senior design project for verizon wireless...

2002.01 Spring 2002

Senior Design Project for Verizon Wireless Communications

Mohamed Fahim

Senior Design Project for Verizon Wireless Communications - Applying Analytic Hierarchy Process, Two-Way Factor Analysis and Engineering Economy

Methods, to Help Verizon in their Decision Making Process to Choose Their New E-mail Systeni'

By: Mohamed Fahim Professor: Thomas Siems

May 7, 2002

I I Table Of Contents

I I I. Management Summary

I II. Background and Description Of the Problem

I Ill. Analysis of the situation

I IV. Technical Description of the Analytic Hierarchy Model

I V. Technical Description of the Statistical Experiment

I VI. Technical Description of the Engineering Economy Methods

I VII. Conclusions and Critique

I I I I I I I I I

I I

Management Summary

For the past several months, Verizon Communication has been conducting an

analysis of whether to keep their internal Email system or replace it with another. They

can either keep using their current system or chose one of two new system options.

Verizon is highly considering all three systems. Using Verizon's collected data for each

product, I did an experimental analysis to help Verizon choose the best system for their

needs and hence make the best decision.

After looking through given data, I decided to divide the analysis approach into

two parts, qualitative and quantitative studies. The first part, the qualitative study, has

two components. First, I applied the Analytic Hierarchy Model to analyze and compare

the three proposed systems. I realized that comparing the three products in a

mathematical form would enable Verizon to obtain a much clearer picture of each

system's potential both in the present and future. I categorized my results based on the

four judgmental categories that Verizon had determined. I was then able to demonstrate

the best system in each category.

The second component of the qualitative approach was to determine which

product would work the best with Verizon's advanced digital feature, VECTR. VECTR is

an advanced digital email feature that Verizon relies on for their emailing process.

Verizon's judgmental decision will be heavily based on what product can best work with

VECTR. Based on Verizon's twelve-month collected data, I designed a two-factor fixed

effects experiment to study the effects of design factors on a response. The two fixed

I I I I I I I I I I I I I I I II 1

factors are: (A) with and without VECTR and (B) the three Products. The response

represented the number of users complaints.

Next, the quantitative part of the project used applied engineering economy

methods. Engineering economy deals with the concepts and techniques of analysis useful

in evaluating the worth of systems in relation to their cost. I did my analysis based on the

cost values for each product that Verizon had given. Verizon had provided three cost

categories: (1) vendor costs, (2) IT costs, and (3) additional costs. After using various

formulas and methods, I was able to obtain results useful for Verizon' s judgmental

process.

Based on the results in both the qualitative and quantitative parts, I was able to

provide Verizon with valuable information that will be included in the study conclusions.

I

I1 2

I I

Background and Description of the Problem

IRecently, Verizon Communication has been debating whether to keep their

internal Email system or replace it with one of another two system options. The problem

originally started when Verzion's Technical Managers realized that their system is a very

high cost product and yet not performing to their level of satisfaction. After numerous

complains about the system, Verizon decided to look for other systems that could

possibly better meet their level of satisfaction and demand. After studying several other

products, Verizon chose two systems to test. The first of the two tested systems is a

system that had developed by Verizon's employees. The second one is a promising

product that has been used by several other companies. Thus, my analysis tests three

systems, Verizon's current email system and two others. For confidential reasons Verizon

could not reveal to me the name of their three debatable systems. Thus, I named them as

Product One (Verizon's current system), Product Two (internally built system by

Verizon), and Product Three. Verizon did provide real informational data of each

product with their actual costs.

The experiment's goal is to offer as much guidance and information as the data

reveals to help Verizon chose the best system for their needs. It is an important issue for

Verizon, and I thus tried to obtain the most accurate results in order to best assess the

problem and make their decision easier.

Several types of decisions and measurements were involved within each part of

the study. Given that it a decision making study, these types of decisions and

measurements were key roles of the problem. In this section, I provide background

I I I I I I I I I I I [1 [] 1 I I ci

HQMO4C66 919 Hidden Ridge Irving, TX 75038

I would like to inform you that Mr. Mohammed Fahim has successfully completed the Mail Management analysis and evaluation. The report that he has produced documenting his evaluation will be considered as one of the key measures in the decision making process for the mail management platform. I hereby certify that Mr. Fahim has successfully completed his task and his deliverables matched our expectations.

Sincerely Yours Hazern Morsy Sr. e-Business Technical Manager Verizon Communications .Flazem.. Morsyverizon.. corn

:1 I information and descriptions for each part of my analysis. As mentioned earlier, I divided

the analysis approach to two parts, qualitative and quantitative. Let's first proceed to

describe the qualitative approach.

Verizon had informed me that they chose the three debated systems because they

all fulfilled Verizon's four main requirements: e-center usage, features, maturity, and

development. But an important question arose here, which system can fulfill the most

requirements? Each system had its own pros and cons in each of the four categories.

Thus, just looking at the collected-data was not sufficient for Verizon to make a decision.

After studying the given data, I realized that a model was needed that could perform a

comparison between the four categories of the three products. Thus, I decided that the

Analytic Hierarchy Method would be the best model for the specific problem. The

Analytic Hierarchy Process is a mathematical theory that was developed by Thomas L.

