ABOUT THE TEAM
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INTRODUCTION
This slide contains some essential case facts and assumptions made in order to proceed with the analysis
ESSENTIAL FACTS ASSUMPTIONS
❑ Market value of the Indian Logistics sector is ❑ Trailers are hired on per km basis and there is no
expected to grow from $160 Bn to $215 Bn loss incurred if trailers are not utilized
❑ Pristine Logistics is an end-to-end integrated ❑ Each trailer used in the project will travel 175 km
and multimodal logistics service provider per day
❑ Requires new trailers for the current project ❑ The trailers have a monthly efficiency of 85%
(approx.) as each trailer operates for 26 days in a
❑ A trailer on average runs 175 km per day and
month
operates for 26 days in a month
❑ The factor of efficiency is already considered in
❑ Tyres in a trailer cost INR 396,000 and need to
the given data for the number of trailers required
be changed every 60,000 km of travel
❑ For every trailer, there is a fixed cost and a
❑ A trailer costs INR 28 lakh at a monthly EMI of
variable cost associated with it
INR 60,000 and Life of 7 years
❑ For every trailer that is not utilized, Pristine
❑ Revenue earned per trailer is Rs. 105 per km
Logistics has to bear a cost due to the fixed cost
❑ Renting Cost of a trailer is 95% of revenue associated
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SITUATIONAL ANALYSIS
This slide is used to draw inference on the data provided in the case
INDIVIDUAL COSTS OF SUB-COMPONENTS
Particulars Per km Rate (₹) Cost Category
Diesel Cost 43 Variable
Driver & Helper Salary 8 Fixed
Driver Allowance 4 Variable
Permit / Insurance / Road Tax 3 Fixed
Maintenance 2 Fixed
Overhead Expense 3 Fixed
Miscellaneous & Exigency 5 Fixed
Tire Usage 6.6 Variable
Opportunity Cost of Vehicle 7.4 Fixed
ESTIMATION OF NET DAILY PROFITS FOR VARIOUS SITUATIONS
Particulars Revenue (₹) Expenses (₹) Profit (₹)
Utilization Cost of an Owned Trailer per Km 105 82 23
Utilization Cost of a Hired Trailer per Km 105 99.75 5.25
Non-utilization Cost of a Trailer per Km 0 28.4 -28.4
Daily Utilization Cost of an Owned Trailer 18375 14350 4025
Daily Utilization Cost of a Hired Trailer 18375 17456.25 918.75
Daily Breakdown Cost of a Trailer 0 4970 -4970
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QUALITATIVE ANALYSIS
This slide contains qualitative analysis of the data given in the case to draw a valid recommendation
Net Cash Inflow from Net Cash Inflow from Net Cash Outflow from Net Monthly
Case Description
Owned Trailers (₹) Rented Trailers(₹) Unutilized Trailers(₹) Profit (₹)
1 Rent 130 Trailers 0 2664375 0 2664375
2 Buy 50 and Rent 80 Trailers 6037500 1286250 0 7323750
3 Buy 110 and Rent 20 Trailers 10867500 183750 2982000 8069250
4 Buy 130 Trailers 11672500 0 4970000 6702500
Optimum Buy 110 and Rent 20 Trailers 10867500 183750 2982000 8069250
Net Monthly Profit =
( Net Cash Inflow from Owned Trailers ) + ( Net Cash Inflow from Rented Trailers ) – ( Net Cash Outflow from Unutilized Trailers )
• Since the logistics industry is predicted to grow steadily in the future, it has been assumed that the new trailers will find their
usage for the next 7 years.
• The optimization model has been formulated using this assumption and solved using Java.
• In case the trailers are special utility vehicle and there are risks associated with the purchase of 110 such trailers, Pristine Logistics
may follow Case 2 and buy 50 trailers.
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AUTONOMOUS TRUCKS
This slide analyses the hurdles of incorporating Autonomous Vehicles in Logistics Model and the solutions to overcome some of those threats
HURDLES SOLUTIONS
➢ Rules and Regulations ➢ Nvidia has recently announced that they will
be training their autonomous vehicle AI in
➢ Poor road and transport infrastructure virtual reality (VR). Venture Beat reports that
➢ Network and Wireless connectivity the VR training system is called Drive
Constellation – a photo-realistic simulation
➢ Liability platform that will allow Nvidia’s AI to drive
➢ Complex insurance structure for billions of miles without ever controlling
an actual vehicle on the road.
