Megabox Write-Up docx

MEGABOX CASE STUDY
SPRING 2015
Catalina Quinones-Rios
Mary Catherine Schoals
Adil Sajan
Matthew Goode

1
The problem that Joe Perez and Megabox is facing is the international transportation of Megabox’s four main
products to Zumburu. These products are 3D-Printers, Ultra HD Copiers, Power Books, and Z-pads. Every product is
different in terms of density, perishability, and volume. The management team needs to take into consideration the options
that are available, which are: scheduled air, contract air, conference sea cargo and non-conference sea cargo.
Some issues identified with these options include relevant cost, modal differences and how they affect selection
(transit time, volume constraints, and other associated costs),customer service and risks involved.
Each of the four alternatives were identified for possible transportation options. Scheduled air cargo flights are
serviced out of JFK airport three times a week with a volume constraint of 3000 ft3 per week. Any additional cargo space
needed can be allocated into charter cargo flights at a cost of 120% of scheduled air rates. If Joe Perez were to enter into
12-month contract with an air carrier (contract air cargo flights), Megabox would have to commit to at least 4000 ft3 per
week during the contract period.Conference container vesselservices are provided weekly and only offer 40 FEU
container loads (CL) or less than container loads (LCL). Since not all Megabox shipments are large enough to fill a
container, the current ratio for conference container services is 70% of shipments in CL shipments and 30% in LCL
shipments. Non-conference container vessel services offer bi-weekly service via 20 FEU containers at a 15% discount of
conference freight rates. If Megabox were to switch to non-conference container vesselservices, it is estimated that the
ratio of shipments would shift to 90% CL and 10% LCL with the use of 20 FEU.
For the analysis ofscheduled air cargo services; The totaldirect shipping cost yearly to Megabox adds up to
$28,558,317.56. Scheduled air flights service Megabox three times a week, which correlates with the desires of the
Zumburu distributor, who is interested reducing his inventory cost. Some risks associated with scheduled air cargo is
insufficient space available for Megabox’s shipments and the higher cost of charter overflow. There is no required
commitment to schedule air shipments. The positive side of no commitment to this particular mode is the flexibility
afforded to Megabox to alternate between modes if necessary. Contract air cargo services: Contract air cargo flights
have a required volume commitment of at least 4000ft^3 a week,for a consecutive 12-month period; this is a considerable
length of time, especially with the concern of fluctuation in demand. Two of the products, Power Book and Z-Pad,will
not meet the minimum load requirements, and will need to be flown in conjunction with other products at all times. The
total direct shipping cost yearly is $33,077,949. The known risk with contract air is the weekly volume requirement
versus actual forecasted unit sales for the next 12-months. Conference sea services; Costs assigned to Megabox totals
$21,920,759.84 yearly. Three out of four products can be serviced within budget. Transit times in combination with
services being offered by this mode weekly, creates some build-up of inventory. Although there is no volume commitment
to mode, there is a commitment to the 40 FEU containers. Megabox will end up paying for LCL movements 30% of the
time, which is costly and an inefficient use of capacity. Non-conference sea services; Totalcost to Megabox annually is
$13,569,384. Only three out of four products can be accommodated within Megabox’s budget. Nonconference container
vessel services Megabox bi-weekly, and there are severaluncontrollable factors in this mode of transportation that can
affect customer service. There is no required commitment to the mode, however there is a volume limitation to 20 FEUs.
We recommend that Megabox divide the shipments of their products by two modes; the shipping of Powerbooks
and ZPads by scheduled air with charter overflow and 3D Printers and HD Copiers by nonconference container vessel
service. Total yearly transportation costs to Megabox is $10,230,911.22, which is a savings of $16,710,588.78. Customer
service would be divided between the rapid transit of two products moved within budget through air transportation, while
the other two would be moved on non-conference,which has a more efficient distribution of CL and LCL shipments. The
manageability of this recommendation is enabled by the annual budget savings acquired through this bi-modal
recommendation; it provides the necessary monetary flexibility to handle these uncontrollable factors. In both modal
selections of scheduled air cargo and nonconference container vessel services, there is no required commitment
to mode, which provides Megabox the flexibility of switching modes of transportation in the event of a
disruption in distribution.
Yearly Costs To Megabox 3D-Printer Ultra HD Copier Power Book Z-Pad
Scheduled 16,709,718.06$ 8,568,091.24$ 435,130.99$ 2,845,377.27$
Contract 16,709,593.50$ 10,207,397.47$ N/A N/A
Conference 8,007,177.70$ 3,728,460.27$ 1,373,801.75$ 8,811,320.12$
Non-Conference 4,522,882.93$ 1,878,591.53$ 912,320.88$ 6,255,588.86$

