MB0028 - Production and Operations Management - Completed

8/9/2019 MB0028 - Production and Operations Management - Completed

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PRODUCTION

ANDOPERATIONS MANAGEMENT

MB0028

SET2

MBA 2ndSEM

Name Mohammed Roohul Ameen

Roll Number

Learning Center SMU Riyadh (02543)

Subject Production and Operations Management

Date of Submission 15th

Feb 2010

Assignment Number MB0028


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Mohammed Roohul Ameen Roll Number:Assignment MBA 2nd Semester Subject: MB0028

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1. Explain how material flow information helps in work center decision. Consider

the example of a shopping centre to illustrate your answer

Material flow refers to the movement of all elements, from all sources of supply within and

around the work center. According to Tompkins and White, it is concerned with using the right

method to provide the right amount of the right material at the right place, at the right time, in

the right sequence, in the right position, in the right condition, and at the right cost.

Material flow information is the movement of the useable content of data, which must be

stored, acted upon, and/or monitored in order to operate the work center effectively. It should

be apparent that material and information flows necessary for a work center to achieve itspurposes constitute fundamental data for the decision process, or the evaluation, of how good

(or bad) the location of a work center is. So, in the process of determining the best location for

work centers, material and information flow data must be collected and evaluated for the

various feasible locations of the work center within a facility. The evaluation is performed by

using the flow data in some appropriately defined measurement, criterion, and/or calculation.

There may be many such measurements, criteria or calculations applicable to the work center

location problem. Some of the more commonly used ones include:

Maximize throughput

Minimize distance traveled Minimize congestion Maximize part-tracking ability Minimize queuing bottlenecks Streamline overall material flow patterns Minimize cost

A work center (E.g. Shopping Center) This shopping center may have a single operation/process

or a number of them conducted on the input items. In the pipeline of receiving the material to

supplying to customers, each work centers contribution is vital as materials are scheduled,

routed, transferred and shipped.

They can also be even considered as cash centers. Location trust means relative position of

different centers so as to minimize the movement of materials, meet technological sequences,

to reduce congestion, maximize throughput, improve part tracking ability and avoid repetitive

movements. In addition another consideration is to provide for expansion of production.


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Each work center receives information along with material that enters it in a shopping center;

the material also leaves the shopping center with information.

The route sheet contains information about the material, process, quantities, and inspectionprocedures. Etc. the drawings or instructions tell the condition of the material of entry and the

required condition at exit. In this sense every operation consists of material transformation

occurring on the basis of information. Activities conducted are on the basis of information that

flows with material. Different locations have to accommodate the constraints for the basis of

enduring maximum benefit of the information that is available. Basically, each location is

determined on the basis of from and to: Where does it receive material? Some centers have to

close as a matter of necessity, some need not to be and some need to be as far away as

possible.

This aspect has been given a rating scale in terms of alphabets as under:

Absolutely necessary to be close

Essential to be close

Important that they are close

Ordinary closeness

Unimportant that they are close or not

Not desirable that the centers are close

It can be seen that this is only a guide for Indian location as the work centers as there will many

competing factors that have to be accommodated.


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2. What are the reasons for failure of a project? Give suitable examples.

1. Incidence of Project Failure

Projects being initiated at random at all levels and often hidden from view Project objective not in line with Business Objective Project Management not observed Project Manager with no prior experience in the related project

Non-dedicated team Lack of complete support from clients

2. Common Reasons for Project Failure

1. Lack of clear links between the project and the organizations key strategic priorities,including agreed measures of success.

2. Lack of clear senior management and Ministerial ownership and leadership.3. Lack of effective engagement with stakeholders.4. Lack of skills and proven approach to project management and risk management.5. Too little attention to breaking development and implementation into manageable

steps.

6. Evaluation of proposals driven by initial price rather than long-term value for money(especially securing delivery of business benefits).

7. Lack of understanding of, and contact with the supply industry at senior levels in theorganization.

8. Lack of effective project team integration between clients, the supplier team and thesupply chain.


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1. Lack of clear links between the project and the organizations key strategic

priorities, including agreed measures of success.

Do we know how the priority of this project compares and aligns with our otherdelivery and operational activities?

Have we defined the critical success factors (CSFs) for the project? Have the CSFs been agreed with suppliers and key stakeholders? Do we have a clear project plan that covers the full period of the planned

delivery and all business change required, and indicates the means of benefits

realization?

Is the project founded upon realistic timescales, taking account of statutory leadtimes, and showing critical dependencies such that any delays can be handled?

Are the lessons learnt from relevant projects being applied? Has an analysis been undertaken of the effects of any slippage in time, cost,

scope or quality? In the event of a problem/conflict at least one must be

sacrificed.

2. Lack of clear senior management and Ministerial ownership and leadership.

Does the project management team have a clear view of the interdependenciesbetween projects, the benefits, and the criteria against which success will be

judged?

If the project traverses organizational boundaries, are there clear governancearrangements to ensure sustainable alignment with the business objectives of all

organizations involved

Are all proposed commitments and announcements first checked for deliveryimplications?