➢ Prone to theft
➢ Truck Platooning
➢ Inability to deal with physical damage en-route
➢ Semi autonomous vehicles
➢ Government apprehension to job losses
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STRATEGIES TO REDUCE TURNAROUND TIME FOR DELIVERY
This slide analyses the various strategies that can be implemented by Pristine Logistics to reduce Turnaround Time (TAT) in Delivery
1. Implementing the Hub and Spoke Model
Advantages Advantages
❑ Ensuring Data Confidentiality and Security ❑ Capabilities Development
❑ Robust Governance Structure ❑ Cost Advantage
❑ Proactive Quality and Risk Management ❑ Improved Time-to-Market
❑ Strong Setup of Technology Platform ❑ Lower Cost of Deployment of Technology
2. Integrating Route Optimization Application within the Trailers
Factors To Consider Advantages
❑ Real Time Traffic Consideration ❑ Saves Fuel Cost
❑ Accurate Geocoding ❑ Reduction of Driver Allowance Costs
❑ Historical Data Inspection ❑ Increased Service Level Agreement (SLA)
❑ Dynamic Route Planning Adherence
❑ Alternate Routes for Rider Preference ❑ Improved Productivity
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THANK YOU
FORUM OPENED FOR QUESTIONS
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ANNEXURE
(A) ROUTE OPTIMIZATION APPLICATION WITHIN THE TRAILERS
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• With 20% reduction in operating cost, Total Expense of Owned Trailers per Km = Rs. 66 (Approx.)
• With 65% reduction in shipment processing time, Distance Covered by Trailer per day = 400 Km assuming 80% efficiency
Particulars Revenue (₹) Expenses (₹) Profit (₹)
Initial Utilization Cost of an Owned Trailer per Km 105 82 23
New Utilization Cost of an Owned Trailer per Km 105 66 39
Initial Daily Utilization Cost of an Owned Trailer 18375 14350 4025
New Daily Utilization Cost of an Owned Trailer 42000 26400 15600
• Application Development Charge for 6 months = Rs. 6,00,000
• Support Function Cost for the remaining 6 months = Rs. 3,00,000
• Additional Training for Drivers
Particulars Revenue (₹) Expenses (₹) Profit (₹)
Initial Daily Utilization Cost of an Owned Trailer 18375 14350 4025
New Daily Utilization Cost of an Owned Trailer 42000 26400 15600
Increase in Daily Profit 11575
Increase in Monthly Profit (26 days) 300950
Increase in Annual Profit (12 months) 3611400
Less: Application Outsourcing Cost 900000
Less: Training and Additional Overhead Expense 100000
Net Increase in Annual Income 2611400
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(B) OPTIMIZATION SIMULATION CODE IN JAVA
/*
* Java file to calculate the Net Cash Inflow for Hired vs Rented Trailers
* @author : Tapishnu Samanta ( Team DMS Warriors, IIT Delhi )
* @version : Version 1.1
*/
import [Link].*;
import [Link].*;
import [Link];
public class Net_CashFlow
{
private int X; // Number of Owned Trailers
private int Y; // Number of Rented Trailers
private double max; // Maximum profit
public Net_CashFlow()
{
X = 0;
Y = 0;
max = 0;
}
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public double owned_inflow(int x)
{
double total = 0;
if (x <= 50)
{
total = (x * 30) * 4025;
}
else if (x > 50 && x <= 110)
{
total = ((50 * 30) + (x - 50) * 20) * 4025;
}
else if (x > 110 && x <= 130)
{
total = ((50 * 30) + (110 - 50) * 20 + (x - 110) * 10) * 4025;
}
return total;
}
public double rent_inflow(int y)
{
double total = 0;
if (y <= 20)
{
total = (y * 10) * 918.75;
}
else if (y > 20 && y <= 80)
{
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total = ((20 * 10) + (y - 20) * 20) * 918.75;
}
else if (y > 80 && y <= 130)
{
total = ((20 * 10) + (80 - 20) * 20 + (y - 80) * 30) * 918.75;
}
return total;
}
public double owned_outflow(int x)
{
double total = 0;
if (x <= 50)
{
total = 0;
}
else if (x > 50 && x <= 110)
{
total = ((x - 50) * 10) * 4970;
}
else if (x > 110 && x <= 130)
{
total = ((110 - 50) * 10 + (x - 110) * 30) * 4970;
}
return total;
}
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public void set_optimum(double nif, int N)
{
if(nif > max)
{
max = nif;
X = N;
Y = 130 - N;
}
}
public void display()
{
[Link]("Optimum Owned = " + X);
[Link]("Optimum Rented = " + Y);
[Link]("Net Cash Inflow = " + max);
}
public static void main (String args[])throws IOException
{
Net_CashFlow obj = new Net_CashFlow();
double inf1 = 0; // Cash Inflow from Owned Trailers (Rs.)
double inf2 = 0; // Cash Inflow from Rented Trailers (Rs.)
double outf = 0; // Cash Outflow from Owned Trailers (Rs.)
double net_inf = 0; // Net Cash Inflow from Owned and Rented Trailers (Rs.)
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for(int N = 0; N <= 130; N++)
{
inf1 = obj.owned_inflow(N);
inf2 = obj.rent_inflow(130-N);
outf = obj.owned_outflow(N);
net_inf = inf1 + inf2 - outf;
obj.set_optimum(net_inf,N);
}
[Link]();
}
}
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