The LTL costs a product moving through a supply chain are $1 per mile and there is a warehouse 200 miles from Central supply. Truckload costs to the ware house are $50 and the warehouse handling and storage costs are $10. The cost to ship the product to the warehouse $50. The market boundary for this supply chain is:
A) 260 miles
B) 130 miles
C) 125 miles
D) 100 miles
E) 50 miles

Question

Quizplus · Accepted Answer

To determine the market boundary of the supply chain, we need to calculate the total cost of transporting the product from Central supply to the warehouse and compare it to the cost of truckload shipping (which is cheaper than LTL).

Total cost of LTL shipping:

$1/mile x 200 miles = $200 
+$50 warehouse handling 
+$50 shipping to warehouse 
Total cost = $300

Truckload cost:

$50

Therefore, the market boundary is 130 miles, because it is more cost-effective to ship the product via truckload for distances greater than 130 miles.

The LTL Costs a Product Moving Through a Supply Chain