Category: Uncategorized

W.6_Saud _ (NPV)

Posted on Tuesday 27 September 2016 22:45 pm by Saud Al Bahri

 

  1. Problem Definition

As we know, the value of money received today is worth more (assuming you can earn interest) than money received in the future.  Thus, money received in the future must be “discounted” to estimate its Present Value. NPV is Net Present Value is an evaluation method used to determine the overall value of a project.  NPV represents the value in today’s dollars of all future cash flows.  The figure below illustrates the idea.

 

download11111

Figure 1 Present value and Future value

 

For this blog; I will take a real case of getting a house loan from a local BANK amount of 60,000 RO (Buying a house) from the bank with interest rate of 0.68 % for 15 years and rent it. In this blog NPV will be used to find out the visibility of this project.

  1. Identify the Feasible Alternative

Either to go ahead with the project (the project is visible) or to cancel the project (the project is not visible).

  1. Selection Criteria

NPV >0   accept the project

NPV<0     reject the project

  1. Analysis and Comparison of the Alternative

npv-formula

The above equation [1]  is the one we used to calculate Present Value (PV) where :

PV:     Present Value

FV:     Future Value

i:         interest rate

n :       number of periods

The table below shows the inflow and out flow of the cash along the period of 15 years

table

Table 1 project cash flow

Where out flow is the monthly installment multiply by 12 to get it in a year paid to the bank, inflow is the money gained from renting the house.

 

  1. Selection of the Preferred Alternative

The NPV from this case is equal 51,269.77 OMR which indicate a green line to go ahead with this project.

  1. Performance Monitoring and the Post Evaluation of Result

As there will be a high uncertainty on estimating the   inflow calculations; using other techniques such as Delphi Technique with P (90) or any other method to have better estimation on  inflow rate. Inflation, Time value of Money and any other uncertainty is highly recommended to consider.

8.Reference

    1. How to Calculate Present Value Using Excel or a Financial Calculator, , Retrieved on 27 September 2016

    http://www.investinganswers.com/education/time-value-money/how-calculate-present-value-using-excel-or-financial-calculator-2138

     

    2.      How to Calculate Net Present Value (Npv) in Excel, Retrieved on 27 September 2016

    https://www.youtube.com/watch?v=hG68UMupJzs

    1. Lesson 1. Net Present Value Prof. Beatriz de Blas April 2006, Retrieved on 27 September 2016
      https://www.uam.es/personal_pdi/economicas/bdeblas/teaching/ucd/ecn134/lectures/slides1.pdf

W.5 _Saud_ Investment Decision Using Expected Monetary Value (EMV)

Posted on Wednesday 21 September 2016 23:00 pm by Saud Al Bahri

 

  1. Problem Recognition

The decision was made to run our own business of Decoration shop. This field of investment requires selecting the location of shop carefully as it will impact the expected profit significantly. We come up with two options: either gets a shop in a capital city which will cost around 50,000 RO or get a place in a hometown which will drop the initial investment to the half.  Expected monetary value will be used to decide which option to be considered. Taking in consideration the risk of market demand.

  1. Development the Feasible Alternative

For both options, expected status of project life economy will be taken in the account covering the cases of  Recession , stable economy, moderate growth and boom which will provide a comfortable decision on the right location of project.

The below criteria will be follow:

– Initial investment of the capital city place will be around 50,000 RO where the hometown place will cost 25,000 RO.

– The probability of the studied economy status will be as following:

  • Recession 10 %
  • Stable Economy 40%
  • Moderate Economy 30 %
  • Boom 20 %
  1. Development of the Outcome for Alternative

Expected monetary value will be calculated for each option to decide which to be considered.

  1. Selection of Criteria

Option with highest EMV will be selected.

  1. Analysis and Comparison of the Alternative

Decision chart created for the alternatives in figure-1 to decide the option with highest EMV:

pmp

Figure-1 Decision chart for alternatives

 

  1. Selection of the Preferred Alternative

From decision chart the first option which recommends selecting the capital city to get your decoration shop. This option is considered because it has the highest EMV.

  1. Performance Monitoring and the Post Evaluation of Result

Second option is still valid when consider the lowest investment at the initial stage of project till the target growth reach the level that allow to the expansion of  project.

