Third Party Supply Chain Planning Operating Models and the Separation of Decision Rights Inventory Ownership and Systems

This paper explains how third-party planning arrangements differ when planning work, final decisions, inventory ownership and financial risk are assigned to different parties. It addresses the limits of describing an arrangement only as outsourced, integrated or vendor-managed. The paper develops a conceptual framework through a selective synthesis of research on vendor-managed inventory, consignment, collaborative planning, system integration and logistics outsourcing. It defines the main design choices, combines them into reference models and uses logical comparisons to explain their possible consequences. Moving demand, inventory, and supply to a provider does not necessarily move approval rights or inventory risk. The framework identifies four sources of difficulty: – A gap between recommendations and approval, – A gap between decisions and available information, – A gap between ownership and financial exposure, and – A gap between local objectives and network needs. Five propositions explain how these gaps may affect responsiveness, oversight and coordination under stated conditions. The paper provides a common way to describe alternative planning arrangements, identifies four gaps between assigned responsibilities and the means to fulfil them, and develops five conditional propositions. These contributions support comparison at the level of individual decisions.