BA 339 – Operations Management

1. BA 339 – Operations Management • Chapter 3, Project Management (PM) • Modern PM • Aligning Projects with Organization Strategy • Organization: Structure & Culture • Defining the Project • Estimating Project Times & Costs • Developing the Project Plan • Managing Risk • Scheduling Resources

2. Chapter 3 – Project Management • Modern Project Management • Projects in ancient times – Pyramids, Great Wall of China, Medieval Cathedrals • Current – most common in construction, IT, DOD contracts, Hollywood films, and large consulting firms • Characteristics of a project: • Established objective • Defined lifespan with a beginning & end • Usually involves several departments & professionals • Typically involves do something that’s never been done before • Specific time, cost and performance requirements

3. Chapter 3 – Project Management • Modern Project Management • Project lifecycle • Definition/Identification – goals, specifications, tasks, responsibilities • Planning – Schedules, budgets, resources, risks, staffing • Execution – Status reports, changes, quality, forecasts • Delivery – transfer documents/ownership, train customer, release resources, reassign staff, lessons learned • PM & OM • PM usually involves one or more areas of OM and affects one or more areas

4. Chapter 3 – Project Management • Modern Project Management • Importance of project management • Compression of product lifecycle (hi-tech = 1.5-3 yrs. Vs. 10-15 yrs. 30 years ago) • Global competition – quality management involves project management; more work is being “projectized” (especially product development) • Knowledge explosion – increase complexity • Corporate downsizing – PM replacing middle management • Increased customer focus – customized products and maintaining lucrative customer relationships • Rapid development of 3rd world and closed economies • Small project represent big problems – cumulative impact of many small project problems

5. Chapter 3 – Project Management • Modern Project Management • PM & maturity levels • Level 1 – absence of a process for developing a project plan that includes cost, schedule & performance • Level 2 – Repeatable processes used primarily on large mission-critical projects • Level 3 Well-defined processes that are integrated with organizational processes • Level 4 – Seamless, integrated, holistic project systems and processes that include strategic decisions that take into account selection, plans, performance & lessons learned • Level 5 – Continuous improvement by archiving and using lessons learned to improve PM learning

6. Chapter 3 – Project Management • Modern Project Management • Technical & socio-cultural dimensions • Technical – scope, WBS, schedules, resource management, budgets, status reports • Socio-cultural – leadership, problem solving, teamwork, negotiations, politics, customer expectations

7. Chapter 3 – Project Management • Aligning Project with Organization Strategy • Strategic management process • Review & define the organizational mission • Set long-range goals & objectives • Analyze and formulate strategies to reach objectives (“SMART” characteristics) • Implement strategies through OM and projects • Projects should reflect a balanced approach for achieving goals & objectives; requires a consistent method for this • Alignment between strategic goals and projects often affected by: • Implementation gap • Organizational politics • Resource conflicts and multi-tasking

8. Chapter 3 – Project Management • Organization: Structure & Culture • PM structures • Functional organization – traditional “stovepipe” • Advantages: • Project completed within existing organization structure,; no alteration of operations • Maximum flexibility in use of staff • If scope narrow, in-depth expertise can of functional unit can be applied • Normal career paths are within functional divisions are maintained • Disadvantages • Project often lack focus and commitment • Poor integration across functional units • Generally takes longer to complete • Motivation of team members often limited

9. Chapter 3 – Project Management • Organization: Structure & Culture • PM structures • Dedicated project teams – operate separately from rest of the parent organizations • Advantages: • Relatively simple way to complete projects; does not disrupt ongoing operations • Get done more quickly • High level of motivation and dedication • High level of cross-functional integration (if staffed properly) • Disadvantages: • Expensive; loss of economies of scale • Projectitis – we-they divisiveness • Inhibits maximization of technological expertise • What to do with personnel when project is complete

10. Chapter 3 – Project Management • Organization: Structure & Culture • PM structures • Matrix management – hybrid that overlays PM structure on functional hierarchy (can have functional, balanced, or project matrix) • Advantages: • Share resources (more cost efficient) • Stronger project focus by having assigned PM • Access to larger reservoir of talent (homeport return helps with economies of scale & technological expertise) • More flexible utilization of resources • Disadvantages: • Tensions between PMs and functional organizations can breed conflicts (need to be managed) • Resource sharing can lead to conflict/competition • Violates unity of command (two bosses) • Decision making can get bogged down

11. Chapter 3 – Project Management • Organization: Structure & Culture • Factors in PM Structure Selection • Size of project • Strategic importance • Novelty & the need for innovation • Need for integration (number of departments) • Environmental complexity (external interfaces) • Budget & time constraints • Stability of resource requirements • *** Higher the levels of these seven factors, the more autonomy & authority the PM & team require >> matrix or dedicated teams are preferred

