You started an 8-month co-op three weeks ago. Your team leader knows that not only are you a PSU SCIS major, but you also completed SCM 404. Based on that she is confident that you can complete a financial analysis on a mode decision. They currently replenish their California DC using rail from their Pennsylvania production plant. She wants to understand the cash flow impact if they switch to truck.

What is your recommendation and what is the cash flow differential versus the other option rounded to the nearest $1,000?

She provided the information below for your analysis.

Rail Truck

Current Transit Time 20 5

Annual Demand (units) 60,000 60,000

Net Cost/COGS per unit $ 375 $ 375

ICC 28%. 28%

Qty/Shipment 4,500 1,500

Cost Per Shipment $2,500 $4,000