Third Party Logistics – Development of a selection model to enhance supply chain visibility

“Demand information sharing and supply visibility are two essential elements that build trust between supply partners and form the foundation of supplier integration.” - Edward FRAZELLE (2002, 161)

Visibility systems become incrementally important for medium sized companies. COMPANY as a Third Party Logistics Provider (3PLs) acknowledged the trend and has developed a web-based visibility system for all sizes of companies. Visibility systems facilitate companies in optimising their links with external supply chain partners in order to gain distinctive visibility into information and product flow. In other words, visibility systems facilitate information sharing between supply chain partners in order to enhance supply chain visibility (SCV) and thus improving supply chain performance. In cooperation with COMPANY a selection model is designed and developed to identify and segment client and non-client companies with the need for better SCV (Figure 1). The foregoing identification is necessary to filter companies with insufficient SCV. The affiliating segmentation allows categorising the clients for additional service offered by COMPANY to enhance the SCV. The selection model analyses and benchmarks the demand variation and its effect
on safety stock in order to identify a SCV gap.

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The selection model is developed for a mid-sized manufacturing company based in Western Australia. The company expressed concerns about insufficient visibility in its supply chain processes towards COMPANY earlier. The concerns are based on growing safety stock levels due to variation in received customer demand in previous years. Analyses of the client company’s customer demand and inventory data provide insides into SCV performance and conclude about the need of a visibility system.

To sum up, the overall objectives of the thesis are:

• Developing a selection model prototype to identify SCV gaps,
• Using demand and inventory data for the analysis,
• IT resource determination of client’s company,
• Including a sub-module for customer segmentation, and
• Application for one specific sample case company.

Companies using Visibility System of COMPANY as their visibility technology are tied closely to COMPANY, resulting in a thoroughly collaboration yielding in enhancement of the overall supply chain performance.