FraserD_SYS6001_final

Douglas Fraser SYS6001 Individual Final Exam: Design Your Own Case 6 June 2012 On my honor, I pledge that I have neither given nor received help on this assignment.

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FraserD_SYS6001_final To buy or not to buy? The client, a 28 year man, is looking for an alternative vehicle for his daily commute. He currently drives approximately 40 miles every day from Albany to downtown Schenectady, NY and generally goes rock climbing on the weekends in New Paltz. Currently, he owns a 1996 GMC SUV with low fuel efficiency, poor city handling, and a broken air conditioning system. He prefers crossover SUVs with manual transmission, and does not want to spend more than $25,000 on a new vehicle. Beyond sticker price, his top priorities are: 1. Fuel economy of at least 20mpg 2. Off road and winter driving capability, since Albany averages about 60 inches of snow per year and average temperatures below freezing between December and March. Develop and rank viable alternatives that meet the client's criteria. Should the client buy a new car? Possible Online Resources: www.edmunds.com www.cars.com www.iihc.org

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FraserD_SYS6001_final Teaching notes: 1. Logistics of the case: Timing of Case: during the Decision Analysis phase of SYS6001 Duration: 60-90min Most likely time breakdown (assuming linear; total time may be shorter if worked concurrently) Storming and Norming: about 15-20 minutes (may be longer depending on group dynamics) Research and alternative development 15-20 minutes Utility and Value model: 10-15 minutes Cost analysis and other options: 10-20 Resources: at least on laptop per team, working knowledge of Excel, access to internet 2. Case goals: This case allows the teams to research, develop, and rank alternatives given a real world situation. The team can use the various methods used in decision analysis (simple dominance, rate and weight, etc.) to develop a recommendation to the client. Additionally, the problem is open ended enough that other options beyond a new car solution should be considered, such as moving closer to work and renting a car for long trips. Therefore, the team should also consider cost, such as cost to own or cost factors in their analysis. Although the case problem was designed with a short deadline, it could be given as a homework problem in which more analysis was expected. 3. Partial solution: The following charts provide a partial solution. The criteria are restrictive enough that a relatively small set of viable new car alternatives meet all priorities. A quick filtered search on www.edmunds.com produced eight viable alternatives, five with manual transmission options.

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The entire model took about 30 minutes to create, starting with the search of alternatives online, filtering based on the client's criteria, and developing the simple metric value model with linear utility functions. Assuming that the team has a member with at least average Excel skills, the team should be able to produce this in about the same time. Possible pitfalls include debating the problem or researching specific data for too long and not pushing through all the steps in the allotted amount of time.
city Jeep Liberty SUV Toyota RAV4 SUV Dodge Nitro SUV Jeep Wrangler SUV Suzuki Grand Vitara SUV Jeep Compass SUV Mitsubishi Outlander Sport SUV jeep patriot high low linear utility function 16 22 16 17 19 23 24 23 24 16 hwy 22 28 22 21 26 29 31 29 31 21 price rating 23395 22650 22245 22045 19499 19295 18795 15995 23395 15995 AWD 4.3 4.1 4.4 4.4 4.4 4.7 4.7 4.5 4.7 4.1 0 0 0 1 1 1 1 1 1 0

utility functions city Jeep Liberty SUV Toyota RAV4 SUV Dodge Nitro SUV Jeep Wrangler SUV Suzuki Grand Vitara SUV Jeep Compass SUV Mitsubishi Outlander Sport SUV jeep patriot

hwy 0 0.75 0 0.125 0.375 0.875 1 0.875 0.1 0.7 0.1 0 0.5 0.8 1 0.8

price

rating AWD 0 0.333333 0.100676 0 0.155405 0.5 0.182432 0.5 0.526486 0.5 0.554054 1 0.621622 1 1 0.666667

0 0 0 1 1 1 1 1

metric priorities weights city Jeep Liberty SUV Toyota RAV4 SUV Dodge Nitro SUV Jeep Wrangler SUV Suzuki Grand Vitara SUV Jeep Compass SUV Mitsubishi Outlander Sport SUV jeep patriot

