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@RISK Modeling Tips
Antea Group uses @RISK to Uncover $14.5M Savings for U.S. Beverage Manufacturer
John Estes of Antea Group, an international environmental, health, safety, and sustainability (EHS&S) consulting firm, helped examine a major U.S. beverage manufacturer’s operations to look at the hidden costs of the water they used. Using @RISK, Antea Group was able to quantify the business value of a water recycling system, once ‘true costs’ of water and the business benefits of the project were added to the company’s investment models. After the analysis, the beverage manufacturer was able to justify the capital investment needed to implement the water recycling project.
Through the @RISK model, Estes found that the most significant cost driver was discharging water to the sanitary sewer. “Essentially, a significant amount of water is used that doesn’t go into the product and instead is discharged to the sanitary sewer system.” The cost of sending this wastewater to the sewer is over $7.50 per thousand gallons— over 3.5x higher than the cost of getting water from the tap. Production cost increases also became dominant because the additional volume to produce the product resulted in additional volume towards sanitary sewer discharge.
Once the recycling facility comes online, projected cumulative savings will range between $10.5 million to $14.5 million over 10 years. The beverage manufacturer will recycle up to 85% of water used, and reduce impacts and dependencies on local watersheds. In addition, the company could use the project to pursue sustainability goals and enhance their reputation as a corporate water steward.
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Biomass fuel in the form of wood and animal dung for heating and cooking has been with mankind from the very beginning of archeological records. Even today, large areas of South America, Africa, and Asia not accessible to an electricity grid are still largely dependent on biomass fuel for heating and cooking. Animal dung is preferred for baking bread because of its steady heat at a constant temperature much like a modern oven. Branches and firewood are bulky to handle, but charcoal is cleaner burning, more compact, and more easily transported.
This example compares several projects as to desirability. @RISK has two measures on project performance: risk and return. The central point of discussion in this section is to identify the desired project based on both risk and return. The challenge is that this objective is harder to achieve than one might expect.
Introduction to Risk and Decision Analysis using
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