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Week 3: Scheduling Networks - Discussion

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Project Schedules (graded)

Forget about cost estimation and budgets this week; now we get to play with the third and greatest element of our triple constraint -- TIME. Project scheduling follows one of Parkinson's laws: "Everything takes as long as it takes." We will explore the elements and functions we must consider when developing the project schedule?

We have developed a complete WBS that we feel truly defines the scope of the project, and it is well organized. We have reviewed some available resources, including some outside sources; however we must first build a schedule baseline.

How do you get started? What methods help in scheduling? Is there the same kind of team process involved as in building the WBS? What are your most important considerations when building a project schedule? Must you first consider deadlines? What kinds of scheduling constraints are common?

Remember, you each don't need to address all the questions. Use them to build a discussion amongst all of us.

Responses Response How to Estimate an Accurate Schedule Author Professor Orr Date/Time 5/18/2013 1:21:54 PM

There is a lot of talk about the process for developing cost estimates but the schedule process is not as w ell defined. What are your thoughts on how to estimate an accurate schedule? Regards, Susan

RE: How to Estim ate an Accurate Schedule

Varune Ram outar

5/19/2013 1:38:14 PM

In my opinion the elements to creating a good schedule are: 1. Know all the activities that must be accomplished in order to achieve the project objective. 2. Once all the activities are known durations for each activity can be estimated. 3. It is very critical to know the dependencies of each of the activities and how they fit in to accomplishing the project. This can be established by creating a network diagram. This must be done before the schedule is properly established. 4. The critical path of the activities is another very important element in scheduling because this is the longest duration of tasks that must be accomplished for the project. Once this is established the project schedule can be well estimated. 5. Slack times of activities must also be determined. This is the amount of time an activity that starts at its earliest start time can be delayed without delaying the project. Thus slack times for activities can help manage the scheduling of resource requirements. 6. The schedule must also take into consideration management issues such as resource constraints, cash flow, change risks, logistics etc. 7. The schedule must also take into consideration of management reserve which is additional time that is placed in the schedule to help with uncertainties that may occur in the project. Ref: Nicholas, John M.; Steyn, Herman (2012-09-10). Project Management for Engineering, Business, and Technology (Kindle Location 5840). Taylor
and Francis. Kindle Edition

RE: How to Estim ate an Accurate Schedule

Cauretta Bell

5/20/2013 8:26:39 PM

Project scheduling involves more than just estimating cost or simplying displaying taks on a Gantt chart. An integral part of project planning, and often involves a trail and error process of adjusting w ork tasks to meet the cintraints of limited resources w hile trying to meet project deadline. First, getting the WBS structure accurate and the start date and finish date for the project. Once you have allocated a duration for the activities for the AON understanding the critical path for the netw ork w ill assist the PM in understanding the LS/ES and ES/EL for each activity. The best w ay to start the project off is have an accurately placed WBS.

RE: How to Estim ate an Accurate Schedule

Chukie Okunzua

5/20/2013 8:54:42 PM

I agree with you Varune that Know the project activities, their interdependencies are critical to developing an accurate schedule. Activities relationship to each other are at the heart of scheduling. It is very critical to know which activities are predecessors and which are successor to each other. We also need to know which activities can be done at the same time. Activity duration must be determined and effect of resource limitation understood. The network diagram is a great tool in schedule planning and management. The WBS provides us the building blocks for starting as the work packages are the activities that are to be scheduled and their predecessor - successor relationship outlined

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RE: How to Estim ate an Accurate Schedule

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Esperanca Rosa 5/19/2013 2:22:53 PM

Hi class, Using a set of proactive estimating techniques to scope, plan, and constrain your project conditions, you can dramatically improve your estimating practices, reduce and mitigate risks, and greatly increase your project success rate. According to the website projectsmart.co.uk there are twelve (12) methods for boosting the accuracy of your estimates:
1.

Maintain an ongoing "actual hours" database of the recorded time spent on each aspect of your projects. Use the data to help estimate future projects and identify the historically accurate buffer time needed to realistically perform the work.

2. 3. 4. 5. 6.

Create and use planning documents, such as specifications and project plans. Perform a detailed task analysis of the work to be performed. Use a "complexity factor" as a multiplier to determine whether a pending project is more or less complex than a previous one. Use more than one method to arrive at an estimate, and look for a midpoint among all of them. Identify a set of caveats, constraints, and assumptions to accompany your calculations, which would bound the conditions under which your estimates would be meaningful. (Anything that occurs outside of those constraints would be considered out of scope.)

7.

If the proposed budget or schedule seems inadequate to do the work, propose adjusting upward or downward one or more of the four project scoping criteria: cost, schedule, quality, and features.

8. 9.

Consider simpler or more efficient ways to organize and perform the work. Plan and estimate the project rollout from the very beginning so that the rollout won't become a chaotic scramble at the end. For instance, you could propose using a minimally disruptive approach, such as a pilot programme or a phased implementation.

10.

In really nebulous situations, consider a phase-based approach, where the first phase focuses primarily on requirements gathering and estimating.

11. 12.

Develop contingency plans by prioritizing the deliverables right from the start into "must-have" and "nice-to-have" categories. Refer to your lessons-learned database for "20:20 foresight" on new projects, and incorporate your best practices into future estimates.

