Industrial and Manufacturing Systems Engineering
2016 ASEE Annual Conference & Exposition
June 26-28, 2016
New Orleans, LA
In this paper, we first describe how critical life-cycle decisions are made for projects facing significant uncertainties. The key differentiating aspect of our approach from the traditional net present value approach is regarding the timing of such decisions. For example, our emphasis is on the effective dates for the commencement and expiration (i.e., a window of opportunity) for possible actions regarding a project, which is clearly above and beyond a single shot decision of investment or no investment. Our approach is based on elementary stochastic optimal control methods, which often afford closed-form solutions on critical timing information such as the expected remaining life of a project under significant uncertainties. These analytic solutions provide managerial insights and economic implications that are simply absent in numerical results under particular sets of parameter values. We next show how we integrate our approach in a traditional engineering economy course utilizing a short, self-contained module of a few lectures. The context of the lectures is the decisions by wind farms to exit and/or enter. For this module, we administer pre- and post- tests as well as self-efficacy surveys. In addition, focus groups are utilized to obtain immediate feedback in an interactive manner. The results from the assessment of outcomes and the self-efficacy surveys, as well as the feedback from focus groups are presented. Finally, subsequent steps towards improved teaching and learning in life-cycle decision making for projects under uncertainty are outlined.
Min, Kyung J.; Jackman, John K.; and Zugg, Michelle, "Critical Life-Cycle Decision Making for Projects under Uncertainty" (2016). Industrial and Manufacturing Systems Engineering Conference Proceedings and Posters. 74.