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Chalman Transportation is located in Milton Ontario, serving mainly the East-West Canadian market. They have a new customer with a delivery opportunity in Gimli Manitoba,

Chalman Transportation is located in Milton Ontario, serving mainly the East-West Canadian market. They have a new customer with a delivery opportunity in Gimli Manitoba, only 56 miles from their Winnipeg terminal and dispatch centre. This customer's product arrives a couple times weekly at Pearson Airport from overseas. There are no direct flights to Winnipeg. The freight requires special handling which is not available at the airport in Winnipeg. Because of this handling requirement, the customer is willing to pay a premium. The customer requires that this freight must be broken down, sorted and reloaded at the Milton terminal for its various retailers. Bill Chalman must determine if this new delivery to Gimli is profitable by analyzing the costs of this route. Equipment Purchase Price Depreciation 1. Line haul tractors = $ 120,000 1. Tractor = 5 year straight line 2. Trailers - $ 40,000 - 53-foot dry van 2. Trailers = 8 year straight line Interest Fuel 1. Tractor = $ 3.25/hr 1. $3.83 per gallon for diesel 2. Trailers= $0.74/hr 2. Line haul tractors = 6 miles/gallon Labour Cost Miscellaneous 1. Line haul drivers - driving -$ 0.55 per mile 1. Insurance - $ 0.067 per mile 2. Line haul drivers - resting = $ 15.00/hr 2. Maintenance = $ 0.152 per mile 3. PUD operation drivers = $ 26.00/hr 3. Billing = $ 1.95 per freight bill 4. Dock workers - $ 22 per hour 4. Tractors and trailers available 24/7 5. Admin./overhead = 10 % of total cost 6. Dock facility cost - $ 20 per hourRoute and Time of Move 1) Pickup: The shipment of 15,000 lbs. originates at Pearson International Airport located 24 miles from the dock in Milton. Tractor and trailer are dispatched at 7: 30 am. and arrive at the airport at 8:30 am. The shipment is loaded from 8:30 am. to 11:00 am. The vehicle returns to the terminal at 12:00 pm. for sorting of the shipment. 2) Terminal: The sorting process at the terminal starts at 1:00 pm. and ends at 6:00 pm. This operation requires two dock workers working on the same trailer for 5 hours. 3) Line Haul: The vehicle and driver depart from the terminal for Winnipeg at 7:00 pm. The driver operates until 12:00 am., travels 265 miles to Sudbury and then rests until 8:00 am. He then operates another 12 hours and 650 miles until 8:00 pm. stopping in Thunderbay. The driver rests from 8:00 pm. to 6:00 am. and then travels the last 500 miles until 4:00 pm. and is on time for his unloading appointment with the customer. 4) Delivery: The trailer is unloaded at the customer from 4:30 pm. to 6:30 pm. with the driver remaining on site. The vehicle and driver then go to the company's Winnipeg terminal located 56 miles away, arriving at 8:00 pm. to await further instructions. Q1: What are the pickup, terminal, line haul, delivery and total costs of this TL move? Q2: What is the total cost of this move? Cost per cwt.? Cost per revenue mile? Q3) If Chalman used two drivers (tandem) for the line haul portion of the delivery, how would the costs change? (Hint: no rest required) Q4) Chalman currently has no back haul to Milton for this new delivery. Would the backhaul costs be the same? How would you account for them now in your pricing strategy? What could you do in the longer term to improve the profitability of this delivery?

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