Abdulaziz Alhawil
Executive summary
It is long established and mutually profitable relation occurred between overland trucking, freight with an important international automobile parts organization named as FHP technologies. To increase efficiency of supply chain and profitability of organization, FHP management has requested overland to provide them with some additional routes also on the other hand overland organization wishes to be in business partnership with FHP but overland is more concerned about availability of their services to new routes given to FHP, analyzing all the potential risks and also they have to analyze about profitability associated with this partnership. The managers have analyzed the business outlooks and all the potential …show more content…
Before taking any decision, the management has to take some factors into consideration like analyzing financial issues, rethinking about allowed capacity and organizational strategic issues. Analyzing the factors of marginal cost-benefit, sensitivity analysis and organizational issues related to strategies results I squeezing the existing allowed capacity and results in increasing the profitability of organization insulating the competition with a new client. As management had to rethink about if OVL can easily give them more routes than capacity form their existing fleets by making an agreement with FHP what will they charge or what cost have to pay by FHP. For making a contract with FHP, OVL has to only limited options about how to fulfill the requirement of FHP; they can straight away decline the offer, limit their existing capacity, increase their capacity or start out outsourcing the services. But there must be some issue with every factor they …show more content…
Current Capacity Utilization = 85% (Sourced from Case) Current Miles Covered = 11,250,000 (Sourced from Case)
Total Capacity they can handle = 11,250,000/0.85 = 13,235,294.1 (Calculated)
The proposal from FHP: two dry-van loads per week; each load -1,500 miles round trip:
For 1 year contract $2.15 per mile, which includes the FSC and all miscellaneous fees For 5 year contract $2.20 per mile, which includes the FSC and all miscellaneous fees
If OVL serves FHP through any outsourcing reliable independent contractor: For a year contract $1.65 per mile, an increase of $20000 in fixed costs annually.
New Demand∶ Per Load = 1500 miles Total Weekly Load = 1500*2
=3000 miles (Calculated) Total Annual Load = 3000*52 =
156000 miles (Calculated)
New Demand as % of total perceived existing capacity = 156000/13235294.1 = 1.2% (Calculated)
Total Capacity Utilization if served with existing Capacity = 85% + 1.2% = 86.2% (Calculated) As the perceiving capacity is much less as compared to the demanded capacity of existing fleet but within safe operating
Executive summary
It is long established and mutually profitable relation occurred between overland trucking, freight with an important international automobile parts organization named as FHP technologies. To increase efficiency of supply chain and profitability of organization, FHP management has requested overland to provide them with some additional routes also on the other hand overland organization wishes to be in business partnership with FHP but overland is more concerned about availability of their services to new routes given to FHP, analyzing all the potential risks and also they have to analyze about profitability associated with this partnership. The managers have analyzed the business outlooks and all the potential …show more content…
Before taking any decision, the management has to take some factors into consideration like analyzing financial issues, rethinking about allowed capacity and organizational strategic issues. Analyzing the factors of marginal cost-benefit, sensitivity analysis and organizational issues related to strategies results I squeezing the existing allowed capacity and results in increasing the profitability of organization insulating the competition with a new client. As management had to rethink about if OVL can easily give them more routes than capacity form their existing fleets by making an agreement with FHP what will they charge or what cost have to pay by FHP. For making a contract with FHP, OVL has to only limited options about how to fulfill the requirement of FHP; they can straight away decline the offer, limit their existing capacity, increase their capacity or start out outsourcing the services. But there must be some issue with every factor they …show more content…
Current Capacity Utilization = 85% (Sourced from Case) Current Miles Covered = 11,250,000 (Sourced from Case)
Total Capacity they can handle = 11,250,000/0.85 = 13,235,294.1 (Calculated)
The proposal from FHP: two dry-van loads per week; each load -1,500 miles round trip:
For 1 year contract $2.15 per mile, which includes the FSC and all miscellaneous fees For 5 year contract $2.20 per mile, which includes the FSC and all miscellaneous fees
If OVL serves FHP through any outsourcing reliable independent contractor: For a year contract $1.65 per mile, an increase of $20000 in fixed costs annually.
New Demand∶ Per Load = 1500 miles Total Weekly Load = 1500*2
=3000 miles (Calculated) Total Annual Load = 3000*52 =
156000 miles (Calculated)
New Demand as % of total perceived existing capacity = 156000/13235294.1 = 1.2% (Calculated)
Total Capacity Utilization if served with existing Capacity = 85% + 1.2% = 86.2% (Calculated) As the perceiving capacity is much less as compared to the demanded capacity of existing fleet but within safe operating