include embedded spreadsheet data where necessary. Please be thorough in your recommendations, especially question #4

The routing of vehicles through a distributor can have a major effect on transportation costs incurred by a firm. Vehicle routing directly affects labor, fuel, and maintenance expenses; influences revenue by the level of service provided to customers; and drives assets by the number of vehicles maintained in the fleet.

This module and accompanying homework assignment expose the student to several heuristics used in vehicle scheduling. Mixed integer linear programming can be employed to solve several routing problems, but are outside the scope of this module. The techniques covered in this homework assignment include:

Load consolidation

Learning objective

Following this assignment, you should be able to

: Determine the effect of temporal postponement on transportation costs by calculating and comparing the costs of individual versus consolidated shipments

Problem. Burnside Brokerage handles freight shipments for several shipping clients. As a brokerage, Burnside Brokerage acts as a middle-man or transportation intermediary by connecting shippers with carriers. Burnside Brokerage contracts with trucking companies to move the freight based on the freight forecasts received from their shipping clients. Based on the rates charged by the carriers, Burnside Brokerage adds a percentage margin to cover their operating costs and to obtain a profit.

Three of Burnside Brokerages key clients have used LTL shipments to enable them to have more frequent deliveries. The delivery quantities (in pounds) is shown below.

client Monday Wednesday Friday

Meade MFG 23000 17800 15200

Hancock Hardware 18900 22000 18880

Grant Ganite 16890 7950 27890

Burnside Brokerage has requested that the carriers quote their rates in dollars per hundredweight (CWT). The rates quoted by the carriers depend on the lane (origin destination pair) and the volume shipped. Due to the low volumes per day, less-thantruckload (LTL) carriers must be used. Based on the daily forecasts provided by the clients, the carriers have quoted the following rates:

Carrier Monday Wednesday Friday TL rate

Meade $16 $19 $20 $13

Hancock $15 $18 $19 $15

Grant $14 $22 $17 $13

Recently, a TL carrier has been seeking to acquire more business on these lanes. You recall that larger LTL shipments may qualify for a truckload (TL) rate. The weekly total in the first column exceeds the minimum required by each of the three carriers to obtain a TL rate. The rates quoted by the TL carrier are shown in the following table:

TL Lane TL Rate

Meade $13

Hancock $15

Grant $13

1. What is Burnside Brokerages cost-to-serve for each of the customers when using the three-day-a-week delivery schedule using the LTL rates?

2. What is Burnside Brokerages cost-to-serve for each of the customers when using a consolidated (one day-a-week) delivery schedule using the TL rates?

. What do you recommend for each customer and why?

4. What would you suggest Burnside Brokerage do to convince their customers to adopt any recommendations that may result from your analysis? Remember, the customers wish to have more frequent deliveries and must ultimately pay the freight bill (plus margin)