Question

Question #6 - I need some help graphing this out.

bis folusel 244 Part III . Elements of Logistics Systems ed that because the e LTL classification of 200 ded to ask the motor car- CASE 13.1 CHIPPY POTATO CHIP COMPANY Located in Reno, Nevada, since 1947, the Chippy Potato Chip Company manufactured potato chips and distrib- uted them within a 100-mile radius of Reno. It used its ovement are the classification CASE Chippy management believed that he new chips were less bulky, the LTL clas was too high. Management decided to ask the bureau for a new, lower classification own trucks for delivery in the Reno, Carson City, and Lakerier classification burea (Motor carrier rates for a movement are the Tahoe areas and common carrier trucking for all other out- multiplied by a distance factor. If the classification would be lowered proportionally for all going shipments. All of its motor carrier shipments were lowered, the rate would be lowered proportion on an LTL basis. The applicable motor carrier freight rating, shipments.) or classification, for LTL potato chips was 200. This clas- t sification was high, although potato chips are often given as QUESTIONS textbook examples of bulky freight that will cause a truck to cube out. Even after much of the motor carrier indus- 1. If you worked for Chippy, what new classification would try was deregulated, Chippy had difficulty finding contract you ask for? Give your reasons. truckers interested in negotiating specific contract rates. 2. Classifications are based on both cost and value of service. This was because potato chips-as a result of their bulk-- From the carrier's standpoint, how has cost of service were not a desirable cargo from the truckers' point of view. changed? The potato chips were packed in 8-ounce bags. 3. Given the existing LTL classification of 200, how has value Twenty-four 8-ounce bags were packed in cartons that of service to the customer changed? were 12 inches by 12 inches by 36 inches. The packed car- 4. The new tubular containers are much sturdier. If you ton weighed 14 pounds. The 8-ounce bags of chips whole worked for Chippy, how--if at all—would you argue that saled FOB plant for 40 cents each and retailed for cents. this factor influences classification? Recently, the Chippy firm acquired rights to pro- 5. You work for the motor carrier classification bureau and duce a new type of chip, made from powdered potatoes, notice that the relationship between the weight of potato yielding chips of identical shape that could be packed in tubular containers. A 5-ounce paper tube of chips would chips and the weight of packaging has changed. How, if at all, should this influence changes in the products wholesale (FOB plant) for 40 cents and retail for 59 cents. The new chips were much less bulky: Twenty-four 5-ounce classification? 6. One of Chippy's own trucks used for local deliveries, has two axles and an enclosed body measuring (inside) 7 te by 8 feet by 20 feet and is limited by law to carrying a of no more than 8,000 pounds. Because the truck of carton weight.) supposed to be overloaded, what combinations, expres in terms of cartons of both new and old-style chips legally carry? (Hint: Use a piece of graph paper.) " CHILS. containers could be packed in a carton measuring one cu- bic foot. The filled carton weighed 10 pounds. (The differ- ence between the weight of chips and that of cartons is due to packaging materials. The carrier is paid on the basis tlons, expressed -style chips can it

Answer 1

If you worked for Chippy, what new classification would you ask for? Give your reasons.

The freight rating or classification is based on density, how easy the cargo can be handled, and liability to damage and theft among others. We need to solve the following formula to determine which classification would be appropriate.

200 (older rating) 14 pounds (old package) ->V1

f (new rating) 10 pounds (new package) -> V2

Taking into consideration than 12 inches equals 1 foot, we can say that V1 (the volume of the first package) is 3 cubic feet or 3V2. We know that the volume of the new carton (V2) is 1 cubic foot. When we divide 14 pounds by 3 cubic feet, we get that the old package density is 4.67 pounds per cubic foot, and with the new package, we get 10 pounds per cubic foot (10 / 1). According to cerasis.com, a weight range of 9 -10.5 pounds per cubic foot should be assigned a class 100. Based on this information, I would ask for a freight rating of 100.

