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Calsall Industries. A company very similar to David Engineering it had two large foundries
which operated at around 60 per cent capacity. It could provide a fairly rapid service, and
though this was the first time that it offered sub contracting work, it decided against setting
preconditions to the use of their foundry by outside firms. Though Calsall Industries were
primarily concerned with the manufacture of pure metal components for other
manufacturers, it had over the last five years moved increasingly into original equipment
manufacture, including the production of more and more valves. Calsall Industries was the
cheapest of all three companies contacted by a small margin (around three percent) and
offered an average delivery period of eight days. They also required some form of
commitment over the year to a minimum order level, but this appeared to be nominal.
Physical distribution
The plan you have developed for Burke Engineering insists upon a major move away from
submersible and general engineering into the manufacture of sophisticated valves, both in
the UK but increasingly overseas. The company's physical distribution system would have
to reflect this shift towards the more rapid delivery of smaller weight items of higher
individual value, and away from the movement of heavy products. It was likely that the
number of customers would increase from around 200 to nearly 1,000 over 5 years, that
the company would become more and more international with average distances between
the company and customers increasing from 50 miles to 250; customers would be more
and more demanding on rapid delivery schedules even though the average order would be
likely to decline from around 250 kilos to 75.
The implication of such a change was that total journeys would increase fivefold from
1,200 to nearly 6,000; mileage would grow from 35,000 to nearly 250,000, while the total
tonnage carried would drop from 800 to around 200. It appeared from analysis that there
would be three main transport requirements; orders of low weight but high value to UK
customers, similar orders to international clients and high weight but low value to UK
customers. Currently the transport department employed five drivers, and used a variety of
vehicles for different types of delivery. The cost of the current operation was about €
380,000 per annum, and with the far greater spread of overseas customers the forecast
physical distribution cost using the same system of operation is around € 650,000, a
fivefold increase in cost per ton.
Obviously the difference between the transport costs of general engineering, submersible
equipment and valves was considerable. The current method of covering the distribution
costs across the entire range of Burke products made accurate costing on a single product
group basis very difficult to achieve. However with the change to valves, the likely unit load
would be around 35 kilos with an average order size of 8 units, with the result that a much
greater control over distribution costs could be envisaged.
Various companies offering particular types of freight forwarding service had sprung up
over the past ten years in the West Midlands. These ranged from freelance operators with
their own lorries, through to large and sophisticated firms that provided anything from local
deliveries to international despatch. Each had different charging arrangements, minimum
orders and extra costs, and four had been approached for the details of the service that
they provided.
Seacost Distribution. Seacost was a medium sized company based in the Midlands. It had
grown rapidly from providing a small local service to one that operated throughout the
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