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**Analyzing Logistics and Distribution
**

A major coffee supplier has warehouses in Seattle and San

Jose. The coffee supplier receives orders from coffee retailers

in Salt Lake City and Reno.

- The retailer in Salt Lake City needs 400 pounds of coffee

- The retailer in Reno needs 350 pounds of coffee

- The Seattle warehouse has 700 pounds of coffee available

- The warehouse in San Jose has 500 pounds of coffee available.

**The cost of shipping from Seattle to Salt Lake City is $2.50 per
**

pound; from Seattle to Reno $3 per pound; from San Jose to Salt

Lake City $4 per pound; and from San Jose to Reno $2 per

pound.

Your Assignment:

Find the number of pounds to be shipped from each

warehouse to each retailer to minimize the cost.

Seattle

400 – x

warehouse

700

$2.50

Salt Lake

City retail store

400

$4

x

350 – y

$3

Reno

350

retail store

$2

y

San Jose

500

warehouse

**x = pounds of coffee shipped from San Jose to Salt Lake City
**

y = pounds of coffee shipped from San Jose to Reno

and 350 pounds of coffee from San Jose to Reno.700 .5) + (300 lbs x $2) = $1.50 Salt Lake City retail store 400 $4 x 350 – y $3 Reno 350 retail store $2 y San Jose 500 warehouse x = pounds of coffee shipped from San Jose to Salt Lake City y = pounds of coffee shipped from San Jose to Reno Solution: Ship 400 pounds of coffee from Seattle to Salt Lake City. (400 lbs x $2.Seattle 400 – x warehouse 700 $2.

to many different locations (location access).. Transportation Mode Selection Distribution planners must first decide on which mode or modes of transportation to use in distributing products. In the US. railroad cars • Water—ships and barges • Pipeline—liquid. . trucks) is the most common mode of transportation that retailers use to distribute products from distribution centers to their stores.g. The major transportation modes are • Air—airplanes • Motor—trucks. gas. slurry • Intermodal—combination of two or more modes Distribution planners select the lowest cost mode that also can get the products there on time (speed). on a consistent basis (reliability). delivery vans. motor transportation (e. and cars • Rail—trains. and without major damage (quality).1.

location access. reliability. They make this choice based on a comparison of cost. . Costs are calculated based on number of units shipped per mile. distribution planners must then decide which suppliers or vendors will transport their products. Transportation Supplier/Vendor After selecting the mode of transportation.2. The final choice is usually made on cost. and damage history. They sometimes must decide whether to use their own transportation equipment and employees (inhouse) or contract with another company (contract out to supplier).

One store is located 53 miles from the distribution center. ..g. cases. How much would it cost the company to ship 50 cases to this store? You must calculate per round trip. Transportation Costs t = Transportation costs n = Number of units (e.25 per mile for every case of bolts shipped from its distribution center to the company’s stores. pounds) m= Number of miles transported c = Cost per unit per mile t=nxmxc A distribution planner for a hardware store chain pays $0.3.

How much would it cost the company to ship 50 cases to this store? You must calculate per round trip.325 .g. pounds) m= Number of miles transported c = Cost per unit per mile t=nxmxc A distribution planner for a hardware store chain pays $0. cases. 53 x 2 x $.25 per mile for every case of bolts shipped from its distribution center to the company’s stores.. One store is located 53 miles from the distribution center. Transportation Costs t = Transportation costs n = Number of units (e.3.25 x 50 = $1.

532 miles Distribution Center 3 --.25 per case per mile Which is the lowest cost trucking company? .132 miles Distribution Center 2 --.28 per case per mile Chicago Trucking charges $0.23 per case per mile Midwest Trucking charges $0. Transportation Costs A distribution planner for a wholesale distributor is selecting which trucking company to use to distribute 500 cases of holiday candy from the central warehouse to 3 distribution centers of a major retail customer.3.432 miles Advance Trucking charges $0. The round trip mileage from the wholesale distributor’s warehouse and the retail distribution centers are Distribution Center 1 --.

040 .180 $0.680 $126.23 x 432 x 500 = $49.23 x 132 x 500 = $15.23 x 532 x 500 = $61.Advance Trucking: $0.180 $0.

Advance Trucking: $0.23 x 532 x 500 = $61.480 $0.23 x 432 x 500 = $49.440 .28 x 432 x 500 = $60.28 x 532 x 500 = $74.23 x 132 x 500 = $15.680 $126.180 $0.480 $153.28 x 132 x 500 = $18.180 $0.480 $0.040 Midwest Trucking: $0.

