A new interval type-2 fuzzy approach for multi-scenario project cash flow assessment based on alternative queuing method and dependency structure matrix with a case study

https://doi.org/10.1016/j.engappai.2020.103815Get rights and content

Highlights

  • Developing a novel DSM method under TIT2FSs to address uncertainties.

  • Proposing a new comprehensive approach to generate project cash flow.

  • Taking a set of effective criteria, e.g., cost, quality, and safety criteria.

  • Proposing a new satisfaction degree based an algorithm under TIT2FSs.

Abstract

Managing project costs effectively, which comprises numerous aspects, is a highly complicated process for project managers that needs dependable cash knowledge in the entire life cycle of the project. Project managers’ proficiency and anticipating dependable cash flows lead to substantial improvements in project costs management. Moreover, healthy cash flow prognostication for the whole construction project gives project managers a real insight into the identification of problems, and its deficiency results in the failure of firms even with big profits to maintain themselves as well. Therefore, predicting reliable cash flow and monitoring the progress of projects in terms of cash are essential to be considered. Furthermore, due to the existence of uncertainties in projects, it is necessary to find it as a significant part of different approaches. Building upon these, an innovative approach is presented in this paper to prognosticate project cash flow based on both type-2 fuzzy extension of dependency structure matrix for project scheduling with overlapping activities and extended alternative queuing method under type-2 fuzzy environment to adopt the best scenario. Moreover, type-2 fuzzy numbers are applied to address the uncertainty of activities. Subsequently, a real case study of a gas field development project is employed to represent the efficiency of proposed approach. Ultimately, a comparative study is conducted to validate the results, and superiorities of the proposed approach are addressed from different aspects. The results illustrate that the presented approach is capable of handling real project problems and providing project managers with a suitable tool to comprehend the cash conditions of the projects.

Introduction

Scheduling and cost estimating are two essential factors that should be considered while planning projects (Görög, 2009). The association between financing and scheduling as well as a decrease in project financial costs are essential to manage projects properly. Lack of this aforementioned association not only has an influence on cash flows but also generates inappropriate schedules, which result in a steady rate of failure (Alavipour and Arditi, 2018). The swiftly growing of universal economy and accordingly changing the size of projects into a larger one lead to a massive investment in projects. Since contractor’s inability to finance results in project failure due to activities that cannot be accomplished with insufficient investment, financial factors are the most significant reasons in comparison with several factors that can be the reason for project failure (Ning et al., 2017, Lachhab et al., 2018). However, as there is no dependency between the amount of the firm’s investment and financial success, a firm needs to be able to manage its cash rather than rely on the amount of its investment (Shash and Qarra, 2018). Thus, due to the effects of financial problems on cash flow, it is necessary to generate accurate cash flows and to control it (Görög, 2009).

The term of cash flow, which is supposed to be the most important sign of a project’s financial health, is considered as a thorough history of all cash inflows and all cash outflows. Meaning that this term comprises all cash expenses and all cash incomes of a project resulting from project implementation (Mohagheghi et al., 2017b). Cash flow management involves exercises that are chosen to maintain a balance between income and expenditure; it encompasses anticipating exercises of cash inflow and outflow during the life cycle of a project and monitoring them as well (Shash and Qarra, 2018). Project cash flow prognostication includes calculating the distribution of revenues and expenditure in the entire life cycle of a project (Navon, 1995).

Incapability to control cash flow effectively can lead to bankruptcy out of its considerable significance for project profitability while the progression of a project (Khosrowshahi and Kaka, 2007). It would be advantageous to project success if early knowledge of cash flows’ trends was accessible since it puts project managers in an excellent position to alleviate detrimental effects of identified problems. This approach can result in a powerful influence on project success (Hwang and Liu, 2005). Hence, both project managers and project owners are required to generate accurate cash flow to predict and to conduct an analysis to tackle the problems (Mohagheghi et al., 2017b).

As it is mentioned before, cash flows contain both cash inflows and cash outflows in the entire life cycle of a project. Striking a fine balance between them throughout the project implementation, which leads to successful project fulfillment, is critical for contractors. Although owing to the existence of several uncertainties in projects, keeping the cash flow balance during the project execution is complicated (Ning et al., 2017). Furthermore, since the aforementioned uncertainties result in unreliable cash flow, which implies a considerable risk to lenders, firms may encounter significant difficulties in exploring external sources of financing (Deng et al., 2013).

There are numerous uncertainties from the scratch of projects. Moreover, project management is done in an uncertain environment (Turner et al., 2010). In comparison with other projects, construction projects encounter huge risks owing to crucial uncertainties that are inherently in their environment (Touran et al., 2004, Khosrowshahi and Kaka, 2007). As a large number of decisions that are made by project managers are most of the time in accordance with indefinite information, it is possible that the initial project assessments, such as cost, project fulfillment time, and cash flow of projects, can be invalidated. As such, project assessment credibility may be damaged out of such project uncertainties. Thus, it is vital to manage uncertainties for better project perception. Complicated tools are required to manage complex uncertainties. In spite of essential developments in the previous investigations of project uncertainties, it can be disputed that it is essential to fulfill the requirement of a more complicated method to manage them (Atkinson et al., 2006, Birjandi et al., 2019, Hamzeh et al., 2020).

