esd.71 – engineering system analysis for design december 9, 2008 abe grindle

Valuing Flexibility in the Face of Uncertainty:

Deploying RFID-wired Cargo Bags on the International Space Station, 2009-2016

ESD.71 – Engineering System Analysis for Design

December 9, 2008

Abe Grindle

Aurora Flight Sciences / Payload Systems Division

OutlineI. Background & MotivationII. Previous WorkIII. Current ObjectivesIV. System Description & DefinitionsV. AssumptionsVI. Decision Tree AnalysisVII. Lattice AnalysisVIII. Conclusions

Grindle December 8, 2008

Background: ISS Inventory Architecture

• Barcodes + manual barcode scanner

• CTBs (Cargo Transfer Bags) and other bags/kits– 1/2, Standard, Double, Triple– Concentration of Inventory Transactions

• IMS (Inventory Management System)– Software database of all inventory information– Copies in Houston, Moscow, Baikanour, and ISS– Delta files

• Proposed: RFID Systems in CTBs– Antennas, Readers, Battery & Wi-Fi in CTBs– Gen II passive RFID tags on all items



Motivation: Automate the ISS Inventory Process

@ ISS Assembly Complete: • 600 Cargo Transfer Bags (CTBs)

on-orbit• 730 Crew Hours / Year spent

updating IMS ~ 4 ½ person-months (40 hrs/wk)

Questions: • Could we save some of this time with a

CTB-based RFID inventory system?

• Would this provide net value?


Image Credits: NASA / Rule-Based Analytic Asset Management for Space Exploration Systems (RAMSES) STTR Phase I Final Report (de Weck, et al. 2007)


Previous Work

• January 2008

– Study of ISS Logistics & Inventory Processes

• Spring 2008

– Development of Cost Model to evaluate Expected Net Present Value (ENPV) of RAMSES RFID System

– Hardware Prototype development

– Analysis of ENPV given hardware & performance uncertainties (single v. inflexible phased deployment)



Objective of this Study

• Evaluate: RFID deployment strategies in the context of uncertain demand, system performance, and lifetime.

– Fixed deployment:

• all RFID systems launched in 2009

– Flexible:

• Some RFID systems launched in 2009

• Option to launch additional systems in 2012



System Description & Definitions

• Deployed RFID Systems = “Wired” CTBs

• Inventory Transactions = “Demand”

• “Captured” Demand

CTB



25% RFID Deployment captures

25% (2/8) of “Demand”

25% RFID Deploymentcaptures

37.5% (3/8) of “Demand”


50% (4/8) of “Demand”

Concentration of DemandUniform Demand

Assumptions

• Initial deployment of RFID systems occur in 2009

• Benefits do not begin to accrue until 1 year after decision to deploy

• ISS will have crew of 6 at start of 2010

• “Planned” ISS retirement (for US) in 2016



Decision Tree Analysis

• Fixed Strategy:

– 2009 RFID Deployment = 33.3% of ISS CTBs

• Flexible (Incremental) Strategy:

– 2009 RFID Deployment = 16.7% of ISS CTBs

– 2012 Option = +16.7% (for total of 33.3% of ISS CTBs)

• 2 Elements of Uncertainty (Chance Nodes):

– Is there Concentration of Demand?

– When will the ISS actually be retired?



D

C

C

Flexible Delayed Deployment Strategy (100 CTBs ~ 16.7%)

Fixed Up-Front Deployment Strategy (200 CTBs ~ 33.3%)

D

D

D

D

D

D

8.33% Demand Captured


25% Demand Captured


33.3% Demand Captured50% Demand Captured

C

C

C

C

C

C

C

C

C

Expand Deployment (to 33.3%)

