Virginia Valley Smoked Hams Transportation Means - Case Study Example

Sustainable logistic case study on Virginia Valley Smoked Hams xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Virginia Valley Smoked Hams Transportation Means xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Institution xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecturer Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date of Submission Virginia Valley Smoked Hams Transportation Means Virginia valley is company that is involved in food processing and California is its major target market. This company specializes in smoked hams which are of a high quality and of affordable prices. This firm has been growing at a very high rate and by 2009; she had four hundred franchisees and 250 retail outlets. The company banks on smoked honey ham though it produces a variety of products made from ham. For instance, income earned from this product in 2009 indicated a fifteen percent increase from the income earned in the previous year. The price for Smoked Honey Ham was $4.00 in 2009 and expected to be the same price in 2010. A 30% increase on sales is expected this year due to planned improvements on advertising and promotions. With proper refrigeration, smoked hams can last 21 days, 14 in refrigeration and 7 days without refrigeration. However, the refrigeration costs are high and would result to increased product cost. As a result, this should be avoided and the main goal should be to ensure that products are supplied and sold shortly after production. Virginia Valley transports her hams via ships packed in orders of 600 cases. All functions in the distribution centre are well managed and the products are then sold to the franchisees and retail outlets from the distribution centre or on the FOB (free-on-board). In 2008, 40% sales revenue was basically acquired from direct variable costs. 60% of this is the estimated cost of the hams and these percentages are likely to be maintained in the near future. Transporting smoked hams from Virginia Valley to California, Los Angeles where the distribution centre is located via refrigerated railroad cars takes about 8 days. The distance between these two places is 2, 620 miles. The transported products are later transported to the franchises and retail outlets by the commercial vans. Each van carries a maximum of 50 cases of hams and covers 150 miles. The total cost for each of this journey is estimated to be $250. The processing cost for each order of Tender Honey is estimated to be $25 and is shipped in a size of 25 pounds case pack. When expressed as the percentage cost of hams, the cost of carrying the inventory attributes to 20% per annum. In every 100 pounds shipped, Virginia Valley pays $8 during transportation in the refrigerated railcars. The cost of transportation has been found to be high and the management seeks for an alternative means of transport this year. There are three alternatives for the company to explore. One of them is the use of the private trucks owned by the company and hence discontinuing the use of refrigerated railroad cars which currently transport the hams from Virginia Valley to Los Angeles. The second alternative is the use of services provided by the air carrier that would ensure direct delivery of the products to the franchisees and retail outlets. An air Cargo Company has offered Virginia Valley attractive transportation rates but the company needs to evaluate if this is the best as per the cost of transportation. This company offers to charge $1 in each case transported for the first fifteen pounds and each extra pound from the 15 pounds will be charged five cents. The option of using the company-owned trucks is to cost a total of $1, 975 per every trip covered. Each truck packed carries a maximum of 1, 290 cases. If this is to be applied, the journey will take 4 days for every trip leg. The third alternative is the use of refrigerated trailer. Appendices To gain the highest amount of profit, Virginia Valley Company should check on the modes of transport it has adopted to transport it goods. In the first case, the company should consider the location of its customers and outlets. It should put into consideration the distance from its premises to the location of them. Some of them, like California is quite distant whereas others are situated few kilometers away. In fact, this estimation will help the company to select the appropriate mode of transport that will be fast enough to reach clients in the right time. To add on, some areas are accessible while others are not easily accessible. This can be caused by poor infrastructure. When the company looks in to this, it will know the best mode to be used in the specified areas. Secondly, there is a need to consider the amount of Smoked Hams to be delivered to each client and outlet. In deed, not all will require large amount. By so doing, this will lead the company to be in a position to estimate the best means of transport to carry the required amount of Smoked Hams to their destination. It is of great significance for Virginia Valley Company to note the number of times they have to deliver the Smoked Hams to their clients. Some may require them on daily basis while others may not. This will help the company to draw a working schedule and select the best means of transport to serve them. As the above factors are being considered, the company is therefore advised to select the means of transport that is reliable. On top of this, the mode of transport should be favorable. The company should consider the regulations set by the country to govern transport. In this case, there is the issue of taxation that should be highly noted to ensure the mode should be lowly taxed to lower cost of production. The proposed mode of transportation In the proposal of these modes there are several hypothesis and conversions made. It is assumed any fuel costs are included in the transport expenses. A year is assumed to have a total of three hundred and sixty days. One mile is equivalent to 1.61 kilometers. A kilogram is equated to 2.2 pounds. The other conversion included is the equivalence of a thousand kilograms to a metric tonne. The company has relied on railroad cars and vans. These vans have been sourced by another