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1
Agenda
2
Activity Duration Risk
30d
Design Unit 1
3
Activity Duration Risk
4
Design Unit 1 Duration Uncertainty
Low=20d, Most Likely=30d, High=60d
0.07
0.06
PROBABILITY
0.05
0.04
0.03
0.02
0.01
0.00
20
24
28
32
36
40
44
48
52
56
5
Risk Along a Path
6
Original Single-Path Schedule
ID Name Duratio Start Finish @RISK: Functions August SeptembOctober NovembDecemb January
1 Project 95 d 9/1 12/4
2 Start 0d 9/1 9/1 9/1
3 Design 30 d 9/1 9/30 Duration=RiskTRIANG(20,30,60) 9/1 9/30
4 Build 40 d 10/1 11/9 Duration=RiskTRIANG(30,40,65) 10/1 11/9
5 Test 25 d 11/10 12/4 Duration=RiskTRIANG(18,25,50) 11/10 12/4
6 Finish 0d 12/4 12/4 Finish=RiskOUTPUT() 12/4
8
Completion Dates from
Simulation
Frequency Distribution
for Project Finish
0.06
0.04
0.02
0.00
11/15
11/24
12/3
12/12
12/21
12/30
1/8
1/17
1/26
2/4
Date
9
The Fallacy of Most Likely
Durations
• People sometimes say:
“Well, at least if we use the best estimates in our
schedule the CPM completion date is the most
likely date. Isn’t it?”
No, Never!
• In this case,
– CPM says December 4
– But the Most Likely completion date is
December 15
10
Cumulative Distribution --
December 10 is only 10% Likely
Cumulative Distribution
for Project Finish
Prob of Value <= X-axis
1.0
0.9
0.8
0.7 CPM
0.6 80% Likely
Value
0.5 Date
0.4 12/4 Schedule 1/3
0.3
0.2
0.1
0.0
1/8
2/4
11/15
11/24
12/3
12/12
12/21
12/30
1/17
1/26
Date
11
Results for Simple
Single-Path Schedule: CPM = 10%
S u m m a ry S ta tis tic s
fo r P ro je c t F in is h
M in im u m 1 1 /1 8
M a x im u m 2 /6
M ean 1 2 /2 2
S td D e via tio n 13
M ode 1 2 /1 5
5% 1 2 /1
10% 1 2 /5 CPM
20% 1 2 /1 1
30% 1 2 /1 4
40% 1 2 /1 8
50% 1 2 /2 1
60% 1 2 /2 5
70% 1 2 /2 9
80% 1 /3 80%
90% 1 /9 12
95% 1 /1 4
Risk at Path Merge Points
The “Merge Bias”
Start
Finish
13
Simple Two-Path Project
ID Name Duration Start Finish @RISK: Functions August Septemb October NovembeDecembeJanuary
1 Project 95 d 9/1 12/4
2 Start 0d 9/1 9/1 9/1
3 Component A 95 d 9/1 12/4
4 Design A 30 d 9/1 9/30 Duration=RiskTRIANG(20,30,60) 9/1 9/30
5 Build A 40 d 10/1 11/9 Duration=RiskTRIANG(30,40,65) 10/1 11/9
6 Test A 25 d 11/10 12/4 Duration=RiskTRIANG(18,25,50) 11/10 12/4
7 Component B 95 d 9/1 12/4
8 Design B 30 d 9/1 9/30 Duration=RiskTRIANG(20,30,60) 9/1 9/30
9 Build B 40 d 10/1 11/9 Duration=RiskTRIANG(30,40,65) 10/1 11/9
10 Test B 25 d 11/10 12/4 Duration=RiskTRIANG(18,25,50) 11/10 12/4
11 Finish 0d 12/4 12/4 Finish=RiskOUTPUT() 12/4
14
Effect of the Merge Bias
D istribution for P roject F inish
O ne and Tw o P ath S chedules
1.0
0.9 CPM Date
P rob of value < = X -A xis
0.8
0.7
0.6
0.5
One-Path
