Essay on Case Stud Powell Logistics

1068 WordsMay 2, 20135 Pages
Assignment #3: Powell Logistics Case Study A. Defining the issue The immediate issue is to make a decision on the future of the family company. B. Analyzing the Case Data * The truck transportation industry is a vital part of the Canadian economy with $43 billion in sales annually and employing 400,000 people * The for-hire sector accounts for 40% of the transportation industry in Canada * The for-hire sector has 2 service offerings: TL – Truck load, only full load between 2 locations and LTL – Less than load, pick up from various locations reorganize then deliver to end customer. Traditionally LTL charge more. * Trucking industry experiencing 3 major issues * Cost of fuel, increased operating costs forced…show more content…
* Current operations included year round business with little seasonal fluctuations * 80 drivers working 5 days per week * Loads were picked up from location A and delivered to one of 5 warehouses, placed on another truck with optimized route for location B (software driven route optimization) * Sales growth would trend the same for the next year as the previous. C. Generating Alternatives 1) Buy New Warehouse and Combine Operations Pros: Reduction in costs including rent, labour, fuel, and administration salary costs. Cons: A total $10 million investment was required to cover $2 million for the land and $5 million loan financed at 5% annually. 2) Sell the Business Pros: There is interest, business is overall doing well and the timing is right in order to get as much value through selling. Cons: Direct access to cash flow stops and the family members work future is jeopardized. 3) Pass the business on to his children Pros: The 3 Powell children are and have been heavily involved in the family business each having their own expertise. Cons: Who to select as the CEO from the 3 Powell children. D. Selecting Decision Criteria: * John Powell wants to retire * The family’s interest is of utmost importance * Improve financial position of PLI * Decrease operating expenses through streamlining operational costs * Decrease liabilities and pay down on

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