X Airline has employees who reside and work in the Atlanta Hartfield area. Employees who work at the airport locations must park in a designated employee lot. There is currently a bus service offered by an independent operator exclusively for X Airline Airways.
To reduce costs X Airline is considering canceling the current contract with the independent bus service and lease a fleet of buses for employee transportation. Should X Airline continue to outsource the employee transportation needs or invest in a fleet of buses to control costs?
Provide a detailed analyses.
Information pertaining to this project is as follows:
Current Bus Service Cost – $80,000.00/month
Bus Lease – $1200.00/month
Service Required – 24hr x 7 days
Bus Driver Total Compensation – $40,000.00/annual
Maintenance & Fuel Costs (all buses) – $10,000.00/month
Insurance Costs (all buses) – $1000.00
Independent Bus Capacity – 20 employees
X Airline Bus Capacity – 30 employees
Travel time, (the trip is always circular as follows)
Parking Lot to Line Maintenance – 12-14 Mins
Line Maintenance to Crew Lounge – 5-6 Mins
Crew Lounge to Parking Lot – 7-8 Mins
Employees should not wait to get transportation to get to work more than 10 mins
Employees Arrive for work to pick up bus on the following schedule
5 – 6am, 2-4 employees every minute
6 – 7am, 3-5 employees every minute
7 – 8am, 4-6 employees every minute
8am – 3 pm 3-5 employees every minute
3 – 4pm, 2 employees every minute
4 – 5pm, 3 employees every minute
6 – 7pm, 2 employees every minute
All other times employees arrive at a rate of 1-2 every minute
30% of employees work at line maintenance and will leave the bus at Line Maintenance.
70% of employees are crew and need to go to crew lounge.
The buses move in a circular way starting at parking lot, then to maintenance then go to crew lounge and back to parking lot. Each stop takes 1-2 minutes.
Analyze this case with your recommendations.