Retrieved from:
http://w w w .projectsmart.co.uk/12-tips-for-accurate-project-estimating.html

Best Regards, Esperanca

RE: How to Estim ate an Accurate Schedule Modified:5/19/2013 7:32 PM

Maria Ventura

5/19/2013 7:29:57 PM

Hello class, When thinking on how to estimate an accurate schedule, we expect to know what does each activity requires or represent in order to complete a project within the expected time frame. In other words, the team uses the WBS to generate an activity list where items are then reviewed to estimate the duration and cost of each one. In order to estimate an accurate schedule, it is necessary to create three duration estimates for each activity. 1- best case (optimistic) 2- worst case (pessimistic) 3- the most likely (realistic) duration. At the minimum, three-point estimates should be created for any activity or deliverable that is unique, risky, or relatively new to the team. Ordinarily, the most likely estimates are used for most activities in developing the project schedule. Or the project manager may elect to use a weighted average of the three-point estimates for selected activities. The three duration estimates allow the project manager to perform simple sensitivity analysis on the project schedule. By changing key durations, the project manager can model the overall schedule impact of possible scenarios. Source: http://www.techrepublic.com/blog/tech-manager/how-to-accurately-estimate-and-forecast-in-project-management/618 Thank you//

RE: How to Estim ate an Accurate Schedule

Tanika Thom as

5/20/2013 6:44:59 PM

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I think both 3 point estimate and the WBS identifying the critical paths, dependencies and slack time would generate close to accurate estimate. Once all the key steps and time durations are addresses like Varune mention, then take and apply the 3 point strategy of best, worst and most likely case to the finding. I think that each one schedule would compliment the other and show how closely the results are; if not then something is off with the estimates, paths or dependencies, etc.

RE: How to Estim ate an Accurate Schedule

Philip Effiong

5/20/2013 6:44:44 AM

Accurate time estimation is a crucial skill in project management. Without it, you won't know how long your project will take, and you won't be able to get commitment from the people who need to sign it off. These steps can be use to make accurate time estimates: Step 1: Understand What's Required Start by identifying all of the work that needs to be done within the project. Use tools such as Business Requirement Analysis, Work Break Down Structure, Gap Analysis and Drill Analysis to help you do this in sufficient detail. Step 2: Order These Activities Now, list all of the activities you identified in the order in which they need to happen. At this stage, you don't need to add in how long you think activities are going to take. However, you might want to note any important deadlines. Step 3: Decide Who You Need to Involve You can do the estimates yourself, brainstorm them as a group, or ask others to contribute.

RE: How to Estim ate an Accurate Schedule

Cauretta Bell

5/24/2013 9:00:21 PM

In order to know w hat is required the project manager need to have a developed a detailed WBS based on the project scope. The budget needs to be set w hether it be top dow n or bottom up approach. It is also important for the managers to know the resources available for the project. It w ould be beneficial for the PM to locate other similar archive to see w hat the major risks that arise during the project so it can be planned for improvement or other alternatives.

RE: How to Estim ate an Accurate Schedule

Joel Khan

5/20/2013 6:45:46 AM

From experience and the talk w e had in class on w eek 1 I think that keeping an accurate schedule w orks w ell if you can:

Continuing to use the same mechanism for estimating and scheduling w ill result in continued inability to meet schedules. The organization needs to find an estimatingand scheduling process that w orks. People w ho w ill be doing the w ork are best able to estimate how long the w ork w ill take. The organization needs training in good estimating and scheduling practices. People doing the w ork need the ability to set the schedule and then need to be held accountable for meeting it. Also, it w orks like a schedule for softw are development, there is alw ays more to it then it seems once you dive into the project. Reference:http://w w w .sw qual.com/images/Creating.pdf

RE: How to Estim ate an Accurate Schedule

Nishan Ragoonanan

5/20/2013 1:36:47 PM

When I think accurate schedule, I think critical path and netw ork diagram. We take the low level tasks from the WBS and put them into a netw ork diagram that w ill show us the dependencies betw een tasks, i.e. w hich ones come first, w hat needs to happen before a certain task can begin etc. We assign the estimates of all these tasks and the longest path through the netw ork diagram gives us our schedule. This is of course all dependent upon the time estimates for the tasks, w hich could in actuality be shorter or longer causing errors in the estimate.

RE: How to Estim ate an Accurate Schedule

Serge Ndongo

5/20/2013 6:38:32 PM

The three point estimates should be good enough to estimate an accurate schedule as it leans on three duration estimates for each activity: best case (optimistic), w orst case (pessimistic), and the most likely (realistic) duration. On the other hand w e can apply the lessons learned from the other projects to make a fair estimation. For example, if the plan on your desk show s that the business requirements w ill be documented and accepted in 15 w orking days, and your last three projects took at least 20 w orking days each, to get accepted requirements, you should be able to explain w hy your estimates are only 15 days.

