W12_MFO_Analyzing Cost-Only Alternative Using Equivalent Worth For Selecting Fire Water Pump

  1. Problem Definition.

Same case like in W11 blog posting, we have plan to install electric fire water pump for the gas plant and we have received a complete offer with the specifications of the three brands of pumps. In this blog, the author wants to analyze cost-only alternatives of the three brands of pumps using equivalent worth. Which pump should be preferred base on equivalent worth?

  1. Identify the Feasible Alternative.

The following table contains data of three brand of pumps that will be selected.

Table 1. The pumps data

This pumps will be used for 10 years and the company has a MARR of 14%

  1. Development of the Outcome for Alternative.

Using table 1 data, we will calculate the PW (Present Worth), AW (Annual Worth), and FW (Future Worth). The result as seen as table below.

Table 2. The result of Equivalent Worth Values

  1. Selection of Criteria.

The pump that will minimize the equivalent worth of total costs over the ten-year analysis period will be used as selection of criteria.

  1. Analysis and Comparison of the Alternative.

The comparison of three brand pump using the PW, AW, and FW methods to minimize total cost as seen as table 3 below.

Table 3. The comparison of the pumps

From the table 3, alternative brand C minimizes all three equivalent-worth values of total costs and is the preferred alternative. The preference ranking (Brand C > Brand B > Brand A) resulting from the analysis is the same for all three methods.

  1. Selection of the Preferred Alternative.

Base from above calculation, brand C minimizes all three equivalent-worth values of total costs and is the preferred alternative for the gas plant.

  1. Performance Monitoring and the Post Evaluation of Result.

Monitoring should be conducted during execution of the project to ensure that all requirements are met.

References:

  1. Sullivan, W.G., Wicks, E. M., Koelling, C. P. (2014). Engineering Economy. Pearson. Sixteenth Edition.
  2. Electric fire water pump specification & quotation Brand A
  3. Electric fire water pump specification & quotation Brand B
  4. Electric fire water pump specification & quotation Brand C
  5. What is the formula for calculating net present value (NPV) in excel. Retrieved from https://www.investopedia.com/ask/answers/021115/what-formula-calculating-net-present-value-npv-excel.asp
  6. How to calculate net present value (Npv) in excel. Retrieved from https://www.youtube.com/watch?v=hG68UMupJzs

 

 

 

W5.3_MFO_ OmniClass on Gas Metering System Installation

1. Problem Recognition, Definition and Evaluation

Our company will install Ultrasonic Gas Metering Station for our project. Is the use of OmniClass can be applied to this project?

This blog is made to revise the W5.2 blog post before.

2. Development of the Feasible Alternatives

OmniClass consists of 15 hierarchical tables, each of which represents a different facet of construction information or entries on it can be combined with entries on other tables to classify more complex subjects.

Fig 1. Inter-related OmniClass

Author will be chosen what kind of tables on OmniClass that applicable for Gas Metering Project WBS.

3. Development of the Outcomes for Each Alternative

To choose top four most applicable tables from the 15 tables, the most appropriate technique will be the multi attributes approach. Compensatory models, the additive weighting technique has been chosen to help performing the comparison and selection. In all compensatory models, which involve a single dimension, the values of all attributes must be converted to a common measureable scale. By using determined criteria related to the Gas Metering Project, the additive weighting technique will rank the 15 tables, shows high to low applicability and relevance to the project.

4. Selection of a Criterion

There are six criteria related to gas metering project that have been determined for the OmniClass tables selection:

  1. WBS location that related to Gas Metering Project (1-3, 3 being highest relationship)
  2. WBS deliverables related to Gas Metering Project (1-3, 3 being highest relationship)
  3. WBS activity related to Gas Metering Project (1-3, 3 being highest relationship)
  4. WBS organization that related to Gas Metering Project (1-3, 3 being highest relationship)
  5. WBS level detail completeness (1-4, 4 being preferable)
  6. Tables applicability/uses for oil & gas project (low to high)

5. Analysis and Comparison of the Alternatives

The comparison result of OmniClass Tables is shown in the following table:

Table 1. OmniClass Tables Comparison Based on Six Selection Criteria

All attributes in table 1, be ranked in order of importance by doing paired comparison between each possible attribute combination. Result as shown on table 2:

Table 2. Ordinal Ranking of OmniClass Tables attributes

Based on Table 2, relative rank = ordinal rank + 1. A rank of 5 is best, the relative ranking will become as follows:

Table 3. OmniClass Tables Selection – Attribute Weight

The attributes values on Table 1 have to be converted in to non-dimensional form. The procedure for converting the original data on table 1 for a particular attribute to its dimensionless rating is:

The non-dimensional (dimensionless) values of the attributes are shown on Table 4:

Table 4. OmniClass Tables Selection – Dimensionless Value

Finally, for each OmniClass table, the normalized weight of the attribute (Table 3) is multiplied the non-dimensional attribute value (Table 4) to obtain a weighted score for the attribute. These weighted score are then summed to arrive at an overall score for each OmniClass table. The result is shown on Table 5.

