Monte Carlo Simulation as Tool for Process Reengineering

Abstract

The business world is fast becoming interconnected electronically. With the advent of the data superhighway, electronic commerce and much of private industry attempting to exploit the enabling ability of electronic data-management technologies to integrate information across organizational boundaries, it is clear that the traditional business procedures employed by the engineering and construction industry will inevitably change. It is imperative that businesses, including those in engineering and construction, be proactive in their response to these sweeping changes. However, proaction necessitates the ability to accurately assess the potential impacts of corporate reengineering initiatives. This paper summarizes a recently conducted study designed to develop a methodology for quantifying the time and cost impacts of process improvements prior to actual corporate implementation. This study demonstrates that Monte Carlo simulation is an excellent tool for analyzing the potential impact of changes or modifications that are proposed for a complex process. The Monte Carlo simulation methodology was applied to a real-world investigation of the materials-management process of industrial construction. The study demonstrates that improvements to cycle time and process cost can be accurately predicted and quantified by “preoperating” the process under investigation.