MGSM 890 Operations Management

1. MGSM 890Operations Management Session 7 - Scheduling & Control of Operations & Projects

2. This Evening’s Program • Scheduling & Control – Concepts & Techniques • Information Systems in Managing Operations • Enterprise Resources Planning (ERP) concepts • Scheduling & Controlling Projects • In-class Activities: • Problems 2, 5 on pp 639-640 in Chase et al • Problems 1, 2 & 4 on pp 89-90 in Chase et al • Case study analysis (“Keep patients waiting? Not in My Office” on pp 643 - 644) • Case Study for the week: The Rise & Demise of an Excellent Team

3. What is Planning & Control? Supply of products & Services Planning & Control Demand for products & Services The activities which reconcile supply & demand The organisation’s resources The organisation’s customers

4. P&C as a Function of the Volume Variety Matrix Variety Short planning horizon Timing decisions important Detailed plans Long planning horizons Volume decisions important Aggregated plans Volume

5. Planning and Control Functions • Loading How much to produce? • Sequencing In what order? • Scheduling When to produce? • Controlling Are we on plan?

6. Loading – Comparing Demand with Available Capacity Maximum Time Available Normal Time Available Not worked Planned Time Available Planned Running Time Set-ups Available Time Actual Running time Down Time

7. Loading Finite Loading Possible to limit the load eg GP Necessary to limit the load eg aircraft Infinite Loading Not possible to limit the load eg hospital Not necessary to limit the load eg queue or flexible capacity

8. Sequencing Various sequencing rules can be deployed: • Customer priority; • Due Date • LIFO – last in first out • FIFO – first in fist out • Longest operation time first • Shortest operation time first

9. Scheduling Forward Scheduling Start work as soon as job arrives Advantage of flexibility, labour utilisation High inventory costs Backward Scheduling Start work to finish when job is required Advantage of lower inventory costs Higher risk JIT based

10. Gantt Charts Mon Tue Wed Thu Fri Mon Tue Job 5th 6th 7th 8th 9th 12th 13th Table Chairs Units Schedule Progress Time now

11. Controlling Monitor deviations from plan and take corrective action. Push system Material moved to next stage as soon as processed Downhill metaphor Consistent with MRP Pull system Material moved to next stage only as needed Uphill metaphor Consistent with JIT

12. Managing Enterprise Systems

13. What is ERP? • Enterprise Resources Planning or • Eternal Revenue Provider? • Exaggerated Requirements Promise? • Extremely Repetitive Pandemonium?

14. Where did ERPs come from? • Early IT systems (1960s – 1980s) were primarily stovepipe (standalone) systems • Organisations began to recognise the need for sharing information across the enterprise • Organisations began to focus on resources and their costs • Organisations had to optimise the utilisation of their scarce resources

15. Where did ERPs come from (cont.)? • Integration of information / processes and systems became a requirement • MRP (Material Requirements Planning) systems evolved • Then MRP II (Manufacturing Resources Planning) systems came on the scene • But what was needed was something which could manage the business from end-to-end (i.e. as per the Value Chain) ERP systems were seen as the solution

16. What were the Promised Benefits? • Cost reduction • Increased productivity • Reduced cycle times • Increased quality & customer service • Managerial benefits • Organisational benefits

17. What is the Reality? • The average ERP implementation costs around $US11 million and takes around 23 months to complete • Almost two-thirds of organisational management consider that their ERP systems may hurt the organisation • The average large system is finished overall a year late and costs almost twice as much as the original estimate.

18. What are the Problems? • Poor project management • Lack of commitment by senior management • Poor governance of the implementation (the Lego Box effect) • Focus on processes rather than information

19. What are the Problems (cont.)? • Poor, inadequate understanding of the business and its information requirements • Inefficient & ineffective business processes • “Not Invented Here” syndrome

20. What are the Problems (cont.)? • Poor fit between the tools, technology and the requirements • Lack of appreciation / recognition of the cascade effect in ERP systems • Underestimation of the effort required – resources, skills, communication, technology, training, post-implementation support, etc.

