AD 690 Problem Set 3 - edited

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Dec 6, 2023

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AD 690 Strategic Logistics Management Transportation Manager’s Dilemmas Problem Set 3 Company Background Alpha is full scope retailer that has stores, warehouses and distribution centers. It has company-owned trucks for making deliveries to customers and picking up goods from suppliers. It also depends on third- party logistics (3PL) providers to support the company’s transportation requirements, especially from remote locations like seaports, river docks and rail yards. Alpha manages the transportation requirements as part of supply chain management (SCM) and strategic logistics management. The company’s transportation manager is responsible for the broad array of transportation-related requirements. The transportation manager’s primary roles and responsibilities include:  Supervising the transportation function, including its assets and employees.  Managing the operational aspects of ongoing logistics; serving as liaison between operations, warehouses, and customer relationships management.  Ensuring that goods are efficiently moved from suppliers to warehouses and retail stores.  Coordinating air and ocean freight forwarding, transportation, reverse logistics, surface transportation and supply chain solutions.  Assuring quality transportation services.  Developing partnerships with 3PL providers in shipping.  Preparing and executing operating budgets.  Utilizing services of less-than-truckload (LTL) carriers and air-forwarders to handle fulfillment shipments.  Scheduling of shipments.  Reviewing financial reports.  Providing distribution and transportation action plans.  Recruiting, interviewing, selecting, training, coaching, and mentoring logistics personnel.  Assisting in the identification and implementation of continuous improvement opportunities and customer satisfaction opportunities The Assignment This assignment involves provide quantitative and qualitative answers to each of the four questions. The problem set is worth seven points. The instructors and facilitators will determine the grade based on the following:  Question 1 = 2.0 points  Question 2 = 2.0 points  Question 3 = 1.5 points  Question 4 = 1.5 points Please provide the answers per the question number. Submit the answers in Word. If you have calculations using Excel, include Excel spreadsheets as Attachments to your Word Doc. Submit only one file. Include your name in the file name that you submit per the following: Last Name Problem Set 3 AD 690. 1

Question 1 Alpha is a retailer that has ten stores in New Orleans area that are supplied by 5 suppliers. It has box trucks for obtaining goods from its suppliers. The transportation manager in consultation with the SCM is assessing whether it is worth switching from box trucks to vans to reduce costs and to optimize the operations. Box trucks have a capacity of 5,000 cartons and the vans have a capacity of 2,000 cartons. The box trucks cost $400 per stop. The vans cost $100 per stop. The annual requirements for each store are the same; each requires 200,000 cartons per year. The holding costs for inventory at the stores is $.40. Calculate the costs of using box trucks and the costs of using vans. Compare the results. Should the transportation manager recommend to the SCM that the company lease vans instead of leasing box trucks based on a cost analysis of the above information? The SCM expects a definitive recommendation with supporting details, especially the calculations and analysis. The SCM expects the memo to include all considerations in addition to the financial (cost) aspects. What information and data would you present in addition to your analysis and recommendation? Question 2 The transportation manager is expecting two barges to arrive the next day at the river port. The transportation manager is concerned whether the two barges will arrive on schedule. Each barge has two FEU containers. The transportation manager knows that the barges may get delayed due to congestion at the upstream locks. The transportation manager also knows that the company must contract for a third party logistics (3PL) trucking company to pick up the containers. The transit and delivery fees are fixed based on the load and distance (these costs are not part of the immediate considerations). The dilemma is that fewer than two barges may arrive, exactly two barges may arrive, or more than two barges may arrive. There is significant uncertainty. The transportation manager has to pay fees for storing the containers at the dock if there are insufficient trucks to transport the containers from the docks upon arrival or the transportation manager has to pay fees to the 3PL trucking company if there are insufficient containers for the waiting trucks and some of the trucks have to return to their terminals empty. The storage fee at the port is $100 per container per day. The “empty truck return” fee is $200 per truck. Each truck can haul only 1 FEU container. The transportation manager realizes that a Poisson distribution will provide perspectives about determining the best course(s) of action. The situation is difficult because the company cannot do anything to facilitate the arrivals of the barges. The transportation manager most likely will have to pay fees unless the number of trucks available exactly matches the number of containers that arrive. The transportation manager’s objective is to minimize the amount of fees that may have to be paid. However, there may be other factors that may have to be considered as well. How many trucks should the transportation manager contract for so that the fees are minimized? The SCM expects a definitive recommendation with supporting details, especially the calculations and analysis. In other words, the SCM expects a written report outlining the logic of the recommendations. Question 3 The SCM approved the leasing of the vans. The transportation manager expects that it will take his team of drivers some time (days/number of trips) to be as productive with vans as they were with the box trucks. There are 20 drivers. There are 5000 trips per year. Each driver can do one trip per day. There are 21 days per month and 12 months per year; therefore, each driver does 250 trips per year (assuming that each driver takes 2 personal days per year). The transportation manager knows from past experiences that the driver learning curve is 85%, i.e., the time to accomplish the delivery of all the packages for each assigned route generally declines as more experience (learning) is obtained (at a 2

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