W2.1_Nasser_ Estimating Time Required for Processing a Monthly Invoices using 3 Point Time Estimating (PERT)
A part of my 2017 individual KPI in my department, Client Contracts & Interface Department (CCI), is processing 3 monthly invoices (being A, B & C) contributing 35% in my overall KPI score. The 3 monthly invoices normally received from Power and Water Plants during the operation period by the beginning of every month and to be processed at least within 20 days from the receipt date.
As “My Time is My Cost” I am going to use a famous concept named “Three-Point Estimate Techniques “ to find out the estimated/expected time required for Processing an invoice, assuming that all 3 invoices will take the same duration.
2. Identify the Feasible Alternative
The Three Point Estimate technique is used to arrive at a better estimate of the time required to complete a particular activity, work package, and can be rolled up to the entire project. Further, this technique can be used for Time as well as Cost. The following 2 methodologies can be used:
- A Simple Mean, or Triangular Estimate
- A Weighted Average, or Beta Distribution
Figure1: BETA vs. Triangular Distribution
For deriving the estimated duration for the full process, the following 3 estimated time durations will be figured out:
o The most optimistic (tO): case where everything goes right
o The most likely (tM): case given normal problems and opportunities
o The most pessimistic (tP): case when everything goes wrong
Step3: Calculating Weighted Average (Estimated Mean) for each activity. It is calculated by a formula:
Step4: calculating Standard Deviation for each activity. It is calculated by a formula:
3. Development of the Outcome for Alternative
Step1: All main activities included in the process of A, B & C monthly invoices are listed below:
1. Outage Confirmation letter (P+W)
2. FDM Run
3. Check Sheet Preparation
4. ONF Verification (P+W)
5. Start-Up Verification
6. Joint Reading Data Inputs (P+W)
7. Final Completion & Finishing
8. 1st Senior Review
9. 2nd Senior Review
10. Line Manager Review
11. Director Review & submit to Finance
Step2: Based on experience & historical information the (tO, tM & tP) time durations for each activity were identified.
Using Triangular Estimate → Mean =(P+M+O)/3
Using Beta Distribution → PERT =(P+4M+O)/6
Using Triangular Estimate → Activity Standard Deviation (σ) = (P-O)/3
Using Beta Distribution → Activity Standard Deviation (σ) = (P-O)/6
Step5: calculating Variance for each activity. It is calculated by a formula:
Using Triangular Estimate → Activity Variance = σ2= ((P-O)/3) ^2
Using Beta Distribution → Activity Variance = σ2= ((P-O)/3) ^2
Step6: for total monthly invoice process sum up all activities value got in Step 3,4&5.
4. Selection Criteria:
The estimated time should be:
- With Lower chance (probability) for best case and worst case to occur
- Reasonable
- Reliable & precised
- Reflecting risk or uncertainty associated with schedule
- Not far from the most likely time duration
3. Analysis and Comparison of the Alternative:
Table1: Monthly Invoice time estimated using Triangular Estimate
Table2: Monthly Invoice time estimated using PERT Estimate
5. Analysis and Comparison of the Alternative
The Estimated Time duration required for processing the invoice, using the 2 methodologies, was found as below:
- Using Triangular Estimate; it is 19.16 hours duration
- Using Beta Distribution; it is 18.52 hours duration
The Standard Deviation for the whole process, as can be shown in both above tables, is as follow:
- Using Triangular Estimate; it is 2.93 hours duration from the Estimated Time
- Using Beta Distribution; it is 1.47 hours duration from the Estimated Time (which is much precised)
5. Selection of the Preferred Alternative
The methodology preferred is Beta Distribution. There is less chance of the worst case or the best case happening. In good faith, most likely estimate (M), is what it will take to get the invoice processed with 1.47 hours difference from the estimated time (18.52 hours) at right and left of the mean when using Z score .
6. Performance Monitoring and the Post Evaluation of Result
This estimated cost will be embodied in my monthly schedule to be used as a base time reference for better management of my time. If our Organizational Process Asset (OPA) for processing the invoice got changed , then a new time estimate analysis shall be required at that time.
7. Reference:
1. Perform PERT (Program Evaluation Review Technique) Analysis Manually on Schedule
2. Use PERT technique for more accurate estimates
3. PERT Estimation Technique
4. PROJECT EVALUATION REVIEW TECHNIQUE, PERT
5. Point Estimate: Triangular Distribution vs Beta Distribution (PERT)
AWESOME Nasser!!! Now you've got it done correctly!!! Don't forget that lesson!!
ReplyDeleteBR,
Dr. PDG, Jakarta