Metal Specialties is a wholesaler of specialty metals such as stainless steel and tool steel. The company purchases its stainless steel from a mill located some 200 miles away. At present the company operates its own truck. However, the truck is in need of repairs estimated at $20,000. Annual operating costs are $30,000 and the line haul costs are $2.20 per mile. Janet Jones (JJ), the traffic manager, wants to reduce the cost of bringing in the stainless steel, and because of the impending repair expense, she feels now is a good time to look at alternatives. She has solicited a number of proposals and has narrowed her choices down to a motor carrier and a rail carrier.

Heavy Metal Transport (HMT), a contract motor carrier, has an excellent reputation for service and reliability. It has submitted an incremental rate, $4.00/cwt. for shipments weighing less than 150 cwt., $3.80 for shipments between 150 and 200 cwt., $3.60 for shipments between 200 and 250 cwt., and $3.40 for shipments over 250 cwt. up to a maximum of 400 cwt.

Midland Continental Railway has submitted a piggyback rate of $3.25 per cwt. with a minimum load of 200 cwt. The piggyback rate includes pickup by truck at the steel mill, line haul by trailer on flat car, and delivery by truck to Metal Specialities' warehouse. They are considered to be a reliable carrier as well.

The finance department estimates that Metal Specialities' annual inventory carrying cost is 20%, the cost of inventory in transit is 10%, and the cost of capital is 8%. The cost of placing an order for stainless steel is estimated to be $40 per order. Stainless steel presently costs $300 per cwt.

Assignment

JJ has to make a decision soon. Given the information provided, what would you advise her to do?

RUBRICS:

Criteria	Exemplary 40 points	Proficient 30 points	Basic 20 points	Unsatisfactory 10 points	Criterion Score
Question One	Answer to this question includes calculations for 3 options (privately owned, Heavy Metal Transport and Midland Continental Railways) based on facts contained in the case.	Answer to this question includes calculations for 2 options based on facts contained in the case.	Answer to this question includes calculations for 1 option based on facts contained in the case.	A clear and reasonable answer is not provided.	Score of Question One, / 40
Grammar, Mechanics, and Appropriacy	Communication is free of grammatical or mechanical errors. Communication is exceptionally professional and polished and skillfully tailored for the reader.	Communication has minimal grammatical or mechanical errors that do not impede clarity or meaning. Communication is professional and appropriate for the reader.	Communication has grammatical or mechanical errors that occasionally impede clarity or meaning. Communication is inconsistently professional and/or appropriate for the reader.	Communication has grammatical or mechanical errors that frequently impede clarity or meaning. Communication is unprofessional and inappropriate for the reader.	Score of Grammar, Mechanics, and Appropriacy, / 40