An overall view
Primary target is to choose the transportation method that minimizes total cost. Total cost consists of transportation cost, order processing cost, inventory holding cost (see also appendices: calculation formula). Transportation costs for each possibility are based on the proposals that have been sent to Honfleur. Furthermore ordering is by average a constant 40$ per order. Thus, it can be affected by increasing or decreasing the amount of orders per year. The last component of total costs can be divided into too parts. The first part consists of the inventory that is stored in the Westfield warehouse while the second part consists of the inventory stored in cargo, that is, the inventory that is on its way to the warehouse.
Banner turns out to be the most profitable option even if the highest pricing category would have still been 4$/hundredweight (price used in calculations is 3$). This observation serves as a base for comparing results that we get when shipment size is changed.
As the shipment size varies we see that even if some of the transportation possibilities were highly profitable they become unavailable due to their inner restrictions (eg. minimum shipment size). If we observe the calculation tables we notice that total cost keeps increasing as the shipment size increases. Thus the lowest total cost would result as an average of 1000 motors/shipment by Trans-Eastern Trucking Company.
One factor we haven’t paid attention yet is the possible revenue gained from soliciting backhauls from Westfield to St. Louis. This is anyhow a very uncertain factor which in principle would need at least some statistical backup. Appendices present a small calculation which shows the correlation between prices and or sold amount that is needed to reach a level of revenue/shipment.
The most significant strength of sending inventory by train is the reliability. This decreases the need to worry about delays...