Partnering Case

Morgan Atkinson

03/30/2011

MAR3461

Partnering Case

1. Evaluate McFarland’s Cascades proposal quantitatively (Ex: The extra costs) Show your calculations

2. What qualitative issues would you also want to explore (Ex: Loss of control, loss of internal jobs)

3. Explain why you would or would not support the proposal

Usage = 3,000 poles per year

75% of 35 ft poles = 2,250 poles

22% of 40 ft poles = 660 poles

3% of 70 ft poles = 90 poles

*Annual cost of poles under current price

35 ft poles: $137 x 2,250 poles = $308,250

40 ft poles: $236 x 660 poles = $155,760

70 ft poles: $1,368 x 90 poles = $123,120

Total = $587,130

*Weight of the poles

35 ft x 40 lbs/ft = 1,400 lbs

40 ft x 40 lbs/ft = 1,600 lbs

70 ft x 40 lbs/ft = 2,800 lbs

*Increase in price per pole

35 ft poles: 1,400 lbs x .0589 per lb = $82.46

40 ft poles: 1,600 lbs x .0589 per lb = $94.24

70 ft poles: 2,800 lbs x .0589 per lb = $164.92

*Annual pole cost under proposal

35 ft poles: 2,250 poles x ($137 + $82.46) = $493,785

40 ft poles: 660 poles x ($236 + $94.24) = $217,958.40

70 ft poles: 90 poles x ($1,358 + $164.92) = $137,962.80

*Annual pole cost increase

35 ft poles: $493,785 - $308,250 = $185,535

40 ft poles: $217,958 - $155,760 = $62,198.40

70 ft poles: $137,962.80 - $123,120 = $14,842,80

*Total Increase = $185,535 + $62,198.40 + $14,842.80 = $262,576.20

Included in the 5.89/cwt increase is delivery to Chino Valley, exclusive use of a section in Chino Yard, delivery to SRP jobsite, and loading/unloading.

McFarland also offers the option to purchase sequence loading, stake delivery, or drop charge. This decision must take into account the:

$2,000 annual fuel cost for the delivery truck

$5,000 annual repair cost for the delivery truck

$50,000 in wages for the employee currently delivering the poles

$100,000 book value of the truck

All of these current costs would no longer be incurred by the company if they decided to...