MBA 8452 Systems and Operations Management

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## MBA 8452 Systems and Operations Management

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**MBA 8452 Systems and Operations Management**PROJECT MANAGEMENT**Introduction to Operations Management/ Operations Strategy**Process Control and Improvement Process Analysis and Design Project Management Planning for Production Quality Management Process Analysis Capacity Management Aggregate Planning Job Design Statistical Process Control Just in Time Scheduling Manufacturing Layout/ Assembly Line Balancing Inventory Control Supply Chain Management Services Waiting Line Analysis**Objective: Project Management**• Defining Project Management • Work Breakdown Structure • Types of Projects • Gantt Chart and Network Diagrams • CPM • Crashing the Project**Activity**Designation Immed. Pred. Time (Weeks) Assess damages to the home A None 1 Write and submit plan to do the job B A 1 Obtain approval C B 1 Get the building inspected D A 2 Hire and schedule contractors E C 1 Complete the work F D, E 12 Inspect the completed work G F 1 CPM (One Time Estimate)Example 1 Repair of a garage damaged by fire and & the house damaged by smoke**Project**• A set of activities (tasks) that are interrelated with a common aim to produce a valuable output • Characteristics • Large-scale, one of a kind, time consuming • Precedence relationship among activities • Time and budget limits**Project Management**• Planning, directing, and controlling resources (people, equipment, material) to meet specific objectives within the technical, cost, and time constraints of the project • We use a team approach to organize for project management.**Project Organizational Structures**• Pure Project • performed by a self-contained team works full time on the project • Functional Project • each component is performed by people within a functional area • Matrix Project • A combination of pure and functional projects**Pure Project**• Pure Project - a self-contained team works full time on the project Project Manager Team Member A Team Member B Team Member C Team Member D Team Member E Each team member has a specialty area: purchasing, design engineering, operations, accounting, etc.**Pure Project:Advantages**• Full authority of project manager • One boss to report • Shortened communication lines • High team pride, motivation, and commitment**Pure Project: Disadvantages**• Duplication of resources • Lack of organizational goals and policies • Lack of technology transfer • No functional area "home” for team members**Functional Project:Advantages**• Shared manpower and resources • Maintained technical expertise within the functional area • Nature “home” in the functional area for team members • Critical mass of specialized knowledge**Functional Project:Disadvantages**• Compromised non-functional-related activities • Weak motivation of team members • Slow response to clients’ needs**Matrix Project:Advantages**• Enhanced interfunctional communications • Pinpointed responsibility • Minimized duplication of resources • Functional home for team members**Matrix Project:Disadvantages**• Two bosses • Depends on Project Manager’s negotiating skills • Potential for suboptimization**Level**Program- Restoration of Homes Damaged by Fire 1 Project 1 Project 2 2 Task 1.1 Task 1.2 3 Subtask 1.1.1 Subtask 1.1.2 4 Work Package 1.1.1.1 Work Package 1.1.1.2 Work Breakdown Structure (WBS) Baker’s Home Carr’s Home Work with Insurance to assess damages Work with Insurance to assess damages Write & submit proposal to do the work Write & submit proposal to do the work Hire contractors to do the work: construction, electrical, painters, etc.**Work Breakdown Structure**Program: New Plant Construction and Start-up Project 1: Analytical Study Task 1: Marketing/Production Study Task 2: Cost Effectiveness Analysis Project 2: Design and Layout Task 1: Product Processing Sketches Task 2: Product Processing Blueprints Project 3: Installation Task 1: Fabrication Task 2: Setup Task 3: Testing and Run**A**B C Activities D E Time Representing Projects: Gantt Chart**Representing Projects: Network Diagram**8 10 D B 20 18 A E 30 C**Critical Path Scheduling:CPM and PERT**• CPM (Critical Path Method) • J. E. Kelly of Remington-Rand and M. R. Walker of Du Pont (1957) • Scheduling maintenance shutdowns of chemical processing plants • PERT (Program Evaluation and Review Technique) • U.S. Navy Special Projects Office (1958) • Polaris missile project**Activity**Designation Immed. Pred. Time (Weeks) Assess customer's needs A None 2 Write and submit proposal B A 1 Obtain approval C B 1 Develop service vision and goals D C 2 Train employees E C 5 Quality improvement pilot groups F D, E 5 Write assessment report G F 1 CPM (One Time Estimate)Example 1 Consider the following consulting project: Develop a critical path diagram and determine the duration of the critical path and slack times for all activities**D, 2**G, 1 A, 2 B, 1 F, 5 C, 1 