decision making on selection of alternate energy resources in a software company presented by hamid...
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Decision Making on Decision Making on selection of alternate selection of alternate energy resources in a energy resources in a Software Company Software Company
Presented By
Hamid Amir
EM/MSC/048
Company IntroductionCompany IntroductionNumetrics Private Limited, Islamabad Pakistan Fully-owned subsidiary of Numetrics Management
Systems Based in Silicon Valley in USAA world leader in providing predictive analytics
project management software for:◦IC◦Semi-conductor ◦Embedded systems organizations
The core engineering center for the worldwide organization
Has setup an offshore office in Islamabad comprising 30 colleagues.
Six Steps in Decision MakingSix Steps in Decision Making
Step 6 Apply the model and make your decision
Decision Making on selection of Decision Making on selection of alternate energy resources in a alternate energy resources in a
Software CompanySoftware Company
Possible AlternativesPossible Alternatives
Do nothing i e WAPDA electricity and working with 4 hour load shedding
Solar plus WAPDA
UPS plus WAPDA
Generator plus WAPDA◦
A.Electricity Load Calculation - Numetrics Software
Equipment Quantity Wattage Total
Wattage
CPUs 50 110 5500
LCD Monitors 18" 50 45 2250
Laptops 40 150 6000
Server Machines 6 260 1560
Refrigerator 2 1000 2000
Split A.C 2 Ton 11 2200 24200
Tube lights 80 40 3200
Energy Savers 70 25 1750
Fans 20 80 1600
Total 48060
Total KW (Watts/1000) 48.06
Per Month = 22 days(Unit Price * Total KW
*8*22)
134,555
Per Year (for 8 hrs, without load shedding)
1,614,655
Per Year (for 4 hrs daily operation)
807,327
Total Electricity Cost WAPDA - 5 years
(for 4 hrs daily operation) 4,036,636
Total Electricity Cost WAPDA - 10 years
(for 4 hrs daily operation) 8,073,273
Peak (Rs.) 13.20
Off Peak (Rs.) 8.01
Assuming Average (Rs.) (Peak+Off Peak)/2
10.61
Total Load (KW) 48.06Electricity Cost Rs. Per Hr
(Unit Price * Total KW) 509.68
Additional Surcharges @ 50% (Fuel Adjustment +
GST + Duty )764.51
1 Electricity Cost - WAPDA
1.1 Electricity Cost - WAPDA @ Total Load Calculation with 4 hrs daily load-shedding
1 Unit Price for 1 KWH (Rs.)
WAPDA Electricity Cost Rs
Per Month = 22 days(Unit Price * Total KW *8 hrs*22 days)
78,392
Per Year (without load shedding)(month * 12 )
940,706
Per Year (for 4 hrs daily operation) 470,353
Total Electricity Cost WAPDA - 5 years (for 4 hrs daily operation)
2,351,765
Total Electricity Cost WAPDA - 10 years (for 4 hrs daily operation)
4,703,530
Peak (Rs.) 13.20
Off Peak (Rs.) 8.01
Assuming Average (Rs.) (Peak+Off Peak)/210.61
1 Unit Price for 1 KWH (Rs.)
WAPDA Electricity Cost Rs. (Partial for AC/Ref. only)
Electricity Cost - WAPDA
Electricity Cost - WAPDA Partial Load Calculation only for AC & Refrigerator Load (28 KW) ) For further consideration with UPS and Solar options which don't support AC/Ref loads)
B. Revenue Loss due to 4 hrs daily load-shedding
No of Employees 30
Total Salaries per month (22 days) 3,000,000
Total Salaries per hr 17,045
Total Salaries loss per day (4 hrs-load shedding) 68,182
Total Revenue loss per day (4 hrs-loadshedding) Assuming 25% of salaries 17,045
Total Revenue Loss per month (22 days)(4 hrs-load shedding) 375,000
Total Revenue Loss per year (12 months)(4 hrs-loadshedding) 4,500,000
Total Revenue Loss for 5 years(4 hrs-loadshedding) 22,500,000
Total Revenue Loss for 10 years(4 hrs-loadshedding) 45,000,000
2 Electricity Cost - SOLAR + WAPDA (Partial)
Solar System CapacityCost
(Rs.)
