Running head: COSTING ANALYSIS 1

Hardee Transportation: New Market Opportunity Tanya Rush TMLT311, B001, spring 12 American Public University Professor Tommy Rector 12 May 2012

Hardee Transportation: New Market Opportunity Hardee Transportation is seeking new innovations for expansion. Currently, the truckload carriers route for freight movement is eastward and westward. In order to expand and remain profitable, Hardee is considering the proposal of expanding its route to accommodate moving freight between Pittsburg and Miami in addition to their normal route. This proposal was presented to Hardee by a customer who envisions great opportunity for the company. Although the proposal is viable, Hardee has a few concerns to consider; lack of backhaul from Florida and implementation of sorting/segregation at its dispatch centers. Hardee must now analysis the cost associated with this new move. To move this shipment, Hardee must consider the pick-up, sort, line-haul, and delivery costs. The total cost gathered from the four activities to include the fixed, variable, and semi-fixed cost can be used as a tool to provide an overall estimation for this new move. For the pick-up portion of this move, seven types of cost are present; depreciation, interest, fuel, labor, maintenance, insurance and billing. It is estimated that it will cost Hardee $2,248.44 for the pick-up of this shipment. A break down in costing can be seen in Table HT-1. There is only one type of cost associated with the sort portion of this move. Back at the dispatch center, two dock workers are required to unload, sort, and repalletize the load. The two dock works are paid by the hour for 8 hours. Total sorting cost for this move is $400. Next, similar to the pick-up portion with the exception of billing cost, the line-haul portion of this move consists of six cost types. Total line-haul cost for this move is $1,536.82. The delivery portion consists of seven cost types. In

3 addition to cost types associated during pick-up and line-haul, delivery requires dock facility services. The total cost for delivery for this move is $126.38. Finally, Hardee must consider the revenue needs for this move. Normally, carriers quote prices in many forms, but more commonly they will price per hundredweight (cwt) and price per revenue, or loaded, mile (153). Because the total TL cost, shipment weight and total miles is known, the cost per cwt is $6.32 and $2.03 per revenue mile. Now the Hardee is aware of the costs associated with this move, they are seeking other possible ways to cut total cost. One consideration is to put two drivers in the tractor for the line haul move. By doing so, no rest period will be required in accordance with DOT. The DOT drive time regulation states that drivers are permitted to drive a maximum of 11 hours after being off duty for 10 consecutive hours and in addition, a driver is permitted to be on duty a maximum of 14 hours after 10 consecutive hours off duty (180). Total drive time for this move is 45 hours and 45 minutes. The drivers drive/rest time is within the allotted regulatory stipulations set forth by DOT. Adding an additional driver would increase the total cost for this move, so there is no cost saving advantage of assigning two drivers. Considering there is no back haul to return the vehicle and driver back to Pittsburg, Hardee must assess this risk and warrant if this move can be considered profitable. To account for this cost, Hardee could consider the possibility of moving freight from another distributor in that same location back to Pittsburg. If none are available, adjustments must be made to include surcharges that cover the price of fuel and all other cost types associated with returning the driver and trailer back to its origin.

4 Hardee Transportation- Table HT-1 TL Costing Analysis

5/12/2012
Costs 1. Pick up Depreciation: A. Tractor: B. Trailer Interest: A. Tractor: B. Trailer Fuel Labor Maintenance Insurance Billing: PICKUP TOTAL COST: 2. Sort a. Dock Workers SORT TOTAL COST: 3. Line Haul Depreciation: A. Tractor: B. Trailer Interest: A. Tractor: B. Trailer Fuel Labor Maintenance Insurance Line Haul Total Cost: 4. Delivery Depreciation: A. Tractor: B. Trailer Interest: Tractor: Trailer: Fuel Labor Maintenance Insurance Docking Facility Delivery Total Cost

4.5 mi @ $2.19 4.5 mil @ $0.41 4.5 @ $2.33 4.5 @ $0.50 40 mi @ $0.32 4.5 mi @ $30/hr 40 mi @$0.15 40 mi @ $0.05

$9.86 $1.84 $10.49 $2.25 $12.80 135 6 $2.00 $5.00 $185.24 $400.00 $400.00

16 hrs@ $50

45h/45 m@$2.19 45h/45m@$0.41 45h/45m@$2.33 45h/45m@$0.50 1249@$0.32 1249@$0.42 1249@$0.15 1249@$0.05

$216.87 $18.53 $104.62 $22.74 $399.68 $524.58 $187.35 $62.45 1,536.82

2.5h @$2.19 2.5h @$0.41 2.5h@2.33 2.5h@.50 15m@.32 2.5h@30 15 m@.15 15 m@0.05 $15@2 hrs

$5.47 $1.03 $5.83 $1.25 $4.80 $75.00 $2.25 $0.75 $30.00 126.38

Total Costs (pickup, sort, line haul, delivery) Admin Overhead (8%) Total Cost Cost per cwt Cost per revenue mile

$2529.54/400 $2529.54/124

$2,248.44 $281.10 $2,529.54 $6.32 $2.03

6 References Coyle, J. J., Novak, R. A., Gibson, B.J., & Bardi, E.J. (2011). Transportation: A Supply Chain Perspective 7th edition, South Western College Publishing.