Supply Chain Partners: Virginia Mason and Owens & Minor (A) (Abridged)

Posted: 8 Nov 2010

See all articles by V. G. Narayanan

V. G. Narayanan

Harvard University - Accounting & Control Unit

Lisa Brem

Harvard University - Business School (HBS)

Date Written: April 14, 2010

Abstract

Owens & Minor (O&M) performed lean inventory services for Virginia Mason (VM) as its Alpha Vendor, but the outdated industry pricing model created perverse incentives and could not capture O&M's costs. Together, O&M and VM created an activity-based pricing model: Total Supply Chain Costs (TSCC), which incented both companies to be more efficient and to streamline their distribution activities. 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?

Suggested Citation

Narayanan, V. G. and Brem, Lisa, Supply Chain Partners: Virginia Mason and Owens & Minor (A) (Abridged) (April 14, 2010). HBS Case No. 110-063, Harvard Business School Accounting & Management Unit, Available at SSRN: https://ssrn.com/abstract=1705470

V. G. Narayanan (Contact Author)

Harvard University - Accounting & Control Unit ( email )

Soldiers Field
Boston, MA 02163
United States
617-495-6359 (Phone)
617-496-7363 (Fax)

Lisa Brem

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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