Maintain 16.7% Deployment







Maintain 33.3% DeploymentEOL = 2020EOL = 2018EOL = 2016EOL = 2014

EPV = $55.46 M

EPV = $73.11 M

EPV = $35.25 M

EPV = $12.11 M

EOL = 2020EOL = 2018EOL = 2016EOL = 2014

EPV = $15.61 M

EPV = $27.24 M

EPV = $2.29 M

EPV = $(12.97) M

EOL = 2020EOL = 2018EOL = 2016EOL = 2014

EPV = $(24.24) M

EPV = $(18.62) M

EPV = $(30.68) M

EPV = $(38.04) M

EOL = 2020EOL = 2018EOL = 2016EOL = 2014

EPV = $25.52 M

EPV = $34.15 M

EPV = $15.65 M

EPV = $4.33 M

EOL = 2020EOL = 2018EOL = 2016EOL = 2014

EPV = $36.86 M

EPV = $54.51 M

EPV = $16.65 M

EPV = $(6.48) M

EOL = 2020EOL = 2018EOL = 2016EOL = 2014

EPV = $5.60 M

EPV = $11.22 M

EPV = $(0.83) M

EPV = $(8.20) M

EOL = 2020EOL = 2018EOL = 2016EOL = 2014

EPV = $5.04 M

EPV = $16.68 M

EPV = $(8.28) M

EPV = $(23.54) M

EOL = 2020EOL = 2018EOL = 2016EOL = 2014

EPV = $(26.78) M

EPV = $(21.16) M

EPV = $(33.22) M

EPV = $(40.59) M

EOL = 2020EOL = 2018EOL = 2016EOL = 2014

EPV = $(14.32) M

EPV = $(11.71) M

EPV = $(17.32) M

EPV = $(20.74) M

ISS End Of Life (EOL) = 2020

EOL = 2018

EOL = 2016EOL = 2014

Est. Prob. = 0.1

Est. Prob. = 0.2

Est. Prob. = 0.6

Est. Prob. = 0.1

Est. Prob. =

0.1

Est. Prob. = 0.3

Est. Prob. = 0.6

Est. Prob. = 0.1

Est. Prob. = 0.3

Est. Prob. = 0.6

EPV = $(31.46) M

EPV = $(16.50) M

EPV = $(4.65) M

EPV = $0.92 M

EPV = $22.17 M

EPV = $18.34 M

EPV = $(28.92) M

EPV = $5.92 M

EPV = $22.36 M

EPV = $11.93 M

EPV = $12.30 M

2009 2012 2014-2020


• Results:

– Fixed Strategy has larger ENPV than Flexible, as considered here

• Why?

– Large Capex required (launch & installation costs)

– Low recurring cost, High recurring benefits






Various Evaluation Criteria

Flexible Deployment Fixed Deployment Better?

Expected Net Present Value: $11.93 Million $12.30 Million Fixed

Maximum Net Present Value: $54.51 Million $73.11 Million Fixed

Minimum Net Present Value: $ (20.74 Million) $ (38.04 Million) Flexible

Initial Cost: $31.24 Million $61.08 Million Flexible

Max. % of Demand Captured: 50.00% 50.00% n/a

Min. % of Demand Captured: 8.33% 16.70% Fixed

Lattice Analysis

• Fixed Strategy:

– 2009 RFID Deployment = 25% of ISS CTBs

• Flexible (Incremental) Strategy:

– 2009 RFID Deployment = 25% of ISS CTBs

– 2012 Option = +10% (for total of 35% of ISS CTBs)

• Uncertainty:

– How much time will a given deployment save the crew?

• Current schedule = 20 min / day / crewmember for Inventory



Lattice Analysis

• Growth Rate = 10% (over 6 yrs) Volatility = 20% (over 6 yrs)

– Somewhat arbitrary; account for learning effects & uncertainties

• Probability of Increase = ~ 60% Prob. of Decrease = ~ 40%

• Upside Factor = ~ 1.09 Downside Factor = ~ 0.92

• Initial Value = 14.40 minutes

– Corresponds to 25% RFID deployment, uniform distribution of transactions, crew of 6, manual inventory time of 20 min/day/crew



Lattice Analysis



OUTCOME LATTICE: Average Total Time (Min) Saved on Inventory Per Day

2009 2010 2011 2012 2013 2014 2015 20160.00 15.63 16.95 18.40 19.96 21.66 23.50 25.50