3 3 5 1 2 0.214285714 0.214286 0.357143 0.071429 0.142857 hwy price rating AWD 0.021429 0 0.02381 0 0.15 0.035956 0 0 0.021429 0.055502 0.035714 0 0 0.065154 0.035714 0.142857 0.107143 0.188031 0.035714 0.142857 0.171429 0.197876 0.071429 0.142857 0.214286 0.222008 0.071429 0.142857 0.171429 0.357143 0.047619 0.142857

14

0 0.160714286 0 0.026785714 0.080357143 0.1875 0.214285714 0.1875

0.045238 0.34667 0.112645 0.270512 0.554102 0.771091 0.864865 0.906548

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FraserD_SYS6001_final Given the metric utility functions, the team should be able to quickly see that there is no single dominant alternative - although the Mitsubishi alternative is almost dominant in all chosen categories. Overall, given equal metric weighting, there are three close front runners that could be recommended to the client.

If sensitivity analysis is an additional learning objective, a simple Monte Carlo analysis could be set up varying the metric weights to find the associated sensitivities. Time permitting, the team could also conduct a simple cost analysis to determine if buying a new car is the most cost effective solution. Given another 15 minutes, the team could figure out that a "total cost to own" metric is available for each alternative. If total cost is substituted for price as a metric, the alternative rank order is Cost to Own (5yr) Price 5 year cost unchanged. Jeep Liberty SUV 41795 23395 65190
Toyota RAV4 SUV Dodge Nitro SUV Jeep Wrangler SUV Suzuki Grand Vitara SUV Jeep Compass SUV Mitsubishi Outlander Sport SUV jeep patriot 37769 48626 41795 38909 37876 40863 35855 22650 22245 22045 19499 19295 18795 15995 60419 70871 63840 58408 57171 59658 51850

Ultimately, the team should compare the overall costs of the baseline with the alternative set. The client's current car, although in need of repairs, does meet his cargo and winter driving criteria, and has significantly lower insurance costs (mostly due to the age and low value of the truck). The chart below gives a quick comparison between a rough estimate on the likely maintenance costs (triangle probability distributions based on www.edmunds.com baseline vehicle data) of keeping the baseline versus the new car cost.

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Likelihood within 5 years Remarks 1.00 needs complete A/C repair Occasional problems on this vehicle are failures of the Transmission Valve Body (automatic transmission only), the Front Axle Actuator (4WD models only) and the Transfer Case Encoder Motor Assembly (4WD models only). Assumed 50% 0.54 probability based on mileage and age assume 30% failure rate based on "occasional" 0.31 problems 0.24 brakes have @ 20K miles; Common problems on this vehicle are failures of the Fuel Pump, Fuel Injectors, Fuel Pressure Regulator and the Exhaust Gas Recirculation (EGR) 0.36 Valve Passages. 1.00 $800 per year for 5 years Assume 15K miles (estimate based on commute and road trips), 15mpg, and $4/gal Min cost Average cost Max cost

