Production and Operations

ManagementThe Sharon

Construction Corporation Case

TEAM 07Christina Danver

Ben GumpertAdan MontoyaGurinder Virdi

Problem• Overhead cost of $500 per week

for any delay after 48 weeks• Penalty of $15,000 per week if

project takes more than 52 weeks• Possible Labor Strike (12/01/04)• Possible Cold December

Probability Duration0.50 0 weeks0.35 8 weeks0.15 12 weeks

Probability Cost of Heating0.333 $500 per week0.667 $0 per weekE(x) $167 per week

Alternatives1. Expedite seat gallery supports 2. Expedite seat gallery supports and filling

of the field 3. Expedite the roofing 4. Do nothing until December 1st. If the cold

is indeed extreme, postpone concrete pouring or heat when necessary; if a strike occurs, expedite all activities after resolution

5. Do nothing

Analysis of Baseline & A5• Do nothing (Tcp = 48+x weeks)

Analysis of A1• Expedite pouring concrete for seat gallery supports

($20,000) (activity G from 12 to 6 weeks) (Tcp=42+x)

Analysis of A2• Expedite pouring concrete for seat gallery supports

($20,000) (G from 12 to 6 weeks) and filling of the field ($10,000) (C from 14 to 9 weeks) (Tcp = 42+x)

Analysis of A3• Expedite the roofing ($9,000) (activity K from 8 to 2

weeks) (Tcp = 48+x)

Analysis of A4 with 8w strike• Do nothing until December 1st. If the cold is indeed extreme,

postpone concrete pouring or heat when necessary; if a strike occurs, expedite all activities after resolution ($3,000 per week cut) (Tcp = 52)

Analysis of A4 with 12w strike• Do nothing until December 1st. If the cold is indeed extreme,

postpone concrete pouring or heat when necessary; if a strike occurs, expedite all activities after resolution ($3,000 per week cut) (Tcp = 56)

Project DurationProbability

StrikeStrike

Duration (x: weeks)

Alternative 1

Alternative 2

Alternative 3

Alternative 4

Alternative 5

0.50 0 42 42 48 48 48

0.35 8 50 50 56 52 56

0.15 12 54 54 60 56 60

E(x) 4.60 46.60 46.60 52.60 50.60 52.60

SD(x) 4.78 4.78 4.78 4.78 2.91 4.78

Time analysis

Summary Mild DecemberProbability

StrikeAlternative

1Alternative

2Alternative

3Alternative

4Alternative

50.50 $20,000 $30,000 $9,000 $0 $0

0.35 $21,000 $31,000 $73,000 $14,000 $64,000

0.15 $53,000 $63,000 $135,000 $76,000 $126,000

E(x) $25,300 $35,300 $50,300 $16,300 $41,300

SD(x) $11,645 $11,645 $45,927 $25,871 $45,927

Summary Cold DecemberProbability

StrikeAlternative

1Alternative

2Alternative

3Alternative

4Alternative

50.50 $20,000 $30,000 $9,668 $668 $668

0.35 $21,000 $31,000 $73,000 $14,000 $64,000

0.15 $53,000 $63,000 $135,000 $76,000 $126,000

E(x) $25,300 $35,300 $50,634 $16,634 $41,634

SD(x) $11,645 $11,645 $45,627 $25,662 $45,627

Cost analysis

Risk Analysis

Expected Losses and Uncertainty in mild December

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Alternative1

Alternative2

Alternative3

Alternative4

Alternative5

E(x)

SD(x)

Risk Analysis

Expected Losses and Uncertainty in cold December

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Alternative1

Alternative2

Alternative3

Alternative4

Alternative5

E(x)

SD(x)

Risk Profiles

0.50.350.15Alternative 1

Alternative 2Alternative 3

Alternative 4Alternative 5

$0$20,000$40,000$60,000

$80,000

$100,000

$120,000

$140,000

Probabilities

Risk Profile of losses with mild December

Alternative 1

Alternative 2

Alternative 3

Alternative 4

Alternative 5

Risk Profiles

0.50.350.15Alternative 1

Alternative 2Alternative 3

Alternative 4Alternative 5

$0$20,000$40,000$60,000

$80,000

$100,000

$120,000

$140,000

Probabilities

Risk Profile of losses with cold December

Alternative 1

Alternative 2

Alternative 3

Alternative 4

Alternative 5

Recommendation1. A4: Do nothing until December 1st.

If the cold is indeed extreme, postpone concrete pouring; if a strike occurs, expedite all activities after resolution (lowest E(x))

2. A1: Expedite seat gallery supports (second lowest E(x))

Conclusion• A1 is better than A2 and A3 if the probability/risk of a

strike is considered.• A4 provides the option of speeding up the remaining tasks

in case of a strike and doing nothing otherwise. This option is powerful.

• A4 has a lower E(x), but a higher uncertainty SD(x) (broad range of losses from $0 to $76,000) than A1. The analysis of the risk profiles will help management to select the alternative which fits the corporation’s risk strategy.

• If the corporation is adverse to risk, it could select A1 (losses are spread out from $20,000 to $53,000). A1 has a lower uncertainty (SD(x)) than A4.

• The project duration could be a factor for the decision, if there are projects on hold due to lack of resources.