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Problem
The root problem that Joe Perez and Megabox is facing is the international transportation of Megabox’s
four main products to Zumburu. These products are 3D-Printers, Ultra HD Copiers, Power Books, and Z-pads.
In Table 2a below the products distribution characteristics are outlined for planning purposes.
Table 2a
Zumburu is one of the largest Middle Eastern markets with an unstable governmental economic policy.
With the late volatility in oil revenues Joe Perez is concerned that the government may suddenly impose higher
import duties or other regulations to control the outflow performed currency. Currently, Joe Perez is using
airlines that serve Zumburu to transport Megaboxe’s products, however, there is been inefficient space available
in cargo airlines.
The transportation related problem that Joe Perez is facing is important for the management team at
Megabox to consider because transportation cost is the single largest expense businesses incur. The amount of
money that is being utilized for transportation represents a lot of capital for the business. Management team
needs to take into consideration the options that are available. Every product is different in terms of density,
perishability, and volume. The management team needs to make the decision together since there is a lot of
capital involved. Even though, Joe Perez is the distribution manager of the company, the transportation problem
requires a complete rerouting of the process. Therefore, it would be more viable if the Senior Executives
approach the problem from different perspectives and make an agreement that would reflect the decision made
Product Line Shipping Volume Shipping Weight Selling price
(Feet3/unit) (Kg/unit) (DAT Plant, $/unit)
3D Printer 18 44
$
950
Ultra HD
Copier 14 36
$
325
Power Book 1 3
$
220
Z-Ipad 1 2
$
790

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and the risks that the changes may bring. Table 2b displays the yearly costs for the various alternatives available
to Megabox for their transportation needs which will be discussed in detail in the following section.
Table 2b
Issues
In this section, the various alternative transportation solutions will be identified and all relevant detailed
will be clearly explained. Including relevant cost, modal differences and how they affect selection (transit time,
volume constraints, and other associated costs), customer service and risks involved. The issues stated represent
the scope of the problem facing Joe Perez and Megabox. Each of these issues need to be carefully evaluated to
ensure the most beneficial decision.
Megabox is currently selling its products to Zumburu using the incoterm deliver at terminal or DAT
Distributors storage facility, port of Zumburu. This means that the seller (Megabox) is responsible for arranging
carriers and delivering the goods, unloaded from the arriving conveyance at the name place. The risk transfers
from seller to buyer when the goods have been unloaded. Also, the buyer is responsible for import clearance
and any applicable local taxes or import duties"1. In the case of Megabox’s responsibilities as a seller, they will
be responsible for cargo insurance, documentation, and wharfage (in the case of sea shipments), as well as many
distribution costs, excluding transportation to consignee.
Under DAT Port of Zumburu, Megabox’s relevant cost are presented on the following table (Table 3a).
1Source: Incotermsexplained.com
Yearly Costs To Megabox 3D-Printer Ultra HD Copier Power Book Z-Pad
Scheduled 16,709,718.06$ 8,568,091.24$ 435,130.99$ 2,845,377.27$
Contract 16,709,593.50$ 10,207,397.47$ N/A N/A
Conference 8,007,177.70$ 3,728,460.27$ 1,373,801.75$ 8,811,320.12$
Non-Conference 4,522,882.93$ 1,878,591.53$ 912,320.88$ 6,255,588.86$

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Table 3a
Although under Incoterms DAT Zumburu, the importer or buyer is responsible for import
documentation, the $220 fee for documentation includes both export and import documents. Therefore, it is the
responsibility of Megabox to cover this cost. It is not the responsibility of Megabox to cover either customs
fees, consular fees, or import duties.2
Other associated costs are presented in Table 3b below.
Distribution Cost Breakdown ($/shipped ft3) Air Schedule Sea Conference
Scheduled CL LCL
Transportationto 0.7 0.9
Packaging/Container 2.3 3
Transportation toport 0.7 0.4 0.4
Freight 16.6 4 6
Unpackaging/Unstaffing 0.9
Table 3b
The four modal options for transportation of Megabox’s products are scheduled air cargo flights (with
overflow into charter cargo flights), contract air cargo flights, conference container vessel service and non-
conference container vessel service.
Scheduled air cargo flights are serviced out of JFK airport three times a week with a volume constraint
of 3000 ft3 per week. Any additional cargo space needed can be allocated into charter cargo flights at a cost of
2 Source: universalcargo.com
Costs Air Sea
Cargo
insurance 1% of DAT value +10% 1.4% (CL), 1.6 (LCL)
Documentation $220 $220
Wharfage N/A 2% DAT value

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120% of scheduled air rates. If Joe Perez were to enter into 12-month contract with an air carrier (contract air
cargo flights), Megabox would have to commit to at least 4000 ft3 per week during the contract period.
Conference container vessel services are provided weekly and only offer 40 FEU container loads (CL)
or less than container loads (LCL). Since not all Megabox shipments are large enough to fill a container, the
current ratio for conference container services is 70% of shipments in CL shipments and 30% in LCL
shipments. Non-conference container vessel services offer bi-weekly service via 20 FEU containers at a 15%
discount of conference freight rates. If Megabox were to switch to non-conference container vessel services, it
is estimated that the ratio of shipments would shift to 90% CL and 10% LCL with the use of 20 FEU. The table
below (Table 3c) differentiates the volume capacity between conference and non-conference container vessel
services available to Megabox.
(Package sizes incompatibility only 90% of inner volume used for cargo)
Table 3c
The estimated transit times for air cargo services (scheduled and contract) are 11 days , which include
trucking to the assembly plant, stuffing by the carriers into the air containers and the time the products are on
storage before cleared from customs and shipped to the local distributor.
Nominal length Outside Inside Actual size
20 FEU 8'X8'X20' 1100ft3 990ft3
40 FEU 8'X8'X40' 2000FT3 1800ft3