Are decisions taken early, decisively, and adhered to, in order to facilitatesuccessful delivery?

Does the project have the necessary approval to proceed from its nominatedMinister either directly or through delegated authority to a designated Senior

Responsible Owner (SRO)?

Does the SRO have the ability, responsibility and authority to ensure that thebusiness change and business benefits are delivered? Does the SRO have a suitable track record of delivery? Where necessary, is this

being optimized through training?


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3. Lack of effective engagement with stakeholders.

Have we identified the right stakeholders? Have we as intelligent customers, identified the rationale for doing so

(e.g. the why, the what, the who, the where, the when and the how)?

Have we secured a common understanding and agreement of stakeholderrequirements?

Does the business case take account of the views of all stakeholders includingusers?

Do we understand how we will manage stakeholders (e.g. ensure buy-in,overcome resistance to change, allocate risk to the party best able to manage it)? Has sufficient account been taken of the subsisting organizational culture?

Whilst ensuring that there is clear accountability, how can we resolve anyconflicting priorities?

4. Lack of skills and proven approach to project management and risk

management.

Is there a skilled and experienced project team with clearly defined roles andresponsibilities? If not, is there access to expertise, which can benefit those

fulfilling the requisite roles?

Are the major risks identified, weighted and treated by the SRO, the Director,and Project Manager and/or project team? Has sufficient resourcing, financial

and otherwise, been allocated to the project, including an allowance for risk?

Do we have adequate approaches for estimating, monitoring and controlling thetotal expenditure on projects? Do we have effective systems for measuring and

tracking the realization of benefits in the business case? Are the governance arrangements robust enough to ensure that "bad news" is

not filtered out of progress reports to senior managers?

If external consultants are used, are they accountable and committed to helpensure successful and timely delivery?


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5. Too little attention to breaking development and implementation into

manageable steps.

Has the approach been tested to ensure it is not 'big-bang' (e.g. in IT-enabledprojects)?

Has sufficient time been built-in to allow for planning applications in Property &Construction projects for example?

Have we done our best to keep delivery timescales short so that change duringdevelopment is avoided?

Have enough review points been built-in so that the project can be stopped, ifchanging circumstances mean that the business benefits are no longer

achievable or no longer represent value for money?

Is there a business continuity plan in the event of the project delivering late orfailing to deliver at all?

6. Evaluation of proposals driven by initial price rather than long-term valuefor money (especially securing delivery of business benefits).

Is the evaluation based on whole-life value for money, taking account of capital,maintenance and service costs?

Do we have a proposed evaluation approach that allows us to balance financialfactors against quality and security of delivery?

Does the evaluation approach take account of business criticality andaffordability?

Is the evaluation approach business driven?


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7. Lack of understanding of, and contact with the supply industry at senior levels in

the organization.

Have we tested that the supply industry understands our approach and agreesthat it is achievable?

Have we asked suppliers to state any assumptions they are making against theirproposals?

Have we checked that the project will attract sufficient competitive interest? Are senior management sufficiently engaged with the industry to be able to

assess supply-side risks?

Do we have a clear strategy for engaging with the industry or are we makingsourcing decisions on a piecemeal basis?

Are the processes in place to ensure that all parties have a clear understanding oftheir roles and responsibilities, and a shared understanding of desired outcomes,

key terms and deadlines?

Do we understand the dynamics of industry to determine whether ouracquisition requirements can be met, given potentially competing pressures in

other sectors of the economy?

8. Lack of effective project team integration between clients, the supplier teamand the supply chain.

Has a market evaluation been undertaken to test market responsiveness to therequirements being sought?

Are the procurement routes that allow integration of the project team beingused?

Is there early supplier involvement to help determine and validate what outputsand outcomes are sought for the project?

Has a shared risk register been established? Have arrangements for sharing efficiency gains throughout the supply team been

established?

If the answers to the above questions are unsatisfactory, projects should not be allowed to

proceed until the appropriate assurances are obtained.

Explanatory notesOffice of Government Commerce,Trevelyan House, 26 - 30 Great Peter Street, London SW1P 2BYService Desk: 0845 000 4999 E: [email protected]


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Explanatory Notes

1. An acquisition-based project is one which has a significant element dependent on the supply ofgoods and/or services by a third party supplier or suppliers. Whilst it is not essential for the

goods or services to be provided by a single supplier, the contribution of the third party supplier

or suppliers should be considered significant, if a failure to deliver on their part attracts public

criticism.

2. An IT-enabled project is any business change activity, including programmers and projects,where the use of IT is critical to its success.

3. A project is defined as a unique set of coordinated activities with a finite duration, defined costand performance parameters and clear outputs to support specific business objectives.

