ACME Frozen Foods - CPU Analysis
Acme Frozen Foods, a manufacturer of frozen entrees, currently delivers to C&S York, PA from their facility in Easton, PA. ES3 transportation needs to determine if it would be profitable to set up a customer pick-up arrangement, and is considering use of either the York store delivery fleet or 3rd party carriers.
If the parties can come to a CPU agreement, Acme would continue to offer delivered pricing of its product, and would compensate C&S with a customer pick-up allowance to cover transportation cost. The customer pickup allowance should represent their total cost to deliver.
Please review the data below to determine the action that should be taken.
- Vendor base CPU allowance is 1.83/cwt.
- Vendor uses a variable fsc schedule that currently pays .61/mile (105.7 miles from Easton to York).
- Weights of last 10 orders (All are full TL. Weights vary, based on product mix.):
- 36,451 lbs
- 41,000 lbs
- 29,654 lbs
- 30,555 lbs
- 37,140 lbs
- 38,741 lbs
- 38,222 lbs
- 37,299 lbs
- 31,050 lbs
- 27,656 lbs
- Origin location: Easton, PA 18044
- Destination: York, PA 17406
- Acme facility operates M-F 6am-6pm; Drop lot available 24/7
- Volume 4 loads per week
- Average unloading cost - $200
- **3 Quotes from 2 contract carriers and 1 broker (fuel surcharge cost would be $52 for all 3):
o Mr. Asset, Inc. - $531
o I Own Trucks, Inc. - $575
o Almost Honest Freight Brokerage, LLC - $475
• York Fleet has frozen deliveries with final stops on a daily basis at one of the following locations(Mileage segments shown in Appendix A) :
o Allentown, PA
o New Hope, PA
o Perkasie, PA
• Total variable fleet cost is $1.46/mile with a $22 stop charge. There is an additional $170 fleet cost that covers reefer fuel and R&M.
Please answer the following:
1. Would a CPU arrangement be profitable for C&S?
2. If so, what is the most cost effective way to execute, and what is the profitability? (Please show all math used to develop conclusion).
3. Should we request that ACME provide a higher CPU allowance?
a. Why or why not?
b. If yes, what per cwt CPU rate should we request and why?
Glossary:
CPU - Customer Pick-up
Cwt - hundred weight (total weight/100)
R&M - Repair and Maintenance
Appendix A:
Allentown, PA to York, PA - 84.9 miles
Allentown, PA to Easton, PA - 18 miles
Easton, PA to York, PA - 105.7 miles
New Hope, PA to York, PA - 113.8 miles
New Hope, PA to Easton, PA - 42.4 miles
Perkasie, PA to York, PA - 99.1 miles
Perkasie, PA to Easton, PA - 38.2 miles
**Please assume the carrier quotes received are representative of the current market.