25 x 432 x 500 = $54.25 x 532 x 500 = $66.680 $126.040 Midwest Trucking: $0.Advance Trucking: $0.23 x 432 x 500 = $49.480 $0.180 $0.28 x 432 x 500 = $60.23 x 532 x 500 = $61.500 $0.480 $153.25 x 132 x 500 = $16.480 $0.000 .180 $0.23 x 132 x 500 = $15.28 x 532 x 500 = $74.500 $0.440 Chicago Trucking: $0.28 x 132 x 500 = $18.000 $137.

ships in 3-5 days Value of each case is $900 Which trucking company will you choose? .5% damage. offers a 2% 10 net 30 discount. and guarantees 1 day delivery within 500 miles Chicago Trucking has a history of 2% damage per shipment offers a 5% 10 net 30 discount.3. ships in 3-5 days Midwest Trucking has a history of . Transportation Costs Advance Trucking has a history of 1% damage per shipment. offers no discount.

520.20 Inventory shrinkage $450. Transportation Costs Advance Trucking has a history of 1% damage per shipment.3. ships in 3-5 days Value of each case is $900 Which trucking company will you choose? . offers a 2% 10 net 30 discount. offers no discount.01 = $4.050 x .02 = $2.519.80 discount.000 x .500 Midwest Trucking has a history of . ships in 3-5 days $126.5% damage. and guarantees 1 day delivery within 500 miles Chicago Trucking has a history of 2% damage per shipment offers a 5% 10 net 30 discount. net $123.

050 x . Transportation Costs Advance Trucking has a history of 1% damage per shipment. ships in 3-5 days $126.000 x .02 = $2.005 = $2. ships in 3-5 days Value of each case is $900 Which trucking company will you choose? . net $123.000 x .3.5% damage.80 discount.250 Chicago Trucking has a history of 2% damage per shipment offers a 5% 10 net 30 discount.500 Midwest Trucking has a history of . and guarantees 1 day delivery within 500 miles $153. offers a 2% 10 net 30 discount.519.20 Inventory shrinkage $450.520.440 shipping cost Inventory shrinkage $450. offers no discount.01 = $4.

Transportation Costs Advance Trucking has a history of 1% damage per shipment.520. and guarantees 1 day delivery within 500 miles $153. net $123.850 Discount net: $130.000 x .050 x . offers no discount.80 discount.02 = $9.01 = $4.005 = $2.250 Chicago Trucking has a history of 2% damage per shipment offers a 5% 10 net 30 discount.000 x .000 x .000 Value of each case is $900 Which trucking company will you choose? .20 Inventory shrinkage $450.519.3.02 = $2. ships in 3-5 days $137. ships in 3-5 days $126.5% damage.000 x .05 = $6.500 Midwest Trucking has a history of .440 shipping cost Inventory shrinkage $450.150 Inventory shrinkage $450. offers a 2% 10 net 30 discount.

99 .25 .33 .28 . What is the rate charged by Chicago Trucking if the routes are longer than 50 miles? 3.2 Transportation Rates by Distance of Route rates = Dollar($) cost per case shipped Miles Midwest Trucking Chicago Trucking Advance Trucking <5 .32 .30 5 – 49.25 .25 100 + .25 .34 .27 50 – 99. Which trucking company has the lowest rates for routes between 6 and 49 miles? .99 .23 1. What is the rate charged by Midwest Trucking to ship cases if the routes are between 3 and 4 miles? 2.Figure 4.25 .

99 .27 50 – 99.25 .25 . Which trucking company has the lowest rates for routes between 6 and 49 miles? . What is the rate charged by Midwest Trucking to ship cases if the routes are between 3 and 4 miles? $.23 1.25 .34 . What is the rate charged by Chicago Trucking if the routes are longer than 50 miles? 3.34 per mile 2.99 .30 5 – 49.32 .28 .2 Transportation Rates by Distance of Route rates = Dollar($) cost per case shipped Miles Midwest Trucking Chicago Trucking Advance Trucking <5 .25 100 + .25 .Figure 4.33 .

34 per mile 2. What is the rate charged by Chicago Trucking if the routes are longer than 50 miles? $.Figure 4.25 .99 .25 .25 per mile 3.34 . What is the rate charged by Midwest Trucking to ship cases if the routes are between 3 and 4 miles? $.30 5 – 49.25 100 + .32 .27 50 – 99.28 .23 1.2 Transportation Rates by Distance of Route rates = Dollar($) cost per case shipped Miles Midwest Trucking Chicago Trucking Advance Trucking <5 . Which trucking company has the lowest rates for routes between 6 and 49 miles? .25 .25 .99 .33 .

