksh 35000
The use of transportation model(s) should save time. However, in our study, we found out that the
effects of moderating variable: poor state of the road network, cancels the gains that could have
been realized. DHL fails to meet the deadline by an average of 15 minutes with a standard
deviation of 4.8 minutes. Wells Fargo fails to meet the deadline by an average of 1hour 34.8
minutes with a standard deviation of 39.9 minutes. G4S fails to meet the deadline by an average
of 58.2 minutes with a standard deviation of 16.9 minutes.
It was also found that the use of Management Information System(s) in operations, significantly
reduces time and cost incurred.
DHL saves an average of 2hours 19.8minutes with a standard deviation of 34.6 minutes when
they use MIS. Wells Fargo saves an average of 2hours 40.2minutes with a standard deviation of
49 minutes, while G4S saves an average of 3hours 56.4minutes with a standard deviation of 51.8
minutes.
DHL saves an average of ksh. 450,000 with a standard deviation of ksh. 50000. Wells Fargo saves
an average of ksh. 425,000 with a standard deviation of ksh. 52440.40, while G4S saves an
average of ksh. 521500 with a standard deviation of ksh. 83452.30

5.2. Findings of research hypothesis


46

47

i.

All the three firms studied use time-window transportation model.

ii.

All the three firms use the following information systems: Transaction processing system,
Customer relationship Management, Enterprise system, Database Management System
and Knowledge Management System.

iii.

The use of transportation model(s) reduces the transportation time. However, in our study,
the gains are cancelled by significant effect of the moderating variable; the poor state of
the roads.

iv.

The use of Management information systems, significantly reduces operation time.

v.

The use of transportation model(s) significantly reduces the transportation cost.

vi.

The use of Management information systems, significantly reduces operation cost.

5.3. Conclusion
In light of this research, it is evident that the use of the selected Management Science tools:
Management information systems and transportation model(s) have a positive impact on the
performance of the studied firms.
5.4. Recommendations
Based on the research findings, it is evident that the use of the selected Management Science
tools: Management information systems and transportation model(s) improves performance in
transportation and logistics firms and therefore other firms in the industry should employ them in
their operations.
5.5. Suggestions for further study
The research wishes to make some proposals for further research based on the findings of the
study, to be carried with regard to other Management Science tools.
A replication of the current study should be done on other similar firms to establish if similar
results will be achieved of the findings.

47

48

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