  1. References:
  • Expected Monetary Value EMV: Definition & Example, retrieved on Sep 21, 2016

http://www.statisticshowto.com/expected-monetary-value-emv/

  • PMP | EMV & Decision Tree Analysis| Project Risk Management | Lesson 11 | Part 6 , retrieved on Sep 21, 2016

https://www.youtube.com/watch?v=Uz5iWjOP2Hk

  • Use Decision Trees to Make Important Project Decisions1 By David T. Hulett, Ph.D, retrieved on Sep 21, 2016

http://www.projectrisk.com/white_papers/Use_Decision_Trees_to_Make_Important_Project_Decisions.pdf

W4_Mubarak_Optimization of Project Schedule.

  1. Problem Recognition, Definition and Evaluation

 

The Company wants to connect a new exploration well which is a high producer to the production Facilities. Going through the conventional way of awarding contracts, procurements & Installations going to take long time, as a result un-realizing good economic value due to delay in hook-up.

Here is a table of data the project:

19-Sep 26-Sep 3-Oct
1 Tender
a Preparing SCW
Tender Strategy Approval – EOI, CRC & MOG Approval
b Floating tender & Receiving Tender
c Technical evaluation & CRC / MOG Approval
d Commercial Evaluation & CRC / MOG Approval
e Award
2 Procurment delivery
3 construction
  1. Development of the Feasible Alternatives

Cost which required for acceleration this project will be used to analyze this project. By comparing the producing gained value from each day comparing to the extra cost paid to accelerate the Schedule.

 

 

  1. Development of the Outcomes for Each Alternative

As the attached Schedule is the current critical path for the project, which is starting 19th Sep 2016 and due to be completed by 6th April 2017. Do crashing to this critical path will allow gaining time equal to the floating time from the following activities.

The current floating time of the second current activity is 4 weeks.

  1. Selection of a Criterion

The optimum time duration for the project will be 4 weeks less.

  1. Analysis and Comparison of the Alternatives

By doing crashing on activities that is possible based on project data table above, the total cost of the project is obtained as follows:

bbl $ $
Production 200 40 (Oil price) 8000
Production (28 days) 224000
daily Cost of accelerating Schedule 4000
Total Cost (28 days) 112000
Profit gain from Accelerating the project 112000

Total Cost of Crushing the Schedule is $112,000 against a total revenue gained from this time in term of production is $224,000, which give us a total saving of $ 112,000

 

From the table and graph above shows that the optimum crashing for this project is for 4 weeks. By doing crashing, this project can be done with the optimum time duration of 4 weeks less.

 

 

  1. Selection of the Preferred Alternative

To answer the question of management, from these calculations can be seen that by crashing, the optimum total project duration can be reduced by 4 weeks which can gives an extra revenue of $112,000.

  1. Performance Monitoring and Post Evaluation of Results

By doing crushing, it can find the optimum time of the project, but may also increase the risk of the project. Therefore, monitoring of the project should be done continuously so that the plan for crushing the project can be accomplished.

Reference:

  1. Christianson, J. S. (2014, March 27). Project Time Compression: Crashing a Project. Retrieved from Youtube: https://www.youtube.com/watch?v=gNwQwFmXGX4
  2. Humpreys, G. C. (2011). Project Management Using Earned Value, Chapter 11 (2nd ed.). Humpreys & Associates, Inc.
  3. Wibowo, G. (2014, August 4). Crashing a Project. Retrieved from Kristal AACE 2014:https://kristalaace2014.wordpress.com/2014/08/04/w21_gw_-crashing-a-project/

W4_Saud_ Company’s field Vehicles Selection Using MADM Attributes

Posted on Monday 19 Sep 2016, 12:40 pm by Saud Al Bahri

 1)      Problem definition

In blog.3, Matrix Analysis technique used for making the decision to select the best fit 4-wheel drive vehicles to be used in the field. For this blog; MULTI-ATTRIBUTE DECISION MAKING will be used to test the previous result.

2)   Feasible alternatives

Considering the follow list of 4*4 vehicles to be purchased:

  • Land Cruiser ( Toyota)
  • Nissan Patrol ( Nissan )
  • Pajero ( Mitsubishi )

 3)      Developments of the outcomes of the alternative

The following criteria to be considered while selecting the right vehicle Brand which matches needs and expectation:

  • Fuel Economy,
  • Cost ,
  • Off-Road Capability,
  • Operating Cost,
  • safety

 

4)      Selection of the criteria

The MADM has two main approaches and each one has different techniques:

  1. The non-compensatory approach
  2. The compensatory approach

1.1-The non-compensatory approach – Dominance:

Assume all attributes are equally important. From Figure-1 It is Land Cruiser.

