QUESTION 2 (20 Marks)

2.1 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.

2.2 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%.