Saaty. The theory is a methodology for modeling unstructured problems. I describe the

theory and how it has been used in the following section.

The second part of the qualitative approach is to study the effect of Verizon's

advanced feature, VECTR, on each of the three products. VCTER is an advanced digital

email feature that Verizon relies on for their emailing process. Thus, Verizon' s

judgmental criteria will be heavily based on what product can best work with VECTR.

Moreover, Verizon had been receiving numerous complaints from their employees

regarding conflicts between Product one and the feature VECTR that often led in loss of

information and emails. Verizon managed to collect twelve-data for each product with

and without the usage of the feature VECTR. The data represented the number of

Verizon employees' complaints for each month about each system. Using the collected

I1 4

I I I I I I I I I I I I I I I I I I I

data, I designed a statistical experiment to test the three products' compatibility with and

without VECTR that would enable Verizon to see which product works the best with

VECTR. I used SAS programming to run the experiment and base my conclusions on the

SAS output.

Let's move now to the quantitative approach that was done using Engineering

Economy methods. Engineering Economy is concerned with the evaluation of

alternatives. These alternatives are usually described by estimating the amount and timing

of future receipts and disbursements. Based on the given data about each product's cost

and values, I calculated the incremental cost for each product, the equal payment sinking

fund factor for n number of years, and the current paid costs.

5

I II

Analysis Of The Situation

For the Qualitative Approach:

(I) Using the Analytic Hierarchy Method

From the project's start, I had to make a decision regarding the best study

approach. I decided the main strategy would be to find a way to analyze the data in a

categorized order, and thus divided the approach into qualitative and quantitative parts. I

first investigated the several factors that Verizon needed to obtain in their product.

Maturity level, features, supporting to new technologies and application, and accessibility

to their e-center usage were the four main factors that Verizon expected to have in their

product.

I then used the conclusive data about each product to draw a general picture of the

strengths and weaknesses, according to Verizon expectations, in each of those four

factored categories. Using the results obtained for each product, I was able to make a

general comparison between the three products in each of those categories. Breaking up

the informational data for each product, I saw that the real problem existed in how to

develop a mathematical method to perform an analytical comparison between the three

products and ultimately come up with an optimal solution or at least suggested one.

In general, decision-making problems involve several kinds of concerns: (1)

planning; (2) generating a set of alternatives {i.e. product one, product two, product

II 6

three); (3) setting priorities (i.e. the four factors); (4) designing solving systems (i.e. the

analytic hierarchy process); (5) optimizing and resolving conflict (i.e. choosing the best

product). After several investigation and trials of how to obtain an optimal result from

the given data, I concluded that applying the Analytic Hierarchy Process would be the

best fit for the problem.

The Analytic Hierarchy Process is a decision making model and also a

mathematical theory that Thomas L. Saaty developed. The model's theme is to

decompose the data by hierarchies and synthesis by finding relations through informed

judgment. The theory is a methodology for modeling unstructured problems. I describe

the theory in the following writings.

To apply the Analytic Hierarchy Process, I first needed to recognize the

unstructured problem, which in this case was finding the most suitable email system

based on Verizon's given data. I then named the set of measurements that would be

needed in the judgmental process. In this case, the set of measurements were the three

debatable email systems. The set of measurements were based on mathematics usage to

construct the right kind of theory to produce numerical scales of judgments. The third

component of the theory was the formulation of hierarchies. A hierarchy is a particular

type of system, which is based on the assumption that the entities (i.e. three products)

which we have identified can be grouped into disjoint sets called factors. However, the

factors are always dependent on their elements. Thus, each factor has its own elements,

called sub-factors. Sub-factors are always independent. The hierarchy looks as follows:

I I I I I I 1 I I I I I Li I LI II I 11 7

I 1 I I I I I I I I I I I I I I I I I

VERIZON

Product 1 I (Product 2

I Product 3l

I factors for each product: a- Maturity b- Features c- Supporting Technology d- [-center Usaqe

78 sub-factc,s Ic, each Icctcr Of eathprcduci!

Charting the hierarchy structure is a helpful tool: it provides visual details of the

system's structure and an overview of all the actors and their purposes. The chart also

shows the level of flexibility within the system, and it describes the priority in levels {i.e.

how changes at the priorities of upper levels affect the priority of elements in the lower

levels).

So far, I have explained how the structural process of the method enabled me to

put the problem in a systematic perspective. Now, I move to the mathematical and

analytical part of the method from which the judgments are mainly based.

The problem has three variables (product one, product two and product three) and

four judgmental factors to compare among the products. For instance, consider the first

factor, features, remembering that we are looking for which product has the best

"features." Since I structured each factor with ten sub-factors for each product, I now

8

I I I I I I I I I I I 1 I •1 I I I I I

compare the products' sub-factors to one another and scale the results in a certain way.

To continue with the example, let's say we are examining which system has the highest

sub-factor, web base access, of the factor "features". The judgments, when comparing

product one, product two, and product three will be based in the following manner:

• If the sub-factor "X" is equally existed in both products, give each 5 points.

• If the sub-factor "X" is weakly stronger in product one than in product two, give 6

and 4 points respectively.

