Case Study Analysis and Solutions

Case ID: 109076

Abstract:
Case Solution & Analysis for Supply Chain Partners: Virginia Mason and Owens & Minor (A) by V.G. Narayanan, Lisa Brem
Virginia Mason Medical Center (VM) hired Owens & Minor (O&M) as its alpha vendor for medical/surgical supplies in 2004. By 2005, O&M was performing JIT and LUM services for VM, but they believed the pricing model in the industry was outdated. VM and O&M partnered to create the Total Supply Chain Cost (TSCC) pricing program, an activity-based model that assigned all the cost drivers of distribution and inventory handling to VM, but also assured O&M of a profit. The TSCC incented VM to streamline its distribution activities, since these would directly impact its fee. After beta testing the TSCC for one year, VM's Daniel Borunda and O&M's Michael Stefanic believed that TSCC was a better and more cost-effective pricing model, but could they convince their companies to continue to invest in TSCC?

Keywords:
Activity-based costing, Distribution, Materials management, Performance measurement, Pricing, Supply chain management, Supply Chain Partners Virginia Mason and Owens & Minor (A) Case Solution

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