1

Figure 1 The Concept of Dominance

1.2-The non-compensatory approach – Satisficing:

We pick the minimum and maximum acceptable values and eliminate the rest. Per Figure-2 the choice is Land Cruiser & Nissan Patrol

2

Figure 2 NON-COMPENSATORY MODEL Technique 2: Satisficing

 

1.3-The non-compensatory approach – Disjunctive Reasoning:

Conduct a Pair-Wise comparison and we give a score of 1 to the WINNING OPTION and a score of 0 to the losing option. From Figure 3 the “Safety” is the most important attribute.

3.png

Figure 3 NON-COMPENSATORY MODEL Technique 3: Disjunctive Reasoning

 1.4-The non-compensatory approach – Lexicography:

Rank the attributes per ordinal ranking from Disjunctive Reasoning and compare our options. Per Figure-4 the choice will be Land Cruiser.

4

Figure 4 NON-COMPENSATORY MODEL Technique 4: Lexicography

 5)      Analysis and Comparison of the Alternative

Its time to test the compensatory approach with its two methods:

5.1 COMPENSATORY MODEL-Dimensional Scaling Technique.

Consist of two steps:

Turn the relative options into a “base 1” or dimensionless value (see figure-5)

5

Figure 5 turning each option into a Base 1 (dimensionless) scoring model

  1. Calculate the relative weighting of each attribute (figure-6):6Figure 6 Relative Weighting

    B-COMPENSATORY MODEL-Di Additive Weighting Technique.

    Consist of 3 steps:

    1. Add up the total of relative ranking of all options which comes out to be 10
    2. Normalize the weighting of each attribute which gives 1.00

    Multiply normalized weighting by each option.7Figure 7 Additive Weighting Technique

    Figure-7   indicates the Land Cruiser is the best choice.
    6)      Selection of the Preferred Alternative.

    The results clearly show that the best choice of 4*4 wheel drive is the Land Cruiser approved by both techniques (Matrix & MADM Analysis)

    7)      Performance Monitoring and the Post Evaluation of Result

    As stated in my previous blog; the company recommended to take in place other considerations such as expected field life, future field’s roads repairing projects, budget ……etc;  which will may change the criteria of selecting the main steering factors and consequently will change the best selecting choice.

    1. References:
    • Pairwise Comparison Charts – Safe Soap Student Team, retrieved on Sep 18, 2016

    https://www.youtube.com/watch?v=eC-Iy3RZR4k

    • Introduction to Multi-Criteria Decision Making and the Evidential Reasoning Approach, retrieved on Sep 18, 2016

    https://phps.portals.mbs.ac.uk/Portals/49/docs/jyang/XuYang_MSMWorkingPaperFinal.pdf

    • Multi-Criteria Decision Analysis, retrieved on Sep 18, 2016

    https://www.ncsu.edu/nrli/decision-making/MCDA.php 

W3_ MAH Shamsi _ Using compensatory models in Bid Technical Evaluation process

 

  1. Problem Definition

Refer to my Blog Positing in W2; I will be evaluating the received bid technically so that the approved bidder wins the contract. Tender board is to approve the technical evaluation report thereafter commercial bids to be open & submit the commercial evaluation report to the tender board again to get the required approval & award the contract.

 

  1. Identify the Feasible Alternative

In this blog I will use the compensatory models to evaluate and rank the bidders in technical evaluation and this model will compose of the following:

  1. Non-dimensional Scaling
  2. The Additive Weighting Technique

 

  1. Development of the Outcome for Alternative

The main area to Evaluation the bidders criteria are as follow and the below listed date are required:-

  • Acceptance Full Scope of Work
  • Bidder Project Execution plan
  • Bidder Health, safety and Security plan
  • Bidder Tenderer’s resources
  • Technical Expectation
  • Experience and Track record

 

  1. Selection Criteria The criteria of the feasible alternatives using no compensatory models as follow:

 

Criteria Category Bidder A Bidder B Bidder C
Acceptance Full Scope of Work Excellent Excellent Excellent
Bidder Project Execution plan Fair Excellent good
Bidder Health, safety & Security plan Fair Excellent Excellent
Bidder Tenderer’s resources Good Excellent good
Technical Expectation Fair Excellent fair
Experience and Track record Poor Excellent good