13.27 14.40 15.63 16.95 18.40 19.96 21.6612.23 13.27 14.40 15.63 16.95 18.40

11.27 12.23 13.27 14.40 15.6310.39 11.27 12.23 13.27

9.57 10.39 11.278.82 9.57

8.13

Lattice Analysis



PROBABILITY LATTICE2009 2010 2011 2012 2013 2014 2015 20161.00 0.60 0.36 0.22 0.13 0.08 0.05 0.03

0.40 0.48 0.43 0.35 0.26 0.19 0.130.16 0.29 0.34 0.35 0.31 0.26

0.06 0.15 0.23 0.28 0.290.03 0.08 0.14 0.19

0.01 0.04 0.080.00 0.02

0.00

Lattice Analysis



Lattice Analysis: Dynamic Programming (not inc. Capex)



ENPV (Cash Flow) 2009 2010 2011 2012 2013 2014 2015 2016NO FLEXIBILITY 51,682,488$ 58,974,334$ 56,262,629$ 52,183,754$ 46,464,563$ 38,787,007$ 28,781,325$ 16,018,237$ Dynamic programming 49,741,558$ 47,478,564$ 44,057,193$ 39,245,649$ 32,774,011$ 24,328,454$ 13,544,615$ approach 40,017,933$ 37,155,005$ 33,114,359$ 27,666,952$ 20,546,467$ 11,443,677$

31,292,722$ 27,906,827$ 23,329,338$ 17,334,285$ 9,659,272$ 23,483,879$ 19,645,243$ 14,606,061$ 8,143,711$

16,516,204$ 12,288,879$ 6,856,489$ 10,320,811$ 5,763,204$

4,834,637$

Original (25%) Initial Fixed Deployment (not inc. Capex)

ENPV (Cash Flow) 2009 2010 2011 2012 2013 2014 2015 2016NO FLEXIBILITY 73,217,769$ 83,486,714$ 79,583,712$ 73,759,210$ 65,630,278$ 54,751,092$ 40,603,388$ 22,585,532$ Dynamic programming 70,560,827$ 67,286,021$ 62,382,024$ 55,523,799$ 46,332,899$ 34,369,369$ 19,122,461$ approach 56,841,138$ 52,718,961$ 46,939,993$ 39,183,016$ 29,074,586$ 16,181,147$

44,511,764$ 39,649,449$ 33,110,357$ 24,577,532$ 13,682,981$ 33,457,321$ 27,952,623$ 20,758,018$ 11,561,196$

23,571,969$ 17,513,963$ 9,759,085$ 14,758,668$ 8,228,486$

6,928,492$

ENPV (Cash Flow) 2009 2010 2011 2012 2013 2014 2015 2016FLEXIBILITY 54,682,083$ 64,305,290$ 65,736,939$ 69,021,739$ 46,464,563$ 38,787,007$ 28,781,325$ 16,018,237$ Dynamic programming 49,741,558$ 47,478,564$ 44,057,193$ 39,245,649$ 32,774,011$ 24,328,454$ 13,544,615$ approach 40,017,933$ 37,155,005$ 33,114,359$ 27,666,952$ 20,546,467$ 11,443,677$

31,292,722$ 27,906,827$ 23,329,338$ 17,334,285$ 9,659,272$ 23,483,879$ 19,645,243$ 14,606,061$ 8,143,711$

16,516,204$ 12,288,879$ 6,856,489$ 10,320,811$ 5,763,204$

4,834,637$ Excercise CALL Option in 2012? YES

Expanded (35%) Initial Fixed Deployment (not inc. Capex)

Flexibility in Original (25%) Fixed Deployment (not inc. Capex)

25% Fixed

35% Fixed

25% + 10% Flexible

Lattice Analysis: Effects of Capex



(All figures in 2009 dollars) Fixed Cost Expected Benefits - Recurring Costs

ENPV

25% inflexible deployment: (46,560,182)$ 51,682,488$ 5,122,306$

35% inflexible deployment: (64,464,254)$ 73,217,769$ 8,753,515$

Exercise 10% deployment option in 2012: (14,615,057)$ 13,744,811$ (870,245)$

Lattice Analysis: Conclusions



• Results:– Flexible strategy has slightly larger ENPV than baseline fixed

deployment (25% in 2009), but only when Capex is not included.

– With Capex, flexible option is a net loss in value.

– Expanded initial fixed deployment (35% in 2009) is better than either.

• Why?– Large Capex required (launch & installation costs)

– Low recurring cost, High recurring benefits

Thank you!

Questions?



