Why might Over-land use an independent operator if
the variable cost per mile is higher than if the company
had purchased a rig and hired a driver?
At what point would management be indifferent
between the scenarios illustrated in questions 4 and 5?
Based on your analysis, would you recommend adding
capacity by purchasing an additional rig or by utilizing
the services of an independent contractor? Why?
The case references J. B. Hunt and Landstar as two
publicly traded companies that have two very different
cost structures. This is true because the companies
practice two different philosophies for using (or not
using) owner operators (e.g., independent contractors).
Speculate about the company that may produce higher
profits in periods of high economic demand. Why?
Speculate about the company that may have a less risky
cost structure in poor economic times. Why?
All organizations have the potential to perform work,
which is determined by the types of resources and the
organization’s capacity. Effective use of resources can be
critical to a firm in any competitive market. In their efforts
to efficiently use capacity, managers may ask questions such
as: What portion of the available capacity is in use? Of the
capacity in use, what portion is used productively? How can
we increase the productive use of capacity? Why is a portion
of available capacity not in use? Can we eliminate unused
capacity? Over-land’s management is no different. In fact,
management is not exactly clear about how to view capacity.
Discuss the challenges that Over-land’s management faces
with defining and managing capacity. Consider various
definitions of capacity, such as theoretical, practical, normal,
and actual capacity. Based on the facts presented in the case,
prepare an estimate of capacity for Over-land (assuming one
driver per rig without slip seating or team driving)