12. Chapter 3 – Project Management • Organization: Structure & Culture • Characteristics of organizational culture and their relationship to PM • Member identity – job vs. organization • Team emphasis – individual vs. group • Management focus – task vs. people • Unit integration – independent vs. interdependent • Control – loose vs. tight • Risk tolerance – low vs. high • Reward criteria – performance vs. other • Conflict tolerance – low vs. high • Means-end orientation – means vs. ends • Open-system focus – internal vs. external

13. Chapter 3 – Project Management • Defining the Project • Step 1 – Defining the Project Scope • Project objectives • Deliverables • Milestones – significant events • Technical requirements • Limits & exclusions • Reviews with customers/stakeholders

14. Chapter 3 – Project Management • Defining the Project • Step 2 – Establishing Project Priorities • Meeting customer/stakeholder expectations in terms of (triple constraints): • Cost • Schedule • Performance (scope, technical, quality) • Tradeoffs can be done by using a priority matrix >> for each of the triple constraints, determine whether to: • Enhance • Constrain • Accept

15. Chapter 3 – Project Management • Defining the Project • Step 3 – Creating the Work Breakdown Structure • Once scope & deliverables have been determined >> project is successively subdivided into smaller & smaller work elements • Hierarchical – Project > Task > Subtask > Deliverable > Work Package • Provides basis for scheduling, resourcing, and budgeting • Each work package: • Defines work (what) • Identifies time to complete (how long) • Identifies a time-phased budget to complete (cost) • Identifies resources needed to complete (how much) • Identifies single person responsible for work (who) • Identifies monitoring points for measuring progress

16. Chapter 3 – Project Management • Defining the Project • Step 4 – Integrating the WBS with the Organization (creating the OBS) • Creates a matrix between the WBS and the organizational resources required to perform the work • Step 5 – Code the WBS for the Info. System • Provides the “structure” for tracking and controlling work, information, costs, etc. • 1.0 - Project • 1.1 – Task • 1.1.1 - Subtask

17. Chapter 3 – Project Management • Defining the Project • Process Breakdown Structure (PBS) • Used for process-oriented projects (such as business process improvement or organizational re-engineering efforts • Responsibility Matrices • Involves taking the OBS to a lower level and identifying specific individuals who will perform work identified in work packages

18. Chapter 3 – Project Management • Estimating Project Costs & Times • Estimating – process of forecasting or approximating the time and cost of completing project deliverables • Unique to the organizations – there is no off the shelf process • 2 types: • Macro: top-down – derived by analogy or mathematical relationships (parametric) • Most useful for strategic decision making, high uncertainty, small, internal projects, unstable scope • Micro: bottoms-up – based on estimates of elements found in the WBS • Most useful when cost/time are important, fixed price contracts and when customers want details • Accuracy increase with time spent – e.g., they cost $$$ • Cost, time, & budget estimates are the lifeline to controlling projects

19. Chapter 3 – Project Management • Estimating Project Costs & Times • Factors influencing quality of estimates • Planning horizon • Project duration • People • Project structure & organization • Padding estimates • Organizational culture • Non-project factors – equipment downtime, holidays, legal limits, etc.

20. Chapter 3 – Project Management • Estimating Project Costs & Times • Macro (parametric) approaches • Ratio method – used in the concept (“need”) phase. Ex. - $110/SF. x 2,700 SF = $297,000 • Apportion method – extension of ratio method; based on past projects/costs; require good historical accuracy to ensure accuracy. Ex. – Construction loan payouts – 3% for foundation, 25% for framing, 15% for plumbing/heating, etc. Can apportion costs to WBS deliverables based on history. • Function Point Methods for SW and IT projects – function points are weighted macro variables or major parameters such as no. of inputs/outputs, number of inquiries, data files and interfaces. Usually adjusted for complexity and added. Provide basis for estimating labor. • Learning Curves – used for repetitious projects of similar scope. Recognize that learning occurs with repetition. “Each time the output quantity doubles, the unit labor hours are reduced at a constant rate.” 60% = significant improvement; 100% = no improvement.

21. Chapter 3 – Project Management • Estimating Project Costs & Times • Micro approaches • Template methods – uses past, similar projects as a starting point and then adjusted for differences. Permits development of schedule, cost and budget estimates in a short period of time. • Parametric methods applied to specific tasks – similar to parametric techniques, but applied to WBS tasks. Ex. – Wallpaper estimate ($5/SY paper x $2SY installation = $7SY) • Detailed estimates for WBS work packages – based on experience of personnel doing the work. If significant uncertainty exist, often use low, avg. & high estimates • Phase estimating (hybrid) – begins with macro estimate and refines it for phases of the project. Breakdowns may include concept definition, design production, deliverables, work package definition, etc.

