The Wheels Group: Evolution of a Third Party Logistic Provider
Question 01: Are the revenue growth estimates reasonable for each alternative? Would either of the alternatives enable the Wheels Group to achieve its revenue targets?
The two alternatives present for the company “Wheels International” are the supply chain management opportunity, dedicated contract carriage and warehouse opportunity which explains the size of each market opportunity and the share of market secured by each subsidiary. The two options give company the direction to opt one of the alternatives. Under supply chain management opportunity with estimated size of the market opportunity is non asset based domestic growth transport management which is $19.5 billion. The growth rates are therefore estimated by Wheels International for the current market opportunity over the next five years will be growing by 21% per year. In International Transport management the company has $16.6 billion. The growth rates are therefore estimated by Wheels International for the current market opportunity within International transportation system management over the next five years will be growing by 10% per year.
The second option is to opt the dedicated contract carriage and warehouse opportunity with estimated market opportunity includes dedication of $9 billion per year for the next five years. Under warehousing services the growth can be achieved 11% per year. The two alternatives for the company are reasonable enough to be selected by Wheels International that are the two basic alternatives supply chain management opportunity and dedicated contract carriage and warehouse opportunity. The growth revenues estimated are therefore quite reasonable for the company for the next five years.
The two options presented in the case are actually quite reasonable for the company because they present a good opportunity. The company has achieved revenues $100 million in first 15 years. A basic decision can be assumed by Wheels International i.e. to generate approximately 20% of the total revenues of the company to achieve 200 million in the next five years. To achieve 100% growth in the coming five years requires the company to achieve 15% growth rate for the company. Out of the two options presented in the case, the company should go for estimated size of the market opportunity. The current situation of the industry is quite mature where the numbers of competitors have increased therefore; the feasible option is to go for estimated size of the market opportunity. With an idea of growth expected by the company as estimated in the case is approximately 100%, Wheels International can figure out the feasible options for the company.
Question 02: What are the advantages and disadvantages associated with pursuing each alternative?
The two options present for the company Wheels Group are to either go for asset based growth strategy or the non asset based growth strategy. Under the two strategies, the company has to decide one from the two alternatives that are Supply Chain Management opportunity and the dedicated contract carriage and warehousing opportunity. The pros and cons for each of the alternatives are as follows.
Advantages of Supply Chain Opportunity
The basic and the foremost advantage for the company while opting for supply chain management is that the company has an experience of more than 15 years with providing third party logistics services. Along with this, selecting SCM as an option will give Wheels International the opportunity to utilize its technical and employee’s infrastructure to execute sales.
Under asset based growth strategy, the business has been generating large proportion of the overall revenue for the group. It has the maximum potential for growth as there are many opportunity and resources are available for future growth. The company has already built a network of supply chain management software tools. The reporting capabilities of the company’s software provide prospective customers with tangible estimates of savings according to the prospective customers’ current logistics costs.
The advantages of having a non asset based growth strategy and the supply chain opportunities along with a strong third party model; the company does not need to employ compound systems to monitor the asset utilization. A non asset based growth strategy is suitable for the company in order to operate efficiently and cut the costs. While using non asset based strategy it is important to consider that either its implementation is cutting the costs for firm or not. Another advantage associated with SCM is that non asset based businesses are generally characterized with major financial flexibility. They do not even require complex systems and models to monitor asset utilization. This system generally reduces risk of exposure to the liabilities with the absence of corporate assets because suppliers use their own insurance and the company does not necessarily require investing and looking after assets.
Disadvantages of Supply Chain Opportunity
The disadvantages associated with the option of exploring the supply chain opportunity is that it takes too long to be succeed. With this system, the company has to.............................
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President Wheels Group and founder and major shareholder of the company evaluate alternatives to double revenue in the next five years. They have to decide between two competing growth strategy: asset-based growth strategy and nonasset based on growth alone. Complicating the decision is the fact that about 75% of the company's revenue now comes from nonasset based activities. Students are able to study issues relating to the development, evaluation, and implementation of business strategy through a third-party logistics. "Hide
by P. Fraser Johnson, Michael Sartor Source: Richard Ivey School of Business Foundation 17 pages. Publication Date: Mar 09, 2004. Prod. #: 904D04-PDF-ENG
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