Since decision making in supply chains is inherently complex, there is a growing need for modeling supply chain system with different methodologies. A large number of manufacturing companies like Bahir Dar Textile Share Company and service providing organizations are therefore seeking modeling systems that can help, identify and implement strategies for designing and improving their supply chain networks nowadays. Developing a supply chain management system requires the analysis of the flow of materials from the initial sourcing to the final end customers. Increased recognition is being placed, both in industry and in academia, on effective supply chain management. The term supply chain management (SCM) presupposes that there exists a supply chain to be managed. SCM has become a universal approach to cost effectiveness, timely delivery and the creation of growth oriented exchange system in goods and services. Supply chain networks are key issues to the success of a business or enterprise within this century’s global competition to satisfy esteemed customers. Effective modelling of supply chains is therefore the most recent concern of company owners, managers and researchers. Consequently, this thesis is aimed to encompass notions that can enhance existing supply chain practices of the case company by studying the existing supply chain management system and developing an improved one which can increase sales and profitability. With a focus on SCM in which cost, inventory and time are the key challenges, this thesis develops a model to aid the improvement of performance of supply chain system by taking one of the most widely used derivatives, cost, through the internal supply chain. In order to make the research practical and realistic, an actual case study was conducted on one of Ethiopian textile manufacturing industries, Bahir Dar Textile Share Company. A new supply chain model is developed to increase the gross sales by about 3,675,071 birr per year and minimize the supply chain cost. The supply chain cost analysis saves Birr 2,404,490 than the existing cost analysis per year.