Write a formal report that summarises your analysis

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Reference no: EM133764920

Case: Swift Shipping is a 20-year-old Glasgow-based clothing retailer specialising in next-day delivery of its affordable, stylish office attire for working women. Recently, Swift has struggled to maintain its competitive edge as more clothing brands focus on speedy shipping. Swift prides itself on using only local Scottish couriers for reliability. Lately, tensions between management and couriers' unions have increased. The possibility of postal strikes could severely impact Swift's shipments right before its busy season ramps up. Swift's Operations Manager must decide whether to ship orders now as usual via its Scottish couriers or wait to see if strikes occur. If Swift ships as normal and strikes happen, costs from delays and rerouting through England would total £60,000. If no strikes occur, regular Scottish shipping would run £4,000. If Swift postpones Scottish shipping pre-emptively, delay costs would hit £10,000 regardless of strikes. The Operations Manager knows Strikes could seriously impact the company's shipping capacity right before the busy season. But postponing shipping may upset customers expecting Swift's signature next-day delivery. She must carefully weigh the costs and benefits of potential actions based on the likelihood of strikes occurring. Let p equal the probability that strikes affect Swift's courier shipments.

a. For what values of p does Swift minimize expected total cost by postponing shipping?

Build a decision tree with trial values of p and determine the approximate probability p that minimises expected cost. [Consider using data table to determine EMV for various values of p] [6]

b. Suppose Swift pays £1000 to purchase strike likelihood data. Based on similar strike threats in the past, the company assesses that if there will be a strike, the information will predict a strike with probability 0.75, and if there will not be a strike, the information will predict no strike with probability 0.85. Provided that p=0.15, what strategy should Swift Shipping pursue to minimize its expected total cost? [8]

c. Using the analysis in Part B, find the EVI when p=0.15. Then use a data table to find EVI for p from 0.05 to 0.30 in increments of 0.05. and chart EVI versus p. [5]

d. Write a formal report that summarises your analysis and provides recommendations to the Operations Manager at Swift Shipping.

Reference no: EM133764920

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