V alue
0.4 Two-Path
0.3 Schedule Schedule
0.2
0.1
0.0
1/3
2/7
11/1
11/8
12/6
1/10
1/17
1/24
1/31
11/15
11/22
11/29
12/13
12/20
12/27
D ate
15
Comparison of Two Risky
Schedules: CPM < 5%
E vidence of the M erge B ias
T w o P a th s
O n e P a th M e rg e B ia s
M ean 1 2 /2 2 1 2 /2 9
M ode 1 2 /1 8 1 2 /3 1
S td D e via tio n 1 3 .1 1 1 .5
5% 1 2 /1 1 2 /1 1
CPM
CPM 10% 1 2 /5 1 2 /1 5
20% 1 2 /1 1 1 2 /1 9
30% 1 2 /1 5 1 2 /2 3
40% 1 2 /1 8 1 2 /2 6
50% 1 2 /2 2 1 2 /2 9
60% 1 2 /2 5 1 /1
70% 1 2 /2 9 1 /4
80% 1 /2 1 /8 80%
90% 1 /9 1 /1 3
16
95% 1 /1 4 1 /1 9
Defining the
Risk Critical Path / Activities
• With hundreds or thousands of activities, which
are most likely to delay the project?
– Depends on risk, project structure (float)
• Simulation program records whether an activity
was critical in each iteration
17
Schedule with Risk Management
of Critical Unit B
ID Name Duration Start Finish @RISK: Functions August SeptembOctober Novemb DecembeJanuary
1 Project 95 d 9/1 12/4 Slack Path
2 Start 0d 9/1 9/1 Not Managed 9/1
3 Component A 93 d 9/1 12/2
4 Design A 28 d 9/1 9/28 Duration=RiskTRIANG(18,28,58) 9/1 9/28
5 Build A 40 d 9/29 11/7 Duration=RiskTRIANG(30,40,65) 9/29 11/7
6 Test A 25 d 11/8 12/2 Duration=RiskTRIANG(18,25,50) 11/8 12/2
7 Component B 95 d 9/1 12/4
8 Design B 30 d 9/1 9/30 Duration=RiskTRIANG(25,30,40) 9/1 9/30
9 Build B 40 d 10/1 11/9 Duration=RiskTRIANG(35,40,50) 10/1 11/9
10 Test B 25 d 11/10 12/4 Duration=RiskTRIANG(20,25,30) 11/10 12/4
11 Finish 0d 12/4 12/4 Finish=RiskOUTPUT() 12/4
Risk Managed
Critical Path
18
Criticality or % of
Iterations on Critical Path
Criticality Index
Percent
Task Critical
Component A 80%
Design A 80%
Build A 80%
Test A 80%
Component B 20%
Design B 20%
Build B 20%
Test B 20% 19
Correlation Between
Activity Durations
• Correlation when some risk factor (“driver”)
affects the durations of two activities together
• Difficult technology makes design and build take
longer
• Severe working conditions affect design and build
• Permit uncertainty affect design and build
S/W
Technology Development
Risk
S/W Testing
20
Correlation
21
Add Significant Correlation to
Single Path Schedule
C orrelation M atrix
D esign / B uild / Test /
D uration D uration D uration
D esign/D uration 1 0.8 0.6
B uild/D uration 0.8 1 0.9
Test/D uration 0.6 0.9 1
22
Correlations Increase the Spread
of the Results Distribution
Distribution for Correlated
and Not Correlated Durations
0.16 Not
Correlated
Relative Likelihood
0.12
Correlated
0.08
0.04
0.00
11/1
11/14
11/27
12/11
12/24
1/7
1/20
2/2
2/16
3/1
Date
23
Correlations Increase the Spread
of the Results Distribution