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Figure 1. Estimated transit times for air cargo shipments
Sea shipments vary because of the required containerization (for CL shipments) and crating (for LCL
shipments) operations that are fulfilled at a packer’s facility close to the loading port. From there the shipments
are trucked to the loading port, and wait for the next ship to arrive. The total transit time for sea shipments add
up to 40.5 days for container loads (CL) and 49.5 days for less than container loads (LCL). 3
In considering both air cargo and sea shipment options, Megabox would have to evaluate both the
volume requirements, the increased cost for charter air cargo services, the discounted cost for non-conference
container vessel services, the transit time differences among the modal options and the risks involved.
Some of the risks Megabox faces are the lack of economic policy in Zumburu (a country that sources
revenue in oil), and the concern for changes in demand due to the fluctuation of the oil market. The demand
uncertainty also bring to light a risk in quality customer service. The current distributor in Zumburu is interested
on receiving frequent small shipments to reduce his average inventory and express an interest in air shipments.
3 40.5 days for CL and 49.5 for LCL represents the days in transitup to Megabox’ responsibilities

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Figure 2. Estimated transit times for container load (CL) ocean shipments
Figure 3. Estimated transit times for less than container load (LCL) ocean shipments
Alternative Identification
Megabox is presented with four alternatives for modal transport of their products. These include
scheduled air cargo with charter cargo overflow service, contract air cargo service, conference container vessel
service, and nonconference container vessel service. To properly evaluate each option, each modal alternative
will be judged by five main criteria. These are: total cost (and if it is within Megabox’s budget), risks associated
with each modal option, customer service, manageability of each option, and required commitment to modal
option.

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The first alternative is scheduled air cargo, with volume constraints of 3,000ft^3 a week. If need be,
Megabox has the option to overflow into charter air cargo service each week if the loads needed to be
transported exceeds the 3,000ft^3 limit. Charter air cargo service is at an increased cost of 20% over scheduled
rates, but does not have a volume limit. This modal option would service Megabox three times a week, with a
transit time of 8.5 days4. A few important things to note about this alternative is the empty backhauls with
charter overflow, and that the option of air cargo service does not incur costs for packing, unpacking or
wharfage in distribution.
The second alternative is a 12 month-contract air cargo service, with a minimum requirement of
4,000ft^3 a week. This volume requirement is the stimulation for entering into contract with the air cargo
provider, and will be carried out for the entirety of 12 months. Any cargo that does not meet the minimum
requirement of 4,000ft^3 a week will not be moved. Contract air cargo would service Megabox three times a
week, with a transit time of 11 days. This alternative is offered at a discount rate of 10% off scheduled prices.
This alternative does not incur any packing or unpacking cost, as well as no wharfage charges at the destination
port.
The third alternative is conference container vessel services, with a minor volume constraint to product
movements in 40 FEU containers. Using 40 FEU containers will divide the shipments into two types of loads:
container loads (CL) and less than container loads (LCL). The split is estimated at 70/30%, with the majority on
CL. Rates offered for LCL are at a 67% premium over CL rates, with higher costs for transportation to port.
LCL shipments incur an unpacking cost in distribution, while CL does not. Another division exists between the
types of loads concerning transit times. CL remains in transit for 40.5 days, while LCL takes 49.5 days.
The fourth and final alternative is nonconference container vessel services, with a minor volume
constraint to product movements in 20 FEU containers. Using 20 FEU containers will divide the shipments into
4 8.5 days in Contractand Schedule air arethe days in transitthatincludeMegabox’ responsibilities

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two types of loads: container loads (CL) and less than container loads (LCL). The split is estimated at 90/10%,
with the majority on CL. Rates for nonconference container vessels are offered at a discount of 15% over the
conference freight rates. A division exists between the transit times for CL and LCL, with 40.5 days for CL and
49.5 for LCL.
In the scoring of criteria, a scoring system is used, where 5 is the most important and 1 is the least
important decision factor. Total cost in relation to Megabox’s budget was given the highest priority, or “5”
because making sure that transportation expenses are within budget are vital to the success of the supply chain.
Therefore, in deciding the most effective alternative, total cost will be the first factor considered. Customer
service was giving a priority of “4” since Megabox has a limited number of quality products that are focused on
meeting the needs of specialized markets. Quality customer service is essential to the relationships of Megabox
and their distributors in those segments. The third and fourth criteria considered in respect to the analysis
(following this section) are risk and manageability of each solution. Both of these criteria are weighted equally,
because an important part of measuring the feasibility of each solution is considering the risk involved. Due to
the fact that there are volume constraints present in some solutions, as well as a 12-month contract clause in the
consideration of contract air cargo, the last decision factor included is “required commitment to mode” has been
added with the lowest weighted score.
The weighted score assigned to each criteria is exemplified in Table 4a below.
Table 4a
Criteria Scoring Weight % Total Score
Total Cost (within budget) 5 35% 1.75
Risk 3 15% 0.45
Customer Service 4 25% 1
Manageability 2 15% 0.3
Required Commitment to Mode 1 10% 0.1
Total 100% 3.6