RE: How to Estimate an Accurate Schedule

Herminio Dionisio

5/21/2013 6:53:28 PM

Estimation is one area w here most project teams have trouble. For one thing, there is no consistency. One person might be optimistic, another pessimistic, and w e w on't know w hich unless w e have had prior substantiating evidence of one or the other. Before w e can estimate duration, w e need to make sure everyone is w orking from a common definition. The duration of a project is the elapsed time in business w orking days, not including w eekends, holidays, or other non w ork days. There are some variances also that w e must consider w hen

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developing our schedule that may be a cause of actual duration to vary from planned duration. Some of these are the varying skill level, unexpected events that w ill cause interruption, and sometimes despite of clearly and concisely describing the task to be performed, mistakes and misunderstanding still happened.

RE: How to Estim ate an Accurate Schedule

Dw ayne Grant

5/22/2013 6:53:15 PM

All business professions have critical skills and cost estimates for scheduling just happens to be one of those skills. If you were an EMT one of the critical skills of a paramedic is to perform triage on a injured person. One type of estimate is a time estimate, and it lays the foundation setting deadlines and planning projects. Another reason a time estimate is important is that if you have a detailed list you can accurately predict how long it will take to complete a task.

RE: How to Estim ate an Accurate Schedule

Bruce Foley

5/23/2013 9:20:02 AM

Another step-by-step process that is used in Project Time Management is to evaluate the project time needs in this order:
1. 2. 3. 4. 5. 6.
1.ACT IVIT Y 2. ACT IVIT Y 3. ACT IVIT Y 4. 5.

DEFINIT ION SEQUENCING RESOURCE EST IMAT ING

ACT IVIT Y DURAT ION EST IMAT ING SCHEDULE DEVELOPMENT CONT ROL

6. SCHEDULE

http://leadershipchamps.w ordpress.com/2008/09/03/brief-overview -on-project-time-management-processes/

RE: How to Estim ate an Accurate Schedule Modified:5/23/2013 10:11 AM

Mary Hart

5/23/2013 10:10:02 AM

The step-by-step precess of Project Time Management presented by Bruce is aligned with concepts presented in the PMBOK Guide 3rd edition as follow: Activity Duration Estimating: In this process, estimation of required time is done to carry out a defined activity based on the scope & resource availability. Accuracy of this process leads to exact schedule development of whole project & cost estimation of resources (Planning Process Group)

Schedule Development: Coming up with planned start and end dates for every activity & also for the entire project happens in this process. This process uses activity sequences, duration estimation, resource estimation & project schedule constraints to arrive the project schedule. Few well established techniques are already available. Output of this process is approved and used as schedule baseline against which project progress is tracked (Planning Process Group)

Schedule Control: This process explains project status monitoring, finding changes in the schedule(early you find lesser the impact!) and controlling schedule changes to meet planned schedule. Communication is more important in this process (Monitoring & Controlling Process Group)

Here we can observe the high interdependency between time management processes. When a project has smaller scope then all time management processes can be combined in a single process.

Ref: PMBOK Guide 3rd edition

RE: How to Estimate an Accurate Schedule

Huyen Bui

5/23/2013 7:18:47 PM

For estimating an accurate schedule, i think the PM can refer to the previous similar projects duration plan / actual duration. Utilize the WBS to estimate schedule to the bottom level (w ork package) It also has to align w ith the resource allocation, budget, and the given project duration. In order to keep the schedule deliverable, using the expertise from the team to have the overall idea

Sensitivity Analysis

Professor Orr

5/20/2013 11:38:06 AM

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Include in your answ ers the constants and variables that w ere included in any calculations of sensitivity a sample calculation w ould be excellent! Regards, Susan

RE: Sensitivity Analysis

Varune Ramoutar

5/20/2013 2:22:33 PM

I think a simple example of this would be linear regression statistical modeling. Here a linear relationship is formulated between 2 variables that have a relationship where the value of one is dependent on the other when a constant regression coefficient applied to the other e.g. if we have a sample of housing prices in the same neighborhood and we want to find out how the cost of a house varies depending on the number of fireplaces we may find that the mean price is $100,000 and for each increase in fireplace the price increases by an applied coefficient of $100 this gives us a linear relationship of Estimated Price of house = $100,000 + $100 x # of fireplaces. So if a house has no fire place the estimated price = $100,000 x $100(0) = $100,000 For 2 fireplaces estimated price = $100,000 + $100(2) = $100,200 The key here is the regression coefficient which is determined by plotting a sample of variables against each other and then determining the linear rerelationship that exists between them form the standard linear equation y = c + m(x). Ref: GM 533 Week 1 lecture.

RE: Sensitivity Analysis

Esperanca Rosa

5/20/2013 8:29:49 PM

Hi Varune! I strongly agree with your comments. They are elucidative for the reason that they are giving a great insight of how can we apply variables and constants in a model to calculate the sensitivity. Adding to that, the statistic class (GM 533) was great because we could learn how to make the relationship between two variables in a particular case. In our industry, we can use and apply the sensitivity analysis in several cases. For instance, we have been using models to calculate the flow of a reservoir and how the sensitivity study will be helpful for that model. The calculation of permeability (K) and porosity () of a reservoir, we need to identify their relationship to apply in the model. In this model, variables have a strong relationship between them. We characterize porosity and permeability distribution in the reservoir to demonstrate the feasibility of our approach for large-scale field applications. Please, find the figure in the attachment to see their relationship. Source Marine and Petroleum Geology, Volume 27, Issue 8, September 2010, Pages 1692-1697 Retrieved from: http://www.sciencedirect.com/science/article/pii/S0264817209001196
PorPerm-Variable Relationship.pptx

