In the model in Example 15.5, suppose bonuses and penalties …

In the model in Example 15.5, suppose bonuses and penalties are incurred for earliness or lateness. Specifically, suppose a bonus of $2000 is received if the project is completed within 60 days, an extra bonus of $1000 is received if the project is completed within 58 days, and a penalty of $1000 is incurred for every full day past a project completion of 64 days. (For example, if the project is completed in 66.7 days, the penalty is $2000—two full days late.) Modify the model appropriately, and then run the simulation to find the distribution of the net monetary outcome (negative if a penalty, positive if a bonus). What is the expected value of this net amount? What is the probability of a $3000 total bonus? What is the probability of a penalty of at least $4000?

Example 15.5

LAN PROJECT WITH UNCERTAIN ACTIVITY TIMES

We again analyze the LAN project from Example 15.1, but we now assume that the activity durations are uncertain, with given probability distributions. The company realizes that the actual activity times can vary due to unexpected delays, worker illnesses, and so on. Assuming that the company has a deadline of 60 days, it wants to use simulation to see (1) how long the project is likely to take, (2) how likely it is that the project will be completed by the deadline, and (3) which activities are likely to be critical. Objective To simulate the time to complete the LAN project, and to estimate the probability that any given activity will be part of the critical path.

Example 15.1

CREATING AN OFFICE LAN

An insurance company has decided to construct a local area network (LAN) in one of its large offices so that its employees can share printers, files, and other conveniences. The project consists of 15 activities, labeled A through O, as listed in Table 15.2. This table indicates the immediate predecessors and immediate successors of each activity, along with each activity’s expected duration. (At this point these durations are assumed known.) Note that activity A is the only activity that can start right away, and activity O is the last activity to be completed. This table implies the AON network in Figure 15.2. The company wants to know how long the project will take to complete, and it also wants to know which activities are on the critical path.

Objective To develop a spreadsheet model of the LAN project so that we can calculate the time required to complete the project and identify the critical activities.