Transportation planning

- please read the following before answering the question

A producer of fresh tomatoes in Spain is currently analyzing 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):

Due to the perishable nature of the product, the transportation optimization process must take into consideration a combination of two factors:

1. transportation lead time for arrival of the product in optimal conditions of freshness and quality;
2. 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 retailers 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).

Fig 4. Alternatives shipment route

The analysis is therefore performed for truck transportation with the following assumptions:

1. Monthly demand: 50,000 kg (October April)
2. Total transportation costs: 3,000
3. Fixed transportation costs: 800
4. Variable transportation costs: 2,200
5. Truck load capacity: 14,000 kg
6. Shipping units are pallets of 750 kg
7. 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: Calculate the frequency for shipping the product.

Variables 10 30 CP51 Transport Cost Dist. Agency Broker Minm. Profit Kg. Selling Price 2,243/kg 0,15 10% (2.243) /kg) 0.04 5% (2.243) /kg) 2.729 /kg 2,545/kg CPS2 Transport Cost Dist. Agency Broker Average Profit kg. Selling Price 20 PLUM CHERRY VINE 2,975 /kg 2,667 /kg 0,15 0,15 10% (2.975/kg) 10% (2,667) /kg) 0,04 0,04 5% (2.975/kg) 5% (2,667)/kg) 3,571/kg 3,217/kg 3,313/kg 2,990 /kg PLUM VINE 2,234/kg 1.789 /kg 0,15 0,15 10% 2,234/kg 10% 1,789 /kg 0,04 0,04 5%,234/kg 5% 1,789 /kg 2,729 /kg 2,207 /kg 2,536 /kg 2,068 /kg CHERRY SUPREME VINE 1,678 /kg 1,308 /kg 0,15 0,15 10% (1,678) /kg 10% (1,308) /kg 0,04 0,04 5% (1,678) /kg 5% (1,308) /kg 2,081 /kg 1,654 /kg 1,952 /kg 1,563 /kg 1,282/kg 0.15 10% 1,282/kg 0,04 5% 1,282/kg 1,624 /kg 1,536 /kg CPs3 Transport Cost Dist. Agency Broker Average Profit kg. Selling Price 0,997 /kg 0,15 10% (0.997) /kg 0,04 5% (0,997) /kg 1,296 /kg 1.237 /kg Total Distance Distance Transit Time nod Trend 100 2036.88 km 1 days(s) 21 hours 2036 88km 1 daysts) 21 hours Femme Distance Transit Time France Romani Spain Turkey Portugal ALMERA Moroc trag United Lith Distance 3724 50 Transit 5 day(s) 11 hours Distance 397 AM BREMEN TERMINAL day Poland many Distance 29527 FRANKFURT Transit time 4 days) 17 hours Distance 374 34km Tra Tume o dayece) o noure France Hungary Romania Italy Serthia - Black See Bulgaria tugal Madrid son Spain Tianbul Ankara Greece Turkey Tu Antalya Aleppo o ALGECIRAS TERMINAL Geo Variables 10 30 CP51 Transport Cost Dist. Agency Broker Minm. Profit Kg. Selling Price 2,243/kg 0,15 10% (2.243) /kg) 0.04 5% (2.243) /kg) 2.729 /kg 2,545/kg CPS2 Transport Cost Dist. Agency Broker Average Profit kg. Selling Price 20 PLUM CHERRY VINE 2,975 /kg 2,667 /kg 0,15 0,15 10% (2.975/kg) 10% (2,667) /kg) 0,04 0,04 5% (2.975/kg) 5% (2,667)/kg) 3,571/kg 3,217/kg 3,313/kg 2,990 /kg PLUM VINE 2,234/kg 1.789 /kg 0,15 0,15 10% 2,234/kg 10% 1,789 /kg 0,04 0,04 5%,234/kg 5% 1,789 /kg 2,729 /kg 2,207 /kg 2,536 /kg 2,068 /kg CHERRY SUPREME VINE 1,678 /kg 1,308 /kg 0,15 0,15 10% (1,678) /kg 10% (1,308) /kg 0,04 0,04 5% (1,678) /kg 5% (1,308) /kg 2,081 /kg 1,654 /kg 1,952 /kg 1,563 /kg 1,282/kg 0.15 10% 1,282/kg 0,04 5% 1,282/kg 1,624 /kg 1,536 /kg CPs3 Transport Cost Dist. Agency Broker Average Profit kg. Selling Price 0,997 /kg 0,15 10% (0.997) /kg 0,04 5% (0,997) /kg 1,296 /kg 1.237 /kg Total Distance Distance Transit Time nod Trend 100 2036.88 km 1 days(s) 21 hours 2036 88km 1 daysts) 21 hours Femme Distance Transit Time France Romani Spain Turkey Portugal ALMERA Moroc trag United Lith Distance 3724 50 Transit 5 day(s) 11 hours Distance 397 AM BREMEN TERMINAL day Poland many Distance 29527 FRANKFURT Transit time 4 days) 17 hours Distance 374 34km Tra Tume o dayece) o noure France Hungary Romania Italy Serthia - Black See Bulgaria tugal Madrid son Spain Tianbul Ankara Greece Turkey Tu Antalya Aleppo o ALGECIRAS TERMINAL Geo