Astro Industries of Minneapolis, MN, makes weekly shipments to 12 customers in the Dallas area. Each customer’s order weighs, on average, 1,750 pounds. A direct truck shipment from Minneapolis to Dallas costs $2,500. The maximum load per truck is 30,000 pounds.
A. How much would it cost Astro to make direct, single-order shipments to all of its customers each week? What would the utilization level for the trucks look like?
B. Suppose a Dallas-based warehousing firm has agreed to run a break-bulk warehousing operation for Astro at a cost of $75 per hundred-weight. Local deliveries to each customer would tack on another $150 per customer per week. How much money could Astro save by going with the break-bulk solution? What would the utilization level for truck be in this case?
C. How high would the warehousing cost (currently at $75 per hundred-weight) have to be before break-bulk warehousing is no more attractive than direct shipments?
Note: You can solve Parts a and b together as we did in class practice problem.