Logisticians, both internationally and domestically, must be able to understand the costs associated with their current operations, as well as the costs associated with potential improvements and innovations to their operations. That is what this case study, Canaan Group: Port Metro Vancouver Trans-Load Service is about.

Patrick Lo, the CEO of Canaan Group, has an idea for a new business innovation. Patricks idea involves opening a new trans-load facility 340 kilometers (204 miles) inland from Port Metro Vancouver to reduce the cost (CA$ and CO₂ Emissions) relating to transport of forestry products coming from Kamloops, British Columbia, Canada. The proposed mode of transport from the new trans-load facility to Port Metro Vancouver would be by rail, a less costly mode and a mode that is more eco-friendly than trucking.

Currently, the forestry products are trucked 350 kilometers (210 miles) from the mill in Kamloops to a container freight station (CFS) located just outside of the Port of Metro Vancouver. The product is offloaded at the CFS and waits on an empty container to be trucked from a nearby container storage area to the CFS for loading. Once loaded, the container is then trucked to Port Metro Vancouver to be loaded onto a vessel for export. The current transport method leads to higher CO₂ emissions for the communities living close to the port, as well as costs the exporters more money to export their products.

The new trans-load facility would be in Cache Creek, BC which is approximately 90 kilometers (54 miles) from the mill in Kamloops. The mill would transport the product to Cache Creek and the product would then be offloaded from the trucks and placed into empty ocean shipping containers that have already been positioned at Cache Creek. This new proposed method would/should be more efficient than the method currently in place.

There are multiple stakeholders that need to buy in to Patricks new venture for it to make financial sense to establish the operation. First, there is CP Rail (Canadian-Pacific Railroad) who must agree to reposition empty containers being shipped back to the West Coast ports of Canada, at the Cache Creek facility. Patrick would then have to negotiate a favorable transport rate with CP Rail for the move from Cache Creeks to Port Metro Vancouver. Second, exporters and their shipping lines would need to support this new method of handling forestry product transportation. Third, Patrick needs to negotiate a favorable leasing arrangement for the facility with the Cache Creek landlord, Joseph Russo.

Your task is to determine if the new operation would be profitable over 3 phases (3 years) as outlined by Patrick Lo. I have provided a spreadsheet that you will complete to assist you in making that determination. The financial analysis template provided in the spreadsheet, details the volume and financial assumptions that you must glean from the case to determine profitability. You will find most of these assumptions on page 4-6 of the case and Exhibit 5 located on page 8. Again, the spreadsheet details the volume and cost assumptions you need to find and enter to calculate profitability for all 3 phases.