Graphical Pinch Analysis Approach to Cash Flow Management in Engineering Project

Abstract

Pinch Analysis (PA) methodology was originally developed for determining feasible Heat Integration targets in process plants, and for designing optimal Heat Exchanger Networks to achieve the previously determined energy budget. This powerful methodology has since been extended to a wide range of applications, such as Mass Integration, Carbon Management and Financial PA. All these extensions have the common feature of utilizing a stream quality index that defines direction of flow, in the same way that temperature differences determine heat transfer. In this paper, a graphical PA approach to cash flow analysis and management in engineering projects is proposed in ensuring project sustainability. This method considers the positive and negative cash flows that occur over time in an engineering project. A case study is used to illustrate how this approach can provide insights for managers to synchronize the operations of a single project to stay within the firm’s cash flow limits. Such strategies can potentially affect the sustainability of construction projects. There were three solutions considered in the case study. Based on the results, it was found that from the hypothetical example, the ideal solution is to allot 50 % or 75 % of the total inflow assigned to labour outflow with a pinch period of 1 month. It resulted in a minimum loan value 61.2 %-months for materials outflow.