Shipping Costs
Your company has several distributors in Guam that service all of your customers on the island. You have been shipping items in parcel shipments based on the requisitions from the distributors, but your Boss thinks that you can improve your operations by opening a warehouse in Agana and pre-stocking items for delivery.
In order to do a complete cost-savings analysis of the options, you are going to need the current costs per item for parcel shipping so you can compare the costs to the bulk shipping that you are planning to do.
You have good forecasts of the item demand for the out-years, and you want to estimate the shipping cost savings based on item quantity and shipping cost per unit item.
Unfortunately, your data on current shipping costs for parcel shipments is maintained at the shipment level—you only have the quantities of each item shipped and the total cost of the shipments. What’s worse, the shipments generally have different quantities of different items.
The Excel file “Shipping Costs” (on Canvas) contains the data from the most recent 339 shipments for 35 of the items you ship.
Calculate the shipping cost per item for each item in your inventory to report to your Boss. Include any uncertainty you may have with your conclusions.
HINT: Some of these shipments might have been unusual—overnight or rush orders—that may cause you some problems with the data.