Back-up Slides



Inventory Transactions (“Demand”) are uniformly distributed between 100%

of CTBs

Concentration of Demand: 75% (6/8) of Transactions occur in

50% of the CTBs

Concentration of Demand: 50% (4/8) of Transactions occur in

25% of the CTBs

25% of CTBs “Wired” with RFID Systems



Percent (%) Deployment


25% (2/8) of “Demand”


75% (6/8) of “Demand”


87.5% (7/8) of “Demand”

Costs Considered

• NASA Engineer Time for:

– Flight Certification & Approval

– Operational Support & Maintenance

• Cost for Vendor to Modify CTBs or Cost to Build Mod-Kits

• Cost of RFID Hardware

• “Opportunity Cost” of:

– Launching the System Mass

– Launching the System Volume

– Crew Time to Transfer Items to Wired Bags or Install Mod Kits

Grindle September 9, 2008


Benefits Considered

• Value of Crew Time Saved on:

– Bi-annual Inventory Audits

– Missing Item Searches

– Daily Inventory Management System Updates

• Reduced workload for JSC Inventory Stowage Officers (ISOs)

– Less need to assist Crew with Inventory updates/searches

• Only Partial Savings realized, per “System Effectiveness” (β) parameter:

β = (% of Inventory Transactions ‘Automate-able’) x (System Accuracy)



Quantifying Value (“Opportunity Cost”) of Cargo Launch Volume & Mass

• Value of Cargo Launch Volume =

[Annual Net Variable Recurring Cost (all Cargo Missions)]

[Annual Net Dry Cargo Launch Volume Available (habitable)]

= ~ $20.3 million / m^3 (‘09-’10), ~ $31.6 million / m^3

(‘10-’16)

• Value of Cargo Launch Mass =

[Annual Net Variable Recurring Cost (all Cargo Missions)]

[Annual Net Cargo Launch Mass Available]

= ~ $25,500 / lb (‘09-’10), ~ $35,700 / lb (‘10-’16)



Quantifying Value of On-Orbit Crew Time

• Value of 1 Hour of On-Orbit Crew Time =

[Average Annual ISS Ops Budget (Common Systems Operations Cost)] [# Crew] x [# “Active” Hours per day / Crew Member] x [365 days/yr]

= ~ $185K / hr (’09) # Crew = 3, Each active 16 hrs/day

= ~ $ 100K / hr (’10-’16) # Crew = 6, Each active 16 hrs/day

• Notes:– Common Systems Operations (CSO) Cost is defined as “the cost to operate the ISS”, including

“the cost to transport crew and common supplies” and “ground operations costs” [9]

– International Partners’ negotiated shares of CSO Costs [10]:NASA = 76.6%; JAXA = 12.8%; ESA = 8.3%; CSA = 2.3% || RSA = Russian Segment & Crew Ops Costs



Conclusions

• If inventory transactions are concentrated in some subset of CTBs, and part or all of that subset can be targeted for RAMSES installation, this application of RAMSES is quite likely to result in positive Net Present Value.

– Such concentration has been reported by JSC ISOs, but not quantified. Intuitively, it makes sense - some desk drawers get almost all the use.

• Cost drivers: System Volume, Mass, & Crew Time required to install.

• Key Benefit: Saving part of 20 min/day each Crew Member spends updating

IMS (total = 730 hours/yr) . System Effectiveness (β) parameter is critical.

• As with any Cost/Benefit Analysis, results are limited – can provide guidance, but not absolute truth. Assumptions and unknowns are important.



Unresolved Issues / Future Work

• Common Systems Operations Costs– Likely to be larger than currently calculated (baseline uses Proposed NASA FY

2009 ISS Ops Budget as reference, but this does not include launch costs)

Would increase likelihood & magnitude of NPV (increase value of Crew Time)

– Russian Ops Costs unknown; likely to be larger as well? Same impact.

• Dry Cargo Volume Capacity of Launch Vehicles

– Only “habitable volume” is consistently available; overestimates cargo space.

Would decrease likelihood & magnitude of NPV (increase cost of cargo volume)

• Benefits of Enhanced Safety and Mission Assurance are not included in this analysis

• Cost of integrating RAMSES with existing IMS not included (technical & political)



esd.71 – engineering system analysis for design december 9, 2008 abe grindle

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