RE: Sensitivity Analysis Modified:5/21/2013 7:38 AM

Maria Ventura

5/21/2013 7:37:47 AM

Hello class, Great posts!! According to our text book, using the model a sensitivity analysis can be performed to see what happens when costs are varied up or down; also to show best-case, most-likely, and worst-case scenarios. The model can also be used to determine by how much and in what combination the costs must vary before the project becomes lucrative or disastrous. In addition to that, when using constants and variables that were included in any calculations of sensitivity at least one of the variables must be fixed or constrained; in order to provide a basis for planning the project. It is possible to constrain two of the variables, again within certain limits, if the third variable is unconstrained. If all three are constrained, there is probably no feasible way to accomplish anything meaningful; your project is in trouble from the very start. Meaning that at least one of the variables has to be flexible in order for a project to be successful. Source: http://www.jamesaward.com/key%20project%20constraints.htm

Thank you//

RE: Sensitivity Analysis

Philip Effiong

5/22/2013 7:39:17 AM

According to our lecture notes, sensitivity analysis determines which parameters (both cash and non-cash variables such as project life) are the most sensitive to a project's economic feasibility. As such, sensitivity analysis forms a bridge between economic analysis and risk analysis. Highlighting these sensitive factors allows further analysis and closer examination, with the goal of improving relevant cash-flow estimates by gathering additional data to narrow the range of accuracy. Sensitivity analysis can be undertaken on single project variables such as break-even point, life of equipment (replacement analysis), rate of return, or on multiple variables such as that performed in scenario analysis. For example, an analyst might create a financial model that will value a company's equity (the dependent variable) given the amount of earnings per share (an independent variable) the company reports at the end of the year and the company's price-to-earnings multiple (another independent variable) at that time. The analyst can create a table of predicted price-to-earnings multiples and a corresponding value of the company's equity based on different values for

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each of the independent variables. http://www.investopedia.com/terms/s/sensitivityanalysis.asp

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RE: Sensitivity Analysis

Serge Ndongo

5/22/2013 11:34:16 AM

Sensibility analysis is a procedure to determine the sensitivity of the outcomes of a model based upon changes to its parameters. This would not usually include changes in its environment. If a small change in a parameter (input factor) results in relatively large changes in the model outcome, the outcome is said to be sensitive to that parameter. If this is the case, either the input factor will need accurate control or the process will need redesign to reduce the sensitivity. That is, sensitivity analysis is used to assess how robust the results are to uncertain decisions or assumptions in the model. A process can be investigated using a mathematical model. The model can comprise a series of equations, input factors, parameters, and variables which aim to characterize the process.
http://w w w .project-management-basics.com/project_management_176_Project_management_systems_part_13_Sensitivity_analysis.shtml

RE: Sensitivity Analysis

Herm inio Dionisio

5/23/2013 6:51:41 PM

Sensitivity Analysis helps to determine and examines the extent to w hich the uncertainty of each project elements affects the objective being examined w hen all other uncertain elements are held at their baseline values. By using a model for experimentation and tests, it permits various alternatives that w ill help and guide in making critical decision. One form of sensitivity analysis is determining a break even point, usually w ith respect to sales. If the break even figure is clearly w ithin reach, it provides a sense of comfort that the project w ill not lose money even if it may not have the desired rate of return on investment. A good sample of a Break Even Point calculation: If a company sells 400 units of its product at $500 per unit, w hat w ill be its Net Operating Income w ith the follow ing given variables? Total Per Unit Sales (400 units) $200,000 $500 Less: Variable Expenses 120,000 300 Contribution Margin 80,000 200 Less: Fixed Expenses 80,000 Net Operating Income $ 0 Note: Remember that w hen Contribution Margin is equal to Fixed Expenses, this is your Break Even Point because the difference betw een these tw o w hich is your Net Operating Income is "zero". In this case, you now know that you need to have a sale of 400 units first and anything above w ill be your profit.

Determining "Sensitivity" to Specific Items

Professor Orr

5/21/2013 9:51:47 AM

Class, how do you determine if the project is "sensitive" to the specific items? What are the criteria for selecting items for analysis? Regards, Susan

RE: Determining "Sensitivity" to Specific Items Modified:5/21/2013 3:33 PM

Mary Hart

5/21/2013 3:30:37 PM

"A sensitivity analysis helps to determine w hich risks have the most potential impact on the project. It examines the extent to w hich the uncertainty of each project elements affects the objective being examined w hen all other uncertain elements are held at their baseline values." (PMBOX Guide, 4th Edition,pg 298) Based on the information given by the PMBOX Guide I w ould consider that first a list of risk item should be established, then w e should identify the uncertainties that most influence estimates of baseline values.

