Question

LM.97 Each week the ABC Company, from Albuquerque, NM receives 56 separate LTL shipments from a number of different suppliers in the Dallas, TX area. Each parcel shipment from Dallas to Albuquerque costs $126.

Alternate Shipping Method

A Dallas-based 3PL provider has approached ABC Company with a proposal to run a consolidation operation where they would pick up the supplier shipments each week and load them on to one truck for shipment to Albuquerque. The relative data for this alternative shipping method are as follows:

• Local pickup fee = $29 pickup fee
• Average weight per supplier shipment = 165 lbs.
• Local consolidation fee = $41 per hundred-weight
• Consolidated TL shipment from Dallas to Albuquerque = $1,140
• What is the total cost of shipping the separate parcel shipments from the Dallas-area suppliers to the ABC company location in Albuquerque? (Display your answer as a whole number.)

   How much money would ABC Company save to hire the 3PL to pickup the shipments from each supplier and consolidate them into one bulk shipment to Albuquerque? (Display your answer as a whole number.)
   At what number of shipments is the cost the same for the two options? (Display your answer as a whole number.)

Answer 1

1.

FOR SEPARATE PARCEL SHIPMENT::

Shipping cost per parcel = $ 126

Number of shipments = 56

Total cost using separate parcel shipment = $ 126 × 56

Total cost using separate parcel shipment = $ 7,056

2.

FOR 3PL PROVIDER::

Pickup fee per parcel = $ 29

Total pickup fee for 56 parcels = 56 × $ 29

Total pickup fee for 56 parcels = $ 1,624

Average weight per shipment = 165 lbs

Total weight for 56 shipments = 165 × 56

Total weight for 56 shipments = 9,240 lbs

Local consolidation fee for 100 lbs = $ 41

Local consolidation fee for 9,240 lbs = 9,240 × $ 0.41

Local consolidation fee for 9,240 lbs = $ 3,788.4

Consolidated TL shipment fee from Dallas to Albuquerque = $ 1140

Total cost for 3PL provider = Total pickup fee + Local consolidation fee + Consolidated TL shipment

Total cost for 3PL carrier = $ 1,624 + $ 3,788.4 + $ 1,140

Total cost for 3PL carrier = $ 6,552.4

Savings = Total cost for separate parcel shipment - Total cost for 3PL provider

Savings = $ 7,056 - $ 6,552.4

Savings = $ 503.6

Savings = $ 504 (rounded off to whole number)

Savings = $ 504

3.

Let number of shipments = N

FOR SEPARATE PARCEL SHIPMENT::

Shipping cost per parcel = $ 126

Total cost for separate parcel shipment = $ 126 × N

FOR 3PL PROVIDER::

Pickup fee per parcel = $ 29

Total pickup fee for N parcels = $ 29 × N

Average weight per shipment = 165 lbs

Total weight for N shipments = 165 × N

Local consolidation fee for 100 lbs = $ 41

Local consolidation fee for 165N lbs = 165N × $ 0.41

Local consolidation fee for 165N lbs = $ 67.65 × N

Consolidated TL shipment fee from Dallas to Albuquerque = $ 1140

Total cost for 3PL provider = Total pickup fee + Local consolidation fee + Consolidated TL shipment

Total cost for 3PL provider = $ 29N + $ 67.65N + $ 1,140

FOR COSTS OF SHIPMENTS TO BE SAME:

126N = 29N + 67.65N + 1140

29.35N = 1140

N = 38.84

N = 39 shipments (rounded off to nearest whole number)

Therefore, at 39 shipments, the cost of both options will be the same.