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was to demonstrate the viability of the proposed model by validating operational efficiencies and motions tainers of pulp and lumber each week from Cache Creek to Port Metro Vancouver. Patrick's objective performance. Performance of the pilot project had gone well, confirming P for handling costs and delivery lead times (see Exhibit 5). ing Patrick's assumptions Pha Based on the results of the pilot project, Patrick planned on a three-phase implementation schedule. The start-up phase would involve one train per week carrving 200 FEU containers. Phase 2 would dauhle the volume with two shipments per week. When the project was running at full volume in the third phase Patrick expected Cache Creek to operate six days per week, with the port each day. The new trans-load operation would reguire 5 acres of land at Cache Creek. Canaan would need to commit resources to support container-handling operations administration. A yard manager and administrative staff for the trans-loading operation at Cache Cre need ed to be hired. Canaan would also need to purchase office equipment and put in a computer system. The yard would require container-handling equipment, which could be leased, and a new pad for container phas orage would need to be installed. The material handling equipment would include two container stackers, each with capacity of 20 moves per hour for both unloading empty containers and loading full containers. Patrick estimated that fixed overhead administra expenses, and lease payments would be $75,000 per monti The number of material handling operators in the yard would be driven by container volume, and labour costs would be recovered through fees charged to asts for administrative costs, including salaries, administrative x (e.g, the $400 container stuffing fee; see Exhibit 5). Initial capital costs were expected to be PREPARING FOR NEGOTIATIONS concerns turned to aligning the stakeholders' collective interests and finalizing a deal that would ric make Cache Creek a viable trans-load operation. Patrick described the situation: need to get CP Rail committed to the project at a competitive rate. They charged a fee of $900 per container during the pilot because of the small volumes. I expect a fee in the $400 range would be more reasonable for phase 1. At full volume, I would expect the rate to be even lower The segment of the market with the best potential is export of forestry products and agriculture products, such as grain and other crops. The major shipping companies, such as Hapag-Lloyd arine Transport Corporation, "K" Line, Maersk Line, and China Ocean Shipping Company (COSCO Group), manage transportation for the producers and their customers. They will need to be convinced of the benefits of using Cache Creek before making changes to their supply chain. In my discussions with Hapag-Lloyd during the pilot project, we had discussed a preliminary total price of S1,825 per container shipped through Cache Creek, as established by the in cost structure set up in our base model [see Exhibit 5] I will need to negotiate a lease with Cache Creek, but it will need to be structured in a manner to share the benefits and risks. We paid Cache Creek the project moves ahead, in addition to S5,000 per mo per acre per month during the pilot.If ent, they are expecting a royalty fee for each container shipped as compensation for using the Cache Creek rail network. However, I 8 The shipping fee of $1,825 is the base model. The trucking cost in line 2 of Exhibit 5 would change based on the location of the producer and the shipping fee would be adjusted accordingly. For example, if the trucking fee was $150 instead of $250, the price to the shipper would be $1,725 instead of $1,825 ILONIES INBOUND CARGO FOR 2014 IN METRIC TONNES China United States South Korea 461,278 2104,743 1530,060 915,051 698,729 679 226 596 663 444.135 415,413 237,060 Taiwan Japa Mexico Ko Thailand India Source: Port www.portmetrovancouver. ancouver, Statistics Overview, 2014, 13. accessed February 12. 2016 p-contentluploads/2015/03/2014-statistics-overview pdt EXHIBIT 4: PRINCIPAL TRADING ECONOMIES OUTBOUND CARGO FOR 2014 IN METRIC TONNES China 24.149 633 15,795,649 South Korea India United States Brazil 4,981,500 4.852,856 Indonesia Taiwan Bangladesh 2,656,862 2.405 304 2.361.706 1,329,078 Source Port Metro Vancouver, Statistics Overview, 2014, 13, accessed February 12, 201, www.portmetrovancouver.com/wp-content/uploads/2015/03/2014-statistics-overview pd EXHIBIT 5: FINANCIAL ANALYSIS OF VARIABLE COSTS Current Cache Creek S 500 250 Model S 500 1. Empty container shipped from Eastern Canada and repositioned at Vancouver rail yard 1050 2 Truck lumber to trans-load yand 3a. Truck empty container from rail yard to trans-load yard 3b. Internal rail movements 140 4. Container stuffed at trans-load yard 5. Container delivered to dock 400 140 100 75 400 400 100 6. Dock charges and reservation fees 7. Dock demurrage and 3PL storage fees (average) Total 50 S 2,380 1725 Note: 3PL third-party logistics supplier Source: Company files Case Video Tutorial Case Worksheet Assignment Questions: Question 1.Complete the attached worksheet (MS Excel spreadsheet) attached. (35 points) Question 2.Question 1 assumes freight cost of $400 per container and uses Variable Cost for Cache Creek Model from Exhibit 5. Say, a favorable freight cost of $300 is negotiated. Complete the revised worksheet with the new decrease of $100 in the Variable Cost. (30 points) lan ion 1 and 2 and highlight your cbsenation nogarding contrbution. Based on your calculations w Banaion d bued on careibematin and olatons Question 1 ana Question 3. Compare the financial results from Question between volume and cos? (15 points) i the relationahip and your calculations (Question 1 and 3, justify if t'sa win-win proposal or not for all three parties (Canaan, Cache Creek and CP and highlight Question 4.Based