Spain Shipping

Case information

Difficulty: Beginner

Candidate-led

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Operations strategy Profitability analysis

Case Prompt:

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.

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Sample Structure

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I. Data-gathering

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II. Required Volume

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III. Optimized solution

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Calculating optimized option

We need to calculate the 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 that 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.

Further 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.

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Spain Shipping i

Case Prompt:

Sample Structure

I. Data-gathering

II. Required Volume

III. Optimized solution

Further Questions

Spain Shipping