MT237 Unit 8 Logistics and Transport Study Example

Two Days Sooner for $101.40, Two Days Later for $18.40 Less: A Unit 8 Logistics and Transport Study for East Coast Desk Orders

[Student Name]

Purdue University Global

MT237: Supply Chain Systems

Unit 8 Logistics and Transport Study

[Instructor Name]

[Date]

Prairie Rise Desk Co., its orders, rates, transit times and margins are composite and illustrative; bracketed figures stand where carrier quotes would supply the numbers; the sources cited are real.

The Shipment

Each desk ships in two cartons, one of [68] pounds holding the frame and columns and one of [49] pounds holding the desktop. Prairie Rise Desk Co. ships about [4,788] web orders a year from Kansas City to homes on the East Coast, mostly in New Jersey, New York, the Carolinas and Virginia. Its current method is ground parcel.

Four Options

Ground parcel costs about [$112.60] per desk, including surcharges for the heavy carton, and takes about four business days. It is the current choice, and the carrier delivers to the front door without any help carrying the cartons inside.

Two-day parcel costs about [$214.00] and takes two business days. It is the speed option.

A consolidated linehaul sends desks by full truck twice a week to a final-mile carrier's hub in New Jersey, which delivers them by parcel or local van. It costs about [$94.20] per desk and takes about six business days on average, because desks wait at Kansas City for the next truck.

Less-than-truckload with a delivery appointment and room-of-choice service costs about [$168.00] and takes about seven business days. It suits buyers who want help carrying the desk inside, but few web buyers ask for it, and the appointment call adds a day of scheduling.

The Comparison

Against ground parcel, two-day parcel costs about [$101.40] more per desk for two days less. The linehaul option costs about [$18.40] less for about two days more. On 4,788 desks, the linehaul would save about [$88,100] a year, while switching everything to two-day parcel would cost about [$485,500] more.

Coyle et al. (2016) note that shippers often overvalue speed for products whose buyers are not in a hurry, and a desk ordered for a home office is rarely urgent. The two-day option is clearly too costly as a default.

The Break-Even

The linehaul's risk is that slower delivery loses sales. If some shoppers see six days instead of four at checkout and buy elsewhere, Prairie Rise loses the margin on those desks, about [$210] each. The linehaul's saving of [$88,100] a year would be wiped out if about [420] East Coast web orders were lost, roughly 8.8 percent of the current [4,788]. Below that loss, the slower option pays; above it, it does not.

The question is whether a two-day difference would cost that many sales. Online furniture shoppers generally expect longer delivery than for small parcels, and competitors' sites quote five to ten days for similar desks. A loss of a few percent seems more likely than nine percent, but the only way to know is to test.

The slow option keeps paying until roughly one East Coast buyer in eleven walks away over two extra days.

Other Factors

Two practical points favor the linehaul. Fewer handlings in the parcel network should mean fewer damaged cartons, since the desks travel most of the way on a single truck. And the New Jersey hub could serve as a small forward stock point later, if East Coast volume grows. Against it, the twice-weekly truck adds a day of waiting in Kansas City, and a missed truck adds three more. Chopra and Meindl (2019) note that consolidating shipments lowers transport cost but raises response time, and this option is a clear example of that trade-off.

Splitting by Region

The East Coast is not one market. Buyers in New Jersey and New York sit close to the linehaul hub and would receive desks in about five days, while buyers in the Carolinas would wait closer to seven, because the final-mile carrier routes south from New Jersey. Ground parcel to the Carolinas takes only three to four days from Kansas City. A split rule, linehaul for the Northeast and ground parcel for the Southeast, would capture most of the saving where the delay is smallest. If about [60] percent of East Coast orders go to the Northeast, the split would save about [$52,900] a year while exposing only those buyers to the longer wait, and the break-even loss would apply to a smaller group.

Recommendation

Prairie Rise should test the linehaul on half of East Coast web orders for three months, showing the six-day estimate at checkout for those buyers and four days for the rest, and compare conversion rates. If the test shows less than about 5 percent fewer orders from the slower group, the company should move all East Coast web orders to the linehaul. Two-day parcel should be offered as a paid upgrade for buyers who want it, rather than as the default. Rushton et al. (2017) recommend that delivery options be priced so that customers who value speed pay for it, which the upgrade does.

References

Chopra, S., & Meindl, P. (2019). Supply chain management: Strategy, planning, and operation (7th ed.). Pearson.

Coyle, J. J., Novack, R. A., Gibson, B. J., & Langley, C. J., Jr. (2016). Transportation: A global supply chain perspective (8th ed.). Cengage.

Rushton, A., Croucher, P., & Baker, P. (2017). The handbook of logistics and distribution management (6th ed.). Kogan Page.