Electriciy Load (KW) 48.06
Electriciy Load (KVA) (1 KVA = 0.8 * KW) 38.448
Solar System Initial CostSolar Panels + Inverters + Charge Controller + Install Cost
4,108,000
Batteries Cost 5,131,000
Solar System Total Initial + Running Cost (5 years) 9,239,000
WAPDA Partial Load Cost for AC + Refrigerator (5 years) 2,351,765
Total Solar (Initial + Running ) + WAPDA Partial Load Cost ( 5 years)
11,590,765
Solar Batteries Upgrade after 5 years 5131000
Solar System Total Initial + Running Cost (10 years)(5 years cost + batteries replacement after 5 years)
14,370,000
WAPDA Partial Load Cost for AC + Refrigerator (10 years) 4,703,530
Total Solar (Initial + Running ) + WAPDA Partial Load Cost ( 10 years)
19,073,530
3 Electricity Cost - UPS + WAPDA Dedicated UPS
Electriciy Load (KW) 48.06
Electriciy Load (KVA) (1 KVA = 0.8 * KW)
38.45
UPS Capacity (KVA) 10No. of Units Required 8Installed capacity (KVA) 80UPS Cost per unit 345,000
UPS Cost per unit + Maintenance @30% during 5 years
448,500
Total UPS Install Cost for 5 years (Rs.) Assuming 5 year life
3,588,000
WAPDA Supply Cost for 5 years (4 hrs daily)4,036,636
UPS Charging cost on WAPDA supply for 5 years (after 4 hrs discharge daily) WAPDA Supply * 1.5
6,054,954
Total Cost for 5 years (UPS Install + UPS Operation + WAPDA Supply for 4 hrs) (Rs.)
10,091,591
Total Cost for 10 years (UPS Install + UPS Operation + WAPDA Supply for 4 hrs) (Rs.)
20,183,181
4Electricity Cost - Generator + WAPDA
Generator Capacity (KVA) 60Capacity (kW) 75Initial Cost (assuming 10 years life) 2,200,000 Running cost per hr (Diesel, Parts, Maintenance)
650
Running cost per 4-hr (daily load-shedding) 2,600 Running cost per month 22 days (4-hr daily load-shedding)
57,200
Generator Running cost per year (during 4-hr daily load-shedding)
686,400
Generator Running cost for 5 years (during 4-hr daily load-shedding)
3,432,000
Total Generator Cost for 5 years (Running cost + initial cost) for 4 hr daily operation
5,632,000
WAPDA Supply cost for 5 years (4 hrs daily) 4,036,636Total Generator + WAPDA Cost for 5 years (4 hrs WAPDA + 4 hrs Generator)
9,668,636
Generator Running cost for 10 years (4-hr daily operation)
6,864,000
Total Generator Cost for 10 years (Running cost + initial cost) for 4 hr daily operation
9,064,000
WAPDA Supply cost for 10 years (4 hrs daily) 8,073,273Total Generator + WAPDA Cost for 10 years (4 hrs WAPDA + 4 hrs Generator)
17,137,273
Decision making models usedDecision making models used
Maximax
Prospect Theory
Decision Tree
Decision Making Models Decision Making Models AppliedApplied
Decision theory is an analytic and systematic approach to the study of decision making models.
Good decision; logical, considering all available data, alternatives and application of quantitative decision model.
Decision Making Environments Certainty: alternatives and outcomes known
with certainty -e g interest on income. Risk: alternatives and Probability of occurrence
of each outcome known-e g fliping of coin . Uncertainty: Probability of occurrence of each
outcome not known-e g election results after 10 years.
Decision Making under Risk◦Probabilistic decision situation◦EMV is the weighted sum of possible payoffs
for each alternative.◦EOL requires an opportunity loss table; it is the
amount lost by not picking the best alternative/solution.
◦Maximum EMV and Minimum EOL will always give same result.
◦Sensitivity Analysis investigates how our decision might change with different input data /probability scenario.
◦Decision Trees used for large sequential decision problems.
Decision making under Uncertainty◦Probability data not available◦Maximax is an optimitic approach/decision
criterion as it maximizes the maximum outcome for every alternative
◦Maximin is a pessimistic approach/decision criterion as it maximizes the minimum outcome for every alternative
◦Equally Likely (Laplace Criterion) computes the highest average outcome
◦Criteria of Realism (Hurwicz Criterion) uses the weighted average approach( personal choice of alpha 0-1;alpha close to 1 ;optimistic decision maker )
◦Minimax Regret is based on opportunity loss;it finds the alternative that minimizes the maximum opportunity loss with in each alternative
Decision Making Models Decision Making Models AppliedApplied
Decision making models under uncertainty
MaximinMaximinMinimax RegretLaplace Hurwicz
Decision making models under RiskEMV( Expected monetary value)EOL( Expected opportunity loss)Decision TreeSensitivity AnalysisProspect Theory
OPTIONS
Net Savings -5 yrs(Revenue Gain - Elect.
