Determining appropriate compensation for third-party logistics in Africa

Loots, Rudolf Peens (2017-12)

Thesis (MEng)--Stellenbosch University, 2017.

Thesis

ENGLISH ABSTRACT: This study aims to illuminate the important role of third-party logistics (3PL) within the distribution network of fast moving consumer goods, specifically beverage products, in the African market. The high level of poverty in Africa leads necessities, such as food and beverages, to dominate the consumer’s spending power. Consequently, the alcoholic beverage industry in Africa has grown significantly over the last decade. Africa is filled with an abundance of challenges when it comes to the distribution of products. With numerous routes to market available, 3PLs have risen to become one of the key routes suppliers use. If a 3PL is running inefficiently, the whole supply network will suffer. It is important to build a lasting relationship between suppliers and 3PLs to help both parties to grow more efficient and stay in business. This led to the research question of how a 3PL should be compensated for the services they provide. This research question resulted in two main research objectives: (1) designing a detailed break-even model to determine the appropriate compensation for a smaller 3PL; and (2) creating a simple 3PL compensation plan streamlining the compensation process for large 3PLs. Thus, this research focuses on finding the ideal method of compensating various 3PLs based on their performance, unique circumstances and how closely they operate to the industry standards. The research approach included a detailed literature review followed by identifying and quantifying several 3PL standards and inputs. Then an in-country visit to Nigeria was conducted followed by an in-depth survey regarding 3PL operations in Nigeria by a third-party surveyor. Extensive analysis of the surveyed data was then conducted which allowed the 10-year break-even model to be created leading to the identification of key performance indicators and determination of a compensation approach for different 3PLs. The first approach advises that smaller 3PLs be analysed individually. By taking into consideration the five highlighted inputs from the sensitivity analysis combined with the specific challenges each small 3PL face, a compensation rate can be determined for each small 3PL in turn. This will result in a sustainable route to market to remote and poor areas. For large 3PLs a set compensation rate must be put in place to drive 3PLs to improve the service they deliver to a certain standard. If not, they will be replaced by one of their competitors who can make a profit at the set compensation rate. The validity of the compensation approaches was tested by means of a margin analysis which found the modelled margins to be aligned with the actual margins the suppliers indicated. The main benefactors of the research are organisations who hire 3PLs across underdeveloped countries. 3PLs will also benefit from the findings of this research as they can then use the tool themselves to ensure that they are being compensated adequately for the services they provide.

AFRIKAANSE OPSOMMING: Hierdie studie beoog om die belangrike rol wat derdepartylogistiek (3PL) speel in die verspreidingsnetwerk van vinnigbewegende verbruikersgoedere uit te lig, veral ten opsigte van drankprodukte in die Afrika mark. Die hoë vlak van armoede in Afrika lei daartoe dat noodsaaklikhede, soos kos en verversings, die verbruikers se koopkrag oorheers. Gevolglik het die drankindustrie in Afrika oor die afgelope dekade aansienlik gegroei. Afrika is gevul met 'n oorvloed van uitdagings wanneer dit kom by die verspreiding van produkte. Met talle roetes tot die mark beskikbaar, het 3PL’e uitgestyg om een van die mees gebruikte metodes vir die verskaffing van produkte te word. As 'n 3PL oneffektief bestuur word, sal die hele verskaffingsketting ly. Daarom is dit noodsaaklik om 'n goeie verhouding tussen verskaffers en 3PL'e te kweek wat beide partye sal help om groei en in besigheid te bly.Dus ontstaan die navorsingsvraag van hoe 'n 3PL vergoed moet word vir die dienste wat hulle lewer. Hierdie vraag het gelei tot twee hoof navorsingsdoelwitte: (1) die ontwerp van 'n gedetailleerde gelyk-breek model om die toepaslike vergoeding vir 'n kleiner 3PL te bepaal; en (2) die skep van 'n eenvoudige 3PL vergoedingsplan wat die vergoedingsproses vir groot 3PLs vereenvoudig. Hierdie navorsing soek na die ideale metode om verskeie 3PL's te vergoed, gebaseer op hul resultate, unieke omstandighede en hoe naby hulle opereer aan die bedryf se standaarde. Die navorsingsbenadering sluit in ‘n gedetailleerde literatuuroorsig, waarna verskeie 3PL standaarde en insette geïdentifiseer en gekwantifiseer was. Daarna is 'n besoek aan Nigerië uitgevoer, gevolg deur 'n opname oor 3PL-bedrywighede in Nigerië gedoen deur 'n derdeparty-maatskappy. Uitgebreide analise is toe verrig op die ingesamelde data wat dit moontlik gemaak het om die 10-jaar gelyk-breek model te skep. Dit het gelei tot die identifisering van kernresultate en die bepaling van 'n vergoedingsbenadering vir verskillende 3PLs. Die eerste benadering vir kleiner 3PLs beveel aan dat elkeen individueel ontleed moet word deur die vyf kern resultate van die sensitiwiteitsanalise gekombineer met die spesifieke uitdagings van elke klein 3PL in ag te neem. Dit maak dit moontlik om 'n vergoedingskoers te bepaal vir elke klein 3PL, wat 'n volhoubare roete vir produkte na markte in afgeleë en arm gebiede sal verseker. Vir groot 3PL’e moet 'n vaste vergoedingskoers ingestel word om groot 3PL’e te dryf om hul dienslewering te verbeter tot by 'n vasgestelde standaard. Indien hulle nie kan kompeteer nie sal hulle vervang word deur ‘n mededinger wat 'n wins kan maak met die vasgestelde vergoedingskoers. Die geldigheid van die vergoedingsbenaderings is getoets deur middel van 'n marge-analise wat gevind het dat die gemodelleerde marges in lyn is met die werklike marges wat die verskaffers aangedui het. Die organisasies wat die meeste sal baat by die navorsing is organisasies wat gebruik maak van 3PL'e in onderontwikkelde lande. 3PL’e sal ook baat vind by die bevindinge van hierdie navorsing, aangesien hulle die model self kan gebruik om te verseker dat hulle voldoende vergoeding ontvang vir die dienste wat hulle verskaf.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/102789
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