Case

Spain Shipping

Solved 1.6k times
4.3 5 308

Problem Definition

Our client is a local shipping firm in Spain where they handle local shipping of packages delivered by international shipping firms like FedEx, UPS & DHL. These firms deliver packages to the key city hubs and then our client takes it from there.

They want to know how many trucks they should lease to support their operations. From a cost-savings perspective they can only lease one model-type and we need to find out how many trucks the start-up needs.


Comments

The candidate needs to find out how many trucks are required to support shipping operations whilst keeping costs at a minimum.

Candidate needs to provide an approach and explain this to interviewer before additional information/data is shared.

This is a case that requires optimization and candidate needs to only use data that is provided.


Short Solution (Expand)


Detailed Solution

Paragraphs highlighted in green indicate diagrams or tables that can be shared in the “Case exhibits” section.

Paragraphs highlighted in blue can be verbally communicated to the interviewee.

Suggested case structure:

I. Data-gathering

Candidate should explain her structure on how to approach the case which should include:

  • Required packages delivered per day.
  • Working hours & days of operations.
  • Average delivery time per package.
  • Size & dimensions of each package.

Moreover, candidate should ask for data on available truck models, their associated costs & load-capacity.

Share following information with candidate upon request:

  • Each day a 1,000 packages needs delivery.
  • Packages are envelope-format and go through the mailbox with dimensions of 1x1x1.
  • Delivery service runs 5 days a week from 09.00 AM to 06.00 PM for 9 hours.
  • It takes on average 10 minutes to deliver each package.
  • Packages are dropped off by DHL, FedEx and UPS at 05.00 PM, then stored overnight and delivered the next day.

II. Required volume

The first step is to calculate the amount of trucks we need on a daily basis to deliver all 1,000 packages.

We work 9 hours a day and take 10 minutes to deliver each package, so we can deliver 54 packages each day.

In order to calculate amount of trucks required we divide total packages by daily capacity:

1,000/54=18.5 trucks.

So we need an estimated 19 trucks to deliver 1,000 packages per day.

III. Optimized solution

Share Table 1 with candidate to showcase the truck models available.

Calculating optimized option:

We need to calculate total daily costs for each model with 19 trucks.

  • Model A: (1,000*(1x1x1))/(3x4x6)=14 rounded trucks or a minimum of 19 trucks costing us 19*$160=$3,040 per day.
  • Model B: (1,000*(1x1x1))/(9x2x2)=28 rounded trucks or a minimum of 28 trucks costing us 28*$50=$1,400 per day.
  • Model C: (1,000*(1x1x1))/(6x8x11)=2 rounded trucks or a minimum of 19 trucks costing us 19*$140=$2,660 per day.

The cost-effective & optimized solution is to take 28 trucks of Model B which helps us meet our daily load & minimizes daily lease costs.

Additional explanation:

The reason why we multiply the daily cost with a minimum of 19 trucks is because we need 19 trucks every day to deliver 1,000 packages. One driver can only deliver 54 packages a day.

So we either take the minimum of 19 trucks unless a model gives us a higher number of trucks such as Model B. In that case, we need the full amount of trucks to cover 1,000 packages per day.

This is a clear example of how using a high number of smaller trucks to benefit from lower costs and a de-centralized approach.


Difficult Questions

What price should we charge per delivery given our daily lease costs? Keep in mind that you might have to assume other cost components such as labor & overhead.

Related consulting question(s)
Best answer so far out of 2 answers:
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School

Hi, 1) You proactively ask in the beginning, even before drawing the structure (something like "What kind of products / revenue sources do we have) and then split the structure into price, qty,... (more)

Best answer so far:
McKinsey Engagement Manager & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 50+ candidates secure MBB offers

Hi Kay, this is indeed one of the fundamental things that you need to learn in order to rigorously disaggregate the value drivers of a business. The driver tree allows you to identify the numerical d... (more)

Hi Elisey, I would personally not recommend to use a single framework for all the so-called business situations (M&A, Entry, New product, Operations etc). Although this would help to more easil... (more)

Best answer so far out of 4 answers:
Bain & Company London | University of Cambridge | CV/Resume writing | 770 GMAT

Broadly agree with Jonathan. A couple extra suggestions: 1) Subscribe to Finimize: They will send you daily updates with recent business/finance news, and explain what is happening (and why) in Lay... (more)

Best answer so far out of 4 answers:
#1 Expert for coaching sessions (1600+) | Ex BCG | 800+ reviews with 100% recommendation rate

Hi Moji, it seems your issue is not the math computation, but rather how to structure the math part once you receive a question (that is, the logic behind that you should apply). This means you sho... (more)

Related BootCamp article(s)

Profitability Case

Learn to crack Profitability Framework Consulting Cases, which are the number 1 reason for real consulting projects and hence are an important case type.

7 Comment(s)
4.3 (308 ratings)
4.3 5 308
Case exhibits