RE: Determ ining "Sensitivity" to Specific Item s

Maria Ventura

5/22/2013 9:03:18 PM

Hello class, Sensitivity analysis, also defined as what-if analysis is a brainstorming technique used to determine how projected performance is affected by changes in the assumptions that those projections are based upon. In other words, it allows a reviewer to assess the impact that changes in a certain parameter will have on the models conclusions.It also helps the reviewer to determine which parameters are the key drivers of a models results. Sources: http://www.medicine.ox.ac.uk/bandolier/painres/download/whatis/What_is_sens_analy.pdf http://www.iplanner.net/business-financial/online/how-to-articles.aspx?article_id=what-if-analysis Thank you//

RE: Determ ining "Sensitivity" to Specific Item s

Nishan Ragoonanan

5/21/2013 8:39:44 PM

I w ould think w e w ould look at the items for w hich w e expect the greatest variance or those for w hich w e have the least information or present the most risk to perform a sensitivity

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analysis upon. We can then quantify the effect on our project by 'simulating' the effect of change on these variables and the result of the project say in terms of cost or schedule or scope.

RE: Determ ining "Sensitivity" to Specific Item s

Esperanca Rosa

5/22/2013 12:39:15 AM

Hi class, Sensitivity analysis is a subject that has brought our attention. Sensitivity analysis is one such method. It is implemented to analyze the various risks to the project by looking at all aspects of the project and their potential impact on the overall goal. Knowing the level of impact various elements have on a project can assist management with setting priorities to more quickly achieve the end result. Project management can easily convey the results of a sensitivity analysis through the use of a tornado diagram. The differences among the risks can be easily seen since the analysis is a quantitive value. Rather than qualifiers describing the risks, the impact of each is quantified in a numerical value. This facilitates comparisons between the various elements to quickly discern which risks are worth taking. Project management can use the sensitivity analysis to create priorities in dealing with elements risk to the project. Retrieved from: http://project-management-knowledge.com/definitions/s/sensitivity-analysis/ Regards, Esperanca

RE: Determ ining "Sensitivity" to Specific Item s

Chukie Okunzua

5/22/2013 10:42:25 PM

Sensitivity analysis examines the effect of change of a variable on the project plan and is the simplest form of risk analysis. this methos has it pros and cons. "Some of the advantages of sensitivity analysis include impressing management that there is a range of possible outcomes, decision making is more realistic, though perhaps more complex. And the relative importance of each variable examined is readily apparent. Some weaknesses are that variables are treated individually, limiting the extent to which combinations of variables can be assessed, and a sensitivity diagram gives no indication of anticipated probability of occurrence" http://certifedpmp.wordpress.com/2008/09/17/risk-analysis-techniques/

RE: Determining "Sensitivity" to Specific Items

Philip Effiong

5/23/2013 6:14:12 AM

Sensitivity analysis helps a business estimate what will happen to the project if the assumptions and estimates turn out to be unreliable. Sensitivity analysis involves changing the assumptions or estimates in a calculation to see the impact on the project's finances. In this way, it prepares the business's managers in case the project doesn't generate the expected results, so they can better analyse the project before making an investment. In capital budgeting calculations, sensitivity analysis changes one assumption or estimate at a time to see how the results change. For example, a business may expect to earn $500, $1,000 and $1,000 in the first three years of a project. If the business makes an initial investment of $2,500, it will recoup its expenses in three years. However, the project may perform better than expected, generating $2,000 yearly in its second and third year. The business will then break even in two years.
http://smallbusiness.chron.com/sensitivity-analysis-capital-budgeting-10153.html

RE: Determ ining "Sensitivity" to Specific Item s

Herm inio Dionisio

5/23/2013 7:28:30 PM

It is very useful to do a sensitivity analysis on one or more of the key estimates. This is done by systematically varying one of the parameters in the calculations to determine its effect on the final outcome. If it is found that the ultimate decision is highly sensitive to a particular estimate, it may be w orthw hile to devote additional time and effort to refining that number. One good example of this is w hen you are applying the parametric method employing the per unit area or per linear foot in your cost estimation. Adjusting your unit rate to different degrees w ill help and assist you on w hich is the most ideal rate to use, and you w ill be aw are that this estimate has risk associated w ith it. My analysis point of concentration w ill be on the triple constraint w hich are time, cost, and scope, and they have its individual criteria and respective priorities.

RE: Determ ining "Sensitivity" to Specific Item s

Dw ayne Grant

5/25/2013 5:05:09 PM

If, I had to select specific items for a sensitivity analysis it would include items from the risk analysis, and also from the critical path. The reason why the critical path was selected is because each day that tasks are delayed on the critical path will add additional days to the project end date. I would then use the risk matrix to determine which risk would effect items on the critical path. Once these items have been identified it would be a good it to do a statistical calculation, and concept called null hypothesis comes to mind. So, we can create a scenario and do hypothesis testing to predict the outcome, and according to the data will accept the hypothesis or fail to reject the null hypothesis.

RE: Determ ining "Sensitivity" to Specific Item s

Bruce Foley

5/25/2013 7:12:19 PM

A project is "sensitive" to specific items mainly if the item is on the critical path to completion. This is the main criteria, in my opinion that dictates if an item is sensitive to a specific item. Critical path item can potentially stop a project in it's path.

