This analysis examines freight cost and cleaning fluid supplies at two locations; Cincinnati and Oakland, to determine the optimal distribution network to supply the cleaning fluid to Great North American at minimal cost to Solutions Plus. Based on projected cost a bid recommendation is made and decision factors related to the analysis are discussed.
Keywords: Solutions Plus, Cost minimization, Breakeven, Bid, Shipping Cost
Background Solutions Plus is an industrial chemicals company that produces cleaning fluids and solvents for many applications. Great North American railroad is taking bids for delivery of a cleaning fluid for its locomotives at eleven different locations. Solutions Plus can …show more content…
This final bid for Solutions Plus, which includes a 15% markup, for Great North American, should be $1,053,656.60.
Decision Factors The bid recommendation above is based upon current information and prior management team decisions. However we strongly recommend that management consider the following points before submitting a bid * Capacity: Will great North American seriously entertain a bid that meets only part of their demand? Management previously decided to limit the number of gallons of cleaning fluid produced at the Cincinnati Plant. This decision should be reevaluated to determine if we could improve our chances of having an acceptable bid by increasing our capacity. In addition we should examine the possibility of contracting with another industrial chemical company to produce and ship additional product. As a result of our analysis there is unmet demand at the following locomotive locations; Santa Ana, El Paso, Kansas City, Los Angeles, Glenda, Jacksonville, Little Rock, Bridgeport, and Sacramento. If we contract with another supplier, these locations should be kept in mind. * Fuel Cost: Our analysis was based on current shipping costs. Since freight costs can be significantly impacted by the price of oil, we investigated current forecasts for oil prices in the near future. The US Energy Information