mgt305a11

Note: The following problem is fictitious but employs names of, and news from, real organizations. The idea is to increase the reality of the situation, and to improve your awareness of various industries and organizations.

You have been hired by Trek Bicycle Corporation as a project manager at the company's operation in Waterloo, Wisconsin. Although Trek outsources production of some models, it still manufactures many of the higher end bikes (such as the Lance Armstrong inspired Madone racing model) at the Waterloo site (Trek is, in fact, one of the few US-based bicycle companies that still makes bikes in US factories).

In the US market, nearly all bikes are sold thought a network of hundreds of authorized dealers. Trek ships bikes to US dealers from two distribution centers, one in Oconomowoc, Wisconsin and the other outside of Long Beach, California. The California DC holds Trek bikes manufactured in Asia.

Management has been discussing the possibility of alternative distribution arrangements for the US market, including:

A) Trek 'superstores.' Company owned retail stores in Madison WI, Los Angeles CA, and Boston MA. Each store would carry a full line of bikes along with parts, apparel, and other gear.

B) E-commerce. Although some apparel and accessories are sold online, the current website functions primarily as an information and marketing tool. The idea is to expand the website to accommodate web-based sales of primary products. Such a 'Trek Direct' channel would permit the company to sell bikes and accessories directly to retail customers.

C) Outsource warehousing, distribution, and order fulfillment. Logistics providers, such as Amazon.com (nice description of their potential capability here), are capable of taking over the front end (physical distribution) and back end (all the paperwork and financial transactions) of downstream supply chain functions. Outsourcing this area would permit Trek to divest their DCs, downsize corporate finance and accounting staff, and stay focused on design, production, and marketing.

The vice president of operations has asked you to evaluate these alternatives. Because you have some supply chain management background from your college days, the VP is particularly interested in how these alternative would mesh with the existing downstream supply chain configuration.

Some issues to keep in mind during your analysis:

What are the key factors you will use when evaluating these alternatives and comparing them? Why these factors? Can you cite an authoritative source that says these factors are important when evaluating a particular supply chain's design?
Consider diagramming the various alternatives so that readers can clearly see a picture of how they are arranged.
What are the possible channel conflicts of operating two or more of these configurations in parallel?
Research other company situations that provide examples of these arrangements and the benefits/problems that arose. Find solid reliable sources and cite them fully.
How will decisions here affect key Trek competitors (make sure you identify them). If Trek moved forward on one or more of these alternatives, how will rivals potentially respond?
Use tables when you are comparing alternatives side-by-side.
What's a conservative next step?

Report your findings in a memo to the VP of operations.