| Course | OPM-4200 Supply Chain Management |
|---|---|
| Module | Module 4 |
| Paper type | Module 4 case assignment: cost management, outsourcing, rationalization and role shifting |
| Length | About 557 words, 5 pages |
| Format | APA 7 student paper |
| School | Thomas Edison State University |
| Program | B.S.B.A. in Operations Management |
| Updated | October 2026 |
Free sample paper for OPM 4200 Module 4
The $22 Price Gap That Became $2: Total Cost of Ownership and Supplier Rationalization
Student Name
B.S.B.A. in Operations Management, Thomas Edison State University
OPM-4200: Supply Chain Management
Mentor Name
Month Day, Year
The $22 Price Gap That Became $2: Total Cost of Ownership and Supplier Rationalization
Total Cost of Ownership: Battery Packs
The company buys about 14,000 battery packs a year, its most expensive component. A supplier in China quotes $210 a pack; a supplier in Mexico, near the planned Monterrey plant, quotes $232. Ellram (1995) described total cost of ownership as a way of counting every cost a purchase brings over its life, from acquisition through use to disposal, rather than its price alone, and showed how purchasing teams can identify the costs that matter.
The $22 price gap shrinks to $1.95 once freight, duties, quality and inventory are counted. The failure cost includes the replacement pack, technician time and shipping a pack to a dealer under warranty.
| Cost element per pack | China | Mexico |
|---|---|---|
| Price | $210.00 | $232.00 |
| Freight and duties | $18.00 | $9.00 |
| Quality failures (rate x $260 cost per failure) | 3 percent: $7.80 | 1 percent: $2.60 |
| Pipeline inventory carrying (25 percent a year; 8 weeks vs 2 weeks) | $8.08 | $2.23 |
| Total cost of ownership | $243.88 | $245.83 |
Weighing What the Numbers Leave Out
At nearly equal cost, other factors decide. The Mexican supplier is a day's drive from Monterrey, which supports the agile chain that Lee (2004) describes, reduces exposure to ocean disruption and, with North American content, helps the commuter bike meet the trade agreement's rules of origin. Fawcett et al. (2007) caution that cost management should consider strategic value and risk as well as measurable costs. I recommend moving commuter battery purchases to the Mexican supplier and keeping the Chinese supplier for the performance line's specialized packs, under annual review.
Supplier Rationalization
The company buys from 140 suppliers, many for small amounts: 90 of them account for only 8 percent of spending. Each supplier requires qualification, audits, invoices and relationships. Fawcett et al. describe rationalization as reducing the supplier base to a smaller group of capable suppliers who can receive more volume and closer collaboration in return. I propose consolidating to about 60 suppliers over two years, starting with fasteners, cables and packaging, where several suppliers sell interchangeable items. Purchasing estimates savings of about 4 percent on consolidated spending through volume pricing, plus lower administrative cost.
Make or Buy and Role Shifting: Wheels
The company builds its own wheels, lacing spokes to hubs and rims in Bordentown, which takes six skilled workers and frequent rework. A wheel supplier in Taiwan, already supplying rims, offers to deliver finished, trued wheel sets. Role shifting moves an activity to the party that can perform it best. The supplier builds wheels by the hundred thousand with automated truing; its finished wheel set costs $11 less than our cost of parts plus labor, and its defect rate is lower. The six wheel builders can move to performance bike assembly, where the company is short of skilled workers, so the shift saves money without cutting jobs and keeps experienced people in the plant.
Risks
Fewer suppliers means more dependence on each, so the company should keep at least two qualified sources for critical parts such as batteries and motors.
Conclusion
Total cost of ownership turned a battery decision that looked like a $22 choice into a strategic one. Rationalization and role shifting reduce cost and complexity while putting work where it is done best, provided second sources protect the supply of critical parts.
References
Ellram, L. M. (1995). Total cost of ownership: An analysis approach for purchasing. International Journal of Physical Distribution & Logistics Management, 25(8), 4-23. https://doi.org/10.1108/09600039510099928
Fawcett, S. E., Ellram, L. M., & Ogden, J. A. (2007). Supply chain management: From vision to implementation. Pearson Prentice Hall.
Lee, H. L. (2004). The triple-A supply chain. Harvard Business Review, 82(10), 102-112.
OPM 4200 Module 4 instructions, in plain terms
The Module 4 case covers cost management, outsourcing, rationalization and role shifting. Expect to compare suppliers on total cost of ownership, decide whether to make or buy, propose how to reduce a supplier base and explain how roles could shift between a firm and its suppliers. Show each cost element in a table, explain where the figures come from and weigh strategic factors that the numbers do not capture. Keep risk in view, since a leaner supplier base raises dependence on each supplier. Include quality and inventory costs, which are easy to overlook and often decide the comparison, and explain how you estimated each. Present the total cost comparison per unit, then annually.
How this OPM 4200 Module 4 example is built
The paper builds a total cost of ownership table for battery packs from two countries and explains each element. A section weighs strategic factors once the costs are nearly equal and recommends a split. A section proposes supplier rationalization with evidence on spending concentration. A make or buy section shifts wheel building to a supplier and redeploys workers. Risks and a conclusion close the paper. The make or buy section shows where the skilled workers freed by role shifting would go, and the risk section keeps second sources for critical parts. Spending data, 90 suppliers accounting for 8 percent of spend, support the rationalization proposal.
OPM 4200 Module 4 rubric: what earns full marks
Mentors grade this case on accurate total cost analysis, correct use of chapter concepts, attention to strategy and risk, and clear writing. Papers that show how total cost changes a price comparison demonstrate the central idea of the module. Supporting rationalization with spending data, rather than assertion, shows rigor. Considering what happens to people affected by role shifting, and keeping second sources, shows practical judgment. Considering the people affected by role shifting, and keeping second sources, shows that cost decisions were weighed against their effects on workers and supply security. Explaining the source of each cost element, such as the cost per warranty failure, lets a reader trust the comparison. A clear recommendation, with a review date, closes the case well.
Common OPM 4200 Module 4 mistakes, and how to avoid them
Students lose points by comparing suppliers on price alone, by omitting quality or inventory costs or by recommending rationalization without considering dependence. Others treat make or buy as a cost question only. List every cost element. Explain each figure's source. Weigh strategy and risk when costs are close. Say what happens to workers and to supply security. Show where the people freed by outsourcing would go, and keep a second source for anything critical. Support rationalization with data on how spending is spread across suppliers. Weigh strategy when costs are close. A free first sample on your own OPM-4200 cost management case is available on request.
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OPM 4200 Module 4 questions, answered
Where can I find a free OPM 4200 Module 4 sample paper?
A total cost of ownership comparison of battery suppliers and a supplier rationalization plan are in the case above.
What is total cost of ownership?
The full cost of buying, owning and using a purchased item over its life: price plus freight, duties, failures and inventory.
What is supplier rationalization?
Reducing the supplier base to fewer, more capable suppliers who receive more volume and closer collaboration.
What is role shifting in supply chains?
Moving an activity to the party in the supply chain best able to perform it.
Why keep a second source after rationalization?
To limit dependence and protect supply of critical parts.