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To know if each modal option falls within the projected yearly budget, a sales revenue table has been
provided for reference as to how this is calculated. Table 4b breaks down revenue by product. Total yearly
revenue is highlighted in yellow.
Table 4b
Alternative Analysis
In this section each individual alternative will be analyzed on an independent basis and scored with the
criteria explained in the Table 4a. Each alternative will include both direct shipping cost to Megabox as well as
the cost of inventory in transit and other fees that the Zumburu distributor is responsible for. In assessing the
strengths and weaknesses of the alternatives, the scoring methods of Table 4a were applied with the appropriate
weights. The pros and cons of each alternative will be presented as how they address key criteria which will
direct the recommendation in the next section.
-Scheduled and Charter Air Cargo
Total cost analysis. Scheduled air cargo flights have a limit of 3,000ft^3 a week, which means that for
two of Megabox’s products, 3D Printers and Ultra HD Copiers, there is overflow into charter air cargo flights,
with an increased freight rate of 20%. The total direct shipping cost yearly to Megabox adds up to
$28,558,317.56. The breakdown of the direct costs to Megabox is provided by Table 5a, and consists of all
transportation activities Megabox is responsible under DAT Port of Zumburu. These include freight rates (both
the rate for scheduled air and the rate increase for charter air depending on the load overflow), cargo insurance,
and documentation.
Annual Budget $
Printer 13,839,000$
Copier 6,300,480$
Netbook 2,079,000$
Z-Ipad 4,725,000$
Total 26,943,480$

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Table 5a5
In comparing the annual budget with the cost of scheduled air flights, servicing the loads for 3D printers and
HD copiers exceeds Megabox’s fiscal capability. Total costs to Megabox surpasses the projected budget by
$1,614,837.56 We have given this alternative a total cost scoring of 3.1 out of 5, due to the fact that two of the
products needing transport to the distributor are out of budget.
Customer Service. Scheduled air flights service Megabox three times a week, which correlates with the
desires of the Zumburu distributor, who is interested in receiving small, frequent shipments to reduce his
inventory cost. Thus, in combination with shorter transit times (transit time Megabox is responsible for is 8.5
days), Megabox will be improving quality of customer service. We have given this alternative a scoring of 5 out
of 5 for customer service, since it would ensure the quality that Megabox is looking for.
Risks and Manageability of Alternative. Some risks associated with scheduled air cargo is insufficient
space available for Megabox’s shipments and the higher cost of charter overflow. Manageability of this risks
can be costly and inefficient, specifically in the case of 3D printer and HD copiers. For these two criteria, we
have scored both with a 2 out of 5, due to the risk of excessive cost with charter overflow, and the uncertainty of
manageability due to possible fluctuations in demand.
Required Commitment to Mode. For the fifth criterion there is no required commitment to schedule
air shipments. The positive side of no commitment to this particular mode is the flexibility afforded to Megabox
to alternate between modes if necessary for shipments, which led to a scoring of 5 out of 5 for this criterion.
5 Documentation costof $31,680 has been added to the total to Megabox calculation for all products.
Scheduled Air
Loads Distribution Cost Insurance ICC Budget Total Cost to Megabox
3D Printer 15,514,197$ 730,699.20$ 433,141.74$ 13,839,000.00$ 16,709,718.06$
Ultra HD Copier 8,169,766$ 230,192.54$ 136,452.86$ 6,300,480.00$ 8,568,091.24$
PowerBook 99,908$ 190,575.00$ 112,968.49$ 2,079,000.00$ 435,130.99$
Zpad 550,919$ 1,420,650.00$ 842,128.77$ 4,725,000.00$ 2,845,377.27$
Total 24,334,789$ 2,572,116.74$ 1,524,691.86$ 26,943,480$ 28,558,317.56$