22. Chapter 3 – Project Management • Estimating Project Costs & Times • Budget estimates • Not the same as cost estimates. • Cost estimate becomes a budget when it is time-phased. • WBS work packages require time=phased budgets • Includes duration and start/end dates • Types of costs include: direct labor, materials, equipment, overhead, G&A

23. Chapter 3 – Project Management • Estimating Project Costs & Times • Estimating guidelines • Responsibility –at work package level, should be done by person most familiar with work • Use several people to estimate – all should have relevant experience • Normal conditions – should be based on normal conditions, efficient methods and normal level of resources (Ex. – 8 hours for shift work) • Time units – all time estimates need consistent time units • Independence – should assume independence of tasks • Contingencies – should not include allowances for contingencies (should be estimated separately at a higher level) • Add risk assessments to estimates to avoid surprises – new technology vs. proven process. Use optimistic, most likely and pessimistic estimates.

24. Chapter 3 – Project Management • Developing the Project Plan • Project Network Terminology • Activity – element that requires time (may or may not include resources). Usually represent one or more tasks from a work package • Merge activity – activity that has more than one activity immediately preceding it (e.g., more than one dependency arrow) • Parallel activity – activities that take place at the same time • Path – sequence of connected dependent activities • Critical path – longest path through the network; if an activity on the critical path is delayed, the project will be delayed by the same amount • Event – point in time where an activity is started or completed • Burst activity – activity with more than one activity immediately following it

25. Chapter 3 – Project Management • Developing the Project Plan • Rules for Developing Project Networks • Networks typically flow right to left • An activity cannot begin until all preceding connected activities have been completed • Arrows on networks indicate precedence and flow; they can cross over each other • Each activity should have a unique identification number • An activity identification number must be larger that than of any activities that precede it • Looping is not allowed

26. Chapter 3 – Project Management • Developing the Project Plan • Approaches to Developing Networks • Activity-on-Node - AON (precedence diagram method) • Activity represented by box; dependencies depicted by arrows • 3 basic relationships for activities • Predecessor activities – which activities must be completed before the activity • Successor activities – which activities must immediately follow the activity • Current/parallel activities – which activities can occur while the activity is taking place • Activity-on-Arrow – AOA: same as AON except that activities are represented by the arrow

27. Chapter 3 – Project Management • Developing the Project Plan • Networks Computations • Forward pass (earliest times – start/complete): • Starts with the first project activities and traces each path through the network to the last project activities. • Activity times are added as you trace through the path. • Longest path denotes project completion time for the plan & is called the critical path (CP) • Backward pass (latest times – start/complete) • Starts with the last project activities and traces backward on each path to the first project activities. • Activity times are subtracted as you trace through the path. • Before computed, the last project activity must be selected. • Slack (float) – used to determine which activities can be delayed. Is simply the difference between LS and ES or LF and EF.

28. Chapter 3 – Project Management • Managing Risk • Project risk is highest at the beginning and decreases as the project progresses • Cost to fix the risk event is lowest at the beginning and increases as the project progresses. • For new products, the cost to fix increase geometrically as you move through the product lifecycle (concept definition, design, production, delivery, installation) • “A god solution to a well-posed decision problem is almost always a smarter choice than an excellent solution to a poorly posed one.”

29. Chapter 3 – Project Management • Managing Risk • The Risk Management Process • Multiple risk management models – FAA, GAO, DOE, COSO, AS/NZ 4360 • All models typically include the following process steps: • Risk identification – involves generating a list of all possible risks that could affect a project • Risk assessment – involves assessing risk based on impact severity, probability/likelihood of occurring, and controllability (includes scenario analysis and probability/impact matrices) • Risk response – involves developing a response strategy and contingency plans (usually includes mitigation, transfer, avoidance, sharing, and acceptance) • Risk response control – involves implementing the risk strategy, monitoring and adjusting, and change management

30. Chapter 3 – Project Management • Managing Risk • Classification • Many classification systems; project risk can be classified based on the following impacts (often referred to as the triple constraints): • Cost • Schedule • Technical/quality

31. Chapter 3 – Project Management • Scheduling Resources • “Project network times are not a schedule until resources have been assigned” • Key ?? • Will assigned labor/equipment be adequate and available for the project? • Will outside contractors have be used? • Do unforeseen resource dependencies exist? Is there a new critical path? • How much flexibility do we have in using resources? • Is the original deadline realistic? • If another project or additional work is added, will it cause delays in the project?

32. Chapter 3 – Project Management • Scheduling Resources • Constraints • Technical or logic constraints – usually address sequence in which activities must occur. • Example: Design > code > test • Example: Pour foundation > frame > roof • Resource constraints – absence or shortage of resources (can alter technical constraints) • People • Materials • Equipment • Capital • Physical constraints