• If the sub-factor "X" is stronger in product one than in product two, give 7 and 3

points respectively.

• The sub-factor "X" is very strongly in product one than in product two, give 8 and 2

points respectively.

• The sub-factor "X" absolutely stronger in product one than in product two, give 9 and

1 points respectively.

• The sub-factor "X" doesn't exist on either one of the products, give 10 and 0 points

respectively.

• The sub-factor "X" neither found in both products, give each 0 points.

I scaled the comparison based on an agreement with Verizon, as I show in more detail in

the next section.

After comparing product one to product two and assigning points, then compare

product one to product three and assign the points, and lastly compare product two to

9

product three. Going back to the sub-factor, web base access, assume that by comparing

the three products we found the following:

(Product one vs. Product two)- Product one received 7 and product two received 3.

(Product one vs. Product three)- Product one received 2 and product three received 8.

(Product two vs. Product three)- Product two received 5 and product two received 5.

Now, by adding each product's points, we get 9 points for product one---8 points for

product two--- and 13 points for product three. Thus, we can conclude that product three

has the highest point value and the best web base access among the three products.

By repeating the same procedure to all the sub-factors that existed in each factor

category, I obtained a total score for each product in each factor category. Finally, I

added each product's scores from the four factor categories, compared them, and ranked

the products in order of highest to lowest scores.

(II) Performing Statistical Experiment on the system VECTR Within the three

Products:

The main part of the study, experimental procedure, consists of the design of the

experiment that tests the effects of two controllable design factors on a quantitative

response. As mentioned, the two controllable design factors are (1) with and without the

system VECTR (2) the three e-mail products. The quantitative response of the

experiment is the number of registered Verizon employee complaints. I introduce the

I I I I I I I I I I I I I I I I I II 10

table below to illustrate the different steps in the procedure. The table emphasizes the

different steps used in the experimental procedure.

Using VECTR Without Using VECTR

Number of 1- 399 1- 729 complaints 2- 487 2- 911

registered for 3- 348 3- 520 Product(l) Number of 1- 258 1- 334 complaints 2- 321 2- 316

registered for 3- 291 3- 355 Product(2) Number of 1- 88 1- 110 complaints 2- 111 2- 126

registered for 3- 69 3- 101 Product (3)

Ilie/1/! cep is I he proccss of scict hg the I hrec -mouth data for ever y case shown in

the table. There are six cells and thus six different data sets were looked at to make a

selection. I looked at the six different data sets and randomly selected three for eaci

Given the twelve-month data set for each of the six sets, the randomization process

done as follows:

(I) I put the values of the twelve-month data given by Verizon before and after

the usage of VECTR in an order from 0 to 11 for each set.

(II) Using the Randomization table, I randomly chose a column, remembering

that the numbers in the table are from 0 to 9, and used the first two columns

from that raw.

(Ill) I assigned combinations between the random Raw and the data sets. For

example, if 04 was seen in the random table then I chose the month 4.

(IV) I repeated the process for each case of the six data sets.

In the second step, I named the first factor, with or without the System, as factor A

and the three Products as factor B. The main idea being to determine whether the factors

A and B affect the response either individually or collectively.

I ended up with eighteen values, nine in each column, and three in each cell. I then

introduced the term Yijk, where i is the level of factor A from 1 to 2, j is the level of

factor B from 1 to 3, and k is the replication from 1 to 3. For example, to know the value

of the termY23 1, look at the 2nd level of factor A that is the 'without VECTR' column,

and the P business center with the 1st replication that is 110.

For the Quantitative Part

(III) Applying Engineering Economy Methods and Techniques

As mentioned in the Management Summary, we used the Engineering Economy

methods and techniques for it. I figured that applying only the Analytic Hierarchy

Method would not be sufficient in order for Verizon to make a decision. I realized that

'cost saving' yet 'higher quality' was a big part of the decision and in order to reach the

optimal solution we needed to divide the problem into two approaches.

In the previous section we illustrated the qualitative part using the analytic

method and were able to find which system has the 'highest qualities' according to

Verizon's needs and expectations. Next, I wanted to calculate which product had the

I I I I I I I 1 I Fi I I I I I I I II 12

I I highest overall costs and which had the lowest. Since I am not the decision-maker, I

I wanted to provide Verizon with the most information about each system. Using the data

given to us, I determined several objectives important for Verizon. They are as follows:

I 1- Calculation of the Equal-Payment-Series Sinking-fund factor for each product

I total cost, in 1, 2, and 3 years.

2- Calculation of the "Current Paid Costs" that Verizon already paid for each

'I product.

I 3- Calculation of the Incremental Costs for each product.

I 4- Tabulation and interpretation of the calculations.

I I I I I I I I I I I 13

Technical Description Of The Usage Of The Analytic Hierarchy Model

The best way to describe the hierarchy model is to see it as a matrix, in this case

it's 30 matrix that is repeated several times for each sub-factor. Back to our Sub-Factor

example: Web Base Access. Thus the matrix will be as follows

lilt,r . . .

