DEF Sports Shoe Company has a Distribution facility in Cambridge Ontario, that imports basketball shoes from China for distribution to retailers across Canada DEF Sports was a small entrepreneurial company that was growing very fast Profit margins were shrinking and they were looking at ways to reduce expenses. Freight charges were an area that they were considering ways to improve. 12,800 pairs of shoes are shipped monthly from China Shoes pairs are packaged in individual boxes and then packaged 8 pairs to a masterpack. The masterpacks are a form of unitization to cut down on the material handling through the distribution channel. Each masterpack measures 0.25 cubic meters and weighs 14 pounds. The 20 foot container interior dimensions are 2.5 meters wide, 6 meters long, and 3 meters high. The 40 foot container interior is double the length; both given as fully usable space. Currently they pay a freight forwarder $300 per 100 pounds or $210 per cubic meter only for the space used in their intermodal containers, whichever is higher. This rate includes pick up in China and delivery to Cambridge Ontario. Recently, quotes for 20 and 40' containers were given to DEF Shoes by three different companies to move the shoes from China to Cambridge DEF would have to sign the contracts with these three companies separately

1) A Chinese company gave them a quote to get the containers from the interior of China to the shipping port (drayage). A 20-foot container was $175 each and a 40-ft container was $300.

2) In addition, to get from China to Montreal, DEF found a shipping co-operative for ocean shipment only from China to Montreal. A) A full 20-foot container is charged @ $150 per cubic meter as long as the weight is under 2000 pounds. There is a $225 surcharge per each extra 100 pounds. B) A full 40-foot container is charged @ $140 per cubic meter as long as the weight is under 4,000 pounds. There is a $400 surcharge per each extra 200 pounds.

3) To get from Montreal to Cambridge, another carrier quoted a rate of $500 for a 20-foot container and $900 for a 40-foot container. Unfortunately, at the Cambridge facility, they do not have the material handling equipment to handle 40-ft containers. Therefore, if they were to go with 40-It containers, an added unpacking and trucking fee of S2 per masterpack would be incurred DFE Sports is charged for the full container when they contract the carriers as the containers arrive sealed from the supplier in China due to Canadian border inspection regulations