Multi-attribute Decision Analysis

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Case study 1

A business firm is contemplating the installation of a material handling system, and two designs are being considered. The first design is an automated guided vehicle system (AGVS). The second design is a pallet conveyor system.

The estimated costing data for the two systems are shown below


AGVS(in thousands)                    Conveyor (in thousands)

Initial cost                                                      280                                                      360

Annual operating cost                                    50                                                         35


The estimated salvage values are


Year                                                  AGVS(in thousands)                    Conveyor (in thousands)

1                                                                    230                                                      300

2                                                                    185                                                      245

3                                                                    145                                                      200

4                                                                    110                                                      160

5                                                                    80                                                       125


A MARR of 10% is used.


  1. Using PV technique, determine the break-even value for the planning horizon, i.e the number of years where the costs of both systems are equal)


  1. If the company’s planning horizon is 4 years, which system should be used?