East Central Ohio Freight

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Ansoff’s Analysis:

Following gives a matrix of how to decision can be made regarding the launch to new product or retaining old product in existing/ new market.

Existing product

New Product

Existing Market

Market Penetration

Increase market advertisements

Increase sales per calls

Product Development

Invest in VLTL in Cambridge

Expand to other regions depending on tonnage

New Market

Market Development

Expand beyond Ohio

Diversification

Expand scope of work, undertake orders other than manufacturing like office/residential movers and packers.

Breakeven Analysis:

Average hauls per week = 500

Average miles per haul = 1000

Profit percentage = 7-10 %

Transportation charge (excluding fuel charge) = $ 1 – 1.2/mile

Fuel Charge = $ 0.5-0.6/mile

Minimum transportation cost = $ (1+0.5) = $ 1.5/mile

Maximum transportation cost = $ (1.2 + 0.6) = $ 1.8/mile

Capital investment = $ 250,000

4 new employees are hired for introducing VLTL in Cambridge with average cost of $800 per week and additional benefit of 40% per employee

Variable cost = 4 x 800 x 52 x 1.4 = $ 232960/year

Total cost = Capital cost + Variable cost = $ 482960

To calculate breakeven point, let’s find out how much hauls are required to recover the cost.

Total cost = No of Hauls x Avg miles per haul x Avg transportation cost x Profit percentage

482960 = N x 1000 x 1.65 x 0.085

- N = 3443 hauls/year

Now, it is expected that by introducing VLTL, 20% of the total hauls will increase

Therefore, Expected hauls of VLTL = (Total hauls of TL/week) x 52 x 0.2

= 500 x 52 x 0.2

= 5200 hauls/year

Therefore, according to the Breakeven analysis calculations, it seems optimistic to introduce VLTL in Cambridge.

CONCLUSION:

1.Anticipated growth in load from VLTL in Cambridge is more than sufficient to meet break-even points.

2. From exhibits 1, 3 5 and 6 market near Columbus looks promising and distance from Cambridge to Columbus is shortest, hence expanding will positively affect the

RECOMMENDATION

- Expand VLTL in Cambridge given the results of break-even analysis

- Sell services to growing companies like Edgetech

- Match packages between 3 hubs to increase efficiency

- Increase backhaul rate