Classifications are based on both cost and value of service. From the carrier’s standpoint, how has cost of service change?

The cost of service has definitely changed. With the new tubular packages, the density per cubic foot has increased from 4.6 pounds to 10 pounds. This means that the carriers would be able to carry greater weight per shipment in the same space. Also, since with the tubular containers the potato chips are less bulky and less likely to get damaged, the cost of service would likely be reduced.

Giving the existing LTL classification of 200, how has value of service to the customer changed?

As I said in the previous question, with the new containers the potato chips are less likely to get damaged, so the value of service to the customer could definitely change. However, we have to consider that the customers would be paying the same amount of money (59 cents) per a 5-ounces tubular container, when they got 8 ounces before. This represents that the customers will pay the same amount of money for less product, so based on this fact, the value of service to the customer could be negatively impacted.

The new tubular containers are much sturdier. If you worked for Chippy, how –if at all- would you argue that this factor influences classification?

As I explained in the previous questions, the new containers make the products less likely to get damaged. Ease of handling and liability of damage are factors that are taken into consideration when determining the appropriate freight classification. Since with the new sturdier containers, the liability of damage is reduced, and the products are easier to handle, I think that a lower classification would be appropriate.

You work for the motor carrier classification bureau and notice that the relationship between the weight of potato chips and the weight of packaging has changed. How, if at all should this influence changes in the product’s classification?

In the old package there were 24 8-ounces bags in a carton that weighed 14 pounds or 224 ounces when fully packed (1 pound equals 16 ounces), making a total of 192 ounces of product in 224 ounces of total weight. If we divide the amount of product (192 ounces) by the total carton weight (224 ounces), we get that the ratio of product weight to carton weight is 85.7 %, making packaging material account for 14.3 % of the total weight. In the new package there are 24 5-ounces bags per carton, and when fully packed the carton weighs 10 pounds or 160 ounces, giving a total of 120 ounces of product in a carton weighing 160 ounces when packed. If we calculate the ratio, we get that the potato chips account for 75 % of the total weight (120 ounces / 160 ounces), making the packaging account for 25% of the total weight. This could influence the classification because the bureau could say that the firm did not maximize packaging efficiency (they need more packaging material than before to carry fewer products). They could use this to give the potato Chips a higher rating.

One of Chippy’s own trucks, used for local deliveries, has two axles and an enclosed body measuring (inside) 7 feet by 8 feet by 20 feet and is limited by law to carrying a load of no more than 8,000 pounds. Because the truck is not supposed to be overloaded, what combinations, expressed in terms of cartons of both new- and old-style chips can it legally carry?

We need to calculate the maximum amount of cartons that a truck can carry in weight terms and in capacity terms (cubic feet). With the old-style chips, the maximum capacity would be 571 cartons (8,000 pounds divided by 14 pounds that each packed carton weighs), and the old carton dimensions were 3 cubic feet each. Taking into consideration the capacity of the trucks in cubic feet, we get that each truck can carry a maximum capacity of 1,120 cubic feet (7 feet x 8 feet x 20 feet). So, if we divide the truck capacity (1,120 cubic feet) by the carton dimensions (3 cubic feet), we get that the truck will be fully loaded with 373 cartons of the old-style chips, or a maximum weight of 5,222 pounds (373 cartons x 14 pounds each). The result will be that the truck will reach its maximum capacity before reaching the maximum weight allowed.

With the new-style chips, the maximum capacity would be 800 cartons (8,000 pounds divided by 10 pounds that each packed carton weighs), and each carton is 1 cubic foot. The capacity of the truck (1,120 cubic feet) divided the 1 cubic foot carton gives us that the maximum amount of cartons that would fit inside a truck is 1,120 or 11,200 pounds, which goes over the limit of 8,000 pounds, so the truck will reach the maximum weight allowed before reaching its maximum capacity.