Table 1 for Feasible Alternatives

  1. Analysis and Comparison of the Alternative

Analysis and comparison of the alternatives as below tables:-

Criteria Category Value Dimensionless Value=( Relative Rank-1)/3
Acceptance Full Scope of Work Excellent 1
Good 0.67
Fair 0.33
Poor 0
Bidder Project Execution plan Excellent 1
Good 0.67
Fair 0.33
Poor 0
Bidder Health, safety and Security plan Excellent 1
Good 0.67
Fair 0.33
Poor 0
Bidder Tenderer’s resources Excellent 1
Good 0.67
Fair 0.33
Poor 0
Technical Expectation Excellent 1
Good 0.67
Fair 0.33
Poor 0
Experience and Track record Excellent 1
Good 0.67
Fair 0.33
Poor 0

Table-2 Non Dimensional Scale

 

Criteria Category Bidder A Bidder B Bidder C
Acceptance Full Scope of Work 1 1 1
Bidder Project Execution plan 0.33 1 0.67
Bidder Health, safety and Security plan 0.33 1 1
Bidder Tenderer’s resources 0.67 1 0.67
Technical Expectation 0.33 1 0.33
Experience and Track record 0 1 0.67
Sum 2.66 6 4.34

Table 3- Non Dimensional Data

 

Criteria Category Relative Rank Normalized Wight (A) Bidder A Bidder B Bidder C
B A* B B A* B B A* B
Acceptance Full Scope of Work 1 0.022 1 0.02 1 0.022 1 0.022
Bidder Project Execution plan 9 0.198 0.033 0.066 1 0.198 0.067 0.134
Bidder Health, safety and Security plan 6 0.132 0.033 0.07 1 0.132 1 0.111
Bidder Tenderer’s resources 5 0.110 0.067 0.12 1 0.110 0.067 0.074
Technical Expectation 4 0.088 0.033 0.07 1 0.088 0.033 0.059
Experience and Track record 2 0.044 0 0 1 0.044 0.067 0.044
Sum 27 0.594 1.166 0.346 6 2.234 0.444 3.099

Table 3- Non Dimensional Data

 

  1. Selection of the Preferred Alternative

The using of Non Dimensional Scale and Additive Weighting Technique it shows that Bidder (B) record as the best bidder score in the technical evaluation and based on that technical evacuation bidder B is the best to select.

  1. Performance Monitoring and the Post Evaluation of Result

Technical evaluation is the heart of tender where it shows the capability of each bidder performance in previous record as well the back history of each evaluated bidder and the planning and arrangement as well the settlement to Performa the project of tender or contract.

  1. Reference:
  2. TRIANUGROHO, A. (2014, March 27). W5_Andi_Decision Making Compensatory Models |Kristal AACE 2014. Retrieved July 10, 2014, from http://kristalaace2014.wordpress.com/2014/03/27/w5_andi_decision-making-compensatory-models/
  3. Sullivan Wicks Koelling, Engineering Economy (fifteenth Edition). Prentice Hall Retrieved July 10, 2014, from http://www.decisionanalyst.com/publ_art/decisionmaking.dai
  4. No compensatory and Compensatory Model Retrieved July 10,2014 From http://www.youtube.com/watch?v=CKM9u65kZHg
  5. W5- Ali Hubais – Using compensatory models in Bid Evaluation process POSTED ON FRIDAY, 11 JULY 2014, 17:39BY HUBAIS

 

W2_ MAH Shamsi _Estimate Preparation Effort For a Bid

 

  1. Problem Recognition, Definition and Evaluation

In a bid process, generally bidders are given specific time to prepare a bid document & submit the required document to the Company on agreed closing date. In this blog posting will conduct   analysis related to time and cost needed to prepare the appropriate estimation by the contractors in a bid process for E&P Companies.

The time required to prepare an estimation during a bidding will be compared to the existing company practice stated that “bidder should submit their bidding proposal 3 to 4 weeks”.

The following project value classification used in Oil & Gas Company will be used in this blog:

table-1

Table 1. Project Value Classification

2. Identify the Feasible Alternatives

The below matrix provides an estimate classification for generic cost.