Producti Product2 Product3

oduct1 70 7 2

Product2 (0 5

oduct3 B •. . S 0

Looking back at the matrix we can see the various relations between the three

products. Notice that the sum of the first rows is 9 and that's the total points of the sub-

factor: Web Base Access, for product one. Same for product two we get 8 and for product

three we get 13. Therefore product three has the highest score. Notice also that the total

of the three "sum of the rows" is 13 + 8 + 9 = 30, and that's because the scale weight is a

total of 10 points distributed on each comparison between the three products and every

time there is 3 comparisons. { e.g. PlvsP2; PlvsP3; P2vsP3}

Thus, for each sub-factor, 30 points are distributed among the three products, and

since there are 10 sub-factors in each of the four judgmental factors, therefore 10 30 =

300 points are distributed over the three products in each factor category. Moreover,

since there are 4 judgmental factors each have 300 points. Therefore the total amount of

14

r I points is 300 x 4 = 1200 and should be ultimately distributed over the three systems. The

I system with the highest points should then become the top in our considerations.

I Before proceeding to apply the method, I need to introduce and describe the term

I

Pijk. Thus:

Pijk refers to the sub-factor k of the factor j for product i:

Where i is from 1 - 3, referring to product 1, product 2 and product 3.

Where j is from 1 -* 4, referring to the 4 judgmental factors (Features, E-Center,

Maturity, Development and Technology)

Where k is from 1 -+ 10, referring to the 10 sub-factor in each factor category.

For example, P238 refers to the 8th sub-factor in the 34 judgmental factor category for

the 2 nd product.

The way the judgments were scaled was rather long and complex. That is because

I had to compare every product's sub-factor to one another and based on the results I

scaled the scalar judgments in a matrices form. Thus, for every factor category I

compared the three products' ten sub-factors to one another. The judgments were done as

follows; if:

The sub-factor "K" is equally existed in both products, give each 5 points

The sub-factor "K" is weakly stronger in product one than in product two, give 6

and 4 points respectively

The sub-factor "K" is stronger in product one than in product two, give 7 and 3

points respectively

The sub-factor "K" is very strongly in product one than in product two, give 8 and 2

points respectively

I I I I I I I I I I I I

I 15

The sub-factor"K" absolutely stronger in product one than in product two, give 9

and 1 points respectively

The sub-factor "K" doesn't exist on either one of the products, give 10 and 0 points

respectively

The sub-factor "K" neither found in both products, give each 0 points.

Note: The way I assigned points in the process of comparison was based on the

informational data given about each product.

The four judgmental factors categories that have been determined by Verizon are:

(1) Features (2) Maturity (3) E-Center Usage (4) Development and Technology. So let's

now study and apply the Analytic Hierarchy Process on each factor separately.

(I) Features

The first of the four factors is Features. Verizon realize that in order to make a

judgment among the three products, they need to know which product has the better

features according to Verizon needs. Verizon specified ten features that they will

definitely need in their product. Thus, those ten features were in priority over other

features. Thus, The ten features are:

1- Email Routing

2- Web Base Access

3- Online Monitoring

4- Mail Merge

5- Address Book

6- Customer History

7- Schedule Reports

8- Attachment

Management

9- Stability

10-Scale Ability

I U I I I I I I I I I I I I I I I II 16

The way the comparison was performed between the three products 10-sub-factors is

done as for example; comparing the "Email Routing" for product one and two, product

one and three, and product two and three. Based on the scalar comparison, insert the

needed points in each comparison and then add the received points for each product and

put in a matrix or table (3 x 10) as wee see in the following:

H CO E LE

U. : .

Product 11 14 12 15 14 10 14 14 2 4 ONE

Product 8 14 6 9 14 10 2 2 14 13 TWO

Product 11 2 12 6 2 10 14 14 14 13 THREE

After adding the total points received for each product I get the following:

Calculation:

Total Points for Product one: 110 Total Points for Product Two:

92 Total Points for Product Three: 98

We can see that Product one has the highest points among the three products. Thus, the conclusion is

product one has the best features according to Verizon's expectations.

(II) MATURITY

The second judgmental factor is Maturity. Verizon is looking for a high level of

maturity in their product. Verizon believe that the higher the level of maturity is the

longer the product will last and the less complains will receive. After studying several

17


other products, Verizon results came to a conclusion that the three products are very

similar and only a study can differentiate which is the better product. Thus, Verizon

specified ten judgmental sub-factors for this study to determine which system with a

higher maturity level. The ten Maturity sub-factors are:

1- User Management

2- Mail Box Management

3- Groups Management

4- Message Achieving

5- Preference Controller

6- In production Maturity

7- System Host

8- Stability Testing

9- Operational Data

10-Web Form Designer

After comparing the three products, the table or matrix will look as follows: (3x10)

ca

Co E 0

0

Product 10 10 10 10 14 6 15 15 14 15 ONE

Product 10 10 10 10 5 15 6 6 2 6 TWO

Product 10 10 10 10 11 9 9 9 14 9 THREE

After adding the total points received for each product I obtained the following:

Calculation:

Total Points for Product one: 134

18

I 1 I I I I I I 1 I I I I I I I I I I

Total Points for Product Two 74 Total Points for Product Three: 92

Looking at the table results, I concluded that Product one has the highest level of maturity

among the three products.

