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
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
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:
options for vehicles as well as lease or buy options for warehousing.
as well as a brief analysis of the commercial implications involved.
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
You will be expected to critically evaluate all the key perspectives of this assignment rather than a
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
Students are advised to stick closely to the word limit within a maximum +/- 10% variation in total
Structure and Outline of the Report
** The report must be written in the 3rd person
References – between 18-25 refences (mix of books, journals and any others)
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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