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136 CHAPTER 3 LINEAR PROGRAMMING: SENSITIVITY ANALYSIS AND INTERPRETATION OF SOLUTION

CASE PROBLEM 3 Truck Leasing Strategy

he Transportation Ministry is undertaking con- Short-term leases differ from long-term leases in that
T struction work relating to the excavation and site the short-term leasing plans include the cost of both a
preparation of a new rest area on a major highway. truck and a driver. Maintenance costs for short-term
The Ministry estimated that it would take four months leases also are paid by the leasing company. The
to perform the work and that ten, 12, 14 and eight following costs for each of the four months cover the
trucks would be needed in months one to four, lease of a truck and driver:
respectively. Length of Lease Cost per Month (E)
The Ministry currently has 20 trucks of the type
needed to perform the work on the new project. These 1 4 000
trucks were obtained last year when the Ministry signed 2 3 700
a long-term lease with a truck leasing company. 3 3 225
Although most of these trucks are currently being used 4 3 040
on existing jobs, the Ministry estimates that one truck
The Ministry would like to acquire a lease that
will be available for use on the new project in month 1,
would minimize the cost of meeting the monthly truck-
two trucks will be available in month 2, three trucks will
ing requirements for the new project, but the Ministry
beavailable inmonth3 and onetruckwillbeavailable in
also takes great pride in the fact that they have never
month 4. Thus, to complete the project, the Ministry will
laid off employees. The Ministry is committed to main-
have to lease additional trucks.
taining the ministry no lay off policy; that is, the Min-
The long-term leasing contract the Ministry has
istry will use its own drivers even if costs are higher.
incurs a monthly cost of E600 per truck. The Ministry
pays its truck drivers E20 an hour, and daily fuel
costs are approximately E100 per truck. All main- Managerial Report
tenance costs are paid by the leasing company. For
planning purposes the Ministry estimates that each Perform an analysis of the Ministry’s leasing problem
truck used on the new project will be operating eight and prepare a report that summarizes your findings.
hours a day, five days a week for approximately four Be sure to include information on and analysis of the
weeks each month. following items:
The Ministry does not believe that current business 1 the optimal leasing plan;
conditions justify committing to additional long-term
2 the costs associated with the optimal leasing plan;
leases. In discussing the short-term leasing possibil-
3 the cost for the Ministry to maintain its current
ities with the leasing company, the Ministry learned that
policy of no layoffs.
they can obtain short-term leases of one-four months.

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