Supply Chain Collaborations in Service Expansion of a Logistics Service Provider - A Case Study on Velove Bikes AB

Abstract

Globalized supply chains and high density of population in urban areas have put pressure on the logistics service providers to find sustainable transportation solutions to cater the logistics demand in the urban areas. These logistics demands have risen sharply over recent years mainly due to the emergence of e-commerce where consumers expect faster deliveries. This phenomenon has led to inefficient logistics services as well as deteriorating quality of life in urban areas. As a solution to the problem, many startups have turned to innovation, coming up with less-to-zero emission logistics services in urban areas under the umbrella of the concept called city logistics. Most of these startups are SMEs with limited capacity that perform sustainable last-mile deliveries on behalf of much larger logistics service providers. As a result, these SMEs have limited bargaining power, depend heavily on the main logistics service providers for business and often struggle for profitability due to undercapacity. Service expansion to a much broader scope to have increased anatomy is seen as a challenging yet highly rewarding avenue for these companies to overcome the above-mentioned unfavorable circumstances. Velove Bike AB is a company that falls into these SMEs that perform innovative last-mile delivery services but in need of aggressive service expansion to attract capacity, thus achieve profitability. The thesis studies the company’s new business model that offers logistics services for e-commerce merchants from the pickup at the shipper to the final delivery point. Expanding its services to such a broader scope requires sophisticated resources including intercity transportation solutions. The firm further faces challenges in predicting the package volumes it will get in future to align necessary resources given that the volume of packages could have a major effect on the type of resources needed and the efficiency of operations. The firm also needs to find ways to access the resources it needs to operate in its new business model putting limited strain on its financial muscle. The thesis employs scenario planning to analyze the effects of package volumes on the type of logistics operation required and studies how Velove can benefit from collaboration to access the valuable resources it needs. The thesis findings suggest the volume of packages has a direct effect on the efficiency of the distribution model, logistics costs as well as the resources that are required. On the other hand, collaboration is seen as an important tool not only to access valuable resources but also to create core-competencies that lead to achieving competitive advantage. The thesis concludes that SMEs like Velove Bikes AB can use collaboration as a strategic tool to achieve logistics efficiency in service expansion by accessing the resources they need avoiding capital-intensive investments.