Transportation planning: Case Tomato Delivery from Spain to Germany A producer of fresh tomatoes in Spain is currently analysing at which frequency products should be delivered to Germany. The process is as follows. The company produces 13-15t of fresh tomatoes annually. The marketer finds a broker or distribution agency in Germany. After negotiating the terms of the agreement, all parties involved in the supply chain start to work collaboratively. Leaving aside the promotion process carried out by the firm and distributor/broker, an order is placed by the German retailer, who communicates it to the distribution agency; the agency or broker approves, signs and transfers it to the Spanish producer. The company receives the order and then dispatches from the warehouse to the packaging plant and production. Cost of production (CP), shipping costs and distribution/broker agencies are the three main costs that directly influence the final price at which the firm would sell to German retailers. Fresh vegetable production is certainly distinct due to the perishable nature of the produce (10 to 14 days from harvest) and its large production lead time. The production quantity is strictly fixed and does not depend on the orders placed. Thus, the glass-greenhouse production method is similar to an economy of scale: the space of production is fixed and the producer has to produce the maximum per plant, whether all the products sell or not, since the cost of producing one more unit is almost zero. The Table 4 below provides the cost overview for three different tomato types for three quarters (1Q, 2Q and 3Q): Table 4 The cost overview for three different tomato types for three quarters (1Q, 2Q and 3Q) Variables 10 CPS1 2,975/kg Transport 20 PLUM CHERRY VINE 2,667/kg 30 2,243/kg Cost 0.15 0,15 0,15 Dist. 10% (2,975/kg) 10% (2,667/kg) 10% (2243/kg) Agency Breker 0.04 0.04 0,04 Minm. 5%(2,975/kg) 5%(2.667/kg) 5%(2,243/kg) Profit Kg Selling 3,571/kg 3,2176/kg Price 3.313/kg 2,990/kg 2,729/kg 2.5456/kg PLUM VINE CPS2 2.234/kg 1,789/kg 1,282/kg Transport Cost 0,15 0,15 0.15 Dist. Agency 10% (2.234/kg) 10% (1.789/kg) 10% (1,282/kg) Broker 0.04 0.04 0.04 Average 5%(2.234/kg) 5%(1.789/kg) 5% (1.282/kg) Profit Ka Selling Price 2.729/kg 2.536/kg 2,2076/kg 2,068/kg 16246/kg 1,536/kg CPs3 Transport 1,678/kg CHERRY SUPREME VINE 1,308/kg 0,997/kg Cost RISE 0.15 0.15 Dist. 10% (1.679/kg) Agency 10% (1.309/kg) 10% (0.997/kg) Broker 0,04 0,04 0.04 Average 5% 1,678/kg) 5% (1.308/kg) 5%(0,997/kg) Profit Ka Selling Price 2,081/Kg 1,952/kg 1,654/kg 1,563/kg 1,296/kg 1,237/kg Due to the perishable nature of the product, the transportation optimization process must take into consideration a combination of two factors: a. transportation lead time for arrival of the product in optimal conditions of freshness and quality; b. cost efficiency of transportation The lead time from harvesting to truck is 48 hours. From that point, the truck needs approx. 55 hours (depending on exact geographical position of retailer within Germany) to retailer's warehouse in Germany covering a distance of 2,100km. Maritime transportation of goods can also be considered; nonetheless the lead time in which the distance from Almeria to Frankfurt is covered doubles the truckload transportation lead time to 96 hours. Although maritime transportation is more cost-efficient, the lead time from the warehouse in Spain to the retailer warehouse in Germany would affect the optimal quality conditions of the product (see Fig. 4). Ireland Unite Total Distance Distance Transit Time: Distance: Transit Time: 100% 2036.88 km 1 days(s) 21 hours 2036.88km 1 days(s) 21 hours France Spain Portugal ALMERA Morocoe land United Kingdom ugal Madrid ion Spain France Roma Turkey Iraq Distance BREMEN TERMINAL Poland ermany FRANKFURT Slovaki Hungary Distance Transit Time Distance Transit Time Liths Distance Transit Time 3724.58 km 5 days(s) 11 hours 397.46km 0 days(s) 8 hours 2952.78km 4 days(s) 17 hours 374.34km 0 days(s) hours Romania Italy Serbia Buck Black Sea Bulgaria Geo Sea Greece Turkey Aleppo ALGECIRAS TERMINAL Fig 4. Alternatives shipment route The analysis is therefore performed for truck transportation with the following assumptions: a. Monthly demand: 50,000 kg (October - April) b. Total transportation costs: 3,000 c. Fixed transportation costs: 800 d. Variable transportation costs: 2,200 e. Truck load capacity: 14,000 kg f. Shipping units are pallets of 750 kg g. Lead-time from harvesting to retailer 103 hours (48h + 55h) The product lasts in optimal condition for selling for 14 days (336 hours) from the date of harvesting. This gives the retailer 10 days for selling the product at maximum price. Question A. Calculate the frequency for shipping the product! Show transcribed image text