Question

Each week the ABC Company, from Albuquerque, NM receives 58 separate LTL shipments from a number of different suppliers in the Dallas, TX area. Each parcel shipment from Dallas to Albuquerque costs $102.

Alternate Shipping Method

A Dallas-based 3PL provider has approached ABC Company with a proposal to run a consolidation operation where they would pick up the supplier shipments each week and load them on to one truck for shipment to Albuquerque. The relative data for this alternative shipping method are as follows:

Local pickup fee = $31 pickup fee
Average weight per supplier shipment = 128 lbs.
Local consolidation fee = $37 per hundred-weight
Consolidated TL shipment from Dallas to Albuquerque = $987
a. What is the total cost of shipping the separate parcel shipments from the Dallas-area suppliers to the ABC company location in Albuquerque? (Display your answer as a whole number.)
b. How much money would ABC Company save to hire the 3PL to pickup the shipments from each supplier and consolidate them into one bulk shipment to Albuquerque? (Display your answer as a whole number.)
c. At what cost for local pickup does the cost of the two options become the same? (Display your answer to two decimal places.)

Answer 1

$5,532; $384; $41.75

Step-by-step explanation:

Current total cost of shipment:

= 58 LTL × $102 per LTL

= $5,916

Consolidated shipments :

Total local pickup fee of 58 shipments = $31 × 58

= $1,798

Total weight of 58 shipments = 128 lbs × 58

= 7,424 lbs

Local consolidation fee = ($37 ÷ 100) × 7,424 lbs

= $2,747

Consolidated TL shipment cost = $ 987

Total cost of consolidated shipment:

= $1,798 + $2,747 + $987

= $5,532

Total money saved by using consolidated shipment:

= Current total cost of shipment - Total cost of consolidated shipment

= $5,916 - $5,532

= $384

Number of shipments at which the cost is same for the two options:

= $987 ÷ [$102 - $31 - (($37 × 128) ÷ 100)]

= $41.75