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60 Decisions involving multiple objectives: SMART
(a) The manager is having difficulty in allocating weights to the
two benefit attributes. Assuming that the two weights sum to
100 and that mutual preference independence exists between
the attributes, perform a sensitivity analysis to show how the
design offering the highest value for aggregate benefits will
vary depending upon the weight which has been allocated to
‘environmental impact’.
(b) Eventually, the manager decides to allocate ‘environmental
impact’ a weight of 30 and ‘reliability’ a weight of 70. By plotting
the benefits and costs of the designs on a graph, identify the
designs which lie on the efficient frontier.
(c) The manager also decides that if he was offered a hypothetical
design which had the lowest reliability and the worst environmental
impact he would be prepared to pay $120 000 to convert
that design to one which had the best impact on the environment
but which still had the lowest level of reliability. Which
design should the manager choose?
(4) A British company has won an important contract to supply components
regularly to Poland. Four methods of transport are being
considered: (i) air, (ii) sea, (iii) road and ferry and (iv) rail and
ferry. The company’s distribution manager has identified four
relevant attributes for the decision: Punctuality, Safety of Cargo,
Convenience and Costs. She has also allocated weights of 30 to
punctuality, 60 to safety of cargo and 10 to convenience.
The manager then rated the performance of each form of transport
on the different attributes. The values she assigned are shown
below together with the estimated annual cost of using each form
of transport.
Form of transport Punctuality
Benefits
Safety Convenience Costs ($)
Air 100 70 60 150 000
Sea 0 60 80 90 000
Road and Ferry 60 0 100 40 000
Rail and Ferry 70 100 0 70 000
(a) Determine the form of transport which has the highest valued
overall benefits, assuming that mutual preference independence
exists between the attributes.