BUS606: Operations and Supply Chain Management

10a. Explain the role of project management within operations management 

• What is project management?
• How does project management inform operations management?
• What are the key attributes of project management?
  

In Project management, we apply knowledge, skills, tools, and techniques to project activities to meet the project requirement. Project management includes planning, putting the project plan into action, and measuring progress and performance.
 
A close reading of the above paragraph might raise the question: What is a project? Is an entire supply chain or the manufacturing process a project? A project, in terms of project management, has specific criteria:

1. Projects are unique.
2. Projects are temporary and have a start and end date.
3. Projects are completed when the project goals are achieved.
   

Is the supply chain or the manufacturing process a project based on these criteria? No! The supply chain and manufacturing process are established, not unique. The supply chain and manufacturing process are permanent, not temporary. The supply chain and manufacturing process do not go away once a consumer receives the good or service.
 
How might we use project management in operations supply chain management? Let's assume you want to design a new product for manufacturing or determine the best location for your first overseas distribution center. These are projects that meet the three criteria listed above. Once you have designed your new product, you can create a static assembly line to produce the product (operations management). Once you have determined your overseas distribution center's location and built it, it becomes part of the static operations management function.
 
The project management process works with the following constraints: cost, scope, quality, risk, resources, and time. The triple constraint, traditionally consisting of time, cost, and scope, are the competing constraints you must be most aware of. For example, decreasing the time allocated for the project could affect the scope of the overall project.
 
To review, see An Overview of Project Management.
 

10b. Create Gantt chart schedules to indicate the link between work structures and activities in a project 

• What is a Critical Path Analysis (CPA), and why is it necessary?
• What are the essential elements of a Critical Path?
  

Critical Path Analysis (CPA) is a tool used to determine the shortest possible time to complete a project. As projects become complex, they require significant investment and risk. The CPA can identify the relationships between the project activities and work out the most efficient way, or path, to complete the project.
 
To complete a CPA, you need a list of the activities necessary to complete the project, the duration of each activity, and the dependencies of the activities. For example, Activity C might need to be completed before Activity D can begin.
 
As you diagram your critical path, you will determine the critical path, which is the longest path of planned activities to the completion of the project, the earliest start time (EST), and the latest finish time (LFT) that each activity can start and finish without making the project last longer, and which activities are critical and which activities have float (that is, those activities that can be delayed without making the project longer).
 

10c. Perform an earned value management analysis of a given project

• What is Earned Value Management?
• What is the process of determining EVM for a project?
• What are the key calculations in EVM?
  

Earned Value Management (EVM) measures and monitors project progress in terms of cost, time, and technical/physical achievement against a defined scope of work. Can you see how EVM is important in project management?
 
Technically, EVM can be determined by following these ten steps:

1. Develop a Work Breakdown Structure (WBS)that includes the entire agreed-upon scope of the project;
2. Develop an Organizational Breakdown Structure (OBS) that ensures responsibility for work accomplished;
3. Distribute the total budget across elements of the WBS;
4. Schedule the work contained in the WBS;
5. Identify a method to measure achievement;
6. Baseline the plan;
7. Record all costs;
8. Collect and analyze performance data;
9. Produce forecasts for remaining work; and
10. Incorporate authorized changes promptly.
    

The first two calculations needed for EVM are Schedule Variance (SV) (a measure that indicates whether work is ahead or behind schedule) and Cost Variance (CV) (which indicates whether the work that has been done is over or under budget). Next, we determine the Cost Performance Index (CPI) and the Schedule Performance Index (SPI). These indices indicate the cost and schedule variances in proportion to the scale of the work so far. The next step is to predict the Estimated Cost at Completion (ECC) and the Estimated Time at Completion (ETC). Based on the current trend of the project, this forecast will tell us what our expected cost and time are at the completion of the project.
 
To review, see 10 Steps to EVM and Earned Value Analysis.
 

10d. Perform a critical path analysis to "crash" a given project 

• What does "crashing" a project mean?
• What elements do we study when we "crash" a project?
• Why would we want to "crash" a project?
  

Crashing or compressing a project is done to reduce the time a project takes. The activities in the critical path are assessed to determine if the activities can be completed in less time, with cost savings.
 
In addition to the critical path, we can also add to our analysis any incentives an organization might pay to decrease the time duration of the project. We can also add indirect costs to our crashing analysis. The indirect costs will increase as the duration of the project increases.
 
Crashing a project can reduce project time and find the optimal project time. However, crashing a project increases direct costs, increases management time, and may increase risk in the project.
 
To review, see Project Time Compression: Crashing a Project.
 

Unit 10 Vocabulary 

This vocabulary list includes the terms that you will need to know to successfully complete the final exam.

• cost
• cost performance index (CPI)
• cost variance (CV)
• crashing
• critical path analysis (CPA)
• earliest start time (EST)
• earned value management
• estimated cost at completion (ECC)
• estimated time at completion (ETC)
• float
• latest finish time (LFT)
• project management
• quality
• resources
• risk
• schedule performance index (SPI)
• schedule variance (SV)
• scope
• time
• triple constraint