QUESTION #2 - Total Cost Analysis Now you have an idea of the competitiveness of Primo...

Transcribed Image Text:

QUESTION #2 - Total Cost Analysis Now you have an idea of the competitiveness of Primo Caf's Vietnamese supplier and one of the Taiwanese suppliers for JDM. So, the next estimate is the total cost to ship product from Asia to the U.S. You realize that this is a little tricky-JDM's warehouse is in Palo Alto, close to the port in California. However, Primo Caf's warehouse is in Grand Rapids- with intermodal (rail and truck) costs from California to Michigan. Marco asks Frank where JDM's customers are located. Are most in the western U.S. or nationwide? Frank digs up the customer list and finds that there are customers in most of the 48 contiguous states. However, 90% of its sales are in California, Oregon, Washington, Arizona and Nevada (primarily Las Vegas). You look up Primo Caf's Family Man sales by region... you find that 60% of its sales are west of the Mississippi River. Would Primo Caf save money if they used a regional warehouse model (Palo Alto and Grand Rapids) for Family Man? Below are the logistics costs from the Vietnamese supplier (for simplicity) to Palo Alto and Grand Rapids, using a weighted average customer base of Denver, Colorado for Family Man's western U.S. sales: Conversions Price/Family Man Family Man cubic feet (cube) Family Man / Container Family Man/Pallet Pallets/Container Palo Alto $ 12.00 $ 1.5 1600 32 50 Grand Rapids 12.00 1.5 1600 32 50 Shipping Costs To Port of Export / container $ 200 $ 200 To U.S. Port / Container $ 3,200 3,100 Duties (% value of price) 5% 5% Port Handling Fee (% value of price) Transportation to Warehouse / Container Warehouse Charges / Pallet (pick & pack) Transportation Cost to Denver / pallet 4% 3% 200 1,200 $ 75 $ 60 63 $ 58 Apply the total cost analysis framework presented in class (Week 8) to complete the questions below. Complete all calculations in the excel file provided that you will upload with your exam. 1. Given the assumptions above, what are the total costs for shipping Family Man product from the Vietnamese supplier to Denver, Colorado: a. Through the Palo Alto warehouse b. Through the Grand Rapids warehouse 2. What additional information would you like to know? 3. What is your recommendation to Elise to support Family Man's western U.S. customers? Why? A B C D E F G H I 2 Palo Alto Warehouse 3 Conversions 4 Price/Family Man $ 12.00 Costs Per Unit FM Pallet Container Cost Drivers 5 Family Man cubic feet (cube) 1.5 Price 6 Family Man / Container 1600 7 Family Man / Pallet 32 Shipping Costs To Port of Export 8 Pallets/Container 50 To U.S. Port 9 Shipping Costs 10 To Port of Export / Container $ 200 11 To U.S. Port/Container $ 3,200 Duties Port Handling Trans Costs to Whse 12 Duties (% value of price) 5% Warehouse Charges 13 Port Handling Fee (% value of price) 14 Transportation to Warehouse/Container 4% Trans to Denver 15 Warehouse Charges/Pallet (pick & pack) 16 Transportation Cost to Denver/Pallet sssssss $ 200 Total $0.00 $0.00 $0.00 $ 75 $ 63 17 18 19 Grand Rapids Warehouse 20 Conversions 21 Price/Family Man $ 12.00 22 Family Man cubic feet (cube) 1.5 Price 23 Family Man / Container 1600 Shipping Costs 24 Family Man / Pallet 25 Pallets/Container 26 Shipping Costs 32 To Port of Export 50 To U.S. Port 27 To Port of Export / Container 28 To U.S. Port/Container 29 30 Duties (% value of price) Port Handling Fee (% value of price) 31 Transportation to Warehouse/Container 32 Warehouse Charges / Pallet (pick & pack) 33 Transportation Cost to Denver/Pallet 34 FM Costs Per Unit Pallet Container Cost Drivers 200 3100 Duties Port Handling Trans Costs to Whse 5% Warehouse