Risk Modelling and Management Assignment (count 50% of the class total mark)

The assignment for this class draws on a group task.

Learning Outcomes The assignment seeks to test you understanding of, and ability to reflect on, experience relating to:

 Modelling to support decision making

 Modelling with Bayesian Networks and Influence Diagram Using Genie to support Bayesian Network modelling and Influence Diagram Creating fault and event tree models

 Appropriate use of these models

 Using Reliability Workbench to support modelling

Marking Criteria Please see appendix for marking form.

Late Penalty As per university policy!

Requirement Working in groups you are required to provide one written 3000 words report, a Reliability Workbench file and a Genie file of your models no later than 29th March 2022 at 10:00 pm.

Scene Setting Monroe Stahr is an inspiring leader within the short run parcel delivery industry. He is Director of Operations for Tycoon Trips plc, which is an organisation that, amongst other activities, collects parcels from Glasgow airport and delivers them by motor vehicle to anywhere in Glasgow. This is a specialised business, where demand is low and each delivery is expensive. Monroe believes that this could be a very lucrative service to provide but currently is not operating in the most efficient way. He is very charming, has taken you out for an extremely expensive lunch at a restaurant in Glasgow city centre and has convinced you to act as an analyst on his behalf, evaluate certain key business risks associated with the operations of Tycoon Trips and recommend appropriate action to manage each. He has made you feel very special and you want to do your best for him.

Description of Operations Provided Over Lunch By Mr Stahr There are currently two people employed by Mr Stahr to deliver the parcels; Ronda and Edgar. Ronda has been working as a delivery person for the past 5 years. During this time she has been ill on 52 days and received 20 complaints from customers about surly behaviour. Edgar has been working for the organisation for the past 10 years, but as a delivery person for the past year only. Over the past year he has taken 40 sick days and there have been 80 complaints about Edgar’s surly behaviour with clients. Each complaint costs Monroe £50 in compensation. This is twice as

likely to happen with Special Care clients, who are charged at a high rate for delivery services, than with regular deliveries and three times more likely than with cheap deliveries. If neither Edgar nor Ronda can deliver a package, then Monroe pays a competitor to carry out the delivery at a cost of £200 per package. Edgar and Ronda are paid the same rate, at £50 per day. Both work five days a week and are paid if they are absent. There are no deliveries over the weekend.

There are two vehicles that are used to deliver the packages. It costs £100 per delivery to hire a vehicle at short notice, if required due to breakdowns. It typically costs £40-£60 to fix a vehicle when it breaks down. Repairs are completed within an hour so will only affect one delivery per breakdown. Both vehicles break down as a result of one of three problems; electrical, petrol or mechanical. The electrical problem concerns the battery which can go flat during operation. Experience shows that this problem occurs on 1 in every 100 days of operation. The petrol problem is simply running out of petrol through the drivers forgetting to fill up the petrol tank. This problem occurs on 1 in every 120 days of use. The mechanical problem concerns a problem with the engine and occurs on 1 in every 200 days of use. Both Edgar and Ronda have recently been trained to check the engine for the mechanical problem and the electrical problem. Edgar and Ronda have good days and bad days. On good days they always identify and rectify the mechanical problem but on bad days they rectify it with probability 0.9. Bad days occur on half of all work days for each delivery person.

Packages arrive at the airport for delivery at a rate of 25 a day on average, but on 95% of the days the number is between 15 and 35. Edgar and Ronda will work until all of the packages have been delivered on any given day. A quarter of the packages are labelled Special Care and Monroe charges £500 for delivery, although this is completely refunded if an alternative delivery company has to be used for delivery. Half of the packages are normal delivery and the client is charged £100 and the remaining packages are charged at the cheap rate of £50 each.

Based on last years’ experience half of the clients pay in cash on delivery, (36% are Special Care deliveries and 64% are Regular deliveries) a quarter pay with credit cards (28% are Special Care deliveries, 52% are Regular deliveries and 20% are at the cheap rate), which costs Monroe 5% in transaction costs, and the remainder delay payment for 6 months to a year and then settle in cash.

The company is financed with a loan from a Building Society at 8% per annum. Petrol costs are approximately £20 per day.

Decisions under Consideration Monroe is considering hiring a third delivery person named Percy, at a rate of £30 per day. Currently Percy works in another division within Tycoon Trips and his rate of sick days is half of that of Edgar. Monroe would have to hire Percy full-time.

Another consideration is the possibility of purchasing a third vehicle at a cost of £5000, which would be just as reliable as the current vehicles. This would be kept as

a backup only; unless Percy was hired then he would require his own vehicle. Alternatively, a major overhaul could be done on the vehicles at a cost of £2000, which would remove the electrical problem.

Monroe is frustrated at the clients who delay payment. A potential solution to this would be to sell the debt to a debt-collecting agency. He doesn’t know how much this would be worth to him.

Your Task Monroe wants a client report analysing his predicament. In particular, he wants appropriate event and fault trees developed to model the current operations and used to evaluate the various decisions he is considering. This analysis should consider appropriate sensitively analysis. In addition, he would like you to model his predicament with a Bayesian Network and make a comparison with the Event Tree and Fault Tree approach to modelling. Please note that a very complex models will likely confuse the client.

Appendix Generic Feedback Form

Department of Management Science

RISK ANALYSIS AND MANAGEMENT

ASSESSMENT AND FEEDBACK FORM

NAME OF ASSIGNMENT

No of group: Date:

Mark

Bre

akdow

n

Excell

ent

Very

Good

Good

Okay

Not

covere

d /

Unaccepta

ble

Mark

Aw

ard

ed

Comment

Part A –

Build Fault

Tree(s) &

Event

Tree(s)

Mark (out of 40)

Statement of

assumptions

5

Structure of

trees and

explanation

25

Analysis 10

Part B –

Build BBNs

and Influence Diagram

Mark (out of 30)

Statement of

assumptions

5

Structure of BBNs, Influence Diagram, andexplanation

15

Analysis 10

Part C –

Comparisons

between two

models

Mark (out of 20)

Statement of

the purpose,

structuring

stage of each

of them

5

Practical

examples

from your

analysis of

their

usefulness

and benefits

15

Part D –

Marks for

additional

work

Mark (out of 10)

Presentation 10

General

Comments