Baseline maintenance new A/C

Cost $1,500

Source Client

transmission repair transmission replace brakes

$400 $2,000 $400

Edmunds.com Edmunds.com Edmunds.com

fuel pump/fuel injectors Insurance fuel cost 5 year likely cost

$500 $4,000 $4,000 $10,621

Edmunds.com Client

New Car cost $43,367 based on price and cost to own

$9,932 $10,470 $10,983

Given the disparity in the on the costs to own, the team should recommend that the client reconsider his option to buying a new car if cost is to be minimized. Additionally, there are other possible solutions to the client's commuting problem, such as moving closer to his work location and walk or bike to work, or buying a small reliable used car and carpool with other climbers for road trips. The team could quickly find online that there are a number of locations and apartment/condo options that are significantly closer than the client's current residence in Albany. The list below represents a small fraction of the apartments near the client's worksite developed from a quick apartment search near the client's workplace. If the client is open to the idea of moving, he could live within a leisurely ten minute walk from work.
Schenectady apartments Name Cost Barney Square Apartments Bedrooms: Studio/Eff - 2 $525 - $875 Stockade View Apartments Bedrooms: 1-2 $650 - $925 Sheridan Village Bedrooms: 1-2 $805 - $880 Hampshire Apartments Bedrooms: Studio/Eff - 2 $725 - $990 Court Royale 2 Bedroom $885 - $885 Graystone Apartments 2 Bedroom $895 - $910 Serafini Apartments Bedrooms: 1-3 $585 - $1,665 Niskayuna Gardens Bedrooms: 1-2 $844 - $1,069 Hillcrest Village Bedrooms: 1-3 $795 - $1,035 Van Antwerp Village Apartments Bedrooms: 1-2 $969 - $1,144 105 Long Pond Road Bedrooms: 1-2 $905 - $1,370 Distance from Work 0.3 miles 0.4 miles 1.6 miles 1.9 miles 3.2 miles 3.2 miles 6.0 miles 2.0 miles 2.3 miles 2.5 miles

Lastly, there are significant risks involved in keeping the baseline beyond costs. The baseline car is old and catastrophic failure is much more likely than with a new car. The maintenance costs of the baseline could easily exceed the overall value of the vehicle itself in five years, whereas the new car will still retain some resale value (although the depreciation rates vary by make and model).

4. Resources 2.6 miles Excel_Basic Tips_Tricks.pdf, UVA Collab resources Excel-quick-reference-2010.pdf, UVA Collab resources Books: How to Conduct Systems Analysis, Chapters, 4, 5 and 6 (Gibson, Scherer, Gibson), 2007 Lecture Notes: Marginal Rates Car-Buying Example, WT Scherer, SYS 6001 Decision Analysis/Tradeoff Analysis, WT Scherer, SYS 6001

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FraserD_SYS6001_final Additional Teaching Notes: 1. Determine Goals of System. The goal of the system is to transport the passengers and cargo efficiently, safely, and within cost constraints. There are a variety of possible solutions, and "crossover" SUVs are part of one solution set. Within this tradespace, the goal is to maximize the cost, performance, and payload of the vehicle. 2. Assumptions Job location, residency, and income (Albany, NY, 20 mile commute, and ~70K) are steady No injuries to preclude lifestyle (will continue rockclimbing) Upper cost bound is inflexible Initial metric utility functions are linear Can only keep one vehicle (no extra storage). Will trade-in if possible Telecommuting is not possible Plans to keep vehicle for at least five years Plan on traveling with one passenger for climbing trips, requiring approximately double the cargo space (30 ft^3) 3. Establish Initial Screening Criteria for Alternative Candidates. In order to reduce the number of candidates, a pre-screening assessment was conducted. The following subfactors were used to screen for viable candidates: Minimum Storage capacity greater than 30 cu ft Hwy Fuel economy greater than 25 Cost less than 26K Working Air Conditioning Minimum of "good" Safety Rating by Insurance Institute for Highway Safety (www.IIHC.org) Minimum of 5 passengers MP3 player and Bluetooth 4. Develop Alternative Solutions. The following alternative list was developed using the pre-screening criteria. The criteria filtered out the majority of large SUVs, four-wheel drive, as well as the baseline option (both due to the low MPG as well as lack of a working A/C). Within the list, it also guaranteed the clients minimum criteria were met.

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2012 Jeep Compass 2012 Volkswagen Jetta SE 2.5L 2012 Toyota Matrix S 2013 Mitsubishi Outlander SE 2012 Dodge Grand Caravan SE/AVP 2012 Chevrolet Equinox 1LT 2013 Ford Escape 2012 Volkswagen Tiguan 2012 Nissan Rogue 2012 Ford Flex SE 2012 Mitsubishi Outlander ES 2012 Kia Sportage 2012 Toyota RAV4 Base 2012 Hyundai Tuscon 2012 Honda CR-V LX 2012 Hyundai Tuscon 2012 Kia Sorento LX 2012 Jeep Patriot 2012 Dodge Journey SXT 2012 GMC Terrain 2012 Suburu outback 2.5i wagon

In order to determine the best set of solutions, we developed the following Goals Hierarchy based on client input into his lifestyle and priorities. Since all viable alternatives met the minimum criteria (high safety rating, MP3 player, etc.) we are able to simplify the Goals Hierarchy and omit these since they would not differentiate between the alternatives.

