ABC Waste Disposal, headquartered in the industrial city of
Dusseldorf, Germany, operates seven specially-constructed
semi-trailers and cabs for commercial long-distance hauling of
radioactive waste materials. Each truck averages one completed load
per week, picking up the radioactive containers from chemical
companies and other manufacturers in central Europe. The loads are
carefully driven to a government site near Dresden, which until the
reunification was a manufacturing center in East Germany.
Currently, pickups are made in eight countries: Italy, Germany,
Austria, France, Belgium, Netherlands, Denmark, and Poland.
ABC maintains an office in each country's capitol. Staffing
includes not only a manager and a secretary at each national
office, but a part-time lobbyist/attorney to assist in the many
political, cross-cultural, border, and legal issues that arise in
the nuclear waste disposal industry.
ABC is seriously considering dropping Italy as source of
business. Last year, only 25 truckloads of wastes were handled
there. Since textile manufacturers in northern Italy are the
primary source of trucking for ABC, the size and revenues from
their shipments will determine if it is profitable to retain an
office and do business in that country.
To analyze the Italian market, ABC gathers data on last year's
shipments and revenues, as shown below. Each of the 25 trucks that
were loaded in Italy last year carried between 28 and 48 barrels of
waste. The income generated per barrel differed significantly
(ranging from 50 to 80 euros, based on the type of radioactive
material being loaded and the weight of the barrels to be
shipped.
Barrels Probability Revenue Probability
28 0.12 50 euros 0.20
33 0.16 60 euros 0.44
38 0.24 70 euros 0.28
43 0.36 80 euros 0.08
48 0.12
The company decided that if they were to simulate 25
truckloads out of Italy they could determine if it would be
profitable to continue to operate there next year. It estimates
that each shipment to the Dresden dumpsite costs 900 euros,
including driver, gasoline, and truck expenses; other cargo and
loading and unloading costs average 120 euros per shipment. In
addition, it costs 41,000 euros per year to operate the Italian
office, including salaries and indirect overhead costs from the
home office in Dusseldorf.
Calculate the Profit based on one replication (25 trips
(truckloads) per year) and repeat the simulation for 200
replications.
Will the shipments in Italy next year generate enough revenues
to cover ABC' costs there?