Value gains from increased visibility in the supply chain - A case study on Volvo Penta’s service market of spare parts

Abstract

The complexity of supply chains worldwide has increased tremendously, with more global chains as well as increased demand for higher customer service levels. Technical enablers can to some extent ease this complexity and allow for better control throughout the supply chains. One aspect is the ability to better transfer information between peers involved in the supply chain which is discussed as something that can generate supply chain visibility. With better visibility, companies are able to follow their products as they travel through the chain, this in turn can improve and make their operations more reliable and efficient. However, many companies struggle to implement high levels of visibility in their supply chains. In this thesis, the authors have gotten the privilege to examine a part of the supply chain of Volvo Penta’s service market concerning visibility in the supply chain and the benefits it can bring them. The purpose of this study is to identify the potential benefits of having increased visibility in the outbound flow of spare parts in Volvo Penta’s supply chain, both for Penta and their dealers. In addition, measures that could be used to increase visibility will be investigated. The study is a qualitative case study where primary data was collected through interviews with Penta employees as well as three dealers to gain a solid view of how the operations are working today. Findings from the empirical data show that it is clear that Penta is lacking visibility in some stages in their supply chain, especially in the outbound transportation leg from the warehouse to the dealers and in the backorder process. Their order setup mainly includes three different order types that have a prioritization hierarchy between them. This hierarchy has implied that some dealers are misusing the setup to secure timely deliveries of parts, there was however a belief among the dealers that they likely would have behaved differently if they had better visibility. It was further evident that the lack of integrated IT systems complicated the information flow between departments within Penta as well as with the dealers. The empirical findings were later analyzed in relation to the already existing research on supply chain visibility and the main takeaway from this study is that if Penta would manage to increase the visibility, they would be able to increase the overall efficiency in both their own and their dealers’ operations.