edioil LLC, a company manufactoring edible oil is currently using all - rail route logitic system known a "System-1'from its plant and the associated plant warehoure to its customers. At the plant warehourse,different type of oil are packed in small buckets and thee buckets are kept in large container boxes and shipped by rail to the customer. you have recently joined in this organization and found that the total logistic cost in the present system is very high and the customer satification is very low.

therefore, you have decided to change the existing system to improve the customer satisfaction through efficient management of logistics and to reduce the total logistic cost. you proposed a new system known as "system-2", which is based on "market-oriented warehouse". in the proposed new system, the oil would be shipped from the plant to the market warehouse and then made into different packet to and end to the customer. instead of shipping all packet by rail, the organization would ship them by mini trucks to the market warehouse, taking advantage of low, bulk transportation prices. then, after bagging the oil packets would move by rail from the warehouse to the customer. assume that the management has asked you to explain how the proposed system-2 will be more economical than the existing system-1

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NI S1 The data related to both the Systems is given in the following tables. Cost Data of System - 1 and System - 2 COST SYSTEM-1 SYSTEM-2 TOTAL FIXED LOGISTICS COST 9300 AED 9800 AED TOTAL VARIABLE LOGISTICS COST 7 AED Per Unit 5 AED Per Unit OUTPUT 250 300 450 500 700 Answer the following question based on the above data: 3. Justify how the proposed new System - 2 will improve the efficiency of logistics by applying total logistics cost principle. Show all the calculations clearly