W11_TH_Pareto Priority Index for Gas Station Project

1. Problem Definition

Author’s company has cost reduction campaign on gas station project. Author will define the alternatives for project cost reduction and specify the priority of project that will be execute.

2. Identify the Possible Alternative

Feasible alternatives project to cost reduction are:

  • Electrical Equipment
  • Civil Specification
  • Instrument Equipment
 3. Development of The Outcome for Alternative

Generate estimate cost, estimate saving and probability of success.

 

  • Electrical Equipment

Value engineering evaluation: using compressor with smaller power consumption, using trafo 400/220 V, using UPS only on critical equipment and improvement on lighting specification.

Cost to implement = 120 M IDR

Cost saving = 4,500 M IDR

Probability to success = 0.7

Time to completion = 0.5 year

 

  • Civil Specification

Value engineering evaluation: backfilling specification adjusted by civil site survey

Cost to implement = 30 M IDR

Cost saving = 1,600 M IDR

Probability to success = 0.8

Time to completion = 0.25 year

 

  • Instrument Equipment

Value engineering evaluation: CCTV re-position by hazardous area classification, minimize the use of gas detector, minimize the use of control valve (no redundancy)

Cost to implement = 10 M IDR

Cost saving = 170 M IDR

Probability to success = 0.9

Time to completion = 0.25 year

 

Calculate Pareto Priority Index (PPI), Equation that will be use is as follow

Table 1: PPI Calculation Result

4. Selection Criteria

Cost reducing project that have biggest PPI will be selected

5. Analysis & Comparison of Alternative

Civil Specification has the biggest PPI value among other, according table 2 the project ranking as follow:

Table 2: Project Priority

6. Selection of the Preferred Alternative

Based on above analysis, Civil Specification project is selected due to has biggest PPI (102.40)

 7. Performance Monitoring and The Post Evaluation of Result

To select project more accurately, if it is available historical information can be use to estimate standard times and resources. Whenever update data is available, calculation should be re-run to validate selection.

 

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/