21. One of the biggest problems however is . . . • The Lack of Proper Change Management over: • The project • The corporate culture • The people, and • The existing business processes And communicating the changes effectively

22. The Solution Seven things MUST be done right: • Planning • Senior Management Commitment • User Involvement & Training • Business Analysis • Project Management • Change Management, and • Constant Communication

23. The Opportunities If you get your ERP system right, you can: • Reduce order-to-shipment times by 50% (Colgate-Palmolive) • Increase efficiencies of coal handling by more than 20% (DBCT) • Obtain improved timeliness of information, greater accuracy, better monitoring, quicker response for information requests and achieve competitive advantage (Philips, Shell, Orica)

24. The Opportunities (cont.) • Improved supply-demand linkages between remote locations and local offices (Unilever) • Improved international operations - multiple tax structures, currencies, accounting practices, etc. (Deutsche Bank) • 42% ROI in 2 years (Houston Independent School District)

25. In Summary . . . • ERP Systems can provide enormous benefits – but at a cost • Done badly, ERP Systems can cost millions (see recent press re Crane) • At worst, the organisation can go belly up • ERP systems don’t just support the business – they ARE the business

26. Exercises • pp 639-640 Chase et al • Problem 2 – Scheduling Hotel Receptionists • Problem 5 – Scheduling a list of jobs • pp 89-90 Chase et al • Problem 1 – prepare a CPM diagram • Problem 2 – Scheduling using CPM • Problem 4 – CPM for a construction project

27. Case Study – Keep My Patients Waiting? Not in My Office • What features of the appointment scheduling system were crucial in capturing “many grateful patients”? • What procedures were followed to keep the appointment system flexible enough to accommodate the emergency cases, and yet able to keep up with the other patients’ appointments? • How were special cases such as latecomers and no-shows handled?

28. Case Study – The Rise and Demise of an Excellent Team • What motivated the team up to the Documentation stage? • What happened then? • What forces were acting on the group? • What lessons can be learned here?

29. Project Planning and Control

30. Volume -Variety Matrix Variety Projects Volume

31. Matrix of Project Types Military Campaign Oil Exploration Uncertainty Wedding Building an Aircraft Complexity

32. What is a Project? • Unique set of objectives • Definite start point and end point • Governed by scope, cost and time goals • Aim to achieve results and disband • Contract to on-going management

33. What is Management? • The Purpose of Management is to plan, lead, organise and control (Fayol, 1916) • leadership of a team; • determination of team objectives; • communication control of a team with its client or sponsor; • comparison of achievement against set objectives; • authority to change what a team is doing; and; • resolution of conflict. • Planning and control are the core of project management

34. Job Design in a Project Environment • Project team - Individuals from different departments within company • Matrix structure - Team structure with members from different functional areas, depending on skills needed • Project manager - Leader of project team

35. Objectives in a Project Environment Quality Time Cost

36. Project Planning Tools • Gantt Charts • Critical Path Method (CPM) • Program Evaluation and Review Technique (PERT)

37. Gantt Chart • Also known as a bar chart • Named after Henry Gantt (World War I shipbuilding) • Very useful for showing: • Amount of time involved • Sequence of activities • Dependencies between activities • Can also be used for: • Tracking progress of the project • Scheduling resources to activities • Identify milestones (major review points) for the project

38. Gantt Chart      Activity Design house and obtain financing Lay foundation Order and receive materials Build house Select paint Select carpet Finish work      1 3 5 7 9 Month

39. Activity Design house Lay foundation Order and receive materials Build house Select paint Select carpet Finish work Month 0 2 4 6 8      Resources required

40. CPM • Critical Path Method (CPM) • Du Pont & Remington-Rand (1956) • based on deterministic task times

41. Critical Path • A path is a sequence of connected activities running from start to end nodes in network • The critical path is the path with the longest duration in the network • A project cannot be completed in a shorter time than the time of the critical path

42. Activities OrganisedIn a Project Activity 1 • Activity on Arrow • Activity on Node Node 1 Node 2 Activity 1 Activity 2

43. 1 2 3 Project PlanningActivities in Series Construct forms Pour concrete

44. 1 2 3 Project PlanningActivities in Parallel Construct forms Pour concrete Build walls 4 Dummy activity

45. Project Plan For A House 3 Dummy Lay foundation 0 Finish work Build house 2 3 1 7 6 1 2 4 6 1 Design house and obtain financing Order and receive materials 1 1 Select paint Select carpet 5

46. PERT • Project Evaluation & Review Technique (PERT) • - First used by US Navy • - Booz, Allen & Hamilton • - Task time estimates are not deterministic, but have some probability distribution

47. PERT (3,4,6) (1,3,4) (optimistic time, most likely time, pessimistic time)

48. PERT Mean time = t (opt) +4 t (likely) + t (pess) 6 Variance = ( t(pess) - t(opt) ) 36 Project Mean = Sum of Activity Means Project Variance = Sum of Activity Variances ( Measure of Riskiness) 2

49. PERT Example 2 Equipment testing and modification Equipment installation System development 1 4 6 System Testing Dummy Recruiting On-job training Off-line Training 3 5

50. PERT • Nominate the Critical Path for this project? • What is the mean duration of the Critical Path? • What is the variance of the Critical Path duration? • Could there be a better path than the Critical Path?