(III) DEVELOPMENT AND SUPPORT TO NEW TECHNOLOGY

The third the judgmental factor is Development and Support to New

Technologies. Verizon seek a flexible product that can be developed and updated in the

future time. They need a product that can support and work with new technologies,

Applications and different computer languages. (e.g. Java) They determined a set of ten

measurements that according to they will make their decision. I used these ten

measurements in the study.

The ten measurements are:

1-Chat

2- Online Fulfillment

3- KB Integration

4- External Applications

5- Foreign Language Support

6- Advanced Artificial Intelligence

7- HTML Rich Text

8-Support to Other Technologies

9- API Architecture

10-Clint's Hosting

19

I 1 After the three inserting the table matrix will look comparing products and points, or a

I

follows: (3x10

I I

I P 8 Product 12 12 12 2 14 2 20 11 4 12 I ONE

Product6 10 10 15 2 16 5 13 12 12 MO

I roduct PEE THR 12 8 8 13 14 12 5 6 14 6

I I

dd i*

C ICLJI' tID (Il - 1 Total Points for Product one: 102 Total Points for Product Two:

I- Total Points for Product Three:

98 Total

300 I I I 1 20

I I Looking back at the table results, I concluded that the three products are very close to

Ieach other in the Development and Support to New Technologies factor. However,

Product one slightly exceeded the other two products. I (IV) E-CENTER USAGE

I The last judgmental factor is the Accessibility to the E-Center Usage. Verizon's

I

B-Center Department plays such a vital role in the company's fast and accessible work.

As a result the company needs to provide them with an Email product that can fit them

I the most. After studying several features and measurements, E-center agreed on ten

I

measurements that they would need the most in their product. Thus, I applied the process

according to those ten measurements and they are as follows: II

i- Email Support Availability

2- SLA Implication

3- Usability 1 4- Keeping up with technologies

5- Distribution Administration

I6- Virus Detection

7- Email-Type supported

I 8- Web Pages Modified

9- Email Security

10- Customer Service Index IAfter finishing the appropriate calculations, the matrix will look as follows:

Hi C,)

.2 °O)

Cl) Q) uJ c

Z13 %C Q) 0

Prod Product ONE 14 18 10 10 14 18 8 6 10 9

I [1 I I 21

Product Two 2 6 10 10 14 6 11 16 10 9

Product 1 THREE 14 6 10 10 2 6 11 8 10 12

When I added the total points for each product I got the following:

Calculation:

Total Points for Product one: 117

Total Points for Product Two: 94

Total Points for Product Three: 89

Total = 300

Looking at the table results we see that Product one received the highest points. Thus,

Product one will be the most satisfying for the E-center usage.

The final step in the Hierarchy Process is to add up each product points that have

been calculated throughout the four judgmental factors. Thus, I calculated the following

table:

PRODUCT ONE PRODUCT TWO PRODUCT THREE

MATURITY 134 74 92

FEATURES 110 92 98

E-CENTER USAGE 117 94 89

DEVEOPMENT AND TECNOLOGIES

104 101 98

TOTAL 462 361 377

22

I I Looking at the table results, we see that Product One has earned the highest points

with 462 points, followed by Product Three with 377 points, and finally Product Two

with 361 points.

The Interpretations and conclusions will be followed in the Conclusions section.

11

H123

Technical Description of the Statistical Experiment

As mentioned, we use Two Factor fixed effects model to determine what product

works the best with the feature VECTR.

The Model used to test the experiment is: the Two Factor Model given as:

Yzjk = t+ài + Pj + (âJ)ij -i-Eijk

With the assumption of:

Za=0

There are three Hypotheses to be tested they are as follows:

1. Ho:âl=â2= ... =âi=O Hi: At least one of the âi's is not equal to zero

2. Ho :31=f32= ... =3j=O Hi: At least one of the 3j's is not equal to zero

3. Ho :(ãf3)il=(af3)12= ... =(af3)ab Hi: At least one of the (âJ)ij's is not equal to zero

The testing procedure will be as follows:

Step 1: Test for Interaction (3)

Step 2: If Interaction is not significant, Test for Main Effects (I, H) and perform

Duncans Multiple Range on Marginal Means.

Step 3: If Interaction is not significant, stop and do Duncans Multiple Test on Cell

Means.

24

Now, let's show the difference between the Marginal Means and the Cell Means. To do

that let's view the illustration table agaw



registered for 3- 348 3- 520 Product (1) Number of 1- 258 1- 334 complaints 2- 321 2- 316


registered for 3- 69 3- 101 Product(3)

For the Marginal Means:

Cwlculwtc the mean of the first, second. and third row, which Will he the sulillihlt R)I) 01'01C lie

six numbers of the first, second and third row divided by six, which they found to he

equal to 565.6, 312.5 and 102.5 respectively. Accordingly, run the Duncans Multiple

For ('cli Walls.

Calculate the means of each cell. Which i a t:a c.c \\ III C.

411.33 for (Center!, Using VECTR

290.00 for (Center2, Using VECTP

I'm r tCeiiter, t sin VICTk)

72().t)() tor ('eaten. 1ine V[('TR)

335.00 for (Center2, Using VECTR)

115.67 for (Center3, Using VECTR)

Using these means, run Duncans Multiple Range.

