Department of Industrial Engineering

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Browsing Department of Industrial Engineering by Subject "3PL"

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    Determining appropriate compensation for third-party logistics in Africa
    (Stellenbosch : Stellenbosch University, 2017-12) Loots, Rudolf Peens; Von Leipzig, Konrad; Stellenbosch University. Faculty of Engineering. Dept. of Industrial Engineering.
    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.