Question
The Superfine Packing Company is considering a freight consolidation program for serving the Missouri market. The program would involve a number of small customers located
The Superfine Packing Company is considering a freight consolidation program for serving the Missouri market. The program would involve a number of small customers located in Jefferson City, Springfield, Rolla, and Hannibal. Under the new proposal shipments would be held until sufficient accumulation had occurred for Superfine to realize lower transportation costs. Demand and shipping rates are shown in the tables below. Each case weighs 60 pounds. Current situation: Orders are shipped LTL directly from Lexington, KY to each Missouri destination. Orders are shipped in the week in which they are received. Alternatives: Orders could be held and shipped every two weeks, or every three weeks. The potential lost sales has been estimated at $1.80 per case for each additional week that orders are held. a. Without considering weight-breaks, should the consolidation program be implemented? If so, how long should orders be held? Assume all cities must follow the same shipping schedule. |
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