Question

ProCannons Donuts: An alum of BSU, Donna Smith, knew the donuts baked by ProCannons donuts would sell like wildfire in the city where She was the new CEO of a local supermarket. They had 20 stores spaced out in the City of Farside Ohio, 200 miles away. The stores were on average 10 miles apart from the city center. Donna suggested that it would be easy to get the donuts to her stores; just buy a fleet of the Ram Sprinter vans at $50K each and have them deliver the needed 1000 lbs. of donuts a day each store would need. It would be all highway driving. You wondered if that was that the most economical logistics system to use for the long term. You did some research and found that instead of a fleet of Sprinter vans maybe a day hauler than cost $100K, and can haul 20,000 lbs. could take the donuts to a warehouse space where you could distribute each stores’ shipment to just two sprinters that went from the warehouse and back 10 times each day. Everyone on your logistics team makes $50,000 a year. You use a 250 day working year. The Day hauler truck must be back at the bakery at the end of the day so it cannot deliver to any of the stores there in Farside. Your company uses a 5 year cost payment scheme for rolling stock and 20 years for buildings. The Warehouse you would have to buy with your day hauler scheme would cost $5,000,000, and you would need 4 people to unload and load the trucks. The Per mile costs highway for the Sprinter would be .35 ( for the fleet of Sprinters going to each store) and .45 for in-town from the warehouse; the Day hauler per mile cost is 1.65. No vehicle would be allowed to drive more than 400 miles in a day. What is the total daily cost? Which option is the best economically? What are two different pieces of information that could change, or might be too simplistic in this scenario.

Answer 1

PURCHASE OF SPRINTER VANS

Daily Cost for the scheme of purchasing the sprinter vans:-

Cost of Vans - 50000*20 (Since, there are 20 stores)

= 1,000,000

Cost per day = 1,000,000/25,000 days (5 years * 250 days for 20 vans)

= 40

Per mile daily cost = 0.35*400*20 (cost * total miles a day * number of vans)

= 2800

Salary of logistics team per day = 20*50000/5000 (Drivers*Salary per year)/No of days a year for each driver

= 200

So, Daily Cost = 40 + 2800 + 200

= $3040

A DAY HAULER SCHEME

Rent a day = 100,000/250 (yearly rent/no of days a year)

= 400

Daily cost of purchase of 2 sprinters = 2*50000/2500 (2*250*5)

= 40

Daily cost of Warehouse = 5,000,000/5000 (20 years)

= 1000

Daily salary cost = 4*50000/1000 (No of loaders * yearly salary)/total number of days for 4 loaders

= 200

Cost per mile for hauler = (1.65*400) + (0.45*2*400) (10 miles running and back for 20 stores from warehouse)

= 660 + 360

= 1020

So, Daily Cost = 400 + 40 + 1000 + 200 + 1020

= $2660

If we see economically, the option of A DAY HAULER is best.

Two different pieces of information which can change is:-

1) Cost per mile fro sprinters.

2) Salaries of drivers and loaders