Analysis of Repair Costs and Mileage for Friendly Courier Inc.

OPERATIONS MANAGEMENT
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Introduction
Friendly Courier Inc. is a Toronto based company which is witnessing a reduction in the
revenue arising from parcel service. The owner (and also President) of the company is
concerned about the falling revenues. Also, another concern that has come to light is that the
break down costs of truck has been rising as the fleet is getting older. This is leading to
higher maintenance costs for the trucks. Joe is sure that replacing the old fleet is not the
solution and therefore wants to conduct some analysis with regards to the relationship
between the total repair costs and the mileage. Also, Joe has suggested that interchanging the
fleet in the East and West may be the solution to the current problem. Additionally, a
proposal has been suggested by his dispatcher regarding a life time warranty on the brakes
and suspension with an estimated cost of $ 4,500 per annum which. Recommendation needs
to be offered to Joe with regards to the above issues that have been highlighted.
Analysis
The first issue at hand is to explore the relationship between the mileage of the trucks and the
repair costs. By considering the data for all the trucks from both East and West, the following
scatter plot has been obtained.
It is apparent from the above scatter plot there is a positive linear relationship between the
mileage and total repair costs which is apparent from the positive slope of the best fit line.
Also, the magnitude of the relationship seems to be quite strong considering the fact that the

correlation coefficient is quite high (near 0.9). This clearly indicates that as mileage travelled
tends to increase, there is higher repair cost as well (Hillier, 2016).
Another task is to explore the relationship of mileage separately with braking and suspension
cost to bring out any differences between the two relationships. The scatter plot between
mileage and braking costs based on the data provided is highlighted as follows.
While there does exist a linear relationship between mileage and brakes repair cost but the
value of correlation coefficient is slightly lower here. Nevertheless the relationship between
the two variables tends to remain strong. Also, based on the regression line equation, it seems
that with an increase of 1 unit in the mileage, the brakes repair cost would increase by $ 0.09
(Flick, 2015).
The scatter plot between mileage and suspension costs based on the data provided is
highlighted as follows.