company. The railroad cars have facilitated the transport of larger amounts of smoked hams to various destinations. They have been ineffective for they are very slow. They take eight days to reach to some of the major markets that have been targeted by the company. This is in fact the Southern California market. The eight days journey has led to demand of installation of refrigerators to ensure that the hams don’t rot while on transit. In addition, the railroad cars speed is slow. Due to this, inventory expensive have been very high. Eight days transportation journey to the market means that the production of any extra hams should be refrigerated. This calls forth for the Virginia Valley Company to have a warehouse. The ware store is used to keep processed and unrefined hams. The store house cost should be met where else if the transport mode was quicker, the cost would be evaded. This can be realized if the produced hams would be send direct to the clients without delay. The vans that have been hired have resulted into the increment of production cost. These vans have limited space to carry large amounts of hams. The Virginia Valley has to meet the above charges since one van has to make several trips to supply large amounts. According to logistics (Bowersox and Closs 1996), for a supplier to incur less production costs, he has to ensure all expenses are reduced. The supplier should check on inventory. This can be met by ensuring processed hams are released immediately from the industry to the various customers and outlets. The warehouse should be big enough to hold only the stock that has to be kept if need be. In some cases, warehouses are not required. The other area is to minimize transportation expenses. This directs us in to the discussion on various modes of transport that Virginia Valley Company can adopt. Trucks These can be referred to as lorries. They are made to carry goods from one place to the other only. They are generally manufactured in distinct sizes. Some are larger than others. They are normally powerful; they can convey massive cargo. In fact, they can be designed fit specific equipment. The Virginia Valley Company needs to buy its own trucks in order to manage the working schedule. The company will ensure that they are available to convey any processed smoke hams to the required destination any time of the day. The Valley Company has to buy only few trucks which will be utilized maximum. The trucks can be used to transport bulky commodities to far distances which cannot be easily accessible to air carrier transport. Trucks are quicker compared to the already existing mode of transport: railroads. The railroad cars have been taking eight days to distribute the hams. If they are a bit faster, and refrigerated hams can stay for seven more days without being affected, it would mean the trucks don’t need to be refrigerated. With the use of trucks, the company can deliver goods to their clients working premises. The trucks are flexible unlike railroad cars that cannot access the remote areas where railway line passes. This will help the company to retain its customers for they will not easily choose to look for other suppliers who can deliver hams at their doorsteps (Porter 1980). At times, when Virginia valley Company is not using the trucks, they can lease to other company's for specified time duration. As it does this, the company will earn more income that can be utilized to meet other needs. This calls out the company to have a weekly or monthly schedule showing the areas where the trucks have to deliver processed hams. In the already established mode of transport, the expenditure seems to be high, for they have been hiring some other companies to transport them. As they utilize their private modes, they can reduce their selling price (Sako 1992) and hence attract more customers as they retain the old ones. The former customers can be enticed to reduce their selling prices and thereby order for more hams hence increasing the number of sales. This would assist the Virginia Valley Company to increase the profit. Conveying large amount of smoked hams would help in stock management. The company will be in a good position to order for production materials as per the amount of hams to be processed for dispatched in specified period of time. Buyers like purchasing goods that are freshly manufactured and this will lead to a good reputation of the company. By so doing, the company will even expand its market and can end up establishing monopoly. The cost involved in stock keeping definitely reduces hence low expenses in hams’ productions. The use of trucks will lead to reduced expenses to be incurred in handling of goods. Where there is direct delivery, the hams condition will be investigate and chances of poor handling are minimal since they reached the buyer in the right quality unlike in some modes where a mediator is needed to convey them to the required destination. The only challenge the company can meet is cases where delayed occurs due to jam in the traffic. To ensure these is overcome, a good communication between the client, the person driving the truck and the company should be established. Even though it is a great challenge, the fact that not always traffic jams occur gives the come a small threat in distributing its hams (Maddison 1996). The company can find out, the areas where jam occurs most and try to avoid the road. The other alternative is to ensure the truck leaves in advance to reach the client’s working place in good time. In addition, sometimes, weather changes such as rain can cause delays. The company is advised to look for alternatives where accessibility is interfered with in rainy seasons. It can encourage the Government to seen into infrastructure construction of various areas. Refrigerated trailers These are transport mediums that have refrigeration components. The units have to be switched on when one wants the hams to be frozen and off in case freezing is not required. The trailers will bear the above benefits as the trucks. In addition to the above, they can be used in steady of the trucks to reach far places. This will enable the hams of the Virginia Valley company to be very high as compared to other companies who don’t refrigerate their goods. In addition to this, the