OPS 445 Week 2 Selecting Supply Chain Partners Example

Who Drives the Shuttle and Who Owns the Battery: Selecting Supply Chain Partners for a Tiered Auto Parts Network

[Student Name]

University of Phoenix

OPS/445: Strategic Supply Chain Design and Collaboration

Week 2 Assignment

[Instructor Name]

[Date]

Big River Auto Parts, its candidate partners and figures are composites written for a model paper.

Week 1 proposed a tier of 16 hub stores for Big River Auto Parts, the composite chain of 220 stores in Missouri, Arkansas and Kentucky, so that repair shops can get rarely used parts within one or two hours. The design adds work: daily replenishment of hubs, shuttles several times a day from hubs to stores and more inventory to manage. Big River must decide which of these activities to perform itself and which to give to partners, and then choose those partners.

Which Activities Matter Most

Dyer and Singh (1998) argued that firms can gain competitive advantage from relationships with partners, because partners invest in assets tailored to each other, learn from each other, combine strengths neither holds alone and govern the arrangement well, so advantage can sit in the relationship rather than inside either firm. That view suggests asking which activities Big River should own because they define its advantage and which it can perform better with partners.

Commercial delivery to repair shops, the last mile from a store or hub to the shop's bay, is where Big River competes. Shops judge it by its drivers, their reliability and how they handle returns and questions. It stays in house. Purchasing from parts manufacturers and running the two distribution centers are core and also stay in house. Two activities are candidates for partners: the hub-to-store shuttles, a demanding but routine transport task, and battery inventory, where a battery manufacturer has data and scale Big River lacks.

Partner One: The Shuttle Network

Running shuttles several times a day between 16 hubs and about 200 stores requires about 60 vans and drivers, dispatch software and backup vehicles. Big River has no experience running a dense, scheduled network of this kind. Selviaridis and Spring (2007) reviewed research on third-party logistics and noted that firms outsource logistics to reduce costs, gain flexibility and access expertise, while facing risks of lost control and dependence; the relationship's design affects which outcomes dominate. Big River will outsource the shuttles under a contract that keeps control of schedules and service standards.

The shuttle van is invisible to the repair shop until it is late.

Selection Criteria for the Logistics Provider

The team set criteria and weights before seeing bids: on-time performance in similar dense networks, 25 percent; capacity and backup vehicles, 15 percent; technology, including real-time tracking that Big River's systems can read, 20 percent; cost per route, 20 percent; financial stability, 10 percent; and cultural fit and responsiveness, 10 percent, judged from reference calls and a site visit.

Comparing Three Providers

Provider A, a national logistics firm, offered strong technology and capacity but the highest cost and a rigid contract. Provider B, a regional courier already serving pharmacies in the area, offered the best on-time record in dense scheduled routes, adequate technology and a moderate price. Provider C, a low-cost local operator, offered the lowest price but limited backup vehicles and no tracking system Big River could connect to. Weighted scores placed B first, A second and C third. Big River chose B, with a three-year contract, a pilot in one region for the first three months, service standards of 98 percent on-time shuttle arrivals and penalties and bonuses tied to them.

Partner Two: Batteries Under Vendor-Managed Inventory

Batteries are heavy, bulky and seasonal: demand rises in the first cold weeks of winter and the hottest weeks of summer, when weak batteries fail. Big River's buyers often run out in the first cold snap and overstock afterward. A battery manufacturer that sees demand across many retailers and weather patterns can manage stock better. Under vendor-managed inventory, the manufacturer would monitor Big River's battery sales and inventory at each store daily and decide replenishment, within agreed limits.

Comparing Two Battery Makers

Both candidates make comparable batteries at similar prices. The first offered a mature vendor-managed inventory program with weather-driven forecasting, used by several national retailers, and would own inventory in stores until sale, freeing Big River's cash. The second offered slightly lower prices but required Big River to manage orders itself. The team chose the first, because the value lies in the management, not the price, and consignment ownership would free about $6 million in inventory.

Structuring the Relationships

Lambert et al. (1996) proposed a model for partnerships that weighs drivers, the compelling reasons to partner, and facilitators, supportive conditions such as compatible culture and management philosophy, to decide the type of partnership and its components, such as planning, joint operating controls, communication and risk and reward sharing. Both new relationships include joint planning: the shuttle provider joins Big River's quarterly network reviews, and the battery maker shares its seasonal forecasts. Both have scorecards reviewed monthly in the first year and exit clauses with transition support if performance fails.

How the Pilot Region Was Chosen

The shuttle pilot runs in the St. Louis region, which has four hubs and about 60 stores, the densest part of the network. A dense region tests the provider's dispatch software and on-time performance under the heaviest load, while being close to the distribution center if Big River needs to step in. The pilot's success criteria were agreed in advance: 97 percent on-time arrivals by week six, no more than two lost or misdelivered parts per thousand and store manager satisfaction of at least four out of five on a short survey.

Information the Partners Need

Both partners need data Big River has never shared outside the company. The shuttle provider needs store and hub addresses, delivery windows and daily volumes by route. The battery maker needs daily sales and inventory by store and battery model. Big River's IT team will provide both through secure data feeds rather than spreadsheets, and the contracts include confidentiality terms and limits on how the data may be used.

Risks

Outsourcing creates dependence. If the shuttle provider fails, stores lose access to hub inventory; Big River keeps eight of its own vans in reserve. If the battery maker's forecasts miss a cold snap, stores run short; the agreement sets minimum stock levels at each store.

Conclusion

Big River keeps the activities that define its advantage, commercial delivery, purchasing and distribution centers, and hands two activities to partners who can do them better: shuttles to a regional courier chosen for reliability in dense routes and battery inventory to a manufacturer with a proven vendor-managed program. Criteria weighted toward capability and fit rather than price, pilots, scorecards and joint planning give the relationships a foundation for the collaboration models of Week 3.

References

Dyer, J. H., & Singh, H. (1998). The relational view: Cooperative strategy and sources of interorganizational competitive advantage. Academy of Management Review, 23(4), 660-679. https://doi.org/10.5465/amr.1998.1255632

Lambert, D. M., Emmelhainz, M. A., & Gardner, J. T. (1996). Developing and implementing supply chain partnerships. International Journal of Logistics Management, 7(2), 1-18. https://doi.org/10.1108/09574099610805485

Selviaridis, K., & Spring, M. (2007). Third party logistics: A literature review and research agenda. International Journal of Logistics Management, 18(1), 125-150. https://doi.org/10.1108/09574090710748207