1)Comfy Mattresses, Inc., is opening a new plant in Orlando, Florida, Ron Lane. Distribution manager has been asked to find the lowest cost outbound logistics system. Given the annual sales volume of 24,000; 25,000; and 26,000 mattresses for the next 3 years, determine the costs associated with each option below. Which one would you choose for your company?

a.Build a private warehouse near the plant for $300,000. The variable cost, including warehouse maintenance and labor, is estimated at $5 per unit. Contract carrier transportation costs are $12.50 per unit on average. No external transportation services are necessary for shipment of mattresses from the plant to the warehouse in this scenario.

b.Rent space in public warehouse 10 miles from the plant. The public warehouse requires no fixed investment but has a variable cost of $8 per unit. Outbound contract carrier transportation would cost $12.50 per unit on average. The carrier also charges $5 per unit to deliver the mattresses to the warehouse from the plant.

c.Contract the warehousing and transportation services to the Freeflow Logistics Company, an integrated logistics firm with warehouse location 25 miles from the plant. Freeflow requires a fixed investment of $150,000 and charges $20 per unit for all services originating at the plant.