number of delivery times can be minimized since the clients can order for more products which can stay for longer before the next delivery. Consequently, as the company reduces the number of delivery times, the cost involved will drastically decrease. Refrigerated trailers can be used to serve various functions. To start with, when it is not being use for hams delivery, it can acts as a storage medium. It can keep raw materials and also store the processed hams to be transported by other modes. It can even store dry hams that need no refrigeration. The demerits these trailers can face are few. A refrigeration component can fail to function well. This would mean that refrigeration cannot be done. To curb this, repairing must be done and hence increase production cost. The Virginia Valley Company should ensure that the workers are well trained on refrigeration and thorough checking should be done. The drivers can drive badly hence breakage of some refrigeration components. This can be solved by ensuring the drivers are qualified in driving and be keen as they drive. Transport services provided by air Carrier Company Since some of the clients live far from Virginia Valley Company, air transport is appropriate. This should be done in conjunction with the Air Cargo Company that will carry hams to re tail destinations. For long distances, where one thousand two hundred and ten miles to be covered, air transport is essential. Normally, air freights take very short duration in comparison to trucks and trailers. Secondly, air transport will ensure inventory expenses are minimized. Since the company will fully utilize the three modes, very limited stock will be retained (Lawrence and Collins 2004). The need to keep stock in a large store will be dealt with hence little or no cost to be incurred. In every flight, hams should be carried in packed containers that are sealed. The company can design or buy refrigerated ones to ensure no damage of hams. This will help in keeping them secure even when they will not be handled in the presence of the company. Though the Virginia Valley Company will incur high air transport cost, they will take the advantage of the fact that it will need to dispatch the hams and the other Air Cargo Company receive on its behalf and send them to intended outlets of Virginia Valley Company. This company will help them to cut down the cost of accompanying the hams containers as they are being conveyed in the space and to their destination. Proper air flight follow-up and monitoring of the other company is fundamental to ensure no delay in delivery(Christopher 1998). The three types of transported can be contrasted to the others with the help of the figure shown below (Bowersox and Closs 1996): Type of transport Amount of volume to carry Speed Service response Inventory expenditure Transport expenditure Sea Very Large Slow Low Very high minimal Rail Large Slow Low Very high Minimal Truck Moderate High Fast Low Reasonable Trailer Moderate High Fast Low Reasonable Air Limited Very high Very fast Least High The effects caused by the above means of transport The three modes affect the environment (Fiksel 1996). They cause pollution to the surrounding. To begin with, they high pollute the air. As they rely on fuel for locomotion, certain gases are emitted as waste products to the space. These include carbon dioxide and monoxide. Other toxic gases are produced which affect both people and animals. In most cases, the toxic gases produced dissolve in water forming acidic solutions that have distinct effects to human beings, animals and the land. Carbon monoxide can cause death. Acidic solutions can lead to corrosion of building and even death occurrences. The Virginia Valley Company can control air pollution by ensuring that they service their trucks and trailers frequently (Hill 2005). The fuel such as petrol and diesel should be properly kept to avoid pouring it out or contamination if not properly sealed. It should ensure that the fuel to be filled into the trailers and trucks is well refined. Refined fuel will help to reduce the amount of pollutant the vehicle could produce. This will help to avoid water pollution where if fuel is poured out and swept away by water during rain seasons, it can be carried into water sources. This may be rivers, swamps, lakes or seas. In deed, the gases they discharge have contributed to global warming. This is attributed to, by the production of carbon dioxide into the space (Raux and Alligier 2007). The above modes cause noise pollution more that the other means. Truck and trailers produce more noise as compare to other r road traveling means. When they are moving fast, they rolling wheels contribute to this. If the road is rough or uneven, the noise is significantly higher. This is also applicable to air transport. It is always very high but the advantage is that at higher altitudes, the noise that reaches the e ground is slightly lower than the one it is producing. Airplanes are being modified to regulate on the amount of noise they generate. The Virginia Valley Company can request to have its goods transported in airplanes that produce low noise. Conclusion Virginia Valley Company can utilize the above means of transportation. The three will help it to achieve its goals. It will reach its clients within the least time, with no or very minimal delay. There is the need to have a competent transport manager to monitor all the activities being conducted as hams are being conveyed from one point to another. The manager should get report concerning all transport transactions(Hill 2005) and keep records for approval and future references. In case of challenges (Nelson Winter 1982), the mentioned suggestions should be observed and they will be overcome. Bibliography Bowersox, D, and Closs, D, (1996), Logistical Management—The Integrated Supply Chain Process, New York, McGraw-Hill. Christopher, M, 1998, Logistics and Supply Chain Management, London, Pitman Publishing. Fiksel, J,1996, Design for Environment , New York, McGraw-Hill. Hill, T, 2005, Corporate strategies for a sustainable future, Environmental Strategies for Industry, Washington, DC, Island Press. Hill, T, 2005, Operations Management, New York, Palgrave Macmillan. 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