Supplier A ships to a frequent customer located at San Diego. A typical order is 6,000 pounds. These orders are delivered via less-than-truckload (LTL) shipping from the plant warehouse at Boston. LTL shipments from Boston to SD cost $1,600 for a 6.000-pound shipment. Company A is planning to establish a breakbulk facility in LA to serve customers in the California, including the SD customer. The cost of breaking bulk in LA is estimated to be $1,500 per truckload shipment received. A truckload shipment has capacity for up to 48.000 pounds (8 typical orders). The truckload carrier charges by the mile. The distance between SD and LA is 100 miles. The carrier charges a rate of $2 per mile, including a fuel surcharge of $0.5 per mile. An LTL shipment of 6,000 pounds from LA to SD is $450. Which option is better? Should Company A establish the breakbulk facility? Please show calculations.
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