Demands on businesses are constantly increasing and the competition in the market-place is becoming ever tougher. To gain the long-term confidence of customers, not only the best businesses, but also the best supply chains are required.

Volvo Cars is experiencing a changing competitive situation and their retailers are having trouble stocking the right spare parts. Shorter product life cycles and the growth of Volvo’s product program result in an increase in the number of spare parts to be stocked. In order to adapt to market trends and meet customer demands, Volvo has developed the LDC model, establishing a number of regional warehouses in strategic locations in Sweden, de-signed to supply spare parts to the regions’ retailers through so-called Vendor-Managed In-ventory (VMI).

The purpose of the study is to examine Volvo personbilar Sverige’s (VPS) motivation for a modified customer-service strategy through LDC. Furthermore, we aim to survey the LDC model and its function, and to identify the pros and cons of VMI and different inventory strategies. Next we will examine how retailers are affected by a transition to VMI and re-gional distribution centers (the need to adapt the organizations and working methods). Fi-nally we will examine how the alliance with VPS for the retailers choosing to join LDC is transformed, and the potential for improvement for the LDC model in action and in the implementation phase.

To attain our purposes, we have chosen conduct interviews with select retailers and key persons at VPS and Volvo Cars.

Our conclusions show that VPS has a well-developed strategy behind the LDC model and that VPS’ motive is to enhance customer service and the total performance of the supply chain. The retailers understand the need for change during the introduction of a new logis-tics system. However, our study shows that the biggest problem for the retailers when in-troducing the LDC model is getting employees to change their working methods and rou-tines. An unexpected conclusion of the study was that the alliance and transparence had not changed to the extent we had expected after the introduction of LDC. The most im-portant improvement suggested by the study is that VPS should work to integrate all func-tions and finished products for the after-sales market in the LDC model, allowing them to offer retailers a complete solution.