Question

In: Operations Management

LM.97 Each week the ABC Company, from Albuquerque, NM receives 58 separate LTL shipments from a...

LM.97 Each week the ABC Company, from Albuquerque, NM receives 58 separate LTL shipments from a number of different suppliers in the Dallas, TX area. Each parcel shipment from Dallas to Albuquerque costs $102.

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 = $31 pickup fee

Average weight per supplier shipment = 128 lbs.

Local consolidation fee = $37 per hundred-weight

Consolidated TL shipment from Dallas to Albuquerque = $987

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 cost for local pickup does the cost of the two options become the same? (Display your answer to two decimal places.)

Solutions

Expert Solution

Total cost of shipping separate parcel shipments from Dallas to Albuquerque = $102/shipment x 58 shipment = $5916

TOTAL COST OF SHIPPING SEPARATE PARCEL SHIPMENTS FROM DALLAS TO ALBUQUERQUE = $5916

Local consolidation fee per supplier shipment = $37/ 100x 128 lbs = $47.36

Local pickup fee per supplier shipment = $31

Therefore , total cost per supplier shipment = $47.36 + $31 = $78.36

Total cost of pickup from 58 suppliers / shipments = $78.36 x 58 = $4544.88

Truck load shipment from Dallas to Albuquerque = $987

Therefore , total shipment cost using 3PL service provider = $4544.88 + $987 = $5531.88

Thus amount of money ABC company would save to hire the 3PL to pick up the shipments from each supplier and consolidate them to one bulk shipment to Albuquerque = $5916 - $5531.88 = $384.12

ABC COMPANY WOULD SAVE = $384.12

Let the local pick up cost per shipment is $P at which cost of two options become same.

Total cost of pick up from 58 suppliers

= Local consolidation fee per supplier shipment x 58 shipment + Local pick up cost / shipment x 58 shipments

= 47.36 x 58 + 31.P

= $ 2746.88 + 31.P

Total shipment cost using 3PL service provider = $2746.88 + 31.P + 987 =$3733.88 + $31.P

Total cost of shipping separate parcel shipments = $5916

Therefore ,

5916 = 3733.88 + 31.P

Or, 31.P = 2182.12

Or, P = 70.39

REQUIRED LOCAL PICKUP COST PER SHIPMENT AT WHICH COST OF TWO OPTIONS BECOME EQUAL = $70.39

keosha answered 1 year ago
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