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Table 5d shows the respective scoring for each alternative, as well as the final weighted score of 3.435 for the
alternative of using scheduled air cargo.
Table 5d
-ContractAir Cargo
Total Cost Analysis. Contract air cargo flights have a required volume commitment of at least 4000ft^3
a week, for a consecutive 12-month period. Because of this obligation and the actual loads shipped weekly by
air (as shown on Table 5e) two of the products, Power Book and Z-Pad, will not meet the minimum load
requirements, and will need to be flown in conjunction with other products at all times. Total direct shipping
costs to Megabox for contract air includes transportation to port, freight rate (offered at 10% below scheduled
air cargo rates), insurance, and documentation. The total direct shipping cost for contract air cargo yearly is
$33,077,949.
Table 5e
Contract- Air QRT 1 QRT 2 QRT 3 QRT 4 TOTAL
Printer 18,900 33,750 16,875 13,500 83,025
Copier 12,600 17,850 10,500 11,550 52,500
Power Book 1,125 2,250 1,275 1,125 5,775
Z-Ipad 2,325 4,125 3,300 3,375 13,125
Total 34,950 57,975 31,950 29,550 154,425
Contract Air
Loads Distribution Cost Insurance ICC Budget Total Cost to Megabox
3D Printer 15,514,072.6$ 730,699.20$ 433,141.74$ 13,839,000.00$ 16,709,593.50$
Ultra HD Copier 9,809,100.0$ 230,175.00$ 136,442.47$ 6,300,000.00$ 10,207,397.47$
PowerBook 1,079,001.0$ 190,575.00$ 112,968.49$ 2,079,000.00$ 1,414,224.49$
Zpad 2,452,275.0$ 1,420,650.00$ 842,128.77$ 4,725,000.00$ 4,746,733.77$
Total 28,854,449$ 2,572,099$ 1,524,681$ 26,943,000$ 33,077,949$
Insufficient Loads
Total Cost (within budget) 3.1 35% 1.085
Risk 2 15% 0.3
Customer Service 5 25% 1.25
Total 100% 3.435

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Table 5f6
In comparing the annual budget with the total cost to Megabox for the alternative of contract air cargo service,
only one product, Powerbooks, is able to be flown within budget with total costs exceeding the allocated funds
by $6,134,949. For this reason, we have classified contract air as the less accessible alternative, with a scoring
in the criterion of total cost of 1 out of 5.
Customer Service. Contract air cargo flights service Megabox three times a week, which is in
correlation with the interests of the distributor in Zumburu. Contract air cargo shipments remain in transit for
8.5 days (Those days represents ups to the point where Megabox is responsible). Transit times in combination
with services being available three times a week, would replenish inventory frequently, and is in compliance
with the wishes of the distributor for lowering his inventory carrying costs. For these reasons, contract air
received a score of 5 out of 5 for customer service.
Risks and Manageability of Alternative. The known risk with contract air is the weekly volume
requirement versus actual forecasted unit sales for the next 12-months, as well at the inability of Megabox to
afford transportation of three of their products. The manageability of this 12-month contract is infeasible, and
would be ill-advised to attempt. Both criteria of risk and manageability are scored with a 2 out of 5 for contract
air.
Required Commitment to Mode. Contract air requires a commitment of 12 consecutive months with
shipments of at 4000ft^3 a week. This is a considerable length of time, especially with the concern of
fluctuation in demand, due to the lack of economic policy in Zumburu itself. Required commitment to mode
was given a 2 out of 5 because of this uncertainty.
Table 5i below totals up all scoring for the alternative of contract air cargo services, for a total score weight of
2.4.
6 Documentation costs of $31,680 has been added to the total cost calculation for Megabox.

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Table 5i
-Conference ContainerVessel
Total Cost Analysis. Conference container vessel service does not have a requirement on volume,
however Megabox is limited to shipping all products in 40 FEU containers, which may require transloading
operations (from domestic to international containers) to and from the ports. More information on the costs
involved with these particular activities would be needed to include those costs into the total cost analysis. Total
direct shipping costs for conference container vessel shipments include all transportation activities before
arriving to Zumburu, packaging-containerization, the freight rate, unpacking at the port, insurance,
documentation and wharfage fees at the destination port. As displayed in Table 5j, costs assigned to Megabox
for conference container shipping totals $21,920,759.84 yearly.
Table 5j7
7 Documentation Costs of $10,560 have been added to the total cost calculation for Megabox.
Risk 2 15% 0.3
Total 100% 2.4
Conference Container
Loads Total Distribution CostsWharfage Insurance ICC Budget Total Cost to Megabox
3D Printer 3,777,637.50$ 1,301,832$ 716,007.60$ 2,201,140.60$ 13,837,500.00$ 8,007,177.70$
Ultra HD Copier 2,388,750.00$ 410,130$ 225,571.50$ 693,448.77$ 6,300,000.00$ 3,728,460.27$
PowerBook 262,762.50$ 339,570$ 186,763.50$ 574,145.75$ 2,079,000.00$ 1,373,801.75$
Zpad 597,187.50$ 2,531,340$ 1,392,237.00$ 4,279,995.62$ 4,725,000.00$ 8,811,320.12$
Total 7,026,337.50$ 4,582,872.00$ 2,520,579.60$ 7,748,730.74$ 26,941,500.00$ 21,920,759.84$

