Question

LM.91 XYZ Company is rethinking the way it ships to its 58 customers in another city...

LM.91 XYZ Company is rethinking the way it ships to its 58 customers in another city 271 miles away. Current Shipping/Delivery Method They currently hire an LTL (less-than-truckload) carrier to pick up and deliver these shipments. Each customer order shipped via LTL carrier costs $169. Alternate Shipping/Delivery Method A 3PL (third-party logistics provider) has approached XYZ Company and suggested that they make full truckload (TL) shipments from their facility to the 3PL's warehouse in the customers' city. The 3PL would then break the bulk shipment (TL or truckload shipment) into individual customer orders to be shipped locally by an LTL carrier.

The relative data for this alternate shipping method are as follows:

Full TL shipment cost (271 miles) = $725

Average weight per customer order = 710 lbs.

Warehouse break-bulk fee (per 100 lbs., a.k.a. per "hundred weight") = $16

Local LTL delivery fee (per customer order) = $26

1- What is the total cost of delivering to all customers via LTL carrier (current method)? (Display your answer as a whole number.)

2 - How much money would XYZ company save by using the alternate shipping/delivery method for delivery to all customers? (Display your answer as a whole number.)

3 - At what number of customers would the cost of these two methods be the same? (Display your answer as a whole number.)

Business   Operations-Management   
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Homework Answers

Answer #1

1.

FOR LTL CARRIER::

Shipping cost per customer = $ 169

Number of customers = 58

Total cost using LTL carrier = $ 169 × 58

Total cost using LTL carrier = $ 9,802

2.

FOR TL CARRIER::

Shipment Cost = $ 725

Average order weight per customer = 710 lbs

Total order weight for 58 customers = 710 × 58

Total order weight for 58 customers = 41,180 lbs

Break bulk fee for 100 lbs = $ 16

Total Break bulk fee for 41,180 lbs = 41,180 × 0.16

Total break bulk fee for 41,180 lbs = $ 6,588.8

Delivery fee per customer = $ 26

Delivery fee for 58 customers = 58 × $ 26

Total delivery fee for 58 customers = $ 1,508

Total cost for TL carrier = Shipment cost + Total break bulk fee + Total delivery fee

Total cost for TL carrier = $ 725 + $ 6,588.8 + $ 1508

Total cost for TL carrier = $ 8821.8

Savings = Total cost for LTL carrier - Total cost for TL carrier

Savings = $ 9,802 - $ 8,821.8

Savings = $ 980.2

Savings = $ 980 (rounded off to whole number)

Savings = $ 980

3.

Let number of customers = N

FOR TL CARRIER::

Shipping cost per customer = $ 169

Total cost using LTL carrier = $ 169 × N

FOR LTL CARRIER::

Shipment Cost = $ 725

Average order weight per customer = 710 lbs

Total order weight for N customers = 710 × N

Break bulk fee for 100 lbs = $ 16

Total Break bulk fee = 710 × N × 0.16

Total break bulk fee = $ 113.6 × N

Delivery fee per customer = $ 26

Delivery fee for N customers = N × $ 26

Total cost for TL carrier = Shipment cost + Total break bulk fee + Total delivery fee

Total cost for TL carrier = $ 725 + $ 113.6 × N + $ 26 × N

Total cost for TL carrier = 725 + 139.6N

FOR TOTAL COST TO BE EQUAL

169 N = 725 + 139.6 N

29.4 N = 725

N = 24.66 customers

Number of customers = 25 (rounded off to nearest whole number)

Number of customers = 25

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