Chippy Potato Chip Company
1) If you worked for Chippy, what new classification would you ask for? Give your reasons.
A) As of December 2006, the NMFC indicated that absent compelling information about other freight classification characteristics (e.g., storability), density becomes the chief criteria guiding classification. The “old” style chips have a density of 4.67 pounds per cubic foot (carton weight of 14 pounds divided by carton size of 3 cubic feet, while the “new” style chips have a density of 10 pounds per cubic foot (carton weight of 10 pounds divided by carton size of 1 cubic feet). Again, as of mid-2003, a 10 lb. /cubic foot density could qualify for a classification of 100. Moreover, the relatively low value per pound of the product qualifies for a classification of less than 100.
2) Classifications are based on both cost and value of service. From the carriers’ standpoint, how has cost of service changed?
A) At a minimum, the cost of service is changed in the sense that the increased density per cubic foot means that carriers will be able to carry greater weight before cubing out of vehicle space. The cost of service might also change because the tubular containers may result in less product damage.
3) Given the existing LTL classification of 200, how has value of service to the customer changed?
A) Because the tubular containers may result in less product damage, the value of service to the customer may change. On the other hand, the value of service appears to be negatively impacted in that they are paying $.59 for a five ounce container, versus $.59 for an eight ounce bag—in other words, about a 40% decrease in product for the same price.
4) The new tubular containers are much sturdier. If you worked for Chippy, how—if at all—would you argue that this factor influences classification?
A) As pointed out in questions 2 and 3, Chippy might argue that the sturdier container makes it less likely that the potato chips will be...