Asset management

Background

You are the Logistics Director for Tip Top Logistics Ltd. Founded in 2008 by two friends Mike Smith

and John Clarke. They currently operate from a rented 12,000 sq. ft. warehouse in Derby.

They currently have a dedicated storage and delivery contract with Central Midlands Furnishings to

collect assembled Wardrobes from their Derby Factory and store them for an average time of 4

weeks until they are ready to be delivered to retailers throughout the Midlands. They have 8 x3.5

tonne Ford Transits on contract lease. Contracts for five of these expire in May 2021 and the

remaining three in May 2023.

They employ 10 drivers, 2 warehousemen and a supervisor. Mike and John also manage the day-today activities of the business.

Apart from this contract Tip Top Logistics have no other major business apart from ad hoc collections

and deliveries, which only account for 2-3% of overall business.

The current contract with Central Midlands is due to expire in 2024.

Central Midlands Furnishings have recently acquired a Leeds based manufacturer of beds and

mattresses and have approached you to see if you would be interested in collecting, storing and

delivering this new range for them for them.

They estimate that 50% of the deliveries will be in Yorkshire and 20% Lancashire with the remaining

30% in the Midlands.

They would like you to consider taking on an additional 4-year contract for this new venture.

Having reviewed the data, you believe that the following assets are required to service this new

venture.

25,000 sq. ft. of warehousing to include 6000 sq. ft. of adjustable pallet racking.

9x 3.5 tonne transits or equivalent

3 x7.5 tonne rigid trucks.

16 x drivers at £24000 per year each.

4 warehousemen at £21000 per year each

2 Supervisors at £27000 per year each.

You are currently unsure as to where to base the new contact.

 

 

 

Key assumptions for prospective new business*.

Suitable warehouse accommodation is available to rent at £6.50 per sq. ft. in Derby you must

research prices in other areas

Vehicles could be purchased, leased or contract hired.

3.5 Tonne Transits fuel economy average 25 mpg.

7.5 tonne rigid fuel economy average 18 mpg.

Total estimated mileage per vehicle 45,000 miles per year. (You have based this on running the

contract from premises in Derby)

Lease on Derby premises expires July 2020

*Where specific costs are shown i.e. Drivers use these. For all other costs i.e. Leasing, Buying or

Hiring vehicles, you will need to carry out research.

You may use any other reasonable cost assumptions

 

Assignment Brief

Fully analyse the direct costs of this proposed new venture and prepare a brief report for Mike and

John. The report should include but not be limited to:

  • Table of key projected costs of all options. These options should include lease, hire and buy

options for vehicles as well as lease or buy options for warehousing.

  • Brief discussion of the hire/leasing/ buy options available along with your recommendations.
  • Recommendations on the optimum location/ locations to operate this contract from and

why.

  • Revenue required over a 5-year period based on delivering a gross margin of 20%
  • Major areas of risk and recommended safeguards. These should also include strategic risks

as well as a brief analysis of the commercial implications involved.

  • Brief analysis of whether to run contracts together or separately along with reasons and

recommendations.

 

 

 

 

 

Criteria

Students must be able to demonstrate an understanding of relevant theories and analytical models

and apply them to aid the analysis of the organisational environment and decision-making

processes.

You will be expected to critically evaluate all the key perspectives of this assignment rather than a

description.

Word Limit:

This is a 1500-word (or equivalent) assignment (excluding table of costs, contents page, references

and appendices) in the form of a structured management report that follows the assessment

strategy.

Students are advised to stick closely to the word limit within a maximum +/- 10% variation in total

word count.

 

Structure and Outline of the Report

  • Executive Summary.
  • Contents.
  • Introduction.
  • Main Body (including Headings)
  • Conclusions / Recommendations
  • Appendices.
  • References.

** The report must be written in the 3rd person

 

References – between 18-25 refences (mix of books, journals and any others)

Essential

 

Atrill, P and McLaney, E (2017) Accounting and Finance for non-specialists. 10th ed. Pearson

 

Rushton, A, Croucher, P, and Baker, P. (2017) The Handbook of Logistics and Distribution Management. 6th Edition, Kogan Page

 

Christopher, M. (2017) Logistics& Supply Chain Management. 5th Edition. Prentice Hall

 

Drury, C. (2018). Management and Cost Accounting. 10th ed. London, Cengage.

 

Emmett S (2006): Excellence in Warehouse Management: How to Minimize Costs and Maximise Value, John Wiley and Sons

 

Johnson, Whittington and Scholes (2017), Exploring Strategy: Text and Cases, 11th Edition, Pearson

 

Slack, N, Brandon-Jones, A and Johnston, R. (2016) Operations Management (8th Edition), Pearson

 

 

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