Question

Seahawk Inc. employs one worker to load packages on an outgoing truck. The work shift is an 8 hour day. Trucks arrive at the loading dock at an average of 40 per day. The worker can load a truck in 8 minutes. Truck drivers earn $20 per hour while the employees who load the trucks earn $18/hour. While the trucks are being loaded, the truck drivers must sit and wait with the truck. a) Should the cost be based on truck drivers in the system or truck drivers in the queue? Explain.

b) What is the hourly cost for this system?

c) Seahawk has the enough capital to make one improvement to the system. They can decrease the loading rate from 8 minutes per truck to 6 minutes per truck; OR they can add a second dock with an additional worker (each worker still loads at a rate 8 minutes per truck). If they add an additional dock, trucks will still line up in a single line and go to the first available dock. Perform a cost analysis (ignore capital improvement costs) for both options and explain which option Seahawk should take. Provide all relevant cost calculations and explain your answer.

Answer 1

Work shift = 8 hrs / day
No. of trucks = 40
Worker load time = 8 mins
Truck drivers' earning = $20 / hr
Worker loading earning = $18 / hr

A) If the truck drivers are dedicated to one station, then the cost can be based on truck drivers in the system. If not, then the cost has to be based on those in queue because that is the best estimate of scope.

B) Hourly cost = no.of trucks in an hour * cost of truck driver + hourly cost of worker = (60/8)*20+18 = $168

C) In case they add another dock. Then in an hour their total cost = $168*2 (this is because both workers take same time and so simultaneously 2 trucks can be loaded) = $336

D) Now while the cost doubles, the no. of trucks serviced also doubles along with the ability of the company
to send out delivered trucks. Hence option 2 is better.