Interiors Business Report: Transportation Cost Analysis, Semester 1

This business report analyzes the transportation costs for Interiors, an Australian retail company, focusing on freight contracts with NatFreight and an alternative, SunnyDels. The report compares the terms of service and pricing structures of both companies, considering factors like metro versus country rates and surcharges. Through analysis of cost data from periods before and after implementing a new quality initiative, which involved reducing pallet loads, the report evaluates the effectiveness of these changes in NSW and WA. The analysis includes comparisons of cost per kg and average freight costs, as well as order count reductions. The report provides a trend line analysis for estimated costs in subsequent weeks and concludes with recommendations on choosing freight providers and strategies for cost reduction. The key finding suggests SunnyDels is more cost-effective for WA, and highlights the better performance of WA in reducing freight costs compared to NSW.

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Business
Report on
Transportation
cost for
Interiors

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Contents
Introduction...........................................................................................................................................3
Objective...............................................................................................................................................4
Analysis -1Comparison of terms of contract of Nat Freight Vis-à-vis SunnyDels...................................5
Advisory.................................................................................................................................................6
Analysis 2: Comparison of cost over period 1-13 with cost of period 14-26- ‘Before’ and ‘after’
change...................................................................................................................................................7
Comparison of order count reduction for week 1-13 to 14-26 for NSW and SA....................................8
Analysis : 4 Trend line of cost for week 27-39.......................................................................................9
Conclusion...........................................................................................................................................11

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Introduction
Interior is an Australian retail company engaged in the business of soft furnishing. The
company operates through more than 100 outlets in Australia. The company operates through
three sizes store in Australia namely large, medium and small sized store with storage
capacity of 1-3 pallet for small, 3-5 pallet for medium and 4-8 pallet for large.
The company has freight contract with NatFreight which is catering the need of
transportation of the company. Further, Interior is exploring an alternate agency to review the
current cost and possible reduction that may seem feasible under the new quality initiative
started by the company from week 14 whereby the load of pallets for large store was directed
to be reduced by 1 from the respective size and similar direction was given for medium store
where pallet capacity is 5. The two states have been chosen for the said initiative namely
NSW and WA with an objective of reduction of freight cost significantly and a one-off bonus
of $1000 has been announced.

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Objective
The objective is to reduce the freight cost significantly by analysing the cost from period 1-13
and period 14-26 weeks. In addition to above, the report also seeks to analyse cost of freight
provided by the alternative freight agency namely SunnnyDels so as to overall reduce the cost
of transportation.

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Analysis -1Comparison of terms of contract of Nat
Freight Vis-à-vis SunnyDels
The salient features of the terms of contract entered into with Nat Freight, a national level
transporter has been discussed here-in-under:
a. Freight rates are broken into country and metro;
b. Country rates per pallet are inversely proportional to the quantity of shipment;
c. Metro city rates are flat subject to surcharge based on destination.
The pricing structure of Nat Freight has been presented through a tabular representation as
under:
Service 1 2 3 4 5 6 7 8
Pallet City Express 100 75 75 65 65 65 65 65
Pallet Ex Country Vic 120 80 80 70 70 70 70 70
Pallet Ex Country NSW 150 100 100 90 90 90 90 90
Pallet Ex Country QLD 200 120 120 110 110 110 110 110
Pallet Ex Country TAS 200 130 130 120 120 120 120 120
Pallet Ex Country SA 200 140 140 130 130 130 130 130
Pallet Ex Country WA 330 200 200 190 190 190 190 190
Pallet Ex NT 400 220 220 210 210 210 210 210
Further, the surcharge rate working is discussed as under:
State Surcharge
VIC $ -
NSW
$
10
QLD
$
25
TAS
$
25
SA
$
25
WA
$
50
On the other hand, the terms of contract with SunnyDels, a national level transporter has been
discussed here-in-under:
a. Freight rates are broken into country and metro;
b. Country rates per pallet are inversely proportional to the quantity of shipment;
c. Metro city rates are flat subject to surcharge based on destination.

