Shop n Spend is considering adding a new warehouse to serve only the New England sales region. The current Northeast warehouse would then serve only the lower Northeastern states. Currently, shipping from the Northeast warehouse to the New England retail centers carries a transportation cost of $8.25 per hundredweight. If a New England warehouse was established, Shop n Spend could take advantage of a high volume discount to ship to that warehouse, and the cost of shipping to the warehouse would be $2.05 per hundredweight, according to the contract. A local trucking company could then deliver orders to the New England retail locations for $1.25 per hundredweight.

Assume that individual orders to retail stores average at 1000 pounds, or 10 hundredweight. It is estimated that the New England warehouse would cost $15 per 1000 pound shipment to operate. Using the Cost-Based Warehouse Justification example from Chapter 11, would you recommend that Shop n Spend operate the New England warehouse? What would the effect of this be on the per-shipment logistics cost?

2.05+1.25+1.50=4.8

4.80/HW<

8.25/HW

Recommendation would be to operate a New England warehouse.

*This is what I have so far for an answer. Any help would be appreciated.