"managing project planning risk"

PG Conf /1

© F.A. Hossen, M&S EngineeringUniversity of Newcastle upon Tyne

Managing Project Planning Risk

Fouzi A. Hossen

PG Conf /2


Overview

• Risk and Uncertainty • Objectives• Project risk management PRM

process• Capital good companies• Product structure • Industrial case study• Conclusions

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Risk

• Risk is defined as “the exposure to the possibility of economic and financial loss or gain, physical damage or injury, or delay as a consequence of the uncertainty associated with pursuing a particular course of action” (Chapman et al., 1991).

• Project risk exists where uncertainty threaten the project’s ability to meet its objectives within the given limitations (CCTA,1996)

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Uncertainty

• Uncertainty is defined as “the unknown future event that cannot be predicted quantitatively within useful limits” (APICS, 1998, p98).

• Uncertainty has a common meaning which is the lack of certainty; risk also has general meaning which is the exposure to loss or injury as a consequence of uncertainty (Chapman et al., 1987).

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Objectives

The objectives of the paper are to:• Review the literature relating to the

project risk management process;• Investigate the risk associated with

project scheduling that result from activity duration uncertainty;

• Analyse the activity completion time risk quantitatively by developing a simulation model.

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Project risk management PRM process

The PRM process is defined as “the process of taking management action in order to respond appropriately to all identified risks to maximise the likelihood of the project meeting its objectives within its constraints, by monitoring risk exposure and adjusting project strategy to keep risk within acceptable levels” (CCTA, 1996, p12).

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Project risk management PRM process

• Risk identification• Risk Analysis

- Qualitative risk analysis

- Quantitative risk analysis

• Risk mitigation• Risk Monitoring

and follow up

Project risk Management process

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Capital Goods Companies

• Product and process usually complex

• Customised to meet individual customers requirements

• Engineer-to-order• Low production volume

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Product Structure

See the product structure considered in this study

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Industrial case study

Component finishing time

Assembly finishing time

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Normal probability plot of final product finishing time

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Final product finishing time

0.1 Sd

0.2 Sd

Due date



0.3 Sd

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Sd 0.1

Sd 0.4

Due date

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Conclusions

• Capital goods are customised and the processing times are uncertain.

• The uncertainty becomes cumulative throughout the production stages.

• Due to the uncertainty and complexity of production in ETO products, it is difficult to estimate accurately the product lead-time.

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Conclusions

• The effect of cumulative uncertainty is to shift the distribution of product completion time to the right. As a result of this the probability of delivering a product on due date becomes very small.

• Increasing of the standard deviation from 0.1 to 0.2 and 0.3 times the mean, the distribution of product completion times are increasingly shifted to the right and the uncertainty is additionally increased.

• Managers need to minimise the risks associated with these uncertainties.

PG Conf /16


Acknowledgement

I would like to thank my supervisor, Dr C. Hicks, for his advise and Dr P. Pongcharoen for his support.

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"managing project planning risk"

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