case sharon construction 1
TRANSCRIPT
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Sharon Construction Corporation
Source: Source Meredith & Mantel
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SituationOverhead cost of $500 per week for any
delay after 48 weeksPenalty of $15,000 per week if project
takes more than 52 weeksPossible Labour Strike in DecemberPossible Cold December
Probability Duration0.50 0 weeks0.35 8 weeks0.15 12 weeks
Probability Cost of Heating0.333 $500 per week0.667 $0 per weekE(x) $167 per week
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Alternatives1. Expedite seat gallery supports 2. Expedite seat gallery supports and filling of the
field 3. Expedite the roofing 4. Do nothing until December 1st. If the cold is
indeed extreme, postpone concrete pouring or heat when necessary; if a strike occurs, expedite all activities after resolution
5. Do nothing
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Analysis of Baseline & Alternative No.5 Do nothing (Tcp = 48+x weeks)
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Analysis of Alternative No.1
• Expedite pouring concrete for seat gallery supports ($20,000) (activity G from 12 to 6 weeks) (Time=42)
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Analysis of Alternative No.2
• Expedite pouring concrete for seat gallery supports ($20,000) (G from 12 to 6 weeks) and filling of the field ($10,000) (C from 14 to 9 weeks) (Time=42)
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Analysis of Alternative No.3
• Expedite the roofing ($9,000) (activity K from 8 to 2 weeks) (Time=48)
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Analysis of Alternative No.4 with 8 Week Strike Do nothing until December 1st. If the cold is indeed extreme, postpone concrete pouring or heat when
necessary; if a strike occurs, expedite all activities after resolution ($3,000 per week cut) (Time= 52)
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Analysis of Alternative No.4 with 12 Week Strike Do nothing until December 1st. If the cold is indeed extreme, postpone concrete pouring or heat when
necessary; if a strike occurs, expedite all activities after resolution ($3,000 per week cut) (Time=56)
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Project DurationProbability
StrikeStrike
Duration (x: weeks)
Alternative 1
Alternative 2
Alternative 3
Alternative 4
Alternative 5
0.50 0 42 42 48 48 48
0.35 8 50 50 56 52 56
0.15 12 54 54 60 56 60
Time Analysis
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Summary Mild DecemberProbability
StrikeAlternative
1Alternative
2Alternative
3Alternative
4Alternative
50.50 $20,000 $30,000 $9,000 $0 $0
0.35 $21,000 $31,000 $73,000 $14,000 $64,000
0.15 $53,000 $63,000 $135,000 $76,000 $126,000
Summary Cold DecemberProbability
StrikeAlternative
1Alternative
2Alternative
3Alternative
4Alternative
50.50 $20,000 $30,000 $9,668 $668 $668
0.35 $21,000 $31,000 $73,000 $14,000 $64,000
0.15 $53,000 $63,000 $135,000 $76,000 $126,000
Cost Analysis
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Risk Analysis
Expected Losses and Uncertainty in mild December
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Alternative1
Alternative2
Alternative3
Alternative4
Alternative5
E(x)
SD(x)
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Risk Analysis
Expected Losses and Uncertainty in cold December
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Alternative1
Alternative2
Alternative3
Alternative4
Alternative5
E(x)
SD(x)
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Risk Profiles
0.50.350.15Alternative 1
Alternative 2Alternative 3
Alternative 4Alternative 5
$0$20,000$40,000$60,000
$80,000
$100,000
$120,000
$140,000
Probabilities
Risk Profile of losses with mild December
Alternative 1
Alternative 2
Alternative 3
Alternative 4
Alternative 5
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Risk Profiles
0.50.350.15Alternative 1
Alternative 2Alternative 3
Alternative 4Alternative 5
$0$20,000$40,000$60,000
$80,000
$100,000
$120,000
$140,000
Probabilities
Risk Profile of losses with cold December
Alternative 1
Alternative 2
Alternative 3
Alternative 4
Alternative 5
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Recommendation
1. A4: Do nothing until December 1st. If the cold is indeed extreme, postpone concrete pouring; if a strike occurs, expedite all activities after resolution (lowest E(x))
2. A1: Expedite seat gallery supports (second lowest E(x))
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Conclusion A1 is better than A2 and A3 if the probability/risk of a strike is
considered.
A4 provides the option of speeding up the remaining tasks in case of a strike and doing nothing otherwise. This option is powerful.
A4 has a lower but a higher uncertainty (broad range of losses from $0 to $76,000) than A1. The analysis of the risk profiles will help management to select the alternative which fits the corporation’s risk strategy.
If the corporation is adverse to risk, it could select A1 (losses are spread out from $20,000 to $53,000). A1 has a lower uncertainty than A4.
The project duration could be a factor for the decision, if there are projects on hold due to lack of resources.