Background of Transportation Organization
The Company ABC is in transportation business since last two decades. The organization
provides freight services to major retailers of Singapore. At present the firm has a fleet of 5
vehicles. These vehicles operate for collecting the goods from wholesalers’ warehouses and
transport the same to retailers’ locations. The vehicles are specifically designed for this
purpose which include features like covered body, tracking software, ramp for materials
loading and unloading etc. In recent times, due to business growth, the current fleet of 5
trucks could only respond to 75% of the total business. For, the remaining 25% operations,
ABC was dependent on contractual services of other transport vendors on short-term
agreement basis.
During the same time, the company has observed that the 25% business from contractual
freight vendors yields more profit margin than the 75% business for which the company itself
maintain the vehicle fleets. The following table sums up the key observations.
ABC Company fleet maintenance cost analysis
Cost per
km for 1
truck
Cost per
km for 5
trucks
Cost
loading
per km
Equipment rents and purchase
for transportation $0.47 $2.35 12.5%
Outside maintenance $0.05 $0.25 1.3%
Tires $0.03 $0.15 0.8%
Miscellaneous $0.38 $1.90 10.1%
Depreciation $0.13 $0.65 3.5%
Insurance $0.09 $0.45 2.4%
Taxes & License $0.05 $0.25 1.3%
Fuel $0.48 $2.40 12.8%
Driver Wages $0.75 $3.75 20.0%
Other wages and benefits $1.32 $6.60 35.2%
Total Costs for own fleet $3.75 $18.75

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