Every week Boss Mustang of Oakland, California, re-ceives shipments from 10 different suppliers in the Los Angeles area. Each supplierâ€™s order weighs, on average, 500 pounds. A direct truck shipment from Los Angeles to Oakland costs $800. A Los Angeles 3PL provider has offered to run a con-sulfidation warehousing operation for Boss Mustang. The 3PL provider would pick up the shipments from each supplier, process them, and put them on a single truck bound for Oakland. The pickup fee would be $100 per supplier, and the warehousing cost would be $55 per hundredweight. The direct truck shipment cost would be the same as before, $800.
a. (*) How much would it cost Boss Mustang per week to accept direct, single-order shipments from all of its suppliers? What would the utilization levels for the trucks look like, assuming that each truck was capable of carrying 10,000 pounds?
Â b. (**) How much would it cost Boss Mustang per week to use the consolidation warehousing option? What would the utilization level for the truck look like?
Â c. (**) Suppose higher gasoline prices have caused the trucking cost to increase to $1,200. Which option looks best now?