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forward, although only costs were paid for 1987. The imbalance
fee was calculated by netting the inbound and outbound shipments
and applying the cost plus 2 percent markup to the difference.
The imbalance cost factor was each company’s average cost of
delivery of packages of any weight and size within its respective
territories, determined annually. The imbalance fee was
calculated using shipment units without considering the weight of
any particular shipment.
In 1987, the U.S. Department of Transportation (DOT)
questioned whether the memorandum of agreement, as it existed
before 1987, adequately compensated DHL for the services
performed by DHL for DHLI/MNV. During due diligence for the 1990
and 1992 transactions, DHL management expressed doubt that the
cost plus 2 percent markup adequately compensated DHL for its
services to DHLI/MNV. Coopers also questioned whether the cost
allocation system accurately reflected the costs incurred by DHL
in delivering shipments for DHLI/MNV.
On average, more than one-third of the DHL network’s
international shipments emanated from or were delivered in the
United States, not including shipments that DHL transferred for
DHLI/MNV in transit from one foreign locale to another.
The DHL cost information models used to calculate the
imbalance fee and the transfer fee were developed by Bain in 1987
and were denominated “Product Line Profitability” (PLP) models.
DHLI also employed a model that was developed by Bain in 1989.
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