Table 2.png

Table 2. Cost Estimate Classification System

3. Development of the Outcomes for Alternative

Based on the above matrix, cost estimates can be described as follow:

  • Class 5 estimates are generally prepared base on very limited information.
  • Class 4 estimates are typically used for project screening, determination of feasibility, concept evaluation, and preliminary budget approval.
  • Class 3 estimates are used as the project budget until replaced by more detailed estimates.
  • Class 2 estimates are often used as the “bid” estimate to establish contract value for contractors.
  • Class 1 estimates are typically prepared to form a current control estimate to be used as the final control baseline.

 

4. Selection of a Criterion

Class 2 estimates are chosen to estimate to prepare the bid for contractors. From the generic cost estimates classification matrix above, the preparation effort are in the range 0.02% – 0.1% of project costs.

 

5. Analysis and Comparison of The Alternatives

To get the preparation effort (cost and time) for the project, the below external data such as Rate for cost estimator and Assumption of working hours a day are used. In this case, Rate for the cost estimator is US $ 29,03 / hour and 8 hours of work  per day. [1]

table-3

Table 3. cost estimator rate

Below table shows estimate preparation effort for each project value:

Project Value Effort to prepare (USD) Man hours Days Days*
Min(0.02%) Max (0.1%) Min Max Min Max Min Max
               500,000                 100                500                 3               17                 1                 3                 1                 3
           5,000,000             1,000            5,000               34            172                 5               22                 6               26
         15,000,000             3,000          15,000            103            517               13               65               16               76
         75,000,000           15,000          75,000            517         2,584               65            323               76            380

Table 4. Bid Estimation Preparation Effort

Days * 85% productivity rate for the cost estimator

 

The level of effort needed to prepare a given estimate is an indication of the cost, time, and resources required.

Estimate preparation effort is dependent on project size, project complexity, estimator skills and knowledge, and on the availability of appropriate estimating cost data and tools.

 

6. Selection of the Preferred Alternative

From table 3, the preparation effort to prepare the project estimate for instance a 15 million USD project is range from 13 days to 65 days and 16 to 76 days for 85% productivity.

Based on the company practice, contractor should submit their bidding proposal 3 to 4 weeks (21 to 28 days) in a normal project. In this case study, assumed that the 15 million USD as normal project for the Company.

 

Project Value (USD) ACCE RP Company practice
Days Days
Min Max Min Max
   15,000,000.00 13 65 21 28

Table 5 . Estimation Preparation Effort: Company vs AACE RP

Based on the comparison, the company should revise its bidding practice so that the bidders have more time to prepare their estimation. The longer time to produce estimation, the higher quality of the estimate is and minimize the possible change order during the project execution.

By using the range 0.02% – 0.1% of project costs, a contractor can estimate preparation effort/ to prepare a bid, but it depends on project size, project complexity, estimator skills and knowledge, and on the availability of appropriate estimating cost data and tools.

7. Performance Monitoring and Post Evaluation of Results

The implementation of this analysis, especially for the contractor is that the contractor should monitor their actual spent during estimating preparation not exceed the budget range and time allowance set by the owner during bidding process.

 

Reference:

  1. Occupational Employment Handbook. (2016, May). Retrieved from: Bureau of Labor Statistics: http://www.bls.gov/ooh/business-and-financial/cost-estimators.htm
  2.  (2007). Cost Estimate Classification System. In S. J. Amos, Skills & Knowledgeof Cost Engineering (pp. E.1 – E.5). Morgantown: AACE International.
  3. (2007). Cost Estimate Classification System – as Applied in Engineering, Procurement, and Construction for the Process Industries. In S. J. Amos, Skills & Knowledge of Cost Engineering (pp. F.1 – F.9). Morgantown: AACE International.
  4. Smith, R. (n.d.). How Much Does / Should It Cost to Prepare a Proposal. Retrieved from Goverment Express: http://governmentexpress.com/articles-proposal.html
  5. W8_GW_ Costs to Prepare a Bid for a Contractor
  6. W20_RM_Estimate Preparation Effort For a Bid, Posted on May 24, 2016 by ricomilza

W.3- Saud –Company’s field Vehicles Selection by using Matrix Analysis

Posted on Wednesday 07 Sep 2016, 13:30 pm by Saud Al Bahri

  1. Problem Recognition

You are in a position to select the 4-wheel drive vehicles which are planning to use in the field over all-out off-road capability.

