The problem, in general terms:
At work, we're supposed to come up with an algorithm to split the expenses incurred during shipping when more than one order is being shipped on the same truck. Basically, we pay the trucking company a flat fee, and charge each customer a different amount for each order. We charge customers based on the
footage they take up, and the
distance they travel (in miles).
Say, for instance, we have four orders:
Order # Start End Miles Footage Revenue ======== ======= ============= ===== ======= ======= 1 Chicago -> Indianapolis 250 10 $200 2 Chicago -> Cleveland 400 20 $500 3 Chicago -> West Virginia 600 10 $400 4 Chicago -> New York 850 10 $600 Total Revenue: $1700 Payment Due to Driver: $1400 Consolidated Order Profit: $300 Order 1 Profit: ? Order 2 Profit: ? Order n...
These are example ratings.
Well, my theory was this:
1. Take the rate per mile 2. Take the rate per foot 3. Average the two
However, that seems braindead. Am I getting the true profit for each order this way?
Anna, Brad, and Cathy are sharing a truck on three orders. Anna's load is going 100 miles, and takes up 10 feet. Brad's load is going 200 miles, and takes up 20 feet. Cathy's load is going 300 miles, and takes up 20 feet.
Now...Do I take the total footage (50 ft.), and blindly smear that ratio of footage to determine the company's cost to ship that load for that order? Or...do I take each stop, understand that after 101 miles, Anna's 10 feet are no longer on the truck, and will raise the observed rate to ship the other two orders? This, in the long run, will protect salespeople like Cathy, who should be given a greater ratio (the last 100 miles, Cathy's load takes up 100% of the truck's load), and therefore, a higher commission.