Fowler Distributing

Company
Proposal

Consultants: Anthony Vatterott,

Brian Vincenz, Tiffany Bowen
Background Information
 Fowler Distributing Company
 Beer and wine distributor
 5 vehicles available for use
 Vehicle capacity = 500 cases of beer
 Distributing from local warehouse to 21
different “pre-sell accounts” located 1 to 35
miles from the warehouse
 Various time window challenges to meet
 Find less expensive, more efficient way to
meet customer’s delivery needs
Current Routes - Summary
 Baseline cost $216,180 per year
 Five routes
 Overtime cost - $295 per year
 Time windows met
 Some inefficiencies
Before After
Improved Routes - Summary
 Baseline cost $188,652 per year
 Time windows met
 Five routes
 No overtime
 Savings of $110.11 per day
 Annual savings of $27,527 (12.7%)!
Savings With Larger Trucks?
 Option to replace some or all 500 case
capacity trucks with 800 case capacity
trucks
 30¢ more per mile ($1.50 vs. $1.20)
 Solution: No combination of 800 and 500
trucks gives a better solution.
Use Larger Vehicles
 Best route using one or more 800
capacity trucks.
 Cost: $195,793/ year
 FOUR routes
 Three 800 capacity
 One 500 capacity

 Annual cost
increase: $7,140
Cash Flow with Larger Trucks
 Sell 4 used 500 case capacity trucks
+ $10,000 each = $40,000
 Buy 3 new 800 case capacity trucks
- $ 3,523 each = $10,568
 Maximum cost per truck to break even
after 4 years

 $10,568 for three trucks is not realistic

 Rising Fuel Costs
 If fuel costs increase more than 80¢ per mile, 800
capacity trucks become more cost-effective.
$1,100
$1,050
$1,000
Daily Fuel Cost

$950
$900
$850
$800
$750
$700
$0.10 $0.20 $0.60 $0.80 $1.00
Increase in Fuel Cost per Mile

500 capacity trucks 800 capacity trucks

Without time windows With time windows
No Time Windows - Summary
 Cost $187,985 per year
 Five routes
 No overtime cost
 Removed time windows – affects 2
customers
 Time windows cost Fowler $667 per year
Time Windows – Ranked List
Rank Customer(s) Time Window

1 12 & 7 8:00am – 8:30am

2 13 8:00am – 10:30am

3 10 8:00am – 10:45am

 These customers’ time windows have the

greatest impact on costs.
 Financial Incentive Options
Option # 1 Option # 2

Cust Current Time Time Annual Time Annual

Window Change Incentive Change Incentive

8:00am – 6:45am – 1:00pm –

12 8:30am 8:00am $300 2:00 pm $300

8:00am – 11:00 –
7 8:30am
No change - 12:30pm $300

8:00am –
13 10:30am
No change - No change -

8:00am – 10:45am –
10 10:45am 12:30pm $300 No change -
Financial Incentives - Summary
 Very small incentive
 Difficult to get customers to agree to the
changes
 Annual savings for Fowler after incentives
is only $67.50
 Is saving $667 per year worth asking
customers to consider other delivery
times?
Key Issues
 Change warehouse location.
 Address union fringe benefits.
 The cost of fuel is always unknown, so
this is a variable risk.
 Adjust warehouse working hours.
 Utilize one or two smaller trucks to save
fuel expenses.
Our Proposal
 Adjust the routes to optimal solution
 $188,652 per year
 Use 500-capacity trucks

 Saves Fowler $27,527 per year

 All time windows met
 No overtime costs
 No additional vehicle purchases

 Do not offer incentives for adjusting time

windows since savings is insignificant.