  1. Development the Feasible Alternative

Considering the follow list of 4*4 vehicles to be purchased:

  • Land Cruiser ( Toyota)
  • Nissan Patrol ( Nissan )
  • Pajero ( Mitsubishi )
  1. Development of the Outcome for Alternative

The following criteria to be considered while selecting the right vehicle Brand which matches needs and expectation:

  • Fuel Economy: need to be considered as the vehicle used in the field will cover long distances.
  • Operating Cost: includes standards requirement of maintenance and spare parts.
  • Cost: should be compatible in the market.
  • Safety: is one of the most important pieces of criteria used to determine the rank.
  • Off-road capability: very important factor when you are working in tough conditions.
  1. Selection of Criteria

Using the decision Matrix Analysis technique for making the decision to select the best fit 4-wheel drive vehicles to be used in the field.

  1. Analysis and Comparison of the Alternative

Table-1 option for each of the factors to make decision. Score each option from 0 (poor) to 5 (very good): where all the number is getting from personal assumption plus Experience site people.

Cost: 4=Cheapest, 3=Cheap, 2=Expensive, 1=Most Expensive

Fuel Consumption: 4= very Low, 3= Low, 2= High, 1= Very High

Operating Cost: 4=Cheapest, 3=Cheap, 2=Expensive, 1=Most Expensive

Off-road capability: 4=very reliable, 3=reliable, 2=Low reliable, 1=Very Low reliable

Safety: 4=Very accepted, 3=Accepted, 2=low, 1=Very Low

Table-2 scoring the numbers for the relative importance of the factors in your decision. Show these as numbers from, say, 0 to 4, where 0 means that the factor is absolutely unimportant in the final decision, and 4 means that it is very important. As an example High=4, Medium=3, Low=2, Very Low=1

Now multiply each of your scores from Table-2 by the values for relative importance of the factor that you calculated in Table-1. This will give you weighted scores for each option/factor combination in Table-3

Product/Comparison Fuel Consumption Cost off-road capability Operating Cost Safety

Land Cruiser ( Toyota)

2

 1 4 2

3
Nissan Patrol ( Nissan ) 2 1 3 3 3
Pajero ( Mitsubishi ) 3 3 1 4 2

 

Table-1 Un- weighted grid

Value/Comparison Fuel Consumption Cost off-road capability Operating Cost Safety
Value

2

 2 4 3

4

 

Table-2 weighted as per importance for the customer

Product/Comparison Fuel Consumption Cost off-road capability Operating Cost Safety Total
Land Cruiser ( Toyota) 4 2 16 8 12 42
Nissan Patrol ( Nissan ) 4 2 12 9 12 39
Pajero ( Mitsubishi ) 6 6 4 12 8 36

 

Table-3 weighted scores

 

  1. Selection of the Preferred Alternative

From the decision Matrix Analysis (Grid Analysis) technique it shows that Land Cruiser is the best fit 4-wheel drive vehicle option for our company to be used in the field

  1. Performance Monitoring and the Post Evaluation of Result

From the result, Nissan Patrol is the second highest score related to the most important factor (off-road Capability & Safety) which can be selected if there is a requirement to consider other highest valuable factors (Cost and Operating Cost).

  1. References:
  • Decision Matrix, retrieved on Sep 07, 2016

http://asq.org/learn-about-quality/decision-making-tools/overview/decision-matrix.html

  • DECISION MATRIX/SELECTION MATRIX, retrieved on Sep 07, 2016

http://www.albany.edu/~gc227838/ist611/decision.pdf

  • Decision Matrix, retrieved on Sep 07,2016

https://en.wikipedia.org/wiki/Decision_matrix

https://www.ohio.edu/mechanical/design/Resources/DecisionMatrixTemplate.xls

W4_Hamood Al Rusheidi_ Car Selection Using MADM Attributes

 1)      Problem definition

In the previous blog (W3) I have used Grid Analysis technique to make a decision (buying a family car) from three possible choices. The analysis findings recommend going for Nissan Patrol.

I will use the same case study but using MULTI-ATTRIBUTE DECISION MAKING (MADM). The MADM is more useful with the subjective attributes rather than financial like my case study.

2)   Feasible alternatives

After a comprehensive discussion with experts I have narrowed my selection to three choices: Yukon, Lexus 4WD and Nissan Patrol.

