Determine the form of transport

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Reference no: EM132461383

A British company has won an important contract to supply components regularly to Poland. Four methods of transport are being considered: (i) air, (ii) sea, (iii) road and ferry and (iv) rail and ferry. The company's distribution manager has identified four relevant attributes for the decision: Punctuality, Safety of Cargo, Convenience and Costs. She has also allocated weights of 30 to punctuality, 60 to safety of cargo and 10 to convenience. The manager then rated the performance of each form of transport on the different attributes. The values she assigned are shown below together with the estimated annual cost of using each form of transport.

Form of transport Punctuality Safety Convenience Costs($)

Air 100 70 60 150000

Sea 0 60 80 90000

Road and Ferry 60 0 100 40000

Rail and Ferry 70 100 0 70000

(a) Use SMART method to determine the form of transport which has the highest valued overall benefits, assuming that mutual preference independence exists between the attributes.

(b) For each form of transport, plot the value of overall benefits against costs and hence identify the forms of transport which lie on the efficient frontier.

(c) If the manager would be prepared to pay $70 000 per year to move from the least safe to the most safe form of transport (all else remaining equal), determine which alternative she should select.

Reference no: EM132461383

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