Using SAS, I wrote the following program with the given file data:

Where V refers to 'with VECTR'

W refers to 'Without VECTR'

And 1,2,3 refers to the three business centers.

The data file was saved in a file called Project.data and looks as follows:

Project.data' file:

V 1 399 V 1 487 V 1 348 V 2 258 V 2 321 V 2 291 V 3 88 V 3 111 V 3 69 W 1 729 W 1 911 W 1 520 W 2 334 W 2 316 W 2 355 W 3 110 W 3 136 W 3 101

26


The Following is the SAS statement:

FILENAME f 'project. data';

Options ls=80;

DATA one;

1NFILE f 1;

INPUT type$ center response;

PROC GLM;

Class type center;

MODEL response= type center type*center;

Title 'Project -- 2 Way ANOVA';

means type center/Duncan;

RUN;

PROC MEANS;

run;

27

After running the program, SAS gave the following output:

Project -- 2 Way ANOVA 20:48 Monday, April 29, 2002

The GLM Procedure Class Level Information

Class Levels Values type 2 VW center 3 123

Number of observations 18 Project --2 Way ANOVA

20:48 Monday, April 29, 20 Dependent Variable: response

Sum of

Source DF Squares Mean Square F Value Pr > F

Model 5 792423.7778 158484.7556 20.96 <.0001

Error 12 907440000 7562000€

Corrected Total 17 883 167.7778

R-Square Coeff Var Root MSE response Mean

0.897252 26.60224 86.95976 326.8889

Source DF Type ISS Mean Square F Value Pr > F

type 1 72200.0000 72200.0000 9.55 0.0094

center 2 645433.4444 322716.7222 42.68 <.0001

ypeenj 2 747903333 373951667 495 00271!

First, test for Interaction:

H°: (â3)1 1 = (â3)12 =. . .=( â3)ab Hi: At least one of the (6f3)ij's is not equal to zero

The highlighted cell refer to the interaction P-Value,

F = 4.95; P_value = .027

28


Since 0.027 < 0.05, we reject the null h ypotheses and conclude that there is

Significant Interactiot

The next two stcps tie the raphi 01 Intetact on Plot and the Icst of I)uncwis NiuhtipIc

Ran o c on cells.

The second step is to run Duncans Multiple range 'lest on the cell means. The test

willa! low us to see when the number of complaints vas the highest and when it was the

I OW C st

Duncans Multiple Range Test on Cell Means:



registered for 3- 348 3- 520 Product(]) Number of 1- 258 1-334 complaints 2- 321 2- 316


registered for 3- 69 3- 101 Product (3)

The first step 1 s to calculate the mean of each cell and order them lroiii the liihiest to the

I&)\ esL

- We will use the following denotation to refer to the six celL

A: refers to cell (1, 1), (Product One, Using VECTR

ft dci to cell (2. I). (Product T o, sine VFC!R)

C; refcis to cell 3. I). Product Three, si ii Vl1( '['R)

29

D: refers to cell (1,2), (Product One, Without VECTR)

E: refers to cell (2,2), (Product Two, Without VECTR)

F: refers to cell (3,2), (Product Three, Without VECTR)

Thus, the values of the means are as follows shown from the highest to the lowest:

D A E B F C

720 411 335 290 115 89

the second step is to calculate the values of Rp's based on the following formula:

FNRp=rp

Where:

MSE: Mean Squared for Error taken from the SAS output

N: Number of observation for each cell

rp: Least Significant Ranges that are obtained from table A. 12 with 12 degrees of

freedom

p: Number of Compared Values

Here's the calculation for the Rp's, since there are six means to be compared, thus

I calculated R2 to R6,. The values are as follows

R2= 154.7

R3= 161.89

R4= 166.31

30

1 I I 1 I I I I I, I I I I I I I I I I

R5= 169.174

R6= (170.68

The third step is to do the actual comparison:

Comparison p Rp Actual Difference

DvC 6 170 720-89>170

DvF 5 169.17 720-115>169.17

DvB 4 166.4 720 - 290 > 166.4

DyE 3 161 720-334>161

DvA 2 154 720 -411 > 154

AvC 5 169.2 411- 89>169.2

AvF 4 166.3 411-115>166.3

AvB 3 161.9 411 —290 NOT> 161.9

EvC 4 166.3 335-89>166.3

EvF 3 161.9 335-115>161.9

EvB 2 154 335-290 NOT > 154

BvC 3 161.9 290-89>161.9

BvF 2 154 290-115 NOT >.154

FvC 2 154 115-89 NOT> 154

Based on the above calculation we can Draw the following diagram:

DAEBFC

31

I I The above diagram shows that the cell D is Significantly Different than all other cells.

ICell A and E is Significantly Different than F and C. Cell B is Significantly Different

than cell C.

** The interpretation of our finding we will be shown in the conclusion of the project.

I I I I I I, 1 I I I I I I 32

Technical Description of the Usage of Engineering Econom y Methods

Ilic USaC of the En-Mcci-111 0 CC0110111Y MCth()dS allowed iiic to hriiiat the

financial data that has been given to me in an easier form that can be more visible to

Verizon in their studies.

