SECDON A [60 MARKS] Carphutly read the seenario below and antwer the questlons that follow. Strategle Cost Mansgement and Procurement Opbinization at Transwerk Background information Transwerk is a feading manufactume of ralway roling stock, coerating in the complex and compelitwe markot of South Africat Over the past year, the compary has been grappling wen significant cost overruns directly athributod to its aging fieet of locomotives and passenger cooches. Frequent broakdowns and the subsequent urgent repair needs have fed io a surge in the mainkensce budget. The situation is furber exacerbased by the unavailabilify of crifical mashrials, making the maintenunce programs not ony expensive but also inefficient. In eddibon is cost manapement chalenges, Transwek faces substantive issues within its procurement operations. Alack. of strabegic sosireing and poor vendor management have culmisated in supply chisin inefliciencies, inflating the overall operational costs. These challenges have had a ripple effect on tho teliabilify and availabdity of the company's tolling stock- Consecuenty, this impacts the brovder-South Ahican businets landscape and commuting public by compromising the quality and reficility of farl transportation. The mansgement of Transwerk is committed to undertaking a comprehensive review and subsequent coverhatil of its cost managoment and procurement frameworks. The primary aim is to restore profitability while also modernizing and stramling operitions worlions. Source: (Masiba: 2023) Answer ALL the questions in this section. QUESTION 1 (20 Marks) Evaluate the challenges faced by Transwerk in its procurenent process, which have led to supply chain inefficiences and increased operational costs. Develap a comprehensive procurement strategy tha! addresses these challenges and assess its potential impact on improving the company's overall cost. structure and operational efficiency. QUESTION 2 (20 Marks) 21 Critically examine the cost overnuns experienced by Transwerk due to its aging fleet of locomotves and passenger coaches. What strolegic initiatives could the company adopt to efficiently manage these costs (15 Marks) without compromising on the quality and reliability of its rolling stock? Provide a datailed 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 tecommendations. 2.2. What are the cost-benefit implications of fleet modemization, preventwe maintenance, and localized (5 Marks) sourcing for Transwerk, assuming the following: Fleet modernzation $10 million uplront but expected to reduce maintenance costs by 30% annually. Proventive maintenance $2 million upfront and an annual running cost of $500,000 but expected to reduce breal fown incidents by 40%. Localized sourcing: increases material cost by 10% but reduces downtime by 20%
