B-Kay Tech: Horizontal Collaboration in Logistics

Explain how to share the benefits of collaboration among the involved partners and look at various methods for doing so, to see how different allocation rules can lead to highly different outcomes.

Which costs should be redistributed between the collaborating partners in question, and how to arrange the necessary synchronization of shipments.

Using the data determine the theoretical economic order quantity, safety stock requirement, reorder point, and average inventory for each of B-Kay Tech and WARE-TOUCH.

Based on the current inventory parameters outlined calculate the total annual logistics costs (transport and inventory) for both B-Kay Tech and WARE-TOUCH. What is driving these costs?

What are the total annual logistics costs (transport and inventory) for B-Kay Tech and WARE- TOUCH if they adopt the replenishment policy given?

Under which conditions is collaboration acceptable (and sustainable) for each party?

The company that organizes the transport (i.e., the company that decides to replenish inventory)

pays for the transport costs, irrespective of whether the other company joins the truck. Should the transport costs be redistributed between both parties when they share a truck? If so, how should they be distributed?

Are the collaboration gains distributed fairly between both companies? Should there be a redistribution of the gains?

Compare the stand-alone cost performance with the cost performance under collaboration. What do you conclude in terms of savings?

How would you redistribute the major order costs? Provide one or two methods for reallocating these costs to one or both companies, and determine their impact on each company's cost performance.