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Calculations of Sensitivity: Constants and Variables

Professor Orr

5/22/2013 11:34:23 AM

This is a good start. Include in your answ ers the constants and variables that w ere included in any calculations of sensitivity a sample calculation w ould be excellent! Regards, Susan

RE: Calculations of Sensitivity: Constants and Variables

Varune Ramoutar

5/22/2013 7:25:40 PM

To build on my example used earlier on calculating the cost of a house based on the number of fireplaces i.e. Cost = $100,000 + $100(x): The constant is the mean price of a house in the neighborhood i.e. $100,000. The variable is the number of fireplaces - x. The rate by which the house price increases based on the number of fireplaces i.e. the gradient of the linear relationship is $100

RE: Calculations of Sensitivity: Constants and Variables

Nishan Ragoonanan

5/23/2013 1:14:17 PM

An example of sensitivity analysis that might be performed could be the cost of a manufacturing plant that is dependent on refinery components that are coming from Germany. In this case if the cost of the components are quoted as 5 million in Euros, and w e are paying our German manufacturer in Euros then w e are sensitive to exchange rate fluctuations so Final Plant cost = US to EuroExchange rate x Cost of Refinery Components We can measure using this equation how even a 1% fluctuation in exchange rate can influence our final plant cost.

RE: Calculations of Sensitivity: Constants and Variables Modified:5/24/2013 1:31 PM

Esperanca Rosa

5/24/2013 1:26:17 PM

Dr. Susan, The variables that I could include while doing calculations on sensitivity analysis would depend on what we are analyzing. Depending on the type of the project, the variables or constant would vary according to the analytical study. A great example is when we have a construction or builder company and want to build new houses or condominiums. What are the major aspects or variables we need to take into consideration? For a seller perspective, I would say location, school zones, security, future monthly expenses, and price. For the buyer perspective, one of the first variables to analyze would be price, location, school zone, and security. All these variables would be relevant in our sensitivity analysis because if one fails it will affect the other ones. Consequently, it will affect our final decision. Whether the price is high, we would have to analyze the other variables and check if it would compensate to be in that house. I have found a great website to share with you that has good explanation of it. One goal of a housing suitability model might be to identify the most desired locations to build a house based on specified criteria. In the following housing suitability model, sensitivity analysis was used to explore how the output housing preference locations changed with slight variations in the input criteria parameters. The suitability surface using the base parameters.

The suitability surface is shown above using the base parameters. Green is the most preferred, while red is the least preferred. Purple defines areas that were removed from consideration. The housing suitability model is a simple model built in ArcGIS Spatial Analyst using four criteria: The lower the slope, the more preferred because of lower building costs. Since the study site is in northern Vermont in the United States (a cold climate), the more southerly the exposure the better. To reduce the cost of access to the infrastructure (for example, electricity) and reduce driveway costs, the closer to a road, the better. Because you cannot build on existing houses or structures or in conservation areas, these areas were removed from consideration. Sensitivity analysis was performed by changing each of the input criteria by 5 percent increments. Only the three most preferred classes were altered for each criteria, since only the best locations for a house are of interest. The following table represents the total number of cells in the top two classifications relative to the change in parameter scenarios (values 30 and 29 being the most preferred locations). Base is the output using the base parameters, Roads 5 percent changed the distance to roads parameters by 5 percent, and so forth. The percent change is also provided for the most preferred locations. The total number of cells in the top two classifications is provided (30+29). Note that a 5 percent change in distance from roads provided no change, but a 10 percent change provided the greatest change. Small changes in both the slope and aspect parameters (5 percent) resulted in large changes but leveled out at greater changes (10 percent).

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Val/Sc 30 29 30+29 Base 163 811 974 Roads 5% 163 (0%) 825 988 Roads 10% 205 (1.26%) 927 1132

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Slope 5% 177 (1.09%) 911 1088 Slope 10% 195 (1.20%) 999 1194 Aspect 5% 178 (1.10%) 889 1067 Aspect 10% 189 (1.16%) 958 1147

The following table shows the total cell change from the changes in values from the base surface to the changed surface. The value changes on the y-axis are identified by two values. The first is the value from the suitability model using the base parameters and the second number is what they changed to with the parameter change. Note that none of the most preferred locations (value 30) changed in any of the change scenarios. However, when more locations were assigned to the most preferred class (value 30) in a change scenario, those locations generally came from the base model's second most preferred locations. The exception to this is with the changes to aspect where some of the third most preferred locations on the base suitability model (value 28) became the most preferred (value 30). Retrieved from: http://resources.esri.com/help/9.3/arcgisdesktop/com/gp_toolref/process_simulations_sensitivity_analysis_and_error_analysis_modeling/performing_sensitivity_analysis.htm Find please the map in the attactment. Thanks, Esperanca
One goal of a housing suitability model might-Erosa.pptx

Changes betw een Prototype and Full Production

Professor Orr

5/23/2013 10:08:28 AM

Good discussion. What factors might change betw een a prototype run and full production, w hich might make data gathered during the prototype run inaccurate? How w ould you adjust estimates? Regards, Susan

RE: Changes betw een Prototype and Full Production

Huyen Bui

5/23/2013 7:26:26 PM

In my FMCG industry, in order to launch the NPD (new product development), it has to pass a certain type of test from the R&D. For example, I w as developed the new bottle of floor cleaning product. The manufacture w ill develop the mock-up bottle and w e had to test the durable of the bottle base on temperature, does the liquid chemical react to the bottle, etc. The plastic of the bottle w as too thick that it made the bottle not flexible and easy to break so they have to fix and it affected to the duration of a w hole project. So in order to lkeep the project on time, w e had to schedule tasks parallel, and ask the R&D w hether they can speed up the process of testing.

