Question description

 

 

 

 

6.a.

Why might Over-land use an independent operator if

the variable cost per mile is higher than if the company

had purchased a rig and hired a driver?

b.

At what point would management be indifferent

between the scenarios illustrated in questions 4 and 5?

Based on your analysis, would you recommend adding

capacity by purchasing an additional rig or by utilizing

the services of an independent contractor? Why?

7.

The case references J. B. Hunt and Landstar as two

publicly traded companies that have two very different

cost structures. This is true because the companies

practice two different philosophies for using (or not

using) owner operators (e.g., independent contractors).

Speculate about the company that may produce higher

profits in periods of high economic demand. Why?

Speculate about the company that may have a less risky

cost structure in poor economic times. Why?

8.

All organizations have the potential to perform work,

which is determined by the types of resources and the

organization’s capacity. Effective use of resources can be

critical to a firm in any competitive market. In their efforts

to efficiently use capacity, managers may ask questions such

as: What portion of the available capacity is in use? Of the

capacity in use, what portion is used productively? How can

we increase the productive use of capacity? Why is a portion

of available capacity not in use? Can we eliminate unused

capacity? Over-land’s management is no different. In fact,

management is not exactly clear about how to view capacity.

Discuss the challenges that Over-land’s management faces

with defining and managing capacity. Consider various

definitions of capacity, such as theoretical, practical, normal,

and actual capacity. Based on the facts presented in the case,

prepare an estimate of capacity for Over-land (assuming one

driver per rig without slip seating or team driving)