on case Rail, 20 points) was to demonstrate the viability of the proposed model by validating operational efficiencies and motions tainers of pulp and lumber each week from Cache Creek to Port Metro Vancouver. Patrick's objective performance. Performance of the pilot project had gone well, confirming P for handling costs and delivery lead times (see Exhibit 5). ing Patrick's assumptions Pha Based on the results of the pilot project, Patrick planned on a three-phase implementation schedule. The start-up phase would involve one train per week carrving 200 FEU containers. Phase 2 would dauhle the volume with two shipments per week. When the project was running at full volume in the third phase Patrick expected Cache Creek to operate six days per week, with the port each day. The new trans-load operation would reguire 5 acres of land at Cache Creek. Canaan would need to commit resources to support container-handling operations administration. A yard manager and administrative staff for the trans-loading operation at Cache Cre need ed to be hired. Canaan would also need to purchase office equipment and put in a computer system. The yard would require container-handling equipment, which could be leased, and a new pad for container phas orage would need to be installed. The material handling equipment would include two container stackers, each with capacity of 20 moves per hour for both unloading empty containers and loading full containers. Patrick estimated that fixed overhead administra expenses, and lease payments would be $75,000 per monti The number of material handling operators in the yard would be driven by container volume, and labour costs would be recovered through fees charged to asts for administrative costs, including salaries, administrative x (e.g, the $400 container stuffing fee; see Exhibit 5). Initial capital costs were expected to be PREPARING FOR NEGOTIATIONS concerns turned to aligning the stakeholders' collective interests and finalizing a deal that would ric make Cache Creek a viable trans-load operation. Patrick described the situation: need to get CP Rail committed to the project at a competitive rate. They charged a fee of $900 per container during the pilot because of the small volumes. I expect a fee in the $400 range would be more reasonable for phase 1. At full volume, I would expect the rate to be even lower The segment of the market with the best potential is export of forestry products and agriculture products, such as grain and other crops. The major shipping companies, such as Hapag-Lloyd arine Transport Corporation, "K" Line, Maersk Line, and China Ocean Shipping Company (COSCO Group), manage transportation for the producers and their customers. They will need to be convinced of the benefits of using Cache Creek before making changes to their supply chain. In my discussions with Hapag-Lloyd during the pilot project, we had discussed a preliminary total price of S1,825 per container shipped through Cache Creek, as established by the in cost structure set up in our base model [see Exhibit 5] I will need to negotiate a lease with Cache Creek, but it will need to be structured in a manner to share the benefits and risks. We paid Cache Creek the project moves ahead, in addition to S5,000 per mo per acre per month during the pilot.If ent, they are expecting a royalty fee for each container shipped as compensation for using the Cache Creek rail network. However, I 8 The shipping fee of $1,825 is the base model. The trucking cost in line 2 of Exhibit 5 would change based on the location of the producer and the shipping fee would be adjusted accordingly. For example, if the trucking fee was $150 instead of $250, the price to the shipper would be $1,725 instead of $1,825 ILONIES INBOUND CARGO FOR 2014 IN METRIC TONNES China United States South Korea 461,278 2104,743 1530,060 915,051 698,729 679 226 596 663 444.135 415,413 237,060 Taiwan Japa Mexico Ko Thailand India Source: Port www.portmetrovancouver. ancouver, Statistics Overview, 2014, 13. accessed February 12. 2016 p-contentluploads/2015/03/2014-statistics-overview pdt EXHIBIT 4: PRINCIPAL TRADING ECONOMIES OUTBOUND CARGO FOR 2014 IN METRIC TONNES China 24.149 633 15,795,649 South Korea India United States Brazil 4,981,500 4.852,856 Indonesia Taiwan Bangladesh 2,656,862 2.405 304 2.361.706 1,329,078 Source Port Metro Vancouver, Statistics Overview, 2014, 13, accessed February 12, 201, www.portmetrovancouver.com/wp-content/uploads/2015/03/2014-statistics-overview pd EXHIBIT 5: FINANCIAL ANALYSIS OF VARIABLE COSTS Current Cache Creek S 500 250 Model S 500 1. Empty container shipped from Eastern Canada and repositioned at Vancouver rail yard 1050 2 Truck lumber to trans-load yand 3a. Truck empty container from rail yard to trans-load yard 3b. Internal rail movements 140 4. Container stuffed at trans-load yard 5. Container delivered to dock 400 140 100 75 400 400 100 6. Dock charges and reservation fees 7. Dock demurrage and 3PL storage fees (average) Total 50 S 2,380 1725 Note: 3PL third-party logistics supplier Source: Company files Case Video Tutorial Case Worksheet Assignment Questions: Question 1.Complete the attached worksheet (MS Excel spreadsheet) attached. (35 points) Question 2.Question 1 assumes freight cost of $400 per container and uses Variable Cost for Cache Creek Model from Exhibit 5. Say, a favorable freight cost of $300 is negotiated. Complete the revised worksheet with the new decrease of $100 in the Variable Cost. (30 points) lan ion 1 and 2 and highlight your cbsenation nogarding contrbution. Based on your calculations w Banaion d bued on careibematin and olatons Question 1 ana Question 3. Compare the financial results from Question between volume and cos? (15 points) i the relationahip and your calculations (Question 1 and 3, justify if t'sa win-win proposal or not for all three parties (Canaan, Cache Creek and CP and highlight Question 4.Based on case Rail, 20 points)