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Alpha is a retailer that has ten stores in New Orleans area that are supplied by 5 suppliers. It has box trucks for obtaining goods from its suppliers. The transportation manager in consultation with the SCM leader is assessing whether it is worth switching from box trucks to vans to reduce costs and to optimize the operations. Box trucks have a capacity of 5,000 cartons and the vans have a capacity of 2,000 cartons. The box trucks cost $400 per stop. The vans cost $100 per stop. The annual requirements for each store are the same; each requires 200,000 cartons per year. The holding costs for inventory at the stores is 0.40.
Question 1: Calculate the costs of using box trucks and the costs of using vans. Compare the results. Should the transportation manager recommend to the SCM leader that the company lease vans instead of leasing box trucks based on a cost analysis of the above information? The SCM leader expects a definitive recommendation with supporting details, especially the calculations and analysis.
Question 2: The SCM leader expects the memo to include all considerations in addition to the financial (cost) aspects. What information and data would you present in addition to your analysis and recommendation?
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