BUS606: Operations and Supply Chain Management

A series of symposia (workshops) is held to provide project duration information for the optimistic, most likely, and pessimistic ranges of each risk item. Participants should understand the background, constraints, and key features of the project, its relation to nearby residents, and its interaction with government organizations. A person without related engineering experience cannot make estimates from various angles. Primavera Risk Analysis R8.7 and Primavera P6 R8.3 are applied to calculate the possible project duration. A simulation with 3,000 iterations is performed to compute the duration estimate, and Latin hypercube sampling is used as the simulation method.

4.2.1. Preanalysis

The preanalysis check is the preliminary verification means used to determine risk-sensitive items with a maximum impact on the total project schedule. Risk-sensitive items should be emphasized in the follow-up risk analysis. Sensitivity analysis can determine which of the most important inputs have the greatest impact on the outputs and can reflect the correlation between activity and project schedule duration during the simulation. Schedule sensitivity also reflects the risks in the activities and their relationships in schedule logic. The result can be presented in a tornado graph, which is easy to read (Figure 5). A total of 679 items are included in the activities under this case project. The seven most sensitive items with great impact on each activity are selected as the major items for the subsequent risk analysis.

Figure 5

Schedule sensitivity of activity.

4.2.2. Premitigation

Figure 6 shows the expected schedule by considering the uncertainty of the current planned project schedule and the impact of the most sensitive risk items before taking mitigation actions. This project has an 80% probability to be completed in 1,138 days and 100% probability to be completed in 1,185 days. Compared with the planned schedule that this case initially required, 976 days, the completion probability of the scheduled project is only nearly 1%.

Figure 6

Probability distribution chart for premitigation simulation.

4.2.3. Postmitigation

Figure 7 shows the expected schedule by considering the uncertainty of the current planned project schedule, the impact of the most sensitive risk items, and the effect of risk disposal actions. This project has an 80% probability to be completed in 1,079 days and a 100% probability to be completed in 1,123 days. According to practical engineering experiences, most companies consider adopting the 80th percentile as a conservative and prudent planning schedule target (Hulett 2009; Mulcahy 2010). Hence, we need a schedule contingency of 103 days (976-1,079) to achieve a conservative 80th percentile level of certainty after conducting risk treatment and considering the planned mitigation actions.

Figure 7

Probability distribution chart for postmitigation simulation.

4.2.4. Distribution Analyzer

Table 1 summarizes the Monte Carlo simulation results, which provide a schedule comparison for this case project. Terms P80 and P100 represent probabilities of 80% and 100%, respectively. The probability of finishing the project within the requested schedule (976 days) becomes less than 1% after considering the uncertainty of the current planned schedule and the impact of the risk items. However, this project has an 80% probability to be completed in 1,079 days when risk response actions are adopted. Figure 8 presents a comparison diagram for the comprehensiveness of the schedule risk analysis with a probability placement analysis provided for different completion duration. It shows the current estimated project schedule (preanalysis), the impact of risk occurrence on the project (premitigation), and the schedule after introducing risk response behaviors (postmitigation).

Table 1

Monte Carlo simulation results.

Figure 8

Project schedule comparison.

According to the result of the risk analysis, the most possible duration for project completion within P80 for the risk postmitigation result is 1079 days, which exceeds the contract requested duration (976 days) and the allowable delay period (100 days). Therefore, a proper crash plan is necessary. In the next section, we will use the method of integer linear programming to develop the optimal solution of the project crash plan. Work activities on the critical path are made into network diagrams. The relationship between the activity time and crash cost needed for each work activity in the network diagram is converted into a mathematical model, which is solved by integer linear programming. We expect to determine the additional engineering cost in accordance with the project duration as stated in the contract and also consider the relationship between delay penalty and crash cost.