QUESTION $2(20$ Marks$)$

$2\mathrm{.}1$ Critically examine the cost overruns experienced by Transwerk due to its aging fleet of locomotives and

passenger coaches. What strategic initiatives could the company adopt to efficiently manage these costs

without compromising on the quality and reliability of its rolling stock? Provide a detailed cost$-$benefit

analysis to support your recommendations, with a specific focus on root causes, strategic initiatives, and

cost benefit analysis. Assumptions can be made to support your recommendations.

$(15$ Marks$)$

$2\mathrm{.}2$ What are the cost$-$benefit implications of fleet modernization, preventive maintenance, and localized

sourcing for Transwerk, assuming the following:

$$ Fleet modernization: $$10$ million upfront but expected to reduce maintenance costs by $30\%$ annually.

$$ Preventive maintenance: $$2$ million upfront and an annual running cost of $$500,000$ but expected to

reduce breakdown incidents by $40\%.$

$$ Localized sourcing: Increases material cost by $10\%$ but reduces downtime by $20\%.$