Activity 2: Application of SMART and Sensitivity Analysis

A UK company has won an important contract to supply automotive 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 three attributes for the decision:

Punctuality

Safety of cargo

Convenience

The manager has then rated the performance of each form of transport on the different attributes. The values she has assigned to each are shown in the table. She has allocated weights of 30 to punctuality, 60 to safety of cargo and 10 to convenience. She has also estimated the annual cost of using each form of transport:

1. Determine the form of transport that has the highest valued overall benefits.

2. For each form of transport, plot the value of overall benefits against costs and hence identify the forms of transport that lie on the efficient frontier.

3. Undertake a sensitivity analysis on the weight allocated to convenience. Refer to the videos shown in Lecture Eight if necessary.