Submitted by: Submitted by Rustam
Views: 108
Words: 766
Pages: 4
Category: Business and Industry
Date Submitted: 09/28/2014 08:08 PM
NanoFlux Desalination Unit Problem
Problem
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Background: Contract with Libya Water Authority
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100 units of “Eau-De-Nano” desalination units
Price at $1.05m per piece
Problem: Choose strategy based on risk of failure of Unit
Robusta Production Strategy Singapura Ship & Install Directly Conduct Test Rebuild, Ship & Install Ship & Install
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Objective: Maximize Profit to keep Shareholders happy
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Robusta gross profit
= 1.050 – 720 = $ 330k per unit
Singapura gross profit = 1.050 – 600 = $ 450k per unit (w/o test)
Standard Operating Procedure
Desalination Model Decision 394.8 Perform Singapura Model w/o test TRUE -600 Not Perform Chance 394.8 12.0% 590 12.0% -10 88.0% 1050 88.0% 450
Decision Tree Recommendation: Singapura without Test
Robusta Production Strategy Singapura Conduct Test Ship & Install Rebuild, Ship & Install
Ship & Install Directly
Probability Chart
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Spread of “Singapura models WITHOUT Test” = “Singapura models WITH Test”
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Singapura models WITHOUT Test gives the company highest profit.
Test Analysis
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Expected Value of SAMPLE Information (EVSI) = 409.5 – 394.8 = 14.70 If test-cost < $14.7K per unit Decision changes: Singapura model WITH test.
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Expected Value of PERFECT Information (EVPI) = 432- 394.8 = 37.20 If the accuracy of the test result is 100%, the maximum cost the company should pay is $37.2K per unit.
Tornado Graph
Cost_per_unit_SGP (B61) Cost_per_unit_ROB (B56)
Rebuilding_cost (B66)
P_True_Positive (E65) Installation_cost (B67) Probability_to_fail (B64) Test cost per unit (E63) Image_cost (B68) Probability_to_work_ROB (B57) P_True_Negative (F67) 400 450 350 500 300 550
Expected Value
Solution most sensitive to:
• • • • •
Cost of Singapura and Robusta models Rebuilding Cost P(True, Positive) of test P(Singapura Model Fail) Test Cost
Sensitivity Analysis
Production Costs
Expected Value of 'Decision' (B13) With Variation of Singapura_Cost...