Reference no: EM133180066
Speedway is a last-mile logistics company that provides express door-to-door delivery for businesses across Southeast Asia. The company operates in Singapore, Malaysia, Philippines, Indonesia, Thailand and Vietnam and employs up to 600 drivers. As the online shopping market grows, Speedway is experiencing increased demand for its delivery services. The company plans to double its pool of drivers within the next three years. Senior management is concerned that the quality of drivers may decline with the manpower expansion, which in turn increases the risk of accidents for the firm. The COO directed HR to explore options to maintain driver quality.
Janice, an HR executive, has been tasked to explore either a driving test or safe driving course to maintain driving standards of new recruits. She compiles the information below to support the business case that she is preparing. Speedway plans to recruit 200 new drivers annually and expects 2 applications per vacancy. The dollar value of one standard deviation of driving performance is $3,000.
Janice believes that the safe driving course has the added benefit of reducing accident costs that are likely to increase with the expansion of operations. She obtains information on the annual rate of accidents, employee medical claims, compensation pay outs and productivity loss due to accidents (see Table 3). Based on information provided by the training vendor, Janice expects the rate of accidents to drop by 50%.
Table 3. Annual Accident-Related Information
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Accident Rate
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20% of drivers
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Compensation Pay out (per year)
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$180,000
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Employee Medical Claim (per year)
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$120,000
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Productivity Loss (per year
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$300,000
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Distinguish between cost savings and avoidance and determine if Speedway derives cost savings or cost avoidance if the firm adopts the safe driving course for all its drivers after expansion.
Calculate the return on investment (ROI) of the safe driving course as a means of reducing accident rates after Speedway expands its pool of drivers. Show your working clearly and round off your answers to two decimal places.
REFERENCE:
Bauer, T., Erdogan, B., Caughlin, D., & Truxillo, D. (2019) Human resource management: People, data, and analytics SAGE Publications
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