Astro Industries of Minneapolis, Minnesota, makes weekly shipments to 3030 custo

Question

Astro Industries of Minneapolis, Minnesota, makes weekly shipments to

3030

customers in the Dallas area. Each customer's order weighs, on average,

1 comma 5001,500

pounds. A direct truck shipment from Minneapolis to Dallas costs

$2 comma 0002,000.

The maximum load per truck is

20 comma 00020,000

pounds.

a.

The

total cost for Astro to make direct, single-order shipments to all of its customers is

$nothing

per week. (Enter your response as a whole number.)

The average truck utilization level for the single-order shipment option is

nothing %.

(Enter your response rounded to one decimal place.)

b. Suppose a Dallas-based warehousing firm has agreed to run a break-bulk warehousing operation for Astro at a cost of

$8585

per hundred-weight. Local deliveries to each customer would tack on another

$250250

per customer per week.

The total cost of the break-bulk warehousing option is

$nothing

per week. (Enter your response as a whole number.)

By going with a break-bulk solution, Astro could save

$nothing

per week. (Enter your response as a whole number.)

c. The warehousing cost would need to be greater than or equal to

$nothing

per hundred-weight for the break-bulk option to be no more attractive than direct shipments. (Enter your response rounded to the nearest whole number.)

Explanation / Answer

a) No. of customers = 30; Cost of direct shipment from Minneapolis to Dallas = $2000

Each customer's order weight = 1500; Truck capacity= 20000

Making direct shipments to each of its customers will cost 30*2000= $60000.

This means only 1500 of entire 20000 truck capacity is used in each order implying truck utilization level =1500/20000 = 0.075 =7.5%.

b) Break bulk warehousing cost = $85 per hundred pounds

Local deliveries cost = $250 per customer per week

Total cost of delivery = Break bulk Warehousing + delivery

= (85*1500/100+250)*30 = $45750

Savings = 60000-45750 = $14250

c) Point at which direct shipments become more attractive than break bulk will be given by

(x*1500/100+250)*30 > = 60000; x = $116.67

Therefore, break-bulk warehousing to become unattractive, the break- bulk warehousing rate per hundred weight should be greater than $116.67

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