 3)      Developments of the outcomes of the alternative

There are four attributes that are governed the selection of each brand:

  1. Price,
  2. Re-Sale Price
  3. Size for family
  4. Suitability for graded roads

4)      Selection of the criteria

The MADM has two main approaches and each one has different techniques:

  1. The non-compensatory approach
  2. The compensatory approach

1.1-The non-compensatory approach – Dominance:

Assume all attributes are equally important. From Figure-1 It is Lexus 4WD.

w4-1
Figure 1 The Concept of Dominance

1.2-The non-compensatory approach – Satisfying:

We pick the minimum and maximum acceptable values and eliminate the rest. Per Figure-2 the choice is Nissan Patrol.

w4-2

Figure 2 NON-COMPENSATORY MODEL Technique 2: Satisficing

 

1.3-The non-compensatory approach – Disjunctive Reasoning:

Conduct a Pair-Wise comparison and we give a score of 1 to the WINNING OPTION and a score of 0 to the losing option. From Figure 3 the “Price” is the most important attribute.

 

 w4-3

Figure 3 NON-COMPENSATORY MODEL Technique 3: Disjunctive Reasoning

 1.4-The non-compensatory approach – Lexicography:

Rank the attributes per ordinal ranking from Disjunctive Reasoning and compare our options. Per Figure-4 the choice will be Yukon.

 w4-4

Figure 4 NON-COMPENSATORY MODEL Technique 4: Lexicography

 5)      Analysis and Comparison of the Alternative

Now we will use compensatory approach which has two methods.

A-COMPENSATORY MODEL-Dimensional Scaling Technique.

Consist of two steps:

  1. Turn the relative options into a “base 1” or dimensionless value (see figure-5)

w4-5

Figure 5 Turning each option into a Base 1 (dimensionless) scoring model

 

  1. Calculate the relative weighting of each attribute (figure-6):

w4-6

Figure 6 Relative Weighting

B-COMPENSATORY MODEL-Di Additive Weighting Technique.

Consist of 3 steps:

  1. Add up the total of relative ranking of all options which comes out to be 10
  2. Normalize the weighting of each attribute which gives 1.00
  3. Multiply normalized weighting by each option

 

w4-7

Figure 7 Additive Weighting Technique

Figure-7   indicates the Nissan Patrol is the best choice.
 

6)      Selection of the Preferred Alternative.

The above findings reveal that the final selection will depends mainly on your preference and most preferred attributes. Though I found the last techqnies is the best as it indicates how much better a choice compare to another is. Nissan Patrol is the final selection.

 

7)      Performance Monitoring and the Post Evaluation of Result

I have bought the car and in 8 years’ time I will revisit this blog to compare the actual findings with the assumptions made above.

8)          References

W5_Salim Al Habsi_Root cause Analysis for Over Expenditure

  1. Problem Definition

We have recently completed UT inspections on equipment and piping systems for one of OOCEP assets for which scaffolding services were obtained. The scaffolding provision was provided by a third party contractor through a separate service order earlier estimated for USD 51,275. It is only after the works were completed that we realised that we had run over the budgeted amount for the scaffolding to an actual amount of USD 118,390. Justifications to management had to be given and and contract value amendment had to be made to cover the costs.

  1. Identify the Feasible Alternative
  • Being the one in charge for the inspection works, I was asked to justify the reasons for the over expenditure on scaffolding and insulation services. The reasons were quite obvious; however, for the sake of avoiding clarifications they were presented through a root cause diagram. The reasons identified are listed below.
    Low cost estimate: though the daily rates for scaffolders were pre-determined, the overtime costs were not incorporated in the service order.
  • Schedule of work: the calculation of estimated amount considered a 56-days service duration, whereas the actual time spent for execution of work was 74 days.
  • Weather condition: the inspection and scaffolding services were performed during summer, where the temperature reaches 50 degC and therefore frequent rests are needed.
  • Drive (unrealistic plan): the scaffolding works were driven by the progress on inspections; i.e. the longer the inspection takes, the longer the scaffolding team had to wait for a scaffold to be dismantled and erected elsewhere.
  • Insufficient scaffolding materials: the amount of scaffolding materials estimated was less than the actual materials needed. Two days were required for additional scaffolding materials to be mobilised.
  1. Development of the Outcome for Alternative

To below graphic shows the analysed root causes leading to the wrong estimate. The analysis is a shared effort between the Integrity Engineer, the Maintenance Supervisor at site and Production Supervisor.