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Three out of four products can be serviced within budget, even though the total cost yearly is $5,020,740.16
under budget. The alternative of conference container vessel service was scored with a 4 out 5 within the total
cost criterion, due to the necessary overdraw of $4,878,911.90 required to transport ZPads with this alternative.
Customer Service. Conference container vessel services Megabox weekly, however, several
uncontrollable factors in this mode of transportation can affect customer service. These include the effects of
weather, port capacities, port authorities, governmental regulation, port labor status and security of cargo. The
effect of any of these factors on the quality of Megabox’s customer service could be considered risks aside from
those listed in the next paragraph. Transit times for conference Container Sea shipments are divided between
container loads (CL) and less-than-container-loads (LCL), with 40.5 days for CL and 49.5 days for LCL8.
Transit times in combination with services being offered by this mode weekly, creates some build-up of
inventory, and the need for our distributor to increase their safety stock. This is not in direct compliance with
the desires of the distributor. For scoring of this alternative in the category of customer service, it was given a 3
out 5, which reflects the reliability of service with all of these unknown factors considered.
Risks and Manageability of Alternative. Risks to consider in conference sea shipments are directly
related to levels of customer service. Aside from the risks listed under the criterion of customer service, there
are risks of volume demand fluctuations with the lack of economic policy in Zumburu, and their reliance on oil
revenue. The manageability of these risks depend on the complexity of each circumstance, and both receive a
score of 2.6 out of 5.
Required Commitment to Mode. Although there is no volume commitment to mode, there is a
commitment to the containers used on conference container vessels (40 FEU). Megabox will end up paying for
LCL movements 30% of the time, which is costly and an inefficient use of capacity. The positive side of not
having a required commitment to this particular mode is the flexibility afforded to Megabox to alternate
between modes if necessary for shipments. The score for this criterion received a 3.2 out of 5.
8 Times in transitfor all options represent up to the point that Megabox is responsible

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Table 5m below displays the collected scoring of 3.25 for the alternative of conference container vessel service.
Table 5m
-Non-Conference
Container Vessel
Total Cost Analysis. Non-conference container vessel shipments services Megabox bi-weekly using 20
FEU containers. It is not limited by volume and it is offered at a 15% discount over conference rates. The
opportunity for usage of 20 FEU containers for shipping is a cost savings advantage for Megabox, in that the
distribution of CL and LCL shipments shifts to 90-10%. This is an increase in capacity efficiencies, and lowers
the amount spent on LCL shipments, which are at 67% higher freight rate. Costs associated with non-
conference container vessel service are all transportation activities before port of Zumburu, packaging and
containerization, freight rate, unpacking, documentation, insurance, and wharfage. Total cost to Megabox of
non-conference container vessel shipments are $13 as shown in Table 5n.
Table 5n9
9 Documentation costof $5,280 has been included to the total costcalculation for Megabox.
Risk 2.6 15% 0.39
Manageability 2.6 15% 0.39
Required Commitment to Mode 3.2 10% 0.32
Total 100% 3.25
Non Conference Container
Loads Distribution Cost Wharfage Insurance ICC Budget Total Cost to Megabox
3D Printer 1,418,482.1$ 1,328,400$ 716,007.60$ 1,054,713.21$ 13,837,500.00$ 4,522,882.93$
Ultra HD Copier 896,962.5$ 418,500$ 225,571.50$ 332,277.53$ 6,300,000.00$ 1,878,591.53$
PowerBook 98,665.9$ 346,500$ 186,763.50$ 275,111.51$ 2,079,000.00$ 912,320.88$
Zpad 224,240.6$ 2,583,000$ 1,392,237.00$ 2,050,831.23$ 4,725,000.00$ 6,255,588.86$
Total 2,638,351$ 4,676,400$ 2,520,580$ 3,712,933$ 26,941,500$ 13,569,384$

17
In comparing the total annual cost of non-conference container vessel service to the annual budget for
transportation, only three out of four products can be accommodated even though the total annual cost for all
four products is under budget by $13,372,116. Transporting the ZPads on nonconference cargo container
vessels exceeds the allocated budget for this product by $1,530,588.86, which leads to a scoring of 4.3 out of 5
for the criterion of total cost.
Customer Service. Nonconference container vessel services Megabox bi-weekly, and there are several
uncontrollable factors in this mode of transportation that can affect customer service. These include the effects
of weather, port capacities, port authorities, governmental regulation, port labor status and security of cargo.
The effect of any of these factors on the quality of Megabox’s customer service could be considered risks aside
from those listed in the next paragraph. Transit times for nonconference sea shipments are divided between
container loads (CL) and less-than-container-loads (LCL), with 40.5 days for CL and 49.5 days for LCL. It is
important to remember the shift of the 90/10% division between CL and LCL shipments here, which would
mean that only 10% of the shipments would be in transit for 49.5 days. However, transit times in combination
with services only being available every two weeks, would create frequent delays in replenishment of inventory,
and is not in compliance with the wishes of the distributor. In the criterion of customer service, the
nonconference sea service is given a 2 out of 5.
Risks and Manageability of Alternative. Risks to consider in nonconference sea shipments are directly
related to levels of customer service. Aside from the risks listed under the criterion of customer service, there
are risks of volume demand fluctuations with the lack of economic policy in Zumburu, and their reliance on oil
revenue. The manageability of these risks depend on the complexity of each situation. For the score of risk and
manageability, nonconference container vessel service was given a 2.8 out of 5, primarily for the risk of
managing semi-monthly shipments.
Required Commitment to Mode. For nonconference container vessel service, there is no required
commitment to the mode, however there is a volume limitation to 20 FEUs. The positive side of no commitment

