ConSort Case Study (2)
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Feb 20, 2024
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ConSort Case Study Gabe Lopez
Question #1. If we use the ship direct model, using the data from figure 1, what are our total costs over a 52-week period?
Manufacturer A- 10,000 lbs weekly weight
LTL rate from manufacturer to customer is 2.00 per cwt
52 weeks= (10,000lbs/100)*2.00*52= $10,400
Manufacturer B-
8,000 lbs weekly weight
LTL rate from manufacturer to customer is 1.40 per cwt
52 weeks=(8,000 lbs/100)*1.40*52=$5,824
Manufacturer C-
15,000 lbs weekly weight
LTL rate from manufacturer to customer is 3.20 per cwt
52 weeks=(15,000 lbs/100)*3.20*52=$24,960
Manufacturer D- 7,000 lbs weekly wight
LTL rate from manufacturer to customer is 1.60 per cwt
52 weeks=(7,000 lbs/100)*1.60*52=$5,824
Total- 10,400+5,824+24,960+5,824= $47,008 for 52 weeks
Question #2 If we use the vehicular consolidation model, using the data from figure 1, what are our total costs?
Manufacturer A-
10,000 lbs weekly weight
LTL rate from manufacturer to customer is 0.75 per cwt
TL rate DC to customer is 1.00 per cwt
10,000*.75/cwt=75
10,000*1.00/cwt=100
3.80 per 1000 lbs* (10,000 lbs/1000)=38
75(ltl)+100(tl)+38(dc)=213
Manufacturer B-
8,000 lbs weekly weight LTL rate from manufacturer to DC is .80 per cwt
TL rate DC to customer is 1.00 per cwt
8,000*.80/cwt=64
8,000*1.00/cwt=80
3.80 per 1,000* (8,000 lbs/1,000)=30.40
64(ltl)+80(tl)+30.40(dc)-174.40
Manufacturer C-
15,000 weekly weight
LTL rate from manufacturer to DC is 1.40 per cwt
TL rate DC to customer is 1.00 per cwt
15,000*1.40/cwt=210
15,000*1.00/cwt=150
3.80 per 1,000 lbs* (15,000 lbs/1,000)=57
210(ltl)+150(tl)+57(dc)=417
Manufacturer D-
7,000 weekly weight
LTL rate manufacturer to DC is 0.50 per cwt
TL rate DC to customer is 1.00 per cwt
7,000*.50/cwt=35
7000*1.00/cwt=70
3.80 per 1000 lbs* (7,000/1,000)=26.60
35(ltl)+70(tl)+26.60(dc)=131.60
Total- 213+174.40+417+131.60)=936*52= $48,672 over 52 weeks
Question #3. Do you recommend using the ship direct or vehicle consolidation model? Explain why. Based on my calculations I would recommend using the ship direct model first because the total cost was only $47,008 compared to the vehicle consolidation model which is $48,672. There is around a $1664 cost differential.
Question #4. If we use the ship direct model, using the data from figure 2, what are our total costs over a 30-day period?
Topeka-(5,000+25,000+16,000)/3=15,333.33 lbs (approximately)
15,333.33*2.36=36,186.66
Question #5. If we use the three-day temporal consolidation model, using the data from figure 2 and 3, what are our total costs over a 30-day period?
5000+25000+16000=46000
46000/100*1.40=644
Total cost for 30 days for ⅓ of cities=6440
6440*3=19320
Question #6. Do you recommend using the ship direct or the three-day temporal consolation model? Explain why.
Based on my calculations i would recommend the three-day temporal consolidation model as it falls significantly short of the total price that it costs for ship direct model. Question #7. Compare and contrast the similarities and differences between freight broker and freight forwarder. When is it appropriate to use one not the other?
There are many differences and similarities between freight brokers and forwarders. For starters, they are both very similar because they both act as intermediaries between shippers and carriers. They both facilitate the transportation of goods. Both have extensive networks of carriers and shipping providers which can benefit shippers by providing access to a range of transportation options. They are also very different. The main difference is a freight broker serves as a middleman who connects shippers with carriers. Their primary focus is to find the best carrier for
a shipper’s specific needs. They do not take physical possession of the cargo. Meanwhile, freight
forwarders take on a comprehensive role as they may handle multiple aspects of the shipping process, including arranging transportation, preparing documentation, and even warehousing. Forwarders often provide end to end solutions as brokers almost never handle more than 1 aspect. Another huge difference is that freight brokers do not own cargo ships while freight forwarders may take temporary ownership in certain situations. You would utilize a freight forwarder if you needed storage, transportation, or any sort of service that could physically be provided to you. One should use freight brokers when they have limited industry knowledge as brokers know more about finding the most efficient and cost effective shipping solutions.
Question #8. Propose a flat rate for each of the 5 zones using a cost/CWT.
Based on the data I’ve collected I think 5 zones could be split up like this:
Zone A; $2.25 per CWT
Zone B: $2.00 per CWT
Zone C: $2.20 per CWT
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Zone D: $2.35 per CWT
Zone E: $2.60 per CWT
Question #9. What would be the additional “cost” to us of using a better performing freight forwarder with a 7.5% EBITDA?
After implementing my 5 zones, I believe that in this scenario there is no additional cost for using the better performing freight forwarder as the rates for both are the same.
Cost better=total logistics cost*(better EBITDA %/100)
Additional cost=cost better-cost initial
Additional cost-
Question #10. What are the risks associated with the strategy of using a mid-sized freight forwarder with a 6.3% EBITDA? Should we use a “better performance” instead?
Using a mid-sized freight forwarder with 6.3%$ EBITDA carries certain risks, and the decision to switch to a “better performing” freight forwarder should be evaluated carefully. Some risks associated with this type of strategy are lower quality of service, financial stability, limited leverage with carriers, etc. Mid-sized forwarders might not have the same level of resources and capabilities as larger ones do which could result in a lower quality of service in terms of tracking and communicating. A forwarder with a lower EBITDA might face financial instability or be more susceptible to economic downturns which could ultimately lead to disruptions in service or delays in shipments. Smaller forwarders also may not have the same level of bargaining power with carriers as a larger one might. This could lead to higher transportation costs. Overall, there is a lot to cinder when it comes to using a mid-sized freight forwarder.