QUESTION ONE $[80$ MARKS$]$

Optimizing transport costs for Polokwane Logistics Concepts $($PLC$)$

Polokwane Logistics Concepts $($PLC$)$ is a logistics company specializing in road transport services across South Africa. PLC faces a significant challenge in managing and optimizing its transport costs due to the diverse and extensive nature of its operations. Recently, the company has taken on a new client requiring a shipment to be transported from their warehouse in Soweto to a consignee in Cape Town. Given the rising fuel prices and competitive market, PLC needs to ensure its pricing strategy covers all operational costs while remaining competitive. The following information regarding an upcoming trip to Cape Town is provided.

Equipment Cost Data:

Equipment Purchase Price:

Line$-$haul tractors: R$1,440,000$

Line$-$haul trailers: R$480,000$

Depreciation:

Tractors: $5-$year straight line

Trailers: $8-$year straight line

Interest:

Tractors: $6\%$ annual percentage rate $($APR$)$ for $5$ years

Trailers: $6\%$ APR for $8$ years

Fuel:

R$12\mathrm{.}00$ per litre for diesel

Line$-$haul tractors: $2\mathrm{.}60$ KM per litre $($or R$4\mathrm{.}61$ per KM$)$

Labour:

Line$-$haul drivers: R$3\mathrm{.}12$ per KM

Pickup and delivery $($PUD$)$ drivers: R$360($fully loaded$)$ per hour

Dock workers: R$300($fully loaded$)$ per hour

Miscellaneous costs:

Insurance cost: R$0\mathrm{.}48$ per KM

Maintenance cost: R$0\mathrm{.}97$ per KM

Billing cost: R$23\mathrm{.}40$ per freight bill

Tractors and trailers are available for use $24$ hours per day, $365$ days per year

Administrative overhead cost: $10\%$ of total cost of move

Dock facility cost: R$150$ per hour

Line$-$haul vehicle averages $80$ kph between origin and destination

Route and Time of Move:

A shipment will originate from the PLC warehouse $($located $35$ KM from the carrier$$s dispatch facility$)$ on $20$ August. A line haul tractor and trailer are dispatched from the terminal at $0730$ hrs and arrive at the shipper$$s dock at $0830$ hrs$.$ The shipment is loaded from $0830$ hrs to $1200$ hrs$.$ Driver and vehicle return to the carrier$$s terminal at $1300$ hrs to pick up paperwork.

Total time for pickup: $5\mathrm{.}5$ hours

Total distance for pickup: $70$ KM

The vehicle and the driver depart from the terminal at $1300$ hrs on the same day for Cape Town, Western Cape. The driver operates from $1300$ hrs to $2300$ hrs and travels $450$ KM$.$ The driver rests from $2300$ hrs to $0700$ hrs $($on $21$ August$)$ in Bloemfontein and then operates another $8$ hrs $(07001500$ hrs$)$ and $375$ KM$.$ The driver rests again from $1500$ hrs to $2300$ hrs in Beaufort West. The driver concludes the trip by traveling $450$ KM from $2300$ hrs to $0900$ hrs $(22$ August$)$ to the consignee in Cape Town.

Total time for line$-$haul: $44$ hours or $1\mathrm{.}83$ days

Total distance for line$-$haul: $1275$ KM

The trailer is unloaded from $09001200$ hrs with the driver and tractor remaining at the facility. The driver and the vehicle then go to the carrier$$s Cape Town terminal located $45$ KM from the customer$$s facility arriving at $1300$ hrs to wait for further dispatch instructions.

Total time for delivery: $4$ hours

Total distance for delivery: $45$ KM

Business Problem:

PLC needs to accurately calculate the costs associated with this shipment to determine a competitive price that covers all operational expenses, including fuel, labor, depreciation, interest, and miscellaneous costs. Additionally, the company must include VAT and desired profit margin in the final price.

Required

Calculate the pickup cost $(20$ marks$)$

Calculate the line$-$haul cost $(30$ marks$)$

Calculate the delivery cost $(12$ marks$)$

Calculate the total costs for this move $(3$ marks$)$

Determine the price to be charged for this trip $(15$ marks$)$

QUESTION TWO $[10$ MARKS$]$

Imagine that you are an operations manager of PLC and provide insights on how you can minimise operational costs to be competitive. Your answer can include the application of relevant technologies

QUESTION THREE $[10$ MARKS$]$

Evaluate contextual issues unique to South Africa can increase the cost of freight transport and distribution