Every week BosssMustang of Oakland, California, receives shipments from 10 different suppliers in the Los Angeles area. Each supplier’s order weighs, on average, 500 pounds. A direct truck shipment from Los Angeles to Oakland costs $800.
A Los Angeles 3PL provider has offered to run a consolidation warehousing operation for BosssMustang. The 3PL provider would pick up the shipments from each supplier, process them, and put them on a single truck bound for Oakland. The pickup fee would be $100 per supplier, and the warehousing cost would be $55 per hundred-weight. The direct truck shipment cost would be the same as before, $800.
a. How much would it cost BosssMustang per week to accept direct, single-order shipments from all of its suppliers? What would the utilization levels for the trucks look like, assuming that each truck was capable of carrying 10,000 pounds?
b. How much would it cost BosssMustang per week to use the consolidation warehousing option? What would the utilization level for the truck look like?
c. Suppose higher gasoline prices have caused the trucking cost to increase to $1,200. Which option looks best now?