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A Supply Chain & Logistics Economics for StratoLogistics Ltd


You have been hired by StratoLogistics Ltd, a small logistics service provider, based in Coventry as a Commercial Manager. The main purpose of your job is to develop and market new transport and logistics services to shippers, retailers and manufacturing businesses and gain contract work from global brands.

The company operates a warehouse and a fleet of 10 trucks from its head office in Coventry. The accountant has given you some costings data that has been compiled by the Managing Director.

Requirements and Deliverables

1.You have been tasked by the Managing Director to analyse the UK logistics market that StratoLogistics Ltd competes within from a macro and micro economic perspective. This will involve examining the overall behaviour of the UK freight logistics market using a macro economic model and discussing how price affects supply and demand for freight logistics services using micro economic theories.

20 marks (learning outcome 1)

2. The MD also requires you to evaluate two investment appraisal methods and

explain the difference between marginal and activity based costing which could be used to purchase an additional vehicle. 10 marks (learning outcome 2)

3.Using the costing data provided to calculate the price of transport to move an artic load of ceramic hand basins from Crappy Ceramics Ltd in Coventry to Gloucester,

which is 52 miles away, using the costs given for rental. Ensure your price includes a mark-up of 70%. Critically appraise the key costing and pricing assumptions you

have made in your calculations. 20 marks (learning outcome 3)

4.Include evidence online in Moodle, of participation in at least four workshops (two from each topic area) during the delivery of the taught material.

10 marks (all learning outcomes)

You have decided the best way to tackle this project is by examining UK government economics data and statistics available at the Office for National Statistics. Academic case studies and market research companies that assess industry sectors such as the Freight Transport Association, Road Haulage Association, Keynotes, and Mintel would be helpful in gaining an idea of the services offered by businesses involved in the transport and logistics service market sector such as express pallet, courier and parcel services and the road haulage industry as a whole.

Your report for the Managing Director should be no more than 3,000 words in length and including a referenced bibliography to be on his desk by Friday 29th April 2016.

Word Count to be shown and complied with and should not include bibliography.

Coursework Guidance

1.Appraise the economics of supply and demand applied to logistics and supply chains

2.Evaluate key cost structures, revenue generation and investment appraisal methods
3.Critically appraise the key approaches to costing and pricing
4.Formulate forecasts and models of basic logistics activities using simple statistical and mathematical tools
5.Apply appropriate techniques to judge financial performance of a logistics or supply chain business.

The overall grade will be influenced by the application of the chosen case study as well as the clarity and justification of ideas presented in the report.

A basic report which meets the learning outcomes with basic referencing and obvious justifications will earn a pass grade of 24/60 (40%) or above.

A grade of 30/60 (50%) will contain an adequate level of application and understanding of logistics strategies with adequate justifications.

A grade of 36/60 (60%) and above will contain a good level of application and appreciation of logistics strategies and be well applied with good justifications.

A grade of 42/60 (70%) and above will demonstrate a level of excellence of application and appreciation of logistics strategies and be well applied with excellent justifications.

Report Format

The written report should have a clear structure, which is evident through the use of a numbering system and/or styles of headings. These indicate a hierarchy of different levels of importance or significance.

It will be necessary to organise ideas and plan this structure in advance of writing the detailed content.

This approach is different to an ‘essay’ style, which relies on the use of paragraphs and link sentences to indicate changes of topic.
M22aae assignment_Apr16.doc 2

M22AAE Supply Chain & Logistics Economics
Costing data for StratoLogistics Ltd’s vehicle fleet & staff
Price per Artic per 5 day week £380
Price per Trailer per 5 day week £100
Contract Hire
Price per Artic per 5 day week for 1 year contract £350
Price per Trailer per 5 day week for 1 year contract £90
Driver Agency costs
One driver per 8 hour day (over time after 40 hours at time and a half) £90
Price per Artic per 5 day week for 6 year operating lease £290
Price per Trailer per 5 day week for 6 year operating lease £60
Depreciated to zero over 6 years
New Volvo FH16 425 bhp 6×2 Artic tractor unit £90,000
New Fruehauf platform trailer £18,000

You pay your drivers £20,000 per year fixed salary for an eight hour minimum day.

Fuel currently costs £4.95 a gallon (£1.10 per litre) and the new Volvo FH16 425 bhp 6×2

Tractor unit has an average fuel economy of 8 miles per gallon.

Other annual costs in the transport office include:

Management costs: £26,000 p/yr for a Supervisor

Overhead costs: £280 p/yr telephones & telematic technologies Assume there are 250 working days a year

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