W2_Ashwaq_Pareto Priority Index for PMI Projects

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W2_Ashwaq_Pareto Priority Index for PMI Projects
1. Problem Definition
A PMI student decides to have cost reduction and a better cost utilization on the PMI program. (Note that the cost here is the value of the hours spent on the PMI projects). The student will define the alternatives for a project cost reduction and specify the priority of project that will be executed.
2. Identify the Possible Alternative
Feasible alternatives projects to cost reduction are:
·         Paper 2500
·         Weekly Report
·         Blog Posting

Table 1 below shows the current cost of each project.

Table 1 Current Cost of Projects

Project
Cost $
Paper 2500
1170
Weekly Report
945
Blog Posting
1260


 3. Development of The Outcome for Alternative
Generate estimate cost, estimate saving and probability of success.
·         Paper 2500

An estimate on utilizing the cost allocated on paper work using 50% cost of the blog posting project.
Cost to implement = 150 $
Cost saving = 630 $
Probability to success = 0.65
Time to completion = 2 Weeks

·         Weekly Report
As estimate on reducing the cost of the weekly reports
Cost to implement = 30 $
Cost saving = 567 $
Probability to success = 0.85
Time to completion = 0.5 Week

·         Blog Posting
As estimate on reducing the cost of blog posting by working smarter not harder.
Cost to implement = 180 $
Cost saving = 441 $
Probability to success = 0.7
Time to completion = 3 Weeks


Now we calculate Pareto Priority Index (PPI). The equation that will be used is:
Table 2: PPI Calculation Result
No.
Alternatives
Cost Saving
Cost to Implement
Probability to Success
Time to Completion
PPI
1
Paper 2500
630
150
0.65
2
1.365
2
Weekly Report
567
30
0.85
0.5
32.13
3
Blog Posting
441
180
0.7
3
0.572





4. Selection Criteria
Cost reducing project that have biggest PPI will be selected.
5. Analysis & Comparison of Alternative
Weekly report has the highest PPI value among the others, according to table 3 below the project ranking as follow:
Table 3: Project Priority

No
Alternative
PPI
1
Paper 2500
1.365
2
Weekly Report
32.13
3
Blog Posting
0.572







6. Selection of the Preferred Alternative


Based on above analysis, Weekly Report project is selected due to its highest PPI (32.13)
 7. Performance Monitoring and The Post Evaluation of Result

To select a project more accurately, use the same analysis after few weeks from the time of the PMI program. Whenever an update data is available, the calculation should be re-run to validate the selection.

Word count: 480 words

References

1.    Six sigma daily (2014). The Six Sigma Approach to Project Selection. Retrieved from: http://www.sixsigmadaily.com/implementation/the-six-sigma-approach-to-project-selection
2.    Selecting Projects where Six-Sigma can add value (2014). Retrieved from: http://unpan1.un.org/intradoc/groups/public/documents/arado/unpan020936.pdf
3.    Laksono, Andhy. (2014). W13_AL_Pareto Priority Index|Kristal AACE 2014. Retrieved from https://kristalaace2014.wordpress.com/2014/05/21/w13_al_pareto-priority-index/

4.    Adhi, Oktafianto. (2017). W13_OAN_ Pareto Priority Index|Emerald AACE 2018. Retrieved from http://emeraldaace2017.com/2017/11/05/w13_oan_pareto-priority-index/

Comments

  1. Dr. PDGNovember 16, 2017 at 10:36 AM

    Great case study Ashwaq but is COST the only priority? What about FLOAT? One of the really big dangers is to allow FINANCE or ACCOUNTING people to make decisions on projects. Why? Because they only look at the costs without seeing which activities are critical. In many cases it is actually better to go over budget on some critical path items to reduce the duration of the project. This is why the "best practices" formula to forecast the cost at completion is the SPI X CPI method.

    Bottom line- be very cautious when using the PPI method to determine where to save money UNLESS you also look at whether or not the activity is or is not on the critical path.

    BR,
    Dr. PDG, Jakarta

    ReplyDelete

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