Presentation on theme: "Value Optimization in a World of Choices Presenters: Timothy J. Havranek, MBA, PMP Leigh A. Hostetter, BA Copyright 2006, Triangle Economic Research, LLC."— Presentation transcript:
Value Optimization in a World of Choices Presenters: Timothy J. Havranek, MBA, PMP Leigh A. Hostetter, BA Copyright 2006, Triangle Economic Research, LLC
DTC Process Optimization Problem Framing Meeting Optimal Decision Modeling
Introduction Client for original model was a chemical manufacturing company This company has developed a number of value improvement processes (VIPs) –Applied to all new projects –Exist for the each phase –Latter phase VIPs are focused on fine tuning the design Model developed to facilitate the Design to Capacity (DTC) VIP.
DTC Purpose Maximize capital efficiency Prevent over design that can occur due to: –Allowances for uncertainty (safety factors) –Equipment and materials come in incremental step sizes –Lack of design definition –Uncertain market demand
DTC Approach Uses a facilitated framing meeting to: –Challenge the design team –Identify design components that add excess capacity and cost –Develop a list of viable alternatives Alternatives are evaluated in terms of: –Capital and operating costs –Useful equipment life –Manufacturing capacity Recognizes that costs and equipment life are uncertain
Framing Meeting Steps Identify Major Equipment Alternatives Provide Equipment Capacities Develop Cost Range Estimates Identify Alternative Constraints
Major Equipment Requirements Under the control of the design team Two or more viable alternatives exist Equipment could have impact on system capacity
Concerns with Standard DTC Process Assumes that stated design capacity is the optimum capacity Does not include an evaluation of uncertain demand Seeks value improvement without addressing Over the Wall effect
Todays Presentation We present the results of a model: –Based on real project –Altered for purposes of demonstration and confidentiality –Evaluates the effect of uncertain demand
Optimization and Inputs Optimization: Model Inputs:
Comparison of Cumulative Profit over Time Curves Optimization #1 Optimization #2Optimization #3
Summary RISKOptimizer can be used to improve the value of value improvement processes: –Improves decision making under uncertainty –Encourages synergetic analysis rather than a fall back to business axioms –Helps achieve a shared understanding of business alternatives @RISK can be used for detailed evaluation of alternatives identified by RISKOptimizer The effects of uncertain demand and product price must accounted for when attempting to design for maximum capital efficiency
Your consent to our cookies if you continue to use this website.