Until quite recently, several studies focusing on the management of uncertainties have been carried out by exerting stochastic, interval, fuzzy or grey numbers (Tavana et al., 2013, Zhang et al., 2011, Huang and Zhao, 2014, Jatobá et al., 2018, Zavadskas et al., 2019a, Zavadskas et al., 2019b). Lachhab et al. (2018) introduced a methodology with the aim of minimizing the cost, duration, and risk, which was considered as an uncertainty, using a multi-criteria decision support tool according to ant colony algorithm to adopt the best scenario. Lukas and Thiergart (2019) applied a model in order to assess the impacts of both uncertainty and cash upon investment. Rezaei et al. (2020) extended a model that aimed at minimizing the risk of project’s NPV (net present value) and investigated the trade-off between them in a stochastic environment. Wang et al. (2020) presented a robust model for the purpose of forecasting financial pressure. To anticipate business failure, De Bock et al. (2020) proposed an approach using NSGA-II to minimize cost under uncertainty. Schroeder and Kacem (2020) considered the problem of managing cash in an uncertain environment utilizing a new method to minimize the maximum regret.

More so, considering the inherent uncertainty of projects and imprecise project information as well, fuzzy sets theory has been commonly utilized as a well-suited tool to manage project uncertainties (Mohagheghi et al., 2017a). Boussabaine and Elhag (1999) conducted an analysis of project cash flow by utilizing fuzzy averaging techniques. Maravas and Pantouvakis (2012) presented a model for assessing project cash flow, considering fuzzy project scheduling. Cheng and Roy (2011) proposed a cash flow model by exerting the fuzzy decision model for the SVM method by concentrating on managing time series. Cheng et al. (2010) considered a fuzzy neural network to enhance the prognostication of project cash flow. Yao et al. (2006) executed a fuzzy model to put managers in a better position to cope with the problems of cash flow management. Gonzalez-Ruiz et al. (2019) extended financial models applying a stochastic fuzzy logistic model with the aim of investigating financial scenarios concerning infrastructure projects.

Multiple criteria decision making (MCDM) indicates a number of methods that are employed to rank different scenarios and to select the best one in sophisticated environments, such as construction industry, in which enhancing decisions’ quality is vital (Levy, 2005, Pohekar and Ramachandran, 2004, Zare et al., 2016). MCDM has been commonly applied for several multi-criteria problems, containing the problems of managing projects. Activities mostly, regarding preferences and criteria, can be carried out in different ways. Accordingly, diverse scenarios can be described for implementing projects. Although some efforts were made to attend to different criteria thus far, there is little attention paid to defining such scenarios and considering other criteria, which can result in more effective project implementation. Therefore, a well-suited MCDM approach is needed. One of the suitable tools is AQM (alternative queuing method). Furthermore, it is worth noting that considering uncertainty, which sophisticates the process in any MCDM problem, is crucial. Apart from the approach applied to address MCDM issues, it is critical to employ appropriate tools to cope with uncertainties. Fuzzy sets are one of the approaches that can be utilized to handle uncertainties (Mohagheghi et al., 2016). In spite of different kinds of fuzzy tools, type-2 fuzzy sets (T2FSs) are proved to be more appropriate (Chen and Lee, 2010). Compared to type-1 fuzzy sets (T1FSs), T2FSs comprise more uncertainties due to their memberships that are T1FSs. Consequently, regarding the aforementioned difference, since T1FSs are not able to thoroughly support different sorts of uncertainty, T2FSs turned out to be more proper to tackle uncertainties (Wu and Mendel, 2007, Celik et al., 2014, Ghorabaee, 2016, Balin and Baraçli, 2017).

Concerning the environment, in which firms are competing with each other, a proper and dependable project scheduling is critical to obtain competitive advantages (Chen, 2007, Vahdani et al., 2014). Contemporary projects depend on declination in fulfillment time of a project. As such, to shorten the time, the activities of the project sometimes need to be overlapped. DSM (dependency structure matrix) has been proved as an appropriate tool to reduce the duration of projects by overlapping activities (Maheswari and Varghese, 2005). Although most of the time activity durations are supposed to be thoroughly known, it is worth noting that it scarcely occurs in the real-world (Zammori et al., 2009). More so, reducing the duration of the project regarding uncertainty evaluation turned out to be a tremendous challenge in project management. Thus, fuzzy sets theory can be applied to overcome such problems effectively owing to its importance to handle uncertainties. Moreover, to the best of our knowledge, compared to critical path method (CPM), there is no adequate investigation concerning DSM, despite the fact that it can lead to both fulfillment time and cost reduction in project management. With this in mind, it is vital to take an approach into account to assess uncertainties for both projects with overlapping activities and project cash flows due to their significance.