RE: Changes betw een Prototype and Full Production

Cauretta Bell

5/26/2013 3:00:30 PM

you are correct! w e have to create a prototype before full production is in place. Prototypes are created to see w hat kinks need to be examine in order for thefull production to take effect. In the examp.e above it w ould have been a w aste of money for tne w ater bottles to go into full production w thout know ing the major or minor issues. once in production it is more costly to make the corrdctions and the start again.

RE: Changes betw een Prototype and Full Production

Dw ayne Grant

5/26/2013 7:11:42 PM

That is great point Huyen and w e can't underestimate the importance of using a prototype. There is a reason for that, and w e talked about this topic at length in our class. One class mate use the example of the carrier catapult that malfunctioned that cause hundreds of those of dollars in rew orks cost. Most of the class agreed the preventing this w ould have been better, and this should of been in the form of a scaled dow n version or a speed test prior to acceptance. I also remember from a quality class it is easier to do it right the first time than to do it over.

RE: Changes betw een Prototype and Full Production

Serge Ndongo

5/23/2013 9:18:00 PM

A prototype is a model of a product w hich is used for testing before a manufacturing run is ordered. Many companies run through several prototypes w hen developing a new product, as they learn more about the manufacturing process, how people w ill use it, and how it can be handle. The factors that might change betw een a prototype run and a full production are the size, the quantity, the design, the quality of material used, and the features of the product. Surveys might make data gathered during the prototype run inaccurate. The best w ay to adjust estimates is through evaluation and testing.

RE: Changes betw een Prototype and Full Production

Tanika Thom as

5/23/2013 10:05:27 PM

Excellent point Serge. Prototype run is where all errors should be worked out to which is similar to R&D. Making adjustment prior to full production would reduce the cost of liability on production/company. When I think of prototype, I always go back to the notion buying new technology on the market is not for me because it was only tested in a selected market and once the product hits full production and all users began to explore and truly test the product, this is when the real results are discovered. Prime example would be iPhone 4 and the location of the antenna was not discovered until after hitting the market. This caused increase in fixing the problem, inconvenience to customers, etc. Please correct me if I'm wrong in my understanding of prototype and full production.
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RE: Changes betw een Prototype and Full Production Tanika, That makes sense.

Joel Khan

5/24/2013 9:57:46 AM

As as example of prototype and production I can also suggest an example of an application that is being developed. Although w e are suppose to test all the functions in development some of the functions like server load, bandw idth is not uncovered till the applications is in production w hich makes changing the application at that point very difficult so w e try to get as many users to test at the same time as possible since the most of the queries on the database have to w ork w ith database locks so everyone can do their job.

RE: Changes betw een Prototype and Full Production

Nishan Ragoonanan

5/24/2013 12:44:40 PM

During a prototype run, chances are w e are w orking the kinks out of the system and w e are not building or producing production / releasable products for the public consumption. This can affect our costs greatly, funny enough on a prototype system, since it's not for public use, simply internal, the costs can be quite low as w e take shortcuts on quality that w e w ould not take on a final system. If this is the case then w e w ould need to inflate our cost and schedule to properly estimate the production run. We w ould also be a lot more tolerant of failures in the system and the process w hich w e could not tolerate on the production run requiring more personnel and supervision to reduce the likelihood of failures or the investment in machinery and quality process checks to guarantee w e meet the quality standards. This all comes w ith associated costs and schedule ramp up time to sw itch over to a production run.

RE: Changes betw een Prototype and Full Production

Varune Ram outar

5/25/2013 1:49:06 PM

Great post Nishan, During prototype testing there could be results that come up that were not expected this could cause some re-design of the prototype which would of course adjust the production run e.g. in testing the prototype for a new cell phone it may be found that the casing becomes hot when the phone is on this would mean that either a new casing would have to be designed or insulation be installed so that the heat is not experienced by the user. In either case the full production run would be changed from the prototype. Also if we subject the prototype to limited tests then the data gathered from it would be limited and the prototype may not be well tested in the real situations it would encounter in the real world e.g. the cell phone may not be tested to see if it would still work if it was used by a person with wet hands. There should be adequate contingencies placed from the prototype model and the final production model. This would be an order of magnitude contingency because you really don't know what could happen during the prototype testing.

RE: Changes betw een Prototype and Full Production

Mary Hart

5/24/2013 4:15:38 PM

Product prototype and full production are phases of a product life cycle. An example of a product life cycle would be as follow: Concept: An idea is developed in this conceptual phase. Here the client defines the deliverables. Design: In this stage the outline of the idea is developed, samples or samples called prototypes are built, test, evaluated, redesigned as needed and approved for production. At the end of this phase the design and specifications are completed. Development/pilot: In this stage the process of "production" is established based on product technical specifications. At the end of this stage, the design, process, production plan and cost estimates are reviewed and approved upon for production. Full Production: In this stage the product is mass produced using defined design and process. The final product is then called "production- products.

