Overview
The case represents the logistics system of HDT Truck Company which assembles heavy trucks for export. Therefore, the paper will examine different cases of the company exports in determining their feasibility. However, every order the company gets depend on the terms and condition with the customers overseas.
Question One
Draft Comparison
Chicago | Price Per Truck | Costs ($) |
Vessel Charter | - | $ 72,000 |
Load & Block | $ 40 | $ 2,000 |
Rail Rate | $ 180 | $ 9,000 |
Wharfage | - | $ 1,070 |
Loading & Stowing | - | $ 4,000 |
Seaway tolls | $ 54 | $ 2,700 |
Unloading | - | $ 4,200 |
Insurance | $ 210 | $ 10,500 |
Total | $ 105,470 | |
Baltmore | Price Per Truck | Costs ($) |
Load & Block | $ 160 | $ 3,000 |
Rail Rate | $ 896 | $ 44,800 |
Handling | $ 200 | $ 10,000 |
Ocean Freight | $ 1,440 | $ 72,000 |
Insurance | $ 50 | $ 7,500 |
Total | $ | $ 137,300 |
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Question Two
Recommended Alternative Route
Based on the comparison the Chicago route appears to be the best choice. The prime reason is that it appears to be close due to the discount offered. Though the discount is only received when shipping through Baltimore and for the truck to be received for the10 days of July 1. In this sense, in the rail rate and shipping, the overall costs will be cheaper. Similarly, all the truck will be taken to the destination of FAS Doha together without using separate vessels. However, it will be in part due to the chartering process of the vessel which is equal to the cost of using ocean freight charges. Shipping together to Baltimore both truck #25 and #26 are expected to arrive and finish the trip at around 16 th of April and thus to get to Doha the route will take the vessels till 8 th of May. With that in mind, it will be logical if the company is paid later and the duration difference of payment is 22 days. The following calculations demonstrate why Chicago route is more expensive than using Baltimore.
($172,000 * .08 * 22) /365 = $829.37
Then considering the alternative and adding the cost to the Chicago route: $(829. 37*50= $41,468.50) $109,470+$41,468.50= $150,938.50
However, coming up with an alternative route will require additional information about the different vessels. For instance, the case does not provide information on rail or port congestion issues. The congestion in either vessel may affect the timeless of shipment and rail rate loading. Additionally, there is no information given on the port performance based on the loss and damage metrics.
Question Three
In this case, all the transportation cost (case 2 calculation) can eliminate or subtract. The amount should be subtracted from the total costs which include the vessel, tolls, loading and, ocean. Insurance should be recalculated and included in the total costs as they as they are not responsible for the sea shipping freight. I would suggest that every truck is charged $95,000 covering raw material goods and labor. Similarly, if the terms of sales will be revised, they should indicate the specific date for picking and making payment for the cargo. The specified price should be inclusive of HDT’s daily costs of investing in finished goods. Notably, it is the responsibility of the HDT to get the trucks to Baltimore on railroad flatcars. On the other hand, the process and costs for unloading the railcars should be met by the buyer. Alternatively, the first term I would recommend is the additional fee per day for holding the cost of the finished truck. The term would ensure that HDT is compensated for tying of the finished goods which are occupying space in the plant. Also, the term assumes that the space occupied by the finished trucks can be used by HDT for other similar orders. The term and conditions would not obviously consider the transportation costs and thus subtracted in the initial price. The date of building is important and could be changed under the new terms as the shipments are no longer on HDT.
Conclusion
If the buyer unloaded from the truck, for instance, the total shipping costs would be subtracted from the total rail rate. The new rail rate would be $44,800 plus labor and materials. However, due to the new terms, HDT would be responsible for rail cost the transportation costs is subtracted. The buyer would bear the cost for unloading at Baltimore and that of shipment on vessels. Through the interest rate, HDT may be able to change from one routing to another. For instance, if the interest rate is 5.3% the equation cost will be:
$109,470 + (8,600,000 * (22/365*0.053)) = $1,375,000
Assuming that HDT cost of borrowing is 12% and the price per truck is $ 172,000; the total cost per truck would be $56.55 per day. However, overtime payment would be advantageous as long as it wouldn’t exceed the cost per day.
[(.12*$172,000)/365]=56.55
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