Figure 1: Recommended Vehicle Goals Hierarchy

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The client's initial priorities were as follows: Price > cargo space > fuel economy = performance With the client's priorities as input, the following initial metric weights were developed and normalized:
Weighting FWD/AWD Total List Price ave (50/50) fuel econ Roof rails Engine block heater 0-60mph (estimated) Luggage volume (max) turning radius Safety "cost to own" (5yr total) 0.10 0.17 0.12 0.03 0.03 0.10 0.14 0.07 0.07 0.16 Rationale Performance is fourth priority Cost is most important metric Fuel economy is third priority After market add-ons available Important in winter, but after market add-on available Performance is fourth priority Cargo space is second priority Driving is mostly on highways Safety is lower priority since every alternative has high safety rating Slightly less important that initial cost

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FraserD_SYS6001_final 5. Rank Alternative Candidates.

Based on the model's results, the three best alternatives for the client are the Honda CR-V AWD, Kia Sportage AWD, and the Jeep Patriot. 6. Sensitivity analysis A Monte Carlo analysis was also conducted on the metric sensitivities. A 1000 event sample set was run, varying all ten of the metrics.

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The following chart displays the top sensitivities. Based on the analysis, turning radius and list price had the largest influence on the alternative scores. If the client

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FraserD_SYS6001_final 7. Cost analysis Another factor the client must make is the decision to buy or continue using the current vehicle. There are a number of hidden costs that the client must consider, including additional insurance costs (current insurance: $790/yr, new car ave: ~1300/year), depreciation, and taxes. Furthermore, the clients current vehicle meets his needs with respect to winter driving (AWD) and cargo space (>70 cubic feet). If the client is most concerned about gas mileage, it will take approximately

Baseline economic cost: despite the initial elimination of the baseline option Buy used? Initial research into local used car market shows most used versions of this SUV set are priced well above the blue book value. Hidden costs Sales tax (immediate devalue) (max: 1300, min:1107 average 1200) cost of insurance (current - 790 versus new - 1300) insurance is generally based on cost new, age, cost to repair resale value Additional considerations Does having an older car prevent you from doing something? Older cars are more risky in long trips Transmission and other engine maintenance on GMC in future Value in return? Maintenance doesnt improve value of car Honda accord - repair parts need to be imported (same with Mercedes and most other foreign cars). Knowledge of own car's history Decision point

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FraserD_SYS6001_final Insurance company cost to repair Nat'l hwy safety administration Counterpart insurance org (safety reports and damage assess Other Options Move closer to work and bike/walk, rent a car for long trips Considering the disparity between the baseline and new car total five year costs, other options beyond a "buy/don't buy" decision could be entertained. For example, the client could move closer to his work location and walk or bike to work.

There are a number of locations and apartment/condo options that are significantly closer than the client's current residence. The list below represent a small fraction of the apartments near the client's worksite.
Schenectady apartments Name Cost Barney Square Apartments Bedrooms: Studio/Eff - 2 $525 - $875 Stockade View Apartments Bedrooms: 1-2 $650 - $925 Sheridan Village Bedrooms: 1-2 $805 - $880 Hampshire Apartments Bedrooms: Studio/Eff - 2 $725 - $990 Court Royale 2 Bedroom $885 - $885 Graystone Apartments 2 Bedroom $895 - $910 Serafini Apartments Bedrooms: 1-3 $585 - $1,665 Niskayuna Gardens Bedrooms: 1-2 $844 - $1,069 Hillcrest Village Bedrooms: 1-3 $795 - $1,035 Van Antwerp Village Apartments Bedrooms: 1-2 $969 - $1,144 105 Long Pond Road Bedrooms: 1-2 $905 - $1,370 Distance from Work 0.3 miles 0.4 miles 1.6 miles 1.9 miles 3.2 miles 3.2 miles 6.0 miles 2.0 miles 2.3 miles 2.5 miles 2.6 miles

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