The first step I intended to do was to bring all the financial information together

in one table. I designed the table as a comparison between the three products various

costs. Thus, by just looking at the table, Verizon can visualize the differences

between the costs. The table looks as follows:

Actual Costs Table

Cost Type Sub Cost Type Product One Product Two Product Three

Software 400,000 0 0 User's License 900,000 0 490,000

VENDOR COSTSProfessional services 300,000 0 600,000

H/W AND S/W 2,500,000 2,500,000 4,000,000 IT COSTS

D&E 300,000 500,000 2,700,000

Technical Support 557,000 550,000 550,000

ADDITIONAL

Call center Migration 400,000

400,000

450,000 COSTS

AGENTS TRAINING

300,000

300.000

Totals 5,657,000

4.250,000

9,090,000

Looktiic at the table. can cc that there aic tinec tvpe' ol cok; Vendor (ots, IT

costs and Additional Costs. The table allows us to conipare the costs of three products

in each type of cost

Thus, by breaking do n the cost \,t1tICS I obtained tile Io!lo\\ iiic rciiIt-:

1 I I I I I I I I I I I I I I I I I I

(I) Product three has the highest overall costs.

(II) Product two has the lowest overall costs.

(III) Product One has the highest Vendor costs

(IV) Product Two has no Vendor costs, thus Verizon will not be charged for any

software or License usage.

(V) Product Three has very high IT costs

Let's now proceed to our objective plan:

(1) Calculate the Equal-Payment-Series Sinking-Fund factor, for 2, 3 and 4 years.

The Equal-Payment-Series Sinking—Fund is the total amount required at the end

of period-payment. By looking back on the previous table, let's consider the last total

cost amount for each product as the 'Future Cost' amount that Verizon will eventually

need to pay in case of ordering the product.

Thus, in order to calculate the equal-payment-series, we need first to know what

interest rate is applied and the value of the future value for each of the three products.

After coordinating with Verizon, the interest rate was known to be 5% annual interest

rate and the future values for each product has been calculated from the previous table.

Now we can proceed for the calculation part:

(a) First let's introduce the formula for the Equal-Payments-Series. It's as follows:

A=E[ }

34

1 I I I I I I 1 I I 1 I I I I I I I I

A: the Equal-Payments-Series over n years.

F: the total amount calculated from the actual costs table.

i: the interest rate given as 5% per year.

Thus, for product one: at n =2:

A= 5,657,000[ 0.05

1 = $ 2,759,511.7 (1.05)2_i

Illustration: in case Verizon wanted to have a 2 years payment at 5% interest rate they

will have to pay 2,759,511.7 at the end of each year to get product one.

Product one at n =3:

A= 5,657,000[3 0.05

1 = $ 1,794,448.4


will have to pay $ 1,794,448.4 at the end of each year to get product one.

Product one, at n =4:

A= 5,657,000[4 0.05

1 = $ 1,312,490.7


will have to pay $ 1,312,490.7 at the end of each year to get product one.

35

Now, let's do the same for product two. Thus, the equal payments for product two

at the end of 2,3 and 4 years will be determined using the same as equation as above

however the Value of F (total cost for product 2) will change to $ 4,250,000.

Our calculation will be as follows:

Product Two at n =2:

A= 4,250,000[ 0.05

2 —1 = $2,073,170.4

Illustration: in case Verizon wanted to have a 2 year-payment at 5% interest rate they

will have to pay $ 2,073,170.4 at the end of each year to get product two.


A=4,250,000[ 0.05 (1.05) _1' = $ 1,348,136.1


will have to pay $ 1,348,136.1 at the end of each year to get product two.


05 A= 4,250,000[

0.] = $ 986,050.15

(1.05) 4 —1


will have to pay $ 986,050.15 at the end of each year to get product two.

W.

1 1 I I I 1 I I I I I I I I I I 1 I I

Following the same procedures for Product three as for Product one and two with

changing the total actual cost to $ 9,090,000, we will be able to get the following equal

payments at the end of 2, 3 and 4 years.

Product Three at n =2:

05

A= 9,090,000[ 0.

I = $ 4,434,145.56 (1.05)2_i


05

A= 9,090,000[ 0.

I = $ 2,883,425.2 (1.05) 3 —1


A= 9,090,000[ 0.05

I = $ 2,108,987.2 (1.05)4-1

Finally let's organize the calculated data on a table thus the information can be easier for

the reader:

Number ofValue of the Value of the Value of the

YearsEqual Payments Equal Payments Equal Payments

for Product 1 for Product 2 for Product 3

Two Years$2,759,511.7 $ 2,073,170.4 $4,434,145.56

Three years$ 1,794,448.4 $ 1,348,136.1 $ 2,883,425.2

$ 1,312,490.7 $ 986,050.15 $ 2,108,987.2 Four Years

37

The above table is a summarization of the previously shown calculations. Using the table,

Verizon can learn the cost of each product at the 5% interest rate at the end of 2, 3 and 4

years.

(2) Calculate the "Current Paid Costs" that Verizon already paid for each product.

