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Tutorial: Zone of Negotiation How to set the upper and lower limits!!

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Presentation on theme: "Tutorial: Zone of Negotiation How to set the upper and lower limits!!"— Presentation transcript:

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2 Tutorial: Zone of Negotiation How to set the upper and lower limits!!

3 Situation Parka value in NYC = $100 Manufacturing Cost in Chicago = $35 Transportation Fixed Cost = $10 Transportation Variable Cost = $20 Full Capacity Excess Capacity

4 Situation Parka value in NYC = $100 Manufacturing Cost in Chicago = $35 Transportation Fixed Cost = $10 Transportation Variable Cost = $20 Full Capacity Excess Capacity Shipper Max So, most shipper can pay and still make a profit. Value – Mfg Cost = Max Trans Cost $100 - $35 = $65 is Max Trans Cost

5 Situation Parka value in NYC = $100 Manufacturing Cost in Chicago = $35 Transportation Fixed Cost = $10 Transportation Variable Cost = $20 Full Capacity Excess Capacity =$65 $65 Note: The top is the same regardless of the carriers capacity.

6 Situation Parka value in NYC = $100 Manufacturing Cost in Chicago = $35 Transportation Fixed Cost = $10 Transportation Variable Cost = $20 Full Capacity Excess Capacity Carrier Min This changes based on capacity Full Capacity = Total Cost (VC+FC) Excess Capacity = Variable Cost only

7 Situation Parka value in NYC = $100 Manufacturing Cost in Chicago = $35 Transportation Fixed Cost = $10 Transportation Variable Cost = $20 Full Capacity Excess Capacity Carrier Min TC = VC+FC 10+20=$30 VC $20

8 Situation Parka value in NYC = $100 Manufacturing Cost in Chicago = $35 Transportation Fixed Cost = $10 Transportation Variable Cost = $20 Full Capacity Excess Capacity TC = VC+FC 10+20=$30 VC $ =$65 $65

9 Situation Parka value in NYC = $100 Manufacturing Cost in Chicago = $35 Transportation Fixed Cost = $10 Transportation Variable Cost = $20 Backhaul???? Cost does matter in Negotiation +$0 $65


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