Capture1

  1. Selection Criteria

The team adopted the ‘5 Whys’ analysis technique to determine the root causes of the over expenditure.

Capture2

  1. Analysis and Comparison of the Alternative

The below figure is the implementation of Route cause analysis by using 5 whys in order to get the main reason of low estimates of the cost for the projects.

  1. Selection of the Preferred Alternative

The above illustrated graphic shows clearly that the root cause for the over expenditure was the improper planning and rush in obtaining the inspection and scaffolding services. The inspections was needed urgently, the reason why the thickness measurement locations were not identified prior to the mobilisation of the inspection team. The marking was done at a later stage post mobilisation of the scaffolding team and therefore lagging occurred in the scaffolding activity.

Should the Company decides to undertake these services again, the following sequence will be followed:

  1. Site visit to be performed by the Inspection Engineer, accompanied by the Scaffolding Supervisor for proper determination of inspection points and accessibility requirements to these points.
  2. Mark-up drawings to include both inspection points and scaffolding requirements. Estimated heights and lengths of scaffolding to be marked on the drawings. The mark-up drawings are to be ready prior to mobilisation of the inspection and scaffolding teams.
  3. Other factors leading to the ‘Over expenditure’ as illustrated in Fig.1 must be considered in the schedule. This will lead to a better pricing estimate.
  1. Performance Monitoring and the Post Evaluation of Result

In general, good planning prior to obtaining services is a good tool to maintaining budgets. Projects and maintenance tasks must be planned we ahead and should be included in the 5-year plan and 90-days. While the project (in this case NDT inspection) is the main focus, other activities driven by the project can lead to budget overrun if they are not planned for. Not only that but they can also affect the overall progress of the project.
Root cause analysis by using 5whys is a good technique to be implemented and it is crucial that the analysis is done by an experienced team or the team directly involved in the project. It is remarkably simple: when a problem occurs, you uncover its nature and source by asking “why” no fewer than five

  1. References:

 

W3_Hamood Al Rusheidi_ New Car Selection

 

 1)      Problem definition

I am in the process of buying a new 4WD car but I am not confident what the best choice that I should go for. This blog will attempt to settle to a final decision by employing choices selection technique.

To do so I will employ Grid Analysis which is a useful technique for making a decision. It is most effective where you have a number of good alternatives and many factors to take into account.

 2)   Feasible alternatives

After a comprehensive discussion with experts I have narrowed my selection to three choices: Yukon, Lexus 4WD and Nissan Patrol.

 3)      Developments of the outcomes of the alternative

There are four factors that are governed the selection of each brand:

  1. Price,
  2. After Sale Price
  3. Size for family
  4. Suitability for graded roads

4)      Selection of the criteria

Based on the selection criteria I have come up with the following findings:

Criteria/Model Yukon Lexus 4WD Nissan Patrol
Price (OMR) 25,000 40,000 30,000
Demand for Re-sale Low High Medium
Size for Family Big Medium Medium
Suitability for graded roads Low High High

Figure 1. Analysis Comparison [1]

5)      Analysis and Comparison of the Alternative

By using Grid Analysis, the comparison of the above criteria will be as below:

 

Criteria/Model Yukon Lexus 4WD Nissan Patrol
Price (OMR) 3 1 2
Demand for Re-sale 1 3 3
Size for Family 3 2 2
Suitability for graded roads 1 3 3
Total 8 9 10

Figure 2. Weight Assessment [2]

Legend:

Price: 3=Cheapest, 2=Cheaper, 1=Cheap

Demand for Re-sale: 3=High, 2=Medium, 1=low

Size for family: 3=Big, 2=Medium, 1=Small

Suitability for graded roads: 3=High, 2=Medium, 1=Low

 

6)      Selection of the Preferred Alternative.

Further to the exercise applied (Grid Analysis), the above table shows that “Nissan Patrol” scored the highest ranked which can be considered as the preferred alternative.

 

7)      Performance Monitoring and the Post Evaluation of Result

The table clearly indicates to go for Nissan Patrol. Therefore, Grid analysis has really helped me to make a solid decision based on a scientific technique. I have bought the car and in 8 years’ time I will revisit this blog to compare the actual findings with the asumptions made above.

8)          References