Questions grocery gateway karthik kvr_408
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Grocery Gateway can save $38,160 by increasing deliveries per hour from 2.7 to 4 based on current order volumes. There are three options to increase deliveries: 1) extend driver shifts, 2) modify the RIMMS route optimization program, or 3) increase delivery fees. The best option is to modify RIMMS for $250,000 as it will optimize routes to increase deliveries and profits while recovering costs within 6 months by reducing driver times. An action plan is presented to evaluate RIMMS further before purchasing and ensure a successful implementation.
Questions grocery gateway karthik kvr_408
- 1. Case - Grocery Gateway 1. How much money can Grocery Gateway save by increasing the number of stops per hour from 2.7 to four at the current volumes? As per Exhibit 2 The total amount of orders per week is 7,818 Avg Value of Order: $135 Hence Revenue earned: $1,055,430 Case 1: Present stops per hour: 2.7 The variable cost of drivers and trucks is $30 per hour. Since a driver only has 6.5 hrs for delivery in its shift, the number of orders delivered taking 6.5 hrs into consideration comes as 6.5 * 2.7 = 17.55 orders or effective 17 orders per shift of 8 hours. So, for delivering 7,818 orders for the current week, Number of shifts required: 7818/17= 459.8 or 460 Shifts So the variable cost of delivering 7,818 orders @ 2.7 SPH=460x30x8= $110,400 Case 2: Present stops per hour: 4.0 Since a driver only has 6.5 hrs for delivery in its shift, the number of orders delivered taking 6.5 hrs into consideration comes as 6.5 * 4 = 26 orders per shift of 8 hours. So, for delivering 7,818 orders for the current week, No of shifts required: 7,818/26= 300.69 or 301 Shifts So the variable cost of delivering 7,818 orders @ 4 SPH=301x30x8= $72,240 Hence the company can save $38,160 by increasing the number of stops per hour from 2.7 to 4 at the current volumes. 2. What are the pros and cons of the three options identified by Dominique? What other options you would consider? Option 1 – Keep the trucks on the road longer by extending driver shifts. Pros: Enables drivers to make more deliveries per day. Enables drivers to spend more time with customers, thus increasing customer service. Able Increased ability to meet increased order demand.
- 2. Cons: Does not ensure reaching the target 4 Deliveries/hour. May increase the risk of driver accidents due to fatigue. Increased wage expenses due to overtime for truck loaders. Would require a plan to replenish. Increases expenses and costs per delivery Option 2 - Modify RIMMS program to analyze route profitability and modify route schedules accordingly Pros: Would provide meaningful information to make the appropriate decisions. Will increase profitability by scheduling routes based on maximized profitability. Will reduce delivery window, and may reduce cost, driver time consumed. Cons: Does not ensure reaching the target 4 Deliveries/hour. Will cost approximately $250,000. Unknown consequences Option 3 - Increase delivery charge Pros: Will increase profit per delivery as a larger portion of the direct cost per delivery will be assumed by the customer. Will not require additional capital expenditures and increased driver hours The higher delivery fee may entice some customers to increase the size of their order in order to reduce the number of deliveries that are required. This will reduce the number of driver hours. Cons: The higher delivery fee may discourage some customers and decrease revenues. Does not ensure reaching the target 4 Deliveries/hour Additional Option that can be looked into – Grocery Gateway could look into moving the payment function from the driver and allow the customer pay on online. This would save some of the driver time and allow him to increase the number of deliveries in an hour. Customer survey should be conducted prior to implementation
- 3. 3. What action would you take and why? How would you sell your plan to Al Sellery and Claude Germain? I will recommend expanding the RIMMS licensing arrangement is the best choice. It is true that there is an expected cost of $ 250,000 but it would eventually be recovered in a couple of months, for example, if they save 30 minutes of 100 drivers’ delivery time, that is mean they will save $1500/day, and hence the cost of RIMMS license will be recovered with less than six months. Also, this solution will be consistent with the overall Grocery Gateway strategy as it would allow the company to maintain the low-cost, high service logistics execution. In the short term, the company will deal with lower cash flow due to the cost spent for RIMMS. The new plant is bigger, so its means the company is expanding. There is a long term benefit for the company as there will be cuts in cost and change in technology is the reason of leaning towards RIMMS. Action Plan: Ask and research more on who the users are or if there is a different company who offer the same idea as RIMMS. Compare RIMMS with the other similar program and find out the length of training in going with a comparable program. Ask for trial to check the new features before purchase, and see validity of them. Provide above gathered information supported by financial analysis recommending purchase of new software. Once proposal is agreed upon and if decision is to stay with RIMMS, contact Descartes and ask for warranties, support and trainings available that is included in the price. Training should be offered to employees. Keep a log of the new system and compare it with the old one to evaluate the purchased features. Submitted by Karthik KVR (408) Penna Cement Industries Limited Hyderabad 3 August 2019