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Abstract
Managers must make important decisions when attempting to effectively coordinate large-scale projects. Uncertainty arising due to quality problems in materials, vendor shipment delays and labour disruptions contribute to the complexity involved in project management.
In this dissertation, we develop mathematical models to guide the acquisition and disposal of items in a project context. Specifically, with-respect to a particular facility, we divide time into two distinct phases: a “construction phase” (during which the facility is erected) and an “ongoing phase” (during which the facility is in operation). We shall consider an important, expensive item (e.g. pipe for a pipeline project, or valves and electronic control devices in a compressor station) that exhibits uncertainty with regard to total requirements during the construction phase. Materials managers are allowed to place a single procurement order for this item at the beginning of the construction phase. We consider such costs as procurement costs, holding charges and stockout penalties.
Surplus units on-hand after the construction phase completion may be salvaged (disposed for revenue), or retained for usage (as a spare part or for routine replacement) in the ongoing operations of the constructed facility.
The decision variables, then, include the appropriate quantity to procure at the beginning of the construction phase, and the proper amount to dispose, in the event of on-hand surplus, after construction completion. The procurement and disposal quantities are to be selected so as to satisfy project and ongoing requirements at lowest possible cost. We use a spreadsheet model to determine the best procurement and disposal quantities.
We consider the effects of non-constant salvage values. “Marginally decreasing” salvage values consist of those situations in which larger disposal quantities generate smaller “per unit” salvage revenues. We also examine the scenario in which, over a limited range, “per unit” salvage values may rise as additional units are disposed (“increasing” salvage values). This higher unit price may still be beneficial to the buyer for it saves the negotiation and logistics hassles involved in procuring smaller quantities from several companies, as well as providing transportation economies.
We numerically explore the advantage of considering both construction phase and ongoing phase issues when making one's original construction phase procurement decision. We determine the least-cost procurement quantities that would result if one considered solely construction phase issues (the “myopic” approach), or construction phase issues plus the disposal of all surplus stock (the “all-disposal” strategy). We determine the percentage cost penalties of following these “non-integrated” approaches, and illustrate those cases that lead to higher penalties.
We further consider the impact of a future project occurring at a random time after completion of the initial project's construction phase. We show how this scenario affects the initial project's procurement quantity. Two specific cases are illustrated: no inter-project usage, and deterministic, level inter-project usage.
We also analyze two separate extensions to our mathematical model; namely, the incorporation of deterministic, time-varying ongoing phase usage, and multiple procurement opportunities in the construction phase.
