Chace Shipping (Abridged) Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Chace Shipping (Abridged) Case Study Solution

Comparison Analysis- Two Options

The comparisonanalysis of both alternative options has been performed in order to examine the best alternative available option out of suggested options along with using Key Decision Criteria (KDC) technique(Gomes, 2005).

The first option of Barley and oat shipment would generate significant revenues in future. But it should be noted down that the Chace generally shipped steels and occasionally shipped grains for developing strengthen relationship with Mid-East government. In addition to this, this alternative option would require modification in the form of steel cutting and welding, this entails extra expensesfor this shipment. With the help of this increased volume, Glory would be able to carry 16,000 tons of Barley and 6,000 tons of Oat in final, utilizing total capacity of 22,000, with the price charged per ton of $18 and $21.80 respectively, providing total expected revenue of $418,800. But if, the shipment would made without any modification, not including cutting and welding cost, then the expected revenue would be $18,800 and if modification would perform, then the expected revenue would be $3,800. (See appendix 1)

The second option of STC steel shipment would generate significant revenues in future only for first lowest bidder. On the other hand, for second lowest bidders, the analysis represent that it would incur loss in future. The analysis represents that after considering all the related expenses which includes operating expense of $400,000 and bond amount of $80,00, without incurring any penalty, the estimated net income from this cargo shipment would be $300,000- for first lowest bidder. But in case of second lowest bidder, the expected net loss of $50,000 would occur(See appendix 2).Thus, it could be concluded that in this steel shipment, only first bidder will earn significant profits.So, Chace should win the first lowest bidder status which is difficult to attain and the chances to win this bid is also very minimal and entails high risk possibilities. In addition to this, Chace want to maintain healthy relationship with STC for further non-public contracts. Chace is confident that he could win the bid at $35/ ton.

Recommendations

After evaluating both alternative options with respect to qualitative as well as quantitative analysis, it is recommended to Chace shipping that it should made contract with the International Grain Company for Barley and Oat shipment.Paul Franquemont desperately wanted that Chace accept this order. With the help of this increased volume, Glory would be able to carry 16,000 tons of Barley and 6,000 tons of Oat in final, utilizing total capacity of 22,000, with the price charged per ton of $18 and $21.80 respectively, providing total expected revenue of $418,800. The first option of Barley and oat shipment would generate $3,800 of net profit in future. In addition to this, it should be noted down that the Chace generally shipped steels and occasionally shipped grains for developing strengthen relationship with Mid-East government.

Conclusion

Chace Shipping Company was founded by William Chace who had bought a T-2 oil tanker for delivering fuel to the U.S. forces. From onward to 1992, William Chace succeed to brought more five freighters, which costed approximately $520,000.The fourth T-2 tanker was named as “Glory”, which could carry approximately 1,316,000 cu. ft. or 22,000.He has to decide upon what to do with Glory for the next two months. The detailed quantity analysis has been performed in order to evaluate the best attractive option available for Chace with respect to Glory. It is recommended to Chace shipping that it should made contract with the International Grain Company for Barley and Oat shipment. The first option of Barley and oat shipment would generate $3,800 of net profit in future.................................

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