Operations Management Report: Friendly Courier Case Analysis

This report analyzes the case of Friendly Courier, focusing on the issue of high maintenance costs related to its aging truck fleet. The analysis begins by examining the relationship between truck mileage and total repair costs, including both suspension and braking-related expenses. Correlation analysis reveals a strong positive linear relationship, indicating that higher mileage leads to increased repair costs. Further analysis compares the average monthly repair costs for the East and West teams, highlighting the impact of mileage on expenses. The report also evaluates the potential benefits of a lifetime warranty plan. The conclusion recommends that the company should avail the life-time warranty for the fleet on both teams as it would enable cost savings realisation in terms of repair costs.

OPERATIONS MANAGEMENT
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Introduction
The case is related to Friendly Courier whose owner Joe is facing the issue of high
maintenance costs related to ageing fleets of trucks. In this regards, there are three objectives
of the given case analysis.
Objective 1: Analyse the underlying relationship between truck mileage and total costs of
repair (suspension + braking related)
Objective 2: Recommend if the swapping of fleets between the two teams would be useful in
addressing the current issue
Objective 3: Recommend if the company should avail; life time warranty plan being offered
at $ 4,500 per year per truck.
Analysis
Relationship between mileage and repair costs
Correlation analysis has been done for the entire fleet of trucks (both teams included) to
highlight the relationship between the given two variables. The relevant scatterplot is
indicated as follows.
It is fair to draw the conclusion that a positive and strong linear relationship is apparent
between the average mileage travelled and the total repair costs for the company’s fleet (Hair,

Wolfinbarger, Money, Samouel & Page, 2015). As a result, it would be fair to conclude that
higher mileage would most likely lead to increased repair costs.
Also, correlation analysis has been performed between the mileage travelled and the brakes
repair cost. Taking into consideration, the complete fleet from both regions, the following
scatter plot is derived.
The above plot highlights that the linear relationship between the two variables is strong and
positive. However, there is a decline in the correlation coefficient in this case. Besides, based
on the equation of the best fit line, it is appropriate to conclude that on average 1 unit increase
in truck mileage would cause the brake related repair costs to rise by 9 cents (Hillier, 2016).
Also, correlation analysis has been performed between the mileage travelled and the
suspension repair cost. Taking into consideration, the complete fleet from both regions, the
following scatter plot is derived.

The above plot highlights that the linear relationship between the two variables is strong and
positive. However, there is a decline in the correlation coefficient in this case. Besides, based
on the equation of the best fit line, it is appropriate to conclude that on average 1 unit increase
in truck mileage would cause the suspension related repair costs to rise by 6 cents (Flick,
2015). Hence, the above analysis leads to the conclusion that the rise in brake repair costs per
unit increase in mileage is about 50% more than the corresponding rise in suspension repair
costs.
Comparison of repair cost (East & West)
For the fleets belonging to the two teams (West & East), a comparison has been drawn with
regards to the average monthly repair costs which yields the following graph based on the
data provided.

For every year on the time series, the average repair costs for the West team are lower than
the East team. A pivotal reason for the same is the lower mileage travelled by the trucks on
the West team compared to East team. And considering the analysis in the above section, it is
noteworthy that mileage travelled tends to closely impact the total repair costs. If the repair
costs for the two teams are drawn on a per mileage basis, then the following comparison can
be obtained.
It is apparent that on a mileage adjusted difference, there is no clear difference between the
total repair costs of the two teams and hence swapping the trucks between the two teams
would not resolve the issue.
Analysis of life –time warranty
The annual average costs have been derived by multiplying the monthly average costs for the
two teams by 12. The time series graph of this for the fleets of the East and West team is
indicated below.

The repair costs on the East team tend to exceed $ 4,500 every year. In the recent times, the
fleet on the West team has also crossed $ 4,500 per year in total repair costs. As a result, it
makes sense for the company to avail the life time warranty for the complete fleet as the total
repair costs would increase only as age of fleet increases and hence cost savings can be
realised by availing the warranty.
Conclusion & Recommendation
A strong and positive relationship is exhibited between mileage travelled and the total repair
costs. This is also the case when the brake and suspension repair costs are taken separately.
Besides, swapping the trucks is not recommended as on a per mileage basis, it cannot be
concluded as to which team fleet has lower repair costs. Additionally, the company should
avail the life-time warranty for the fleet on both teams as it would enable cost savings
realisation in terms of repair costs.

References
Flick, U. (2015). Introducing research methodology: A beginner's guide to doing a research
project New York: Sage Publications.
Hair, J. F., Wolfinbarger, M., Money, A. H., Samouel, P., & Page, M. J. (2015). Essentials of
business research methods New York: Routledge.
Hillier, F. (2016). Introduction to Operations Research.New York: McGraw Hill
Publications.