Sensitivity Analysis


Sensitivity analysis can and should play a key role in a transport modal choice decision. This technique allows a decision maker to explore how changes in key variables or factors affect a decision. In the modal choice analysis presented in the last chapter, there were a variety of assumptions about values for key variables, such as annual inventory carrying cost interest rate and safety stock requirements. Even if we make accurate assumptions about the values for these variables, it is likely that their values may change over our planning horizon. For example, freight rates change over time, as do interest rates and therefore the firm’s cost of capital and carrying cost rate. For this reason, it is ...

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