Analysis of Repair Costs and Mileage Relationship for Friendly Courier

OPERATIONS MANAGEMENT
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Introduction
The given case relates to Friendly Courier which is based in Toronto and currently facing
issue in the form of revenue reduction. There is concern on account of decreasing revenues.
Yet another concern that the company is facing is a rise in the breakdown costs owing to the
ageing of fleet. The net result of that the related maintenance costs for the fleet are on the
rise. The owner of the business Joe is confident that buying the new fleet of trucks would not
solve the problem and hence wants to understand the nature and extent of relationship
between the mileage and total repair costs. Further, Joe also suggest that a possible solution
to the high maintenance problem could be the swapping of the fleets of the two teams
catering to East and West. Besides, recommendation also needs to be offered in relation to a
offer as per which for a $ 4,500 p.a. amount per truck, life time warranty with regards to
suspension and brakes would be provided.
Analysis
The primary task is to analyse the underlying relationship between the truck mileage and
repair costs incurred. Taking into consideration, the complete fleet from both regions, the
following scatter plot is derived.
From the scatter plot, it becomes clear that positive relationship exists between the given two
variables as the slope of the best fit line is positive. Further, the correlation magnitude
between the variables seems to be close to 1 as the deviations of the points from the best fit

line are quite less. As a result, it would be fair to conclude that the increasing mileage of
trucks leads to increased repair costs (Hair, Wolfinbarger, Money, Samouel & Page, 2015).
While the above correlation analysis was conducted between truck mileage and total repairs,
the objective of given correlation analysis is to consider the two components of repair costs
separately to understand if the relationship for these two variables with mileage tends to
differ or not. The requisite scatter plot between the braking costs and mileage considering the
entire fleet available with the company is indicated below.
The linear relationship is apparent in this case also but the correlation coefficient is relatively
smaller as compared to the total cost. However, the two variables still tend to have a strong
linear relationship. Also, considering the equation of the regression line, it can be concluded
that a unit increase in the truck mileage would lead to increase in brake repair cost by $0.09
(Flick, 2015).
The requisite scatter plot between the suspension costs and mileage considering the entire
fleet available with the company is indicated below.