After being informed that Verizon had made some payments regarding each

product, we thought it would be beneficial for them to know the exact amount that had

been paid for each product. After corresponding with Verizon, we realized that Product

one has been already installed within their email system thus the company has been

paying its fees. Verizon also ordered a trial usage period from the third email product that

they had to pay for. For product one, we have been informed that since Verizon

employees internally build the product, therefore the product didn't cost any fees. Thus

we gathered the data given and came to the following calculations shown in the table

below:

Product One Product Two Product Three

User's License $ 200,000.00 $0.00 $ 490,000.00

services Professional $ 300,000.00 $0.00 $ 600,000.00

Agents Training $ 300,000.00 $0.00 $ 0.00

Costs Total Current Paid $ 800,000.00 $0.00 $ 1,090,000.00

* The highlighted cells show the total Current Paid Costs for each product. Thus, Verizon

can know the total amount they already paid; we thought that might be useful to their

decision process.

38

I I I I (3) Calculate the incremental costs for each product.

I

I realized that calculating only the paid cost wouldn't be sufficient. Thus, I

thought providing information for the amount that still needs to be paid: Incremental

I

Costs, regarding each product would be beneficial. From the previous table, I showed the

exact current paid costs that was paid by Verizon. To get the Incremental Costs for each I product simply apply the following equation:

I Incremental Costs = Actual Costs - Current Paid Costs

I I Thus, the Incremental Costs for Product one = the Actual Cost of Product one (given in

' table 1) - Total current paid costs. Therefore it's equal to:

$5,657,000.00 - $800,000.00 = $4,857,000.00

I Therefore, Verizon would still need to pay $4,857,000.00 in order to get Product One.

IOn the other hand, The Incremental Costs for Product Three can be calculated as follows:

$9,090,000.00 - $1,090,000.00 = $8,000,000.00

Therefore, Verizon would still need to pay $8,000,000.00 in order to get Product Three.

Using the above Calculation we can compare the Incremental Costs in the following

table:

I Li I I I I 39

Cost Type Product One Product Two Product Three

Current Paid Costs $ 800,000.00 0.00 $1,090,000.00

Incremental Costs $4,857,000.00 0.00 $8,000,000.00

Note: hicrcnicntt1 Cot for Product o ht to bc Zero sincc the prodtict ha hccn hui It IocaII\. I

'

1 find that providing Verizon with Incremental cost information can be very usciul

to them, as they know now the rest of the payment amount in order for them to buy each

I product.

I I I

I I I I

I I I I

Ii I I

I I I I

40

Conclusions

My conclusions to Verizon are based on the results I obtained from both the

Qualitative and Quantitative parts of the project. Since I did three different tests on the

data collected by Verizon, my conclusions will be based on the results of those tests.

(I) Conclusions for the Analytic Hierarchy Process

Let's first look back at the results obtained from applying the Hierarchy process:

PRODUCT ONE PRODUCT TWO PRODUCT THREE

MATURITY 134 74 92

FEATURES 110 92 98

E-CENTER USAGE 117 94 89 DEVEOPMENT AND

TECNOL OGlES

TOTAL

104

462

101

361

98

- 377441*S

Looking at the table above I concluded that Product One has the highest overall collected

points through the comparison in each of the four judgmental factors. Product Two and

Three are very close to each other. Thus, according to Verizon needs and expectations to

their email system, I advise them that product one will meet their judgmental criteria the

best.

(II) Conclusions for The Statistical Experiment

By looking back at the SAS, Interaction Plots and Duncans Multiple Test results,

I concluded the following:

(a) There is a significant difference in the interaction between the three systems

before and after the usage of system VECTR.

41

(b) The highest number of employee's complaints happened in the case of using

Product One without the usage of VECTR. Thus, a critical conclusion here is

to advise Verizon not to use the Email system One without installing the

feature VECTR with it.

(c) The Third E-mail system has the lowest number of complaints when used with

VECTR. Thus, I concluded that the Third E-mail system is most compatible

with the VECTR feature.

(d) The number of complaints for the second Email system didn't change much

with and without the usage of VECTR.

(III) Conclusions for The Usage of the Engineering Economy Methods

Based on the following tables, I concluded my results:

Table shows the comparison between Incremental Costs and Current paid Costs for each

product:

Product One Product Two Product Three

Current Paid Costs $ 800,000.00 0.00 $1,090,000.00

Incremental Costs $4,857,000.00 0.00 $8,000,000.00

Thus:

(a) Product Three has the highest Current Paid Costs and Incremental Costs yet

it's not used yet. Those costs are the trial usage costs.

(b) Product Two has the lowest Current Paid Costs and Incremental costs. Since

it's internally built by Verizon employees.

42

1 I I I I I 1 1 I I I I I I I I I I 1

Final Conclusion

Based on the previous conclusions, I can summarize my findings for each product

as follows:

Product Three

(a) Highest cost product

(b) Has the best compatibility with the system VECTR

(c) Average in meeting Verizon' s four factors expectations

Product One

(a) Average cost Product

(b) Has an average compatibility with the feature VECTR

(c) Highest in meeting Verizon' s four factors expectations

Product Two

(d) Lowset cost Product

(e) Has a low compatibility with the feature VECTR

(f) Average in meeting Verizon's four factors expectations

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senior design project for verizon wireless...

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