The retailer expects an extrememly high service level

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Reference no: EM132299716

Complete the following cost analysis and provide a recommendation of the following option. A retail shipper is considering two options for shipping products to its customers and would like to know the total estimated cost for each option. On a typical day the retail shipper will have 475 deliverers to dense metro areas and 125 to rural areas averaging 2 packages for each delivery.

key points to consider when making your decision.

-The retailer expects an extrememly high service level for delivery's to its Customers, Customer commitment is 2 day delivery.

-Cost is a significant issue for the retailer and needs to find the lowest cost options.

-in option 1, there is no regular satruday delivery service but at an additional cost of $10 per delivery, deliveries are made 7 days a week and into the evening hours.

Option 2 is at 92% with large swings in service where committed delivery times could be off by as much as 2 days. Rural areas have no committed service levels.

Option 1 Traditional UPS/FedEx Integrator model.

i. In dense metro areas a driver can make 20 deliveries within 1 hour averaging 2 packages per delivery. It costs $4 per delivery which equals a cost of $80/hour.

ii. For rural areas, a driver can only make 4 deliveries per hour x $20/package equals a cost $80/hour. In addition, it costs $2.50 for each rural delivery.

Option 2 "Amazon Flex" non-assets based model

i. In dense metro areas a driver makes $18/hour and can make 20 deliveries averaging 1 package for each delivery. The driver is limited to only 1 package for each delivery because of vehicle limitations and no access to receiving docks.

ii Rural areas are not serviced and packages are given to the USPS. USPS charges 5.oo for each package.

Reference no: EM132299716

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