From the above, it is concluded that it is critical to propose a comprehensive approach to generate an accurate project cash flow in an uncertain environment, which is a significant problem in the construction industry and has an influence on project management. Furthermore, project scheduling concerning both project completion time reduction and uncertain activity duration has been an important matter that requires considering a suitable method. As argued previously, although trapezoidal interval type-2 fuzzy sets (TIT2FSs) have numerous merits in dealing with uncertainties in such issues, there is a need for conducting more investigations about them. On the other hand, since exerting a sound MCDM method under uncertain conditions, which can consider various factors, not only has an effect on project cash flow but also has an influence on project scheduling, it is vital to take them into account. Nonetheless, this method still has not entirely remarked. Besides, the literature gap is depicted in Table 1.

To progress the existent literature of project cash flow, a novel approach with several novelties is proposed in this study. The proposed approach, initially, by defining various scenarios that each one indicates the different ways of project implementation and with regard to preferences of project experts and criteria adopts the best scenario. In this way, the AQM method, in which criteria weights are partly known, is proposed in an uncertain environment. To state the significant factors, cost, safety, quality, time, and stakeholder satisfaction are addressed. As such, based on the resulting information from the last section, the DSM method with overlapping activities and considering uncertainties in the duration of activities is developed for project scheduling. Thereafter, building upon the obtained project network, the cash flow of the project is generated through the extension of a sound method in uncertain conditions. Consequently, to tackle the matter of uncertainties in all aforementioned problems, merits of TIT2FSs are utilized for the whole project. In summary, the main innovations of this study are addressed as follows:

  • i.

    Using DSM method leads to more completion time reduction in comparison with other methods applied for project scheduling. Thus, employing this method can be useful for project management. A novel DSM method is developed under TIT2FSs to address uncertainties in real conditions.

  • ii.

    A new comprehensive approach is proposed to generate project cash flow by considering AQM method to select the best way of project implementation and DSM method for better project scheduling, which both result in a proper cash flow prognostication. A new AQM method is extended under TIT2FSs to adopt the best criteria in an uncertain environment.

  • iii.

    Contrary to the existent investigations, the proposed decision-making method takes a thorough set of effective criteria, including cost, quality, time, stakeholder satisfaction, and safety criteria, for more effective project implementation. Apart from the importance of considering comprehensive criteria, defining various scenarios in the proposed method, which describe different ways of project implementation, concerning experts’ preferences results in project accomplishment efficiently.

  • iv.

    A satisfaction degree-based algorithm under TIT2FSs is proposed for deriving the weights of criteria, which are not completely known, to improve the type-2 fuzzy decision-making process.

  • v.

    Owing to the importance of TIT2FSs for making calculations extremely flexible and supporting more uncertainties compared to type-1 fuzzy sets as well, they are taken into account to cope with uncertainties more effectively.

The rest of this article is arranged as follows. The next section, Section 2, presents a novel approach that first adopts the best scenario, and then with respect to the project network, which is based on DSM, project cash flow is conducted under a type-2 fuzzy environment. Section 3 of the article is devoted to represent the capability of the proposed model by employing in a real-world case study and discussing corresponding outcomes through a sensitivity analysis implementation, while the last section makes concluding remarks and infers the contributions of this study.

Section snippets

Multi-scenario project cash flow analysis framework

All steps of proposed framework are illustrated in Fig. 1. According to this figure, the experts’ opinions about both criteria and scenarios are collected to make pairwise comparisons for all scenarios. Then, an extended TIT2F satisfaction degree-based model is employed to derive the criteria weights. Based on the resulting weights, the ranking value of each scenario will be calculated. Consequently, the final ranking of all scenarios will be determined using type-2 fuzzy extension on AQM

Case study

To assess how applicable and efficient the presented model is, a case study in the oil and gas industry is stated in this section. Generating petrochemical products has schemed for a Petro-Refinery Complex (PRC) situated in Bushehr province in Iran. The products of a corporation for the national gas and liquefied natural gas pipelines contained both light and sweet gas as well as other products, such as ethane, propane, butane, and pentane, which are derivative of the delivered gas to the

Concluding remarks and future directions

Mostly, firms are heavily dependent on cash flow to be profitable during project fulfillment. Being unable to anticipate and monitor project cash flow effectively may result in project failure. Thus, the prognostication of project cash flow turned out to be the most significant task in light of its critical role in the long-term survival of projects. Although prognosticating project cash flow emerges as an incredibly complex task owing to the existence of uncertainties especially in the

CRediT authorship contribution statement

Seyed Ali Mirnezami: Conceptualization, Data curation, Formal analysis. Seyed Meysam Mousavi: Supervision, Methodology, Writing - review & editing. Vahid Mohagheghi: Validation, Writing - review & editing.

Declaration of Competing Interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Acknowledgments

The authors would like to thank anonymous referees for their valuable comments on the initial version of this study for the improvements.

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