Logistics; Case 8-1; Aero Marine Logistics
Overview of numbers in the case;
1. Income
There is a monthly income of (150 000 x 0.20 =) 30 000 US by the full sale of 150 000kg of food.
2. Fixed costs
1 Lakh = 2 222US,
There will be needed to buy equipment to provide the containers with power. These cost 9 Lakh in total. This is (9 x 2 222 =) 19 998US.
Also in the periods of extreme conditions there will be more energy costs. AML expects them to be 3 Lakh annual. This is (3 x 2 222=) 6 666US.
3. Optional costs
Optionally AML and Freshfood inc. can chose between a situation of shipping in 20-foot containers or 40-foot containers.
Buying ten 20-feet containers will cost 8 Lakh per ...view middle of the document...
* Ten 20-foot containers; 10 x 300 = 3 000US (36 000 annual)
* Five 40-foot containers; 5 x 500 = 2 500US (30 000 annual)
Also in this case the return cost of empty containers is mentioned. For 20-foot containers this is 150US per unit and for 40-foot containers this is 250US per unit.
* Ten 20-foot containers; 10 x 150 = 1 500US (18 000 annual)
* Five 40-foot containers; 5 x 250 = 1 2500US (15 000 annual)
Additionally in the case it says that 10% of the times the costs for returning the empty containers will be covered by replacement cargo.
This results in a 10% reduction on the returning expenditures.
* 18 000 annual costs x90% = 16 200US for 20-foot containers.
* 15 000 annual costs x90% = 13 500US for 40-foot containers.
Answers to the questions asked in the case;
1 – What would the first-year costs be to AML if it purchased the 10 used 20-foot containers? How long would it take to recoup the investment, assuming that the mushroom traffic continued?
For the first year they would have to buy the ten 20-foot containers. Get all the power supplies. And pay the fitting shipping costs.
Purchase price; ten 20-foot containers | 10 | x | 80 x 2222 | .= | 177 760 |
Power units | 1 | x | 19 998 | .= | 19 998 |
Power costs | 1 | x | 6 666 | .= | 6 666 |
Shipping costs; Amsterdam - Bombay | 10 | x | 1700 x 10 x 12 | .= | 204 000 |
Shipping costs; Bombay - Delhi | 10 | x | 300 x 10 x 12 | .= | 36 000 |
Returning expenditures (10% incl.) | 10 | x | 150 x 10 x 12 x 90% | .= | 16 200 |
| | | | | |
Total | | | | | 460 624 |
For the first year the total costs are 460 624US. Dividing this number by 30 000 will result in telling us how much periods are needed to clear the investment.
460 624 / 30 000 = 15,35.
This means that we need 15, 35 months which us 1 year and 4 months (periods go in months) to cover the investment.
2 – What would be the first-year costs be to AML if it purchased five new 40-foot...