S-Curve for Correlated and Not
Correlated Durations
Prob Value <= Value on
1.0 Not
0.9 Correlated
0.8
0.7
Correlated
X-Axis
0.6
0.5
0.4
0.3
0.2
0.1
0.0
1/7
2/2
3/1
11/1
11/14
11/27
12/11
12/24
1/20
2/16
Date
24
Probabilistic Branching
25
Calculating Possibility of
Failure from 3 Events
Probability of Failure from 3 Events
Source of Probability Probability Merged
Failure Event of Failure of Success Probability
of Success
Facilities 5% 95% 64%
Equipment 10% 90% of Failure
26
Computing the Impact of a
Failure from 3 Events
27
Probabilistic Branching
28
Network Logic of Test Failure
Probabilistic Branch
29
Probabilistic Branching
Histogram
Distribution for Branch
of Probabilistic Failure
0.12 Success
0.1 Branch
PROBABILITY
Failure
0.08
Branch
0.06
0.04
0.02
0
1/8
2/9
11/5
11/21
12/7
12/23
1/24
2/25
3/13
3/29
Date
30
Cumulative Distribution of
Probabilistic Branch
Distribution for Finish of Probabilistic
Branching Network
Prob of Value <= X-axis
1.00
0.90
0.80
0.70
0.60 “Shoulder” at
Value
0.50
0.40 64% Success
0.30
0.20
0.10
0.00
11/5
12/7
1/8
1/24
2/9
2/25
3/13
3/29
11/21
12/23
Date
31
Conditional Branching
32
Model Technology Decision
33
Technology A Alone: No Plan
B? A = 100% Pr(Plan A) = 100%
Cumulative Distribution T echnology A : N o P lan B
Technology A: No Plan B Task C ritical Index
Mean 2/4
Mode 2/2
Technology A 100%
10% 1/5 D esign Tech. A 100%
20% 1/13 M ake & Q ual Tech A 100%
30% 1/20
40% 1/27
Technology B 0%
50% 2/2 D esign Tech. B 0%
60% 2/9 M ake & Q ual Tech B 0%
70% 2/17
80% 2/25
90% 3/10 34
If Technology A Design not
done by 10/25: Plan B
35
Switch to Plan B if Design for
Plan A is Not done by 10/25
C um ulative D istribution T echnology D ecision
S w itch to P lan B on 10/25 C onditionalB ranching:
M ean 1/10 S w itch to P lan B on 10/25
M ode 1/5 Task C ritical Index
10% 12/27 Technology A 30%
20% 12/31 D esign Tech. A 23%
M ake & Q ual Tech A 30%
30% 1/2
Technology B 70%
50% 1/7
D esign Tech. B 70%
60% 1/9 M ake & Q ual Tech B 70%
70% 1/12
80% 1/16 Pr(Plan A) = 30%
36
90% 1/27
Decision Rule Trade-Off
• Trade off
– Likelihood of completing on time
– Likelihood of using Preferred Technology A
38
Resource Leveling
1 .0
0 .9
0 .8
0 .7
0 .6
0 .5
0 .4
Not
0 .3 Leveled
0 .2 Resource
0 .1
0 .0
Leveled
1 1 /2 0
1 2 /1 0
1 2 /2 9
1 1 /1
1 /1 8
2 /2 6
3 /1 7
4 /2 5
2 /6
4 /6
D a te
39
Effect of Constraints
E ffe ct o f C o n strain in g S ch e d u le
to F in ish N o t L ate r T h an 12/11
P ro b o f V alu e < = X -ax
1 .0
0 .9
0 .8
0 .7
Constrained
V alu e
0 .6
0 .5
0 .4
0 .3
0 .2 Not
0 .1 Constrained
0 .0
1 1 /1 3
1 1 /2 5
1 2 /1 9
1 2 /3 1
1 1 /1
1 2 /7
1 /1 2
1 /2 4
2 /1 7
2 /5
D a te
40