34 per mile 2.25 .27 50 – 99.23 1.99 .30 5 – 49.25 .25 .25 . Which trucking company has the lowest rates for routes between 6 and 49 miles? Chicago Trucking .2 Transportation Rates by Distance of Route rates = Dollar($) cost per case shipped Miles Midwest Trucking Chicago Trucking Advance Trucking <5 .32 .28 .34 .33 . What is the rate charged by Midwest Trucking to ship cases if the routes are between 3 and 4 miles? $.25 100 + . What is the rate charged by Chicago Trucking if the routes are longer than 50 miles? $.99 .Figure 4.25 per mile 3.

99 .34 . What would be the transportation costs for Midwest Trucking to ship 50 cases of product with a route distance of 7 miles? How much could you save if you hired Advance Trucking to do the same shipment? .30 5 – 49.25 .25 .2 Transportation Rates by Distance of Route rates = Dollar($) cost per case shipped Miles Midwest Trucking Chicago Trucking Advance Trucking <5 .Figure 4.27 50 – 99.23 4.32 .28 .25 .25 100 + .99 .33 .25 .

What would be the transportation costs for Midwest Trucking to ship 50 cases of product with a route distance of 7 miles? How much could you save if you hired Advance Trucking to do the same shipment? Midwest Trucking: $.25 .34 .Figure 4.27 50 – 99.50 Advance Trucking: $.99 .25 .23 4.25 .33 x 7 x 50 = $115.27 x 7 x 50 = $ 94.50 $ 21.99 .2 Transportation Rates by Distance of Route rates = Dollar($) cost per case shipped Miles Midwest Trucking Chicago Trucking Advance Trucking <5 .30 5 – 49.25 .25 100 + .00 Savings .33 .28 .32 .

How much will the planner have to pay to distribute the 2. Storage Costs d = total handling and storage costs of a distribution center or warehouse n = number units handled and stored c = cost per unit handled and stored d=nxc A distribution planner for a paint store chain is calculating the total handling and storage costs.300 cases from the warehouse? If the planner is charged $0. She will have to pay to use a temporary storage warehouse to distribute 2.66 per case handled and stored at the warehouse.54 per case by another warehouse. The warehouse charges $0.300 cases of paint for a special promotion.4. how much money would be saved by choosing the lower cost warehouse? .

4.300 cases from the warehouse? 2.300 cases of paint for a special promotion.300 x $0. Storage Costs d = total handling and storage costs of a distribution center or warehouse n = number units handled and stored c = cost per unit handled and stored d=nxc A distribution planner for a paint store chain is calculating the total handling and storage costs.66 per case handled and stored at the warehouse.66 = $1. The warehouse charges $0.54 per case by another warehouse.518 If the planner is charged $0. how much money would be saved by choosing the lower cost warehouse? . She will have to pay to use a temporary storage warehouse to distribute 2. How much will the planner have to pay to distribute the 2.

$1.300 x $0.242 = $276.518 2.54 per case by another warehouse.242 $1. how much money would be saved by choosing the lower cost warehouse? .300 x $0.00 If the planner is charged $0. The warehouse charges $0.300 cases of paint for a special promotion. How much will the planner have to pay to distribute the 2. She will have to pay to use a temporary storage warehouse to distribute 2.300 cases from the warehouse? 2. Storage Costs d = total handling and storage costs of a distribution center or warehouse n = number units handled and stored c = cost per unit handled and stored d=nxc A distribution planner for a paint store chain is calculating the total handling and storage costs.66 per case handled and stored at the warehouse.4.518 .66 = $1.54 = $1.

5. The formula for calculating these costs is r=dxt r = total distribution costs d = total handling and storage costs of a distribution center t = total transportation costs . Distribution Costs Total distribution costs are a combination of handling and storage costs at a distribution center and transportation costs from the center to the stores.

25 per case.5. (Hint: you must calculate round trip mileage.34 per case per mile. He wants to ship the parts from the company’s regional distribution center. which is 23 miles away.) What is the total distribution cost to distribute the parts over the three-month period? . Distribution Costs r=dxt r = total distribution costs d = total handling and storage costs of a distribution center t = total transportation costs A distribution planner wants to calculate the total distribution cost for distributing equipment parts to a construction site in rural Illinois. The cost of shipping by truck to the stores is $0. He needs to make a delivery of 50 cases of parts each month for three months. The regional distribution center charges $0. per month.

975 .34 x 50 x 46 x 3) r = $87.5. Distribution Costs r=dxt r = total distribution costs d = total handling and storage costs of a distribution center t = total transportation costs r = ($0.25 x 50 x 3) x ($0.

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