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W3.1__Hamda__Using PERT technique in Estimating time duration for processing Monthly Invoice__

1-     Problem Recognition

In each company, each project depends on the estimations of different aspects such as, the estimating of time will be taken to complete each activity under the project and the estimating of the costs that will be incurred in executing any activity or phase under the project. under CCI department in our company there are several small projects which have START & FINISH date. One of these main projects is Processing the Monthly Invoices of different Power and Desalination plants as I discussed in W2 blog. Processing the Monthly Invoice has a specific FINISH date which is according to the receipt date of these such invoice. Processing the Monthly Invoice depends on different things which may affect on completing the task in the specific scheduled date. In this blog, I will use the Project Evaluation and Review Technique (PERT) in analyzing this activity and to find the estimated and preferred time to complete it.

2-     Feasible alternative
PERT is a three-point activity estimating technique that considers estimation uncertainty and risk by using three estimates to define an approximate probability for an activity’s cost or duration. At activity level PERT can help us to determine a more realistic estimate. Bell curve,
also called a Normal Distribution curve is one methodology used in PERT technique. Figure 1 shows the Normal Distribution curve.
Picture from: https://www.linkedin.com/pulse/what-pert-how-can-we-use-dave-fourie-pmp-prince2-

In order to use this technique, there are 3 main estimated point shall be known and used which they are:
-        Most likely (Tm) - This is the time duration where there is a high probability of completing the task within the given time duration.
-        Optimistic(To) - In this scenario, the estimate is determined considering all favorable conditions; i.e. it is a best-case scenario. In other words, you can say that this is the shortest time in which you may complete the task.
-        Pessimistic(Tp) - Here, estimate is determined considering all unfavorable conditions; i.e. worst-case scenario. In other words, this is the longest time the activity might require to complete itself.
The formula used in calculating the PERT is: 
PERT Estimate = (To + 4Tm + Tp) / 6 & Standard Deviation (Sigma) = (Tp – To) / 6 & Variance= (Sigma) ^2
3-     Development of the outcome of Alternative
Regarding to the above description of one main task/project under CCI department, the completion of it depends on different tasks such as:
1-     The submitting and receiving Power and Water Outage Confirmations.
2-     Availability of the all data required in processing the invoice.
3-     The preparation, editing, and reviewing the sheet of calculations.  
4-     The process of checking the accuracy of such data received from the Generation.
5-     The process of the plant model (FDM model).
6-     Finalizing the process of monthly invoice.
7-     Reviewing the invoice by the Senior Engineers and approve it.
8-     Reviewing the invoice by the Department Manager and approve it.
9-     Reviewing the invoice by the Department Director and approve it.
10-   Submitting the invoice to Finance Department (FINISH Date).
From all these tasks, I think the main important tasks that processing the Monthly Invoice depends on are the first 4 one (tasks from 3-6), Because completing these four tasks on time which make the other 4 tasks on time. 
4-     Selection Criteria
5-     Analysis and comparison of the Alternative
Table 1 shows the three-estimated duration for the main tasks in processing the monthly invoice which I mentioned above in point 3, because completing these task on time will help us in completing the remaining task on time. They will not take a lot of time as I mentioned in table 1. As shown in the table, the mean or the Estimated/Expected duration for processing the monthly invoice completely is 18.25 days, which is very acceptable duration which will not cause any delay on due date. The standard Deviation of all tasks under processing the monthly invoice is 1.04 (Sigma).
we can say that:
-         Optimistically we can complete the activity in five (12.5) days. There will be 12.5 days from the Due Date, which is very good estimating duration in completing the invoice.
-         Pessimistically we estimate that it can take us up to Fifteen (25) days. There will 0 day from the Due Date. And this will put us in high Risk in payment.
-         Most likely it will take us only seven (18.0) days. There will be 7 days from the Due Date which is also good duration for completing the monthly invoice in a time which will not put the company in Risk.
From the second Figure, we can thus predict that there is:
-        A 68% Probability of completing the process of monthly invoice each month is between 17.21 and 19.29 days.
-        A 95.46% Probability of completing the process of monthly invoice each month is between 16.16 and 20.34 days.
-        A 99.73% Probability of completing the process of monthly invoice each month is between 15.12 and 21.38 days.

6-     Selection of the preferred Alternative
By suing one of the most useful technique in analyzing and estimating the time and the cost of each activity, or task under any project or in general case estimating the project duration or cost which is PERT technique, it is clear from the above table that the best case of time duration in processing the monthly invoice is 12.5 days (by taking in our account the days consumed in each task especially task 4&5). This duration is actually the best duration because by completing the invoice in this period we will have enough time for other tasks and also remaining days from the Due Date which will help other department in processing their work on time.
7-     Performance Monitoring and the Post Evaluation of result
Using the PERT technique in calculating the estimated duration of completing the project and the cost that will be incurred in executing any project will might be used in calculating the Contingency Reserve for that project in order to avoid any risk on the company in case the monthly will not be submitted before the Due Date to Finance Department and then to the Generator.
References
1-     Fahad Usmani, (2017). A Short Guide to PERT – Program Evaluation and Review Technique. Retrieved 20 November 2017, from https://pmstudycircle.com/2013/08/pert-program-evaluation-and-review-technique/
2-     Dave Fourie, (2015). What is PERT and how can we use it? Retrieved 20 November 2017, from https://www.linkedin.com/pulse/what-pert-how-can-we-use-dave-fourie-pmp-prince2-  

3-     A Guide to the PROJECT MANAGEMENT BODY OF KNOWLEDGE (PMBOK GUIDE), Fifth Edition. Retrieved 14 November 2017.

Comments

  1. Dr. PDGNovember 21, 2017 at 5:42 AM

    AWESOME Hamda....!!! Now you've got it.... I think you too will find PERT to be a very powerful and useful tool for you to use in your every day working environment. Just make sure to remember that the TARGET should remain at the P50 value and the difference between P50 and whatever P level you chose is the RISK CONTINGENCY or BUFFER.

    You should keep this in mind and get in the habit of always tracking how much contingency you've drawn down against the physical progress. IF there is significantly MORE drawdown of contingency than there is physical progress, it will give you an early warning sign or risk trigger that your project may be headed for problems.

    BR,
    Dr. PDG, Jakarta

    ReplyDelete

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