18
to this particular mode is the flexibility afforded to Megabox to alternate between modes if necessary for
shipments. In the category of required commitment to mode, nonconference container vessel service was scored
with 4 out of 5.
Table 5r displays the final scoring of 3.245 for the alternative of nonconference container vessel service.
Table 5r
Recommendation
We recommend that Megabox divide the shipments of their products by two modes; the shipping of
Powerbooks and ZPads by scheduled air with charter overflow and 3D Printers and HD Copiers by
nonconference container vessel service.
Due to the customer service desires of the distributor in Zumburu, we recommend that all products that
can possibly be transported by air, should be. Transit times are shorter which would be in direct compliance
with the distributor’s wishes for small, frequent shipments. As we were considering a recommendation, the first
criterion evaluated was the amount of the products that could be transported by air. The reason why we do not
advice for the use of contract air cargo services as an alternative, is because of several cost factors that make
this option infeasible. The total annual cost is $4,519,631.44 over budget, and the only product that can be
serviced within budget (Powerbooks), does not meet the minimum weekly load requirement of 4000 ft^3.
Combining all these factors with this 12-month commitment, entering the contract is highly ill-advised.
Therefore, we recommend using scheduled air with charter overflow, for the two products that can be shipped
via this mode within budget: Powerbooks and ZPads.
Table 6a below compares the budgetary analysis for both air alternatives.
Risk 2.8 15% 0.42
Total 100% 3.245

19
Table 6a
This leaves the last two items that cannot be serviced via air cargo flights, 3D Printers and HD Copiers.
In considering the use of sea cargo service, there are the options of conference container vessel service and
nonconference container vessel service. Conference container vessel service is not recommended for the
distribution of loads between CL and LCL shipments. The division of 70/30% means that 30% of Megabox’s
products will be in transit for 49.5 days on LCL, as opposed to nonconference service, where the division is
90/10%, leading with a transit time efficiency of 20%. Transit time efficiency, coupled with the savings gained
through the selection of nonconference container vessel services, is why we recommend transporting the two
remaining products aboard nonconference container vessels. (Table 6b compares the LCL load distribution
between both sea alternatives.)
Table 6b
-Bi-
Modal:
Scheduled Air Cargo/NonconferenceContainerVesselServices
Budget Comparison Annual Scheduled Air Contract Air
Budget Total Cost to Megabox Total Cost to Megabox
3D Printer 13,839,000$ 16,709,718.06$ 16,709,593.50$
Ultra HD Copier 6,300,480$ 8,568,091.24$ 10,207,397.47$
PowerBook 2,079,000$ 435,130.99$ 1,414,224.49$
Zpad 4,725,000$ 2,845,377.27$ 4,746,733.77$
Total 26,943,480$ 28,558,317.56$ 33,077,949$
Conference Container
Loads CL LCL CL LCL CL LCL CL LCL
3D Printer 735 315 1,313 563 656 281 525 225
Ultra HD Copier 630 270 893 383 525 225 578 248
PowerBook 788 338 1,575 675 893 383 788 338
Zpad 1,628 698 2,888 1,238 2,310 990 2,363 1,013
Total Yearly 45,360 19,440 80,010 34,290 52,605 22,545 51,030 21,870
Total LCL yearly 98,145
Loads CL LCL CL LCL CL LCL CL LCL
3D Printer 945 105 1,688 188 844 94 675 75
Ultra HD Copier 810 90 1,148 128 675 75 743 83
PowerBook 1,013 113 2,025 225 1,148 128 1,013 113
Zpad 2,093 233 3,713 413 2,970 330 3,038 338
Total Yearly 58,320 6,480 102,870 11,430 67,635 7,515 65,610 7,290
Total LCL yearly 32,715
QT1 QT2 QT3 QT4
QT1 QT2 QT3 QT4

20
Total Cost Analysis. Scheduled air cargo services with charter overflow offers flights three times a
week with a volume restriction of 3000ft^3 on scheduled flights. Any cargo needed movement over 3000ft^3 is
allocated to charter air cargo overflow at an increased rate of 20%. In comparing the actual loads shipped of
Powerbooks and Zpads yearly (Table 6c) to the volume restriction per week on scheduled air, there is a yearly
overflow into charter air services of 4,500ft^3 accumulated from the last three quarters of ZPad shipments.
Table 6c
Non-conference container vessel shipments services Megabox bi-weekly using 20 FEU containers. It is not
limited by volume and it is offered at a 15% discount over conference rates. Table 6d below displays the load
distribution quarterly for 3D Printers and HD Copiers shipped via nonconference sea vessels.
Table 6d
Total direct shipping costs to Megabox yearly for using scheduled air cargo services for Powerbooks and Zpads,
and nonconference container vessel services for 3D Printers and HD Copiers is represented in Table 6e below.
These costs include everything Megabox is responsible for under the Incoterms DAT Port of Zumburu: all
Contract- Air QRT 1 QRT 2 QRT 3 QRT 4 TOTAL
Power Book 1,125 2,250 1,275 1,125 5,775
Z-pad 2,325 4,125 3,300 3,375 13,125
Total 3,450 6,375 4,575 4,500 18,900
Loads CL LCL CL LCL
3D Printer 945 105 1,688 188
Ultra HD Copier 810 90 1,148 128
Total 1,755 195 2,835 315
Loads CL LCL CL LCL
3D Printer 844 94 675 75
Ultra HD Copier 675 75 743 83
Total 1,519 169 1,418 158
QT1 QT2
QT3 QT4

