Question

One of Jim O’Brien’s customers, Mid-West Supply, has presented him with an opportunity for a significant amount of freight moving into a new market for Hardee. Hardee is a truckload carrier primarily moving freight in east/west lanes in the United States, with some movements into Canada. Hardee has dispatch centers located throughout the United States which have some dock and warehousing capacity. The new move would be between Lincoln, NE and Miami, FL. Hardee has avoided this market because of the lack of backhaul opportunities that exist outbound from Florida. However, this new move offers a significant increase in volume for Hardee. A complicating factor is the request from Mid-West’s customer, Global Bike Inc. (GBI), that they deliver mixed pallet loads to GBI’s Miami distribution center (DC). Mid-West want’s to outsource this work to Hardee believing they have lower labor rates. Each shipment from Mid-West will consist of straight (one product) pallet loads of various SKUs destined for GBI’s DC. Sorting and segregation at Hardee’s warehouse would consist of breaking down the pallets, sorting the freight, and then re-palletizing into rainbow (mixed products) pallets so that GBI may cross-dock and ship directly to their local customers. Hardee has never experienced this type of request before. Jim knows that he needs to put some type of costs to this move to make sure that it is profitable. Because of the large volume involved, not covering Hardee’s costs in pricing could result in large losses for Hardee. For depreciation and interest costing purposes, Jim considers that his equipment utilization (uptime) is 80%.

Route and Time of Move

The 40,000# shipment originates at Mid-West Supply located 20 miles from Hardee’s warehouse and dispatch center (DC). A pick-up and delivery driver is dispatched from the Hardee location and arrives at Mid-West an hour later. The shipment loading takes 2 hours. The driver departs Mid-West and returns to the Hardee dispatch center to unload the pallets for rainbow sorting. The process of unload, sort, and reload onto a line-haul trailer requires two dock workers, each working for 8 hours in the DC’s warehouse. The warehouse overhead rate is $15.00 an hour. The line-haul portion begins the next day as soon as a driver comes on duty, destined for Global Bike Inc.’s DC at 5341 Blue Lagoon Drive, Miami, FL. Upon arrival, the line-haul driver stays with the equipment during the 2 hour unload time. The driver then deadheads 15 miles to a Hardee dispatch center located in Miami, a 30 minutes trip. A flow chart of the entire move, including a deadhead return is shown in the diagram below. IV. Create a worksheet to calculate cost and revenue detail (similar to the TL and LTL models) for each of the cost elements itemized in the previous diagram. The worksheet must have a “cost breakdown” side and an “input table” side as demonstrated in the templates within Figure 3; all calculated values must be by formula or cell reference from the input tables. Trip mileage and transit time must be self-determined inputs. Note that driving time must be based on current Hours of Service Regulations; tractor must have a sleeper berth; trailer size is 53’dry van. V. Build a new worksheet for the same trip, but use an “expedited” trucking model with 2 drivers. Use the Figure 3 template but modify for 2 drivers. VI. Add a new page to the Word document previously developed. Create a table as shown below to summarize the costs calculated by the worksheets. Then answer the questions below, using the same question copy and response requirements as before. a. Where would the “FOB origin” point be for the line haul shipment: Mid-West or Hardee? b. Assume that Hardee does not want any financial interaction with GBI. How would Mid-West want to list the terms on the BOL? c. Assume you and GBI like this business model and it will continue, however, you have to deadhead back to Lincoln 3 out of 4 trips. What percentage of the deadhead cost would you add to the price for the GBI trip to Miami? Discuss the pros and cons adding this cost into your price to Mid-West. d. Assume a deadhead situation and that the deadhead cost will not be part of the original trip (typical). What price would you initially use as a "floor" to accept for a return shipment from Miami to Lincoln? Explain why, and include textbook terminology to defend the position. e. As the owner of Hardee, what change to the delivery end of this arrangement would you recommend in order to increase your “value add” to Global Bike and increase your revenue? f. As a sales manager of Global Bike, explain why you wouldn’t set up a distribution network as described by this case study; recommend a new plan (keep the rainbow sort at Hardee).

Answer 1

1. Create a worksheet to calculate cost and revenue detail (similar to the TL and LTL models)?

For this we would require the Diagram that has not been enclosed along this question

2. Build a new worksheet for the same trip, but use an “expedited” trucking model with 2 drivers?

This question also missing the template which furnishes the required information.

As such there are other questions related, and the information provided seems insufficient, adding the details would help us to address the questions accordingly.