RE: Changes betw een Prototype and Full Production

Chukie Okunzua

5/25/2013 9:17:16 PM

Prototypes differ from production in materials, processes and fidelity. Production materials tend to require manufacuring processes that involve higher capital cost than is practical for prototype. Prototype tend to use substitute materials that simulate the final material. Production process tend to require expensive and time comsuming unique tools to fabricate a custom design while prototype compromise by using variable processes. Final design often require extensive effort to capture high volume manufacturing detail that is not required in prototype. Final production often use statistical process control and rigorous testing . http://www.en.wikipedia.org/wiki/prototype

RE: Changes betw een Prototype and Full Production

Herm inio Dionisio

5/25/2013 6:47:19 PM

Many clients cannot relate to a narrative description of a system but they can relate to a visual representation of that system. Its purpose is to help clients define w hat they w anted. By show ing them a mock up solution, they could comment on it and give the developers more insight into w hat constitutes an acceptable solution. It should be obvious that the meaningful involvement of the client is critical to the success of this approach. The client w orks w ith a version of the solution and provides feedback to the project team as they envision further enhancement and changes until all requirements are satisfied and met. Prototype support the concept of progressive elaboration because they are used in iterative cycles of mock up creation, users experimentation, and feedback generation.

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Organizational Use of Sensitivity Analysis

Professor Orr

5/25/2013 2:34:41 PM

Excellent responses! How w ould you encourage an organization to adopt formal sensitivity analysis? What are the benefits? Regards, Susan

RE: Organizational Use of Sensitivity Analysis

Herminio Dionisio

5/25/2013 7:23:39 PM

Sensitivity Analysis is a very useful guide w hen there are only few uncertain factors w ith major influences on the outcome and the distribution or possible outcomes for these factors are easy to understand by sw itching values to determine the critical values for parameters at w hich it becomes w orthw hile to sw itch to another option. It is a matter of systematically varying each variable aw ay from its base case to its low and high, one variable at a time, and seeing w hat happens to value. When used properly, sensitivity analysis can help determine how the extent of variation from factors used w ill affect. It can help management focus on w here opportunities lie for profitability that w ill make an operation more suitable over the long term.The only disadvantage of this approach is w hen there are many uncertainties or w here the uncertain factors are interrelated in complex w ay, and this is w hen it becomes less suitable.

RE: Organizational Use of Sensitivity Analysis Modified:5/25/2013 7:50 PM

Tanika Thomas

5/25/2013 7:48:36 PM

One way to encourage and organization to adopt formal sensitivity analysis would be showing visual aid to help communicate the picture, because like Herminio mention most people are visual. I think this would apply to sample of what I did in medical field with helping to create a display to communicate to patients if doctors were on time or not for appointments. In the beginning of the discussion many avoided the topic because it was tried and failed. I tried to explain the concept verbally but no one could understand, so I took their previous plan and put it on paper and compared it to my plan; once everyone was able to see the visual the comprehension fell in place.By changing a few small things on the drawing and keeping most things constant the failed item became a success item. Also it also created a duplication affect in the clinics once everyone understood it and the concept grew to include additional tools to help making the patient time more valuable. Instead of waiting hours for a doctor who is behind on appointment, the patient can go do other things or see another doctor and be paged when it's their turn. I never would have thought such a simple idea would grow and be used through out the hospital clinical system.

RE: Organizational Use of Sensitivity Analysis

Joel Khan

5/26/2013 11:55:19 PM

Sensitivity analysis is a tool for looking at a w ide range of variables and assumptions in the Business Plan to determine the impact on the company and the viability of the plan if and w hen these planning assumptions change - w hich they invariably and inevitably w ill. Sensitivity analysis raises questions such as the follow ing: Will our Business Plan still be viable if 20% of the target customers that w e assume w ill adopt this new product do not? 30%? 40%? What w ill be the impact on our Business Plan if tw o of the key potential competitors w e have identified become actual competitors? What w ill be the impact on our Business Plan if w e can't attract new employees or strategic partners that w e have identified as critical to implementation? What if w e can't raise the equity capital w e need to implement the Business Model? What if w e have to give up more ow nership and control than w e had anticipated to raise the capital? What if w e need to raise more debt capital? If w e planned to borrow money to implement the Business Model, w hat impact w ould higher interest rates have on the economics of the model? If our customers w ill need to borrow to buy our products and services, w hat impact w ill higher rates have on these buying decisions? What if the market rejects the pricing structure that underlies the introduction of the new product or service? What if deeper discounts need to be offered to encourage customers to make the sw itch? What impact w ill this have on our margins? The bottom line is that overly optimistic or w eakly researched assumptions in a Business Plan can and w ill come back to haunt the entrepreneur. Assuming conservative assumptions and adequate research, there are still many variables that can and w ill change that w ill have an impact on the Business Plan and the company. Sensitivity analysis seeks to anticipate the changes in these variables so that ow ners are not caught by surprise.

Reference: http://w w w .entrepreneurship.org/en/resource-center/business-planning-building-an-effective-business-model.aspx

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