Strategic Cost Management and Procurement Optimization at Transwerk

Background Information

Transwerk is a leading manufacturer of railway rolling stock, operating in the complex and competitive market of South

Africa. Over the past year, the company has been grappling with significant cost overruns directly attributed to its aging

fleet of locomotives and passenger coaches. Frequent breakdowns and the subsequent urgent repair needs have led to a

surge in the maintenance budget. The situation is further exacerbated by the unavailability of critical materials, making

the maintenance programs not only expensive but also inefficient.

In addition to cost management challenges, Transwerk faces substantive issues within its procurement operations. A lack

of strategic sourcing and poor vendor management have culminated in supply chain inefficiencies, inflating the overall

operational costs. These challenges have had a ripple effect on the reliability and availability of the company's rolling

stock. Consequently, this impacts the broader South African business landscape and commuting public by compromising

the quality and reliability of rail transportation.

The management of Transwerk is committed to undertaking a comprehensive review and subsequent overhaul of its cost

management and procurement frameworks. The primary aim is to restore profitability while also modernizing and

streamlining operational workflows.

Source: $($Masiba; $2023)$QUESTION $6$

$(20$ Marks$)$

$6\mathrm{.}1$ Describe the primary purpose of the plan cost in a project.

$(5$ Marks$)$

$6\mathrm{.}2$ Demonstrate how plan cost can address Transwerk Cost Management Issues.

$(5$ Marks$)$

$6\mathrm{.}3$ Examine current Transwerk challenges and explore the benefits of applying plan cost techniques.

$(5$ Marks$)$

$6\mathrm{.}4$ Conclude on the best practice that must be adopted by Transwerk.

$(5$ Marks$)$