Table 5. OmniClass Tables Selection – Weighted Score

6. Selection of the Preferred Alternative

Based on calculation and Table 5 comparison, the top three most applicable and relevant WBS from OmniClass for the Gas Metering Project is:

  1. Table 14-Spaces by Form (score 0.310)
  2. Table 23-Products (score 0.357)
  3. Table 31-Phases (score 0.270)

7. Performance Monitoring and Post Evaluation of Results

Monitoring and supervision should be conducted strictly during project to keep the project inline with the WBS.

Reference:

  1. Planning Planet (2017). Creating Work Breakdown Structure. Retrieved from http://www.planningplanet.com/guild/gpccar/creating-work-breakdown-structure
  2. Hendarto, Tommy. (2017). W6.1_TH_Standardized WBS Structures for Gas Station Project-Part 3. Retrieved from http://emeraldaace2017.com/2017/09/22/w6-1_th_-standardized-wbs-structures-for-gas-station-project-part-3/
  3. OmniClass (2017), OmniClass Table 21 – Elements (includes design elements). Retrieved from www.omniclass.org/tables/OmniClass_21_2012-05-16.zip
  4. Gannasonggo, Gustaf. (2012). W3_GGS_OmniClass WBS|Casablanca AACE 2012. Retrieved from https://aacecasablanca.wordpress.com/2012/02/06/w3_ggs_omniclass-wbs-table-selection-using-additive-weighting-technique/

 

 

 

W13_TH_Selection LNG ISOtank Using Present Worth Method

1. Problem Definition

The decline in world oil prices resulted hard competition between gas and oil fuel. As we know that gas is alternative fuel beside oil. Gas is feasible to use when oil price above 50 $/barrel. When oil price is around 50 $ /barrel, gas player need to very efficient on supply chain to make sure gas price is still acceptable for costumer. Indonesia is now developing LNG retail supply chain. One of the critical parts of this supply chain is LNG ISOtank. Author wants to reduce cost by selection on LNG ISOtank Investment.

Figure 1. LNG ISOtank Truck

2. Develop the Feasible Alternative

Manufacturer purpose 2 alternative, among others:

  1. Using LNG ISOtank ASME U stamp
  2. Using LNG ISOtank that follow ASME U stamp

Compare Value from Present Worth Method approaching will be used to select the best option.

3. Development of The Outcome for Alternative

Calculate all variable including Capital Expenditure/Capex, net income, operating cost, maintenance cost, and salvage value.

4. Selection Criteria

The acceptance criteria when the present worth value or PV ≥ 0 or the large value.

5. Analysis & Comparison of Alternative

Regarding to company data, that we summarize on Tabel-1 which represent for using LNG ISOtank ASME U stamp.

Tabel-1 LNG ISOtank ASME U stamp Cash Flow (in IDR)

Refer to Bank Indonesia Rate at 2017 is 7%, now we can drag Future Value/FV from 10th year to zero (initial) to calculate Present Value/PV, a summarize calculation represent on Tabel-2.

Table-2 PV for all cash flow LNG ISOtank ASME U stamp (in IDR)

Regarding to Tabel-1 and Tabel-2 now we can total Cash Flow in and out IDR. 1,425,478,520 + IDR. (1,080,000,000) = IDR. 345,478,520 (LNG ISOtank ASME U stamp is economically justified because PW ≥ 0 ) but we not finished yet, we have to calculate for LNG ISOtank that follow ASME U stamp.

next step we calculate for LNG ISOtank that follow ASME U stamp, the cash flow show on tabel-3.

Tabel-3 LNG ISOtank that follow ASME U stamp Cash Flow (in IDR)

Regarding to tabel-3, now we can calculate PV for all year cash flow, it shown on tabel-4

Tabel-4. PV for all cash flow LNG ISOtank that follow ASME U stamp (in IDR)

Regarding to Tabel-3 and Tabel-4 now we can total Cash Flow in and out IDR. 1,420,395,027 + IDR. (918,000,000) = IDR. 502,395,027 (LNG ISOtank that follow ASME U stamp is economically justified because PW ≥ 0 )

Now we can compare each PW from LNG ISOtank ASME U stamp and follow ASME U stamp, it shown on tabel-5

Tabel-5 Comparison LNG ISOtank ASME U stamp and follow ASME U stamp Present Worth Value (in IDR)

6. Selection of the Preferred Alternative

Regarding to tabel-5 it shown that follow ASME U stamp has PW Value higher than ASME U stamp, gap value between them is IDR. 156,916,507.08, it can conclude that follow ASME U stamp in economically point of view can justified to select.

7. Performance Monitoring and the Post Evaluation of Result

Management must monitor maintenance cost, because maintenance cost has given effect to select better decision.

References:

  1. Sullivan, G. W. (2014). Engineering Economy 16th Chapter 5 – Evaluating a Single Project, pp. 213-215. Pearson. Sixteenth Edition.
  2. BI Rate and Primary Reserve Requirement Lowered Again (February, 2016). Retrieved from http://www.bi.go.id/en/ruang-media/siaran-pers/Pages/sp_181416.aspx
  3. Ardiansyah. (2017). W4_A_Selecting Oil Pump|Emerald AACE 2018. Retrieved from https://emeraldaace2017.com/2017/08/22/w4_a_selection-oil-pump-using-present-worth-method/
  4. Pengiriman LNG Pertama dengan Media (December, 2013). Retrieved from http://www.candraawiguna.id/2013/12/pengiriman-lng-pertama-dengan-media.html