ACME Pump Company Case Analysis
ACME has seen a drastic increase in their transportation prices and are overpaying. Only 5% of the total cost for their products is being allocated to transportation expense, thus ACME cannot see how much they are being billed by their suppliers.
Assuming ACME only works Monday through Friday thus having on average 260 working days in a year with 104 weekend days.
ACME is currently using separate LTL shipments for each customer and supplier. They are losing monetary resources and overspending on transportation costs, which could be reduced through a number of different strategies. The product is used is durable, its main materials consist of aluminum and iron, and is used in multiple industries. We can assume that ACME is selling a lot of pumps due to the fact that ACME is making shipments to their customers on a daily basis. In addition, their suppliers are shipping to ACME on a daily basis. Essentially, shipments are being made 240 days out of 240 days within a working year to and from ACME in Scranton, PA. We can now assume that ACME has all their carriers traveling an added total of 2,823 miles on a daily basis that is 677,520 miles per year.
ACME pumps are in class 60 rate class which is a low rate class meaning the shipment is dense, not easily damaged but most importantly the cost per hundred weight is lower compared to a product with a higher class rate. The shipment from Scranton, PA to Charlotte, NC is costing ACME $185,284.32 to ship 910,000 pounds 154,700 miles annually. The shipment from Scranton, PA to Columbia, SC is costing ACME $238,224.48 to ship 1,170,000 pounds 178,360 miles annually. Both costs include the 45% discount and 20% fuel surcharge. See Table 1 for a breakdown of the LTL pricing structure. This a yearly total outbound transportation cost of $423,508.80 to ship 2,080,000 pounds.
ACME has 3 suppliers...