BoxPlus is a plant producing premium quality shipping boxes for International Paper (IP). The factory receives rolls of paper for box production from the IP company daily. On average, it accepts ten trucks a day carrying eight rolls each. In addition, BoxPlus gets five rail cars every weekday with 20 rolls of high-quality paper. However, the warehouse is limited in its capacity to receive the necessary materials as it only has five rail car docks and eight truck docks. In the last six months, the business paid a total of $80,525 in demurrage fees as not all the rail cars were unloaded on time. The fee is $200 per undelivered railcar per day, with the rail line planning to double it. This essay will discuss the main problems causing the high demurrage payments and actions that the company should make to lower them.
The root cause of the high demurrage fees received by the BoxPlus is the plant’s failure to unload all the rail cars and trucks on time. The producer employs two unloaders who are tasked with emptying ten trucks and five rail carts. Overall, the workers are expected to unpack 180 rolls per day. The estimated time of clearing one truck is one hour. As the rail cars carry more than twice the number of rolls transported by the lorries, it can be assumed that the time required to clear one car is two hours. BoxPlus receives paper rolls from 7 am to 6 pm on weekdays. Thus, accounting for an hour-long lunch break, employees have approximately 10 hours to unpack all the supplies. However, considering the number of trucks and rail cars arriving every day, the unloaders can only partially clear the vehicles. Overall, the plant receives more deliveries than it can accept, leading to increased demurrage fees.
One of the actions that can be exercised by BoxPlus is to hire more unloaders to handle the daily shipments. Considering that it would take two workers over 20 hours to empty ten trucks and five rail cars, it is recommended to hire two additional employees. Doubling the staff will halve the average time required on one truck and one car to 30 minutes and one hour, respectively, or ten hours overall. With labor costs of $22/h and the 11-hour workday, the expenses of hiring extra unloaders are estimated at $9680 a month for work on weekdays. Compared to $80,525 in demurrage fees in the past six months and accounting for the expected increase in costs for unaccepted deliveries to $400, employing two workers is a financially viable step.
Moreover, BoxPlus should review its production and estimate how many paper rolls a day are used for making boxes. If the plant utilizes considerably less than 180 rolls daily, with the substantial surplus left in the warehouse, the quantity should be re-calculated. The company can evaluate its paper needs and reduce the number of trucks arriving daily. If the number of arrivals is decreased significantly, BoxPlus can hire only one additional unloader and lower its labor costs. Alternatively, the contract with the rail line can be broken in favor of truck deliveries. However, this course of action will involve extra workers being hired to unpack the added vehicles. Thus, 13 trucks will be required to replace five train cars. Overall, there is a need to review the number of rolls necessary to be delivered daily and reconsider the rail line contract.
In summary, BoxPlus should ensure that it is capable of receiving the supplies and unpacking them from all the incoming transport. The company is recommended to employ two unloaders whose monthly salary will be lower than the increased fees for failing to empty the train cars. The factory should also review the number of paper rolls needed to be delivered every day, reducing incoming vehicles. Finally, ending the contract with the rail line in favor of extra deliveries by trucks should be considered.