E, 5 Network Diagram**D, 2**ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 ? G, 1 A, 2 B, 1 C, 1 F, 5 ES=4 EF=9 E, 5 Forward Pass: Calculate Early Start and Early Finish times ES=4 EF=6**ES=4**EF=6 D, 2 ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 ES=9 EF=14 ES=14 EF=15 G, 1 A, 2 B, 1 C, 1 F, 5 ES=4 EF=9 E, 5 Calculation for Merged Activity (F)**ES=4**EF=6 D, 2 ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 ES=9 EF=14 ES=14 EF=15 LS=7 LF=9 G, 1 A, 2 B, 1 C, 1 F, 5 ES=4 EF=9 LS=9 LF=14 LS=14 LF=15 ? E, 5 LS=4 LF=9 Backward Pass: Calculate Late Finish and Late Start times**ES=4**EF=6 D, 2 ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 ES=9 EF=14 ES=14 EF=15 LS=7 LF=9 G, 1 A, 2 B, 1 C, 1 F, 5 ES=4 EF=9 LS=0 LF=2 LS=2 LF=3 LS=3 LF=4 LS=9 LF=14 LS=14 LF=15 E, 5 LS=4 LF=9 Calculation for Fork Activity (C)**ES=4**EF=6 D, 2 ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 ES=9 EF=14 ES=14 EF=15 LS=7 LF=9 G, 1 A, 2 B, 1 C, 1 F, 5 ES=4 EF=9 LS=0 LF=2 LS=2 LF=3 LS=3 LF=4 LS=9 LF=14 LS=14 LF=15 E, 5 LS=4 LF=9 Duration = 15 weeks Critical Path & Slack Times Slack=(7-4)=(9-6)= 3 Wks Slack=0 Slack=0 Slack=0 Slack=0 Slack=0 Slack=0 Critical path: A, B, C, E, F, G**Summary**Q: What is the minimum time to finish the project A: 15 weeks Q: Which activities are critical for whole project? A: Activities A, B, C, E, F, G Q: Which activities can be delayed, by how much? A: D, 3 weeks**Questions Addressed by CPM/PERT**• When will the project be completed? • Which tasks are most critical to ensure timely completion of the project • Which tasks can be delayed if necessary without delaying the whole project? • When there is uncertainty how likely can the project be completed by due date?**Critical Path Scheduling with Three Time Estimates**• Three estimates of the completion time for each activity (task) a = optimistic time m = most-likely time b = pessimistic time**Solution Procedure**• Calculate the mean of each task time • Calculate the variance of each task time • Determine the critical path using the estimated time • Calculate variance and the standard deviation of the critical path Calculate probability of the time to complete the project by a certain date**C, 14**E, 11 H, 4 A, 7 D, 5 F, 7 I, 18 B 5.333 G, 11 Network Diagram with ET**C, 14**E, 11 H, 4 A, 7 D, 5 F, 7 I, 18 B 5.333 G, 11 Critical Path Method 7 21 21 32 32 36 EF=7 7 21 21 32 ES=0 7 12 12 19 LS=0 LF=7 32 36 36 54 20 25 25 32 36 54 5.333 16.333 0 5.333 25 36 19.667 25 Critical Path = A-C-E-H-I Expected Completion Time= 54**Formulas**• Calculate standard deviation of the critical path • Calculate probability of the time to complete the project (T) base on the statistic: = variance of a task on critical path D = Due dateTE = Expected project completion time**Standard Deviation of CP**• Now we have • expected project completion time (TE) = 54 days • standard deviation of critical path = 6.4031 • The Z statistic is**P(T < D)**T TE = 54 Calculate Probabilities of Completion • What is the probability of finishing this project in less than 53 days? Solution:Since D = 53, P(T < D) = P(Z < -0.1562) .5 - .0636 = .436, or 43.6 % (See Appendix D) 53**T**TE = 54 Calculate Probabilities of Completion • What is the probability that the project duration will exceed 56 weeks? Solution:Since D = 56, P(T > D) = P(Z > 0.3123) .5 - .1217 = .377, or 37.7 % (See Appendix D) P(T > D) 56**Expediting A ProjectTime-Cost Model**• Motivations to accelerate a project • Avoid late penalties • Get incentive payments for early completion • Free resources for other uses • Basic Assumption: some activities can be expedited, at a cost • Time-Cost Tradeoff Problem • What is the optimum project schedule based on time-cost tradeoffs?**Time-Cost Relationships**• Activity Direct Costs—direct labor expenses, materials, per-diem expenses—increase as the project duration is shortened • Project Indirect Costs—overhead, facilities, resource opportunity cost—increase as project completion time increases**Time-Cost Trade-Off ModelIllustration**Total cost Minimum cost = optimal project time Indirect cost Cost ($) Direct cost Crashing Time Project Duration**Time-Cost ModelSome Terminology**• Normal Cost: the cost to complete an activity under normal condition (normal expected cost) • Normal Time: the time to complete an activity under normal condition (with normal cost) • Crash Time: the shortest possible time to complete an activity • Crash Cost: the cost to complete an activity within crash time**Time-Cost ModelSolution Procedure**• Find the critical path with normal times • Compute unit cost to crash each activity • Shorten the critical path one day (or week etc.) at a time with the least cost activity • Find the minimum-total-cost crashing schedule**A**B F 6 10 2 C D E 5 4 9 Time-Cost ModelExample 3 Assume project indirect cost = $1000/day**Critical Path and Unit Crash Cost**• Determine normal critical path • A-B-F: Duration = 18 • C-D-E-F: Duration = 20 (critical path) • Calculate cost per day to crash