Cost –Revenue Losses)
Net Savings- 10 yrs
(Revenue Gain - Elect. Cost –
Revenue Losses)
1
(Do Nothing) WAPDA Supply for 4 hrs daily
-26,536,636 -53,073,273
2SOLAR + WAPDA (Partial)
10,909,235 25,926,470
3 UPS + WAPDA 12,408,409 24,816,819
4Generator + WAPDA
12,831,364 27,862,727
Decision Model
Decison making model under Decison making model under uncertainityuncertainity
Options Regret Table Minimax Regret
Do Nothing 39,368,000 80,936,000 80,936,000
Solar + WAPDA
1,922,129 1,936,57 1,922,129
UPS + WAPDA
422,955 3,045,908 3,045,908
Generator + WAPDA
0 0 0
Decision making under uncertaintyDecision making under uncertainty
Decision making model under RiskDecision making model under Risk
Prospect TheoryProspect Theory
Decision TreeDecision Tree
Do Nothing
Solar+WAPDA
UPS+WAPDA
Generator+ WAPDA
5 yrs
10 Yrs
5 Yrs
10 Yrs
5 Yrs
10 Yrs
5 Yrs
10 Yrs
- 26,536,636
- 53,073,273
10,909,235,
25,926,470
12,408,409
24,816,819,
12,831,364
27,862,727
- 39,804,954.5
18,417,852.5
18,612,614
20,347,045.5
Decision Making under Decision Making under UncertaintyUncertainty
Criterion Choice
Alternative
Maximax Generator plus WAPDA
Maximin Generator plus WAPDA
Laplace
(Equally Likely)
Generator plus WAPDA
Hurwicz
(Criteria of Realism)
Generator plus WAPDA
Minimax(Regret) Generator plus WAPDA
Criterion Choice
Alternative
EMV Generator plus WAPDA
EOL Generator plus WAPDA
Sensitivity Analysis Generator plus WAPDA
Decision Tree Generator plus WAPDA
Prospect Theory Generator plus WAPDA
Decision Making under Risk
Conclusion Conclusion
Decision planningMaking a decision without planning is fairly
common but does not often end well. Planning allows for decisions to be made
comfortably and in a smart way.Planning makes decision making a lot more
simple than it is.Decision will get four benefits out of planning:
1. It gives chance to the establishment of independent goals. It is a conscious and directed series of choices. 2. Provides a standard of measurement. It is a measurement of whether you are going towards or further away from your goal. 3. It converts values to action. 4. Allows for limited resources to be committed in an orderly way. Always govern the use of what is limited to you. (e.g. money, time, etc.)
Decision makingIn the real world, most of our decisions are made
unconsciously in our mind.Decision-making models offer analytical tools
which can be combined to provide useful insights.
No perfect model as decision environments vary. Therefore risk preference/profile and decision environment may dictate choice of appropriate model.
Decision planning must be done.Cognitive Biases must be taken care off.Objectives must first be established.Objectives must be classified and placed
in order of importance.Alternative actions must be developed.
Alternative must be evaluated against all the objectives.
Alternative that is able to achieve all the objectives is the tentative decision.
Tentative decision be evaluated for more possible consequences.
Decisive actions be taken and additional actions must be taken to prevent any adverse consequences from becoming problems and starting both systems (problem analysis and decision making) all over again.
Selected Decision model steps be followed to determine an optimal plan.
In a situation featuring conflict, role-playing is helpful for predicting decisions to be made by involved parties.
Cognitive and personal biases in decision making
Biases can creep into our decision making processes.
Confirmation bias in psychology- (Scott Plous, 1993) – People tend to be willing to gather facts that support certain conclusions but disregard other facts that support different conclusions.
Premature termination of search for evidence – People tend to accept the first alternative that looks like it might work.
Cognitive inertia – Unwillingness to change existing thought patterns in the face of new circumstances.
Selective perception – We actively screen-out information that we do not think is important. (e g prejudice.)
Wishful Thinking – a tendency to want to see things in a positive light, which can distort perception and thinking.
Choice Supportive Bias- occurs when people distort their memories of chosen and rejected options to make the chosen options seem more attractive.
Recency – People tend to place more attention on more recent information and either ignore or forget more distant information.
Repetition bias – A willingness to believe what one has been told most often and by the greatest number of different sources.
Anchoring and adjustment – Decisions are unduly influenced by initial information that shapes our view of subsequent information
Group think – peer pressure to conform to the opinions held by the group.
Source credibility bias – A tendency to reject a person's statement on the basis of a bias against the person, organization, or group to which the person belongs. People preferentially accept statement by others that they like .
Incremental decision making and escalating commitment – We look at a decision as a small step in a process and this tends to perpetuate a series of similar decisions; can be contrasted with zero-based decision makin.
Attribution asymmetry – People tend to attribute their own success to internal factors, including abilities and talents, but explain their failures in terms of external factors such as bad luck.
Role fulfillment – A tendency to conform to others' decision-making expectations.
Illusion of control–People tend to underestimate future uncertainty because of a tendency to believe they have more control over events than they really do.
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