21
transportation before arriving to the port of destination, packing/unpacking, wharfage, freight movement costs,
documentation, and insurance. Total yearly transportation costs to Megabox is $9,681,982.73, which is a
savings of $17,259,517.27. The scoring of total cost criterion for the recommendation of scheduled air cargo
and nonconference container vessel services was given a 4.7 out of 5, for the ability to transport all four of
Megabox’s products with major savings to the allocated budget.
Table 6e
Customer Service. Scheduled air cargo services with charter overflow offers flights three times a week
with a volume restriction of 3000ft^3 on scheduled flights. Any cargo needed movement over 3000ft^3 is
allocated to charter air cargo overflow. Total transit time for air cargo services is 11 days, and in combination
with flights three times a week, scheduled air cargo is going to be in agreement with the wishes of the
distributor in Zumburu. Non-conference container vessel shipments services Megabox bi-weekly using 20 FEU
containers, with a CL and LCL distribution rate of 90/10%; meaning that 90% of the shipments remain in transit
for 40.5 days, and 10% for 49.5 days. This is not in agreement with what the distributor desires to accomplish
with his inventory management, however, this option is more efficient in comparison to conference container
vessel services which has a distribution of 70/30%. It has already been established that 3D Printers and HD
Copiers cannot be viably transported via air cargo services (budgetary constraints), therefore we recommend
using nonconference sea vessel services to obtain a slightly higher quality of customer service. In the evaluation
Scheduled Air QTR1 QTR2 QTR3 QTR4
PowerBook 1125 2250 1275 1125 2,079,000$ 435,130.99$
Zpad 2325 4125 3300 3375 4,725,000$ 2,845,377.27$
Total 6,804,000$ 3,280,508.26$
Non Conference Container QTR1 QTR2 QTR3 QTR4
Loads
3D Printer 1050 1875 937.5 750 13,837,500$ 4,522,882.93$
Ultra HD Copier 900 1275 750 825 6,300,000$ 1,878,591.53$
Total 20,137,500$ 6,401,474.46$
Total yearly cost 26,941,500$ 9,681,982.73$
Budget Total Cost to Megabox
Loads
Budget Total Cost to Megabox
Loads

22
of customer service criterion for the recommendation of scheduled air cargo and nonconference container vessel
services, a score of 3.5 out of 5.
Risks and Manageability of Recommendation. Some risks associated with scheduled air cargo is
insufficient space available for Megabox’s shipments which results in the usage of charter overflow, at a higher
rate of 20%. Risks to consider in nonconference sea shipments are the several uncontrollable factors in this
mode of transportation that can affect reliability of service: the effects of weather, port capacities, port
authorities, governmental regulation, port labor status and security of cargo. Manageability of the bi-modal
recommendation is facilitated by the division of product shipments. The risk of insufficient space on scheduled
air cargo service is lessened by the selection of the two Megabox products that incur less unit demand. The
manageability of nonconference sea vessel shipments is enabled by the annual budget savings acquired through
this bi-modal recommendation; it provides the necessary monetary flexibility to handle these uncontrollable
factors. For the criteria of risks and manageability of the recommendation, a score of 3.7 out of 5.
Required Commitment to Mode. In both modal selections of scheduled air cargo and nonconference
container vessel services, there is no required commitment to mode, which provides Megabox the flexibility of
switching modes of transportation in the event of a disruption in distribution. There are volume constraints in
each modal option (a limit of 3,000ft^3 a week for scheduled air with charter overflow, and 20 FEU container
usage for nonconference sea vessel), however these constraints do not hinder Megabox’s ability to fulfill
volume necessities via these modes, because of the division made between the distribution of each product
based on the most advantageous alternative. The criterion of required commitment to mode is scored with a 4
out of 5, given the fact that no commitment to mode is required, and all volume constraints can be easily met.
Table 6f below summarizes the total scored evaluation of 4.03 for the recommendation of bi-modal shipments
using scheduled air cargo services for Powerbooks and Zpads, while using nonconference container vessel
services for 3D Printers and HD Copiers.

23
Table 6f
In a couple last comparisons, Figures 6a and 6b are the final weighted scores assigned to each alternative
individual versus the weighted score of the final recommendation.
Figure 6a
Risk 3.7 15% 0.555
Customer Service 3.5 25% 0.875
Total 100% 4.03

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