Based on the EMV done above, the optimum decision strategy based on the cost alone is to get the component from ARC solution and transport it via Land route.

Consider the calculations attached in Memo 1 to draw the conclusion in the above analysis

Sensitivity Analysis

Resale of new thrust reverser .

Considering the ‘Y’ as the number of years after which we are able to sell the newly purchased Thrust Reverser (Node B). As seen from Memo 2, the optimum decision strategy remains the same as long as ‘Y’ is equal or more than 2 years.

Probability of whether BCS component is fit or not

Consider the probability that the BCS component will fit is ‘p’ and then the probability that BCS component will not fit is (1-p) As seen from calculation done from Memo 3, The optimum decision strategy remains the same as long as p < 51.7 %. Since its mention that the probability that BCS component fits is 35% to 50%, the optimum decision remains the same.

Based on the sensitivity analysis done above, our optimum decision strategy doesn’t change unless the variables take unreasonable values.

However this optimum decision strategy is calculated based on cost alone, If we consider the reputation loss along with revenue for the Latin Airlines, then transporting the ARS solution component by land has a 20% chance of delaying the aircraft by 3 more days leading to significant loss in reputation of the Airlines.

Whereas transporting the ARS solution component by Air doesn’t have such of extending the delay and is 100% safe way of transport.

Considering the difference in the cost between transferring ARS solution component by Air and by Land, the cost difference is only $7659, which is very negligible.

So after considering the loss in revenue along with reputation for the Latin airlines, we suggest that the Optimum decision strategy will be to get the component from ARC solution and transport it via Air route.

Courtney from Study Moose

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