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The pricing structure of SunnyDels has been presented through a tabular representation as
under:
Service 1 2 3 4 5 6 7 8
Pallet Direct City Express 90 85 80 75 70 65 60 55
Pallet Direct Country Vic 110 70 70 60 60 60 60 60
Pallet Direct Country NSW 175 120 120 100 100 100 100 100
Pallet Direct Country QLD 210 130 130 120 120 110 110 110
Pallet Direct Country TAS 220 140 140 140 120 120 120 120
Pallet Direct Country SA 190 130 130 120 120 110 110 110
Pallet Direct Country WA 315 190 190 180 180 180 180 180
Pallet Direct NT 360 200 200 200 200 200 200 200
On perusal of the above tables of both transportation company, it may be seen that the cost
under SunnyDels shall be lower on account on no surcharge for transportation to cities and
lower pallet charges. Thus, SunnyDels has a favourable freight policy for 4 outlets.
A brief comparison of cost under the two categories is presented as under:
Based on above, it may be inferred that in terms of per kg data the transportation cost is lower
for SunnyDels while on pallet while on the basis of average freight cost Nat Freight is better.
Thus, overall considering cost per kg shall be a better option, thus SunnyDels shall be chosen
which shall reduce the cost by 0.23%
Advisory
Interior should chose Nat freight for NSW and SunnyDels for WA that will help the company
to reduce the freight cost significantly.

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Analysis 2: Comparison of cost over period 1-13 with
cost of period 14-26- ‘Before’ and ‘after’ change
On analysis of the data for the cost incurred for the period 1-13 week and period 14-26 week
it has been inferred that the cost of freight for the city NSW per kg has reduced by 3% and
the cost of freight per kg for the city WA per kg has been reduced by 6%. Further, for the
purpose of computation the base has been considered as period 1-13 week.
Similar trend has been observed for average freight cost, wherein the cost of freight for the
city NSW has been reduced by 2% and the cost of freight for the city WA has been reduced
by 4%.
Screenshot for the above information is detailed here-in-below:

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Comparison of order count reduction for week 1-13 to
14-26 for NSW and SA
State Store No. of
Pallet
%
Chang
e
NSW M 5p -45%
WA M 5p -44%
NSW L 7p 34%
WA L 7p -41%
NSW L 8p -32%
WA L 8p -9%
On perusal of the above tables, it may be inferred that WA has performed better in
comparison to NSW.
5P comparison: There is a 45% reduction in pallet count at NSW compared to 44%
reduction in pallet order count at WA. Thus, NSW has fared well.
7P Comparison: There is a 34% increase in pallet count at NSW while on the other hand
WA has achieved a reduction of 41%. Thus, WA fared well by a very big margin.
8P Comparison: There is a 32% increase in pallet count at NSW while on the other hand
WA has achieved a reduction of 9%. Thus, NSW fared well by a very big margin.
On an overall basis, it may be inferred that WA has performed better in comparison to NSW.

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Analysis : 4 Trend line of cost for week 27-39
Based on the cost data obtained for week 14-26, an estimation of cost for week 27-39 has
been made, the same has been presented as under:
Week NSW Avg CPK WA Avg CPK NSW Avg Freigt WA Avg Freight
27 $ 0.8901 $ 1.3849 $ 365.80 $ 501.41
28 $ 0.8909 $ 1.3915 $ 366.56 $ 501.41
29 $ 0.8916 $ 1.3980 $ 367.31 $ 501.40
30 $ 0.8924 $ 1.4045 $ 368.07 $ 501.40
31 $ 0.8932 $ 1.4111 $ 368.83 $ 501.40
32 $ 0.8940 $ 1.4176 $ 369.59 $ 501.40
33 $ 0.8947 $ 1.4241 $ 370.34 $ 501.40
34 $ 0.8955 $ 1.4307 $ 371.10 $ 501.40
35 $ 0.8963 $ 1.4372 $ 371.86 $ 501.39
36 $ 0.8971 $ 1.4437 $ 372.61 $ 501.39
37 $ 0.8978 $ 1.4503 $ 373.37 $ 501.39
38 $ 0.8986 $ 1.4568 $ 374.13 $ 501.39
39 $ 0.8994 $ 1.4634 $ 374.89 $ 501.39
27 28 29 30 31 32 33 34 35 36 37 38 39
$-
$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
Average Freight
NSW Avg Freigt WA Avg Freight

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27 28 29 30 31 32 33 34 35 36 37 38 39
$-
$0.2000
$0.4000
$0.6000
$0.8000
$1.0000
$1.2000
$1.4000
$1.6000
Per Kg Cost
NSW Avg CPK WA Avg CPK

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Conclusion
Based on above, it may be inferred that cost under SunnyDels is lower for WA and higher for
NSW. Further, WA is performing better than NSW and is able to achieve better reduction of
cost.