Charges 3% Trans to Denver 1200 Total $0.00 $0.00 $0.00 60 58 QUESTION #2 - Total Cost Analysis Now you have an idea of the competitiveness of Primo Caf's Vietnamese supplier and one of the Taiwanese suppliers for JDM. So, the next estimate is the total cost to ship product from Asia to the U.S. You realize that this is a little tricky-JDM's warehouse is in Palo Alto, close to the port in California. However, Primo Caf's warehouse is in Grand Rapids- with intermodal (rail and truck) costs from California to Michigan. Marco asks Frank where JDM's customers are located. Are most in the western U.S. or nationwide? Frank digs up the customer list and finds that there are customers in most of the 48 contiguous states. However, 90% of its sales are in California, Oregon, Washington, Arizona and Nevada (primarily Las Vegas). You look up Primo Caf's Family Man sales by region... you find that 60% of its sales are west of the Mississippi River. Would Primo Caf save money if they used a regional warehouse model (Palo Alto and Grand Rapids) for Family Man? Below are the logistics costs from the Vietnamese supplier (for simplicity) to Palo Alto and Grand Rapids, using a weighted average customer base of Denver, Colorado for Family Man's western U.S. sales: Conversions Price/Family Man Family Man cubic feet (cube) Family Man / Container Family Man/Pallet Pallets/Container Palo Alto $ 12.00 $ 1.5 1600 32 50 Grand Rapids 12.00 1.5 1600 32 50 Shipping Costs To Port of Export / container $ 200 $ 200 To U.S. Port / Container $ 3,200 3,100 Duties (% value of price) 5% 5% Port Handling Fee (% value of price) Transportation to Warehouse / Container Warehouse Charges / Pallet (pick & pack) Transportation Cost to Denver / pallet 4% 3% 200 1,200 $ 75 $ 60 63 $ 58 Apply the total cost analysis framework presented in class (Week 8) to complete the questions below. Complete all calculations in the excel file provided that you will upload with your exam. 1. Given the assumptions above, what are the total costs for shipping Family Man product from the Vietnamese supplier to Denver, Colorado: a. Through the Palo Alto warehouse b. Through the Grand Rapids warehouse 2. What additional information would you like to know? 3. What is your recommendation to Elise to support Family Man's western U.S. customers? Why? A B C D E F G H I 2 Palo Alto Warehouse 3 Conversions 4 Price/Family Man $ 12.00 Costs Per Unit FM Pallet Container Cost Drivers 5 Family Man cubic feet (cube) 1.5 Price 6 Family Man / Container 1600 7 Family Man / Pallet 32 Shipping Costs To Port of Export 8 Pallets/Container 50 To U.S. Port 9 Shipping Costs 10 To Port of Export / Container $ 200 11 To U.S. Port/Container $ 3,200 Duties Port Handling Trans Costs to Whse 12 Duties (% value of price) 5% Warehouse Charges 13 Port Handling Fee (% value of price) 14 Transportation to Warehouse/Container 4% Trans to Denver 15 Warehouse Charges/Pallet (pick & pack) 16 Transportation Cost to Denver/Pallet sssssss $ 200 Total $0.00 $0.00 $0.00 $ 75 $ 63 17 18 19 Grand Rapids Warehouse 20 Conversions 21 Price/Family Man $ 12.00 22 Family Man cubic feet (cube) 1.5 Price 23 Family Man / Container 1600 Shipping Costs 24 Family Man / Pallet 25 Pallets/Container 26 Shipping Costs 32 To Port of Export 50 To U.S. Port 27 To Port of Export / Container 28 To U.S. Port/Container 29 30 Duties (% value of price) Port Handling Fee (% value of price) 31 Transportation to Warehouse/Container 32 Warehouse Charges / Pallet (pick & pack) 33 Transportation Cost to Denver/Pallet 34 FM Costs Per Unit Pallet Container Cost Drivers 200 3100 Duties Port Handling Trans Costs to Whse 5% Warehouse Charges 3% Trans to Denver 1200 Total $0.00 $0.00 $0.00 60 58