Modeling and simulation techniques are often used for schedule risk analysis and cost analysis. For example, modeling allows you to translate the potential risks at specific points in the project into their impacts so you can determine how the project objectives are affected. Simulation techniques compute the project model using various inputs, such as cost or schedule duration, to determine a probability distribution for the variable chosen. (Cost risks typically use either a work breakdown structure or a cost breakdown structure as the input variable. Schedule risks always use the precedence diagramming method as the input variable. I'll cover schedule diagramming methods in Chapter 7.) If you used simulation techniques to determine project cost and use the cost of the project elements as the input variable, a probability distribution for the total cost of the project would be produced after running the simulation numerous times. Modeling and simulation techniques examine the identified risks and their potential impacts to the project objectives from the perspective of the whole project.
Monte Carlo analysis is an example of a simulation technique. Monte Carlo analysis is replicated many times, typically using cost or schedule variables. Every time the analysis is performed, the values for the variable are changed using a probability distribution for each variable. Monte Carlo analysis can also be used during the Schedule Development process.
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What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.