Hardee Transportation One of Jim O’Brien’s customers has presented him with an opportunity for a…

Hardee Transportation

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One of Jim O’Brien’s customers has presented him with an
opportunity for a significant amount of freight moving into a new market for
Hardee. Hardee is a truckload carrier primarily moving freight in the East/West
market in the United States. Although it has some movements in and out of
Canada and Mexico, Hardee has focused on moving freight in eastward and
westward directions. Hardee has dispatch centers located throughout the United
States, which have some dock capacity

The new move would be between Pittsburgh and Miami. Hardee
has avoided this market because of the lack of backhaul opportunities that
exist outbound from Florida. However, this new move offers a significant
increase in volume for Hardee. A complicating factor in this move is the
request that Hardee perform sorting and segregation at its dispatch centers.
Each shipment will consist of straight (one product) pallet loads of various
types of consumer goods freight destined for a retailer’s distribution center
in Miami. Sorting and segregation at Hardee’s locations would consist of
breaking the pallets and sorting the freight by the retailer’s store locations,
then repalletizing into rainbow (mixed products) pallets for each store.

Hardee has never experienced this type of request before.
Jim knows that he needs to put some type of costs to this move to make sure
that the moves are profitable. Because of the large volume involved, not
covering Hardee’s costs in pricing could result in large losses for Hardee. The
relevant information for costing this move is as follows:

Equipment Cost Data

Route and Time of Move

The shipment (45,000 pounds) originates at a customer
location in Pittsburgh, located 20 miles from Hardee’s dispatch center. A PUD
driver is dispatched from the Hardee location at 8:30 a.m. on January 12, 2015,
and arrives at the destination at 9:00 a.m. the same day. The shipment is
loaded from 9:00 a.m. to 12:00 p.m. The PUD driver departs the customer
location at 12:00 p.m. and arrives back at the Hardee dispatch center at 12:30
p.m.

The sort process starts at 12:30 p.m. and ends at 8:30 p.m.
on January 12. It requires unloading the trailer, sorting, and repalletizing
the load. This operation requires two dock workers, each working the same
trailer for 8 hours in the dispatch center.

The line-haul portion begins with the vehicle being
dispatched from the Pittsburgh location at 8:30 p.m. on January 12 and
traveling to Charlotte, North Carolina, a distance of 481 miles, and arriving
at Charlotte at 7:12 a.m. on January 13. The driver rests from 7:12 a.m. until
3:12 p.m. The trip continues with the vehicle departing Charlotte at 3:12 p.m.
on January 13 and traveling to Jacksonville, Florida, a distance of 399 miles,
arriving at Jacksonville at 12:06 a.m. on January 14. The driver rests from
12:06 a.m. until 10:06 a.m. The line-haul portion concludes with the vehicle
departing Jacksonville at 10:06 a.m. and traveling to the customer’s location
in Miami, a distance of 369 miles, and arriving at the distribution center at
6:18 p.m. on January 14.

The line-haul driver stays with the vehicle while it is
being unloaded (2 hours unload time). The driver then deadheads at 8:18 p.m.
from the customer’s distribution center and arrives at a Hardee dispatch center
located in Miami at 8:48 p.m., a distance of 15 miles from the distribution
center.

CASE QUESTIONS

1. What are the pickup, sort, line-haul, and delivery costs
to Hardee for this move?

2. What is the total cost of this move? Cost per cwt? Cost
per revenue mile?

3. If Hardee would put two drivers in the tractor for the
line-haul move, there would be no rest required for drivers during the
line-haul move. What would happen to total costs?

4. Assume that Hardee has no loaded backhaul to return the
vehicle and driver to Pittsburgh. How would you account for the empty backhaul
costs associated with this move? Would you include those in the headhaul move?
How would this impact your pricing strategy?

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