4. By value for money is meant "the optimum combination of whole-life cost and quality, fitnessfor purpose to meet user

Example of Failed Projects

FBI Virtual Case File

Source: IEEEhttp://spectrum.ieee.org/print/1455

Implementers: SAIC (Science Applications International Corp)

LOC: 700 000

Cost: $170 million project

Problems: bug-ridden and functionally off target

Decision: Scrap

Contributing factors:

poorly defined and slowly evolving design requirements; overly ambitious schedules; and the lack

of a plan to guide hardware purchases, network deployments, and software development for the

bureau.
http://spectrum.ieee.org/print/1455http://spectrum.ieee.org/print/1455http://spectrum.ieee.org/print/1455http://spectrum.ieee.org/print/1455


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Cargo Management Reengineering

Customer

Australian Customs

Vendor

IBM

Platform

Websphere, DB2, ZOS Mainframe

Complexity

Design detail in the 19,000 pages of analysis for ICS includes 800 screens, 16,000 business rules, 70

complex business messages, 850 database tables, 3700 executable load modules, 1800 CICS

transaction types, 55 batch jobs, 90 reports and 35 system interfaces. (Source:ACS)

Technology Infrastructure prescribed by Legislation

Legislation passed in 2001 created a legal framework for electronic cargo management secured by

Public Key Infrastructure (PKI) using the GateKeeper accredited certification authority to deliver

registration or certification services to meet Commonwealth standards.

Failures

Not performant.

Cost blowout from $33m to $240m.

Blames users.

Usability problems.

Big bang approach with new rule sets introduced

"The problems experienced in part, flow from inaccurate and incomplete information being

submitted by some users, which the new system is designed not to accept for security reasons," the

spokesperson said.

Type of failure

Estimation error

Causes

Not phased in. Not running old and new system in parallel.

The system that it replaced was 4 years old.

Follow up

The Federal Government has introduced the UK Gateway methodology to manage IT project risk.
http://www.infoage.idg.com.au/index.php/id;1158761497;fp;4;fpid;71937704http://www.infoage.idg.com.au/index.php/id;1158761497;fp;4;fpid;71937704http://www.infoage.idg.com.au/index.php/id;1158761497;fp;4;fpid;71937704http://www.infoage.idg.com.au/index.php/id;1158761497;fp;4;fpid;71937704


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Bharti Airtel & MTN Deal

Complexity

South African governments refusal to budge from its demand that the Indian government amend

laws to allow dual-listed companies as a precursor to the deal sealed its fate.

Dual listing allows companies retain their separate legal identities and listings on stock exchanges

while entering into equalization agreements to collectively run operations and share profits orlosses. Such arrangements are also seen protecting the national identities of companies.

Type of failure

Legislative, Corporate laws

Causes

It was a cash-cum-stock deal which would have resulted in Bharti Airtel getting a 49% stake in MTN

and the South African telco and its shareholders getting a 36% economic interest in Bharti. But the

South Africans wanted assurances for the future, which the Indian government was not in a

position to give as it said that allowing dual listing will need major amendments to key corporate

laws and cannot be done in haste.

Follow up

In the post deal scenario, the Government, Sebi and RBI should arrive upon the implementations

that are required at the highest priority to avoid similar situations.

Codenamed Project Green by Bharti Airtel

and Project Saffron by MTN, the two

companies and their numerous advisors and

bankers had worked on the transaction since

the beginning of the year 2009. After over

eight months of torturous and complex

discussions, both companies reached an

agreement for a $24-billion alliance to create

the worlds fourth largest telco spanning 24

countries and 200 million subscribers.


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3. Explain the various phases in project management life cycle?

Phases of the project management life cycle:

The project life cycle:

According to Method123 Project

Management Methodology (MPMM) 1

by Jason Westland

There are four key phases within the

project life cycle and multiple phases

within the Project Management Life

cycle


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Project Initiation

The first phase of a project is the initiation phase. During this phase a business problem or opportunity

is identified and a business case providing various solution options is defined. Next, a feasibility study is

conducted to investigate whether each option addresses the business problem and a finalrecommended solution is then put forward. Once the recommended solution is approved, a project is

initiated to deliver the approved solution. Terms of reference are completed outlining the objectives,

scope and structure of the new project and a project manager is appointed.

The project manager begins recruiting a project team and establishes a project office environment.

Approval is then sought to move into the detailed planning phase. Within the initiation phase, the

business problem or opportunity is identified, a solution is defined, a project is formed and a project

team is appointed to build and deliver the solution to the customer.

Develop a business case: The trigger to initiating a project is identifying a business problem or

opportunity to be addressed. A business case is created to define the problem or opportunity in detail

and identify a preferred solution for implementation. The business case includes:

A detailed description of the problem or opportunity;

A list of the alternative solutions available; An analysis of the business benefits, costs, risks and issues;

A description of the preferred solution;

A summarized plan for implementation.

An identified project sponsor then approves the business case and the required funding is allocated to

proceed with a feasibility study.

Undertake a feasibility study: At any stage during or after the creation of a business case, a formal

feasibility study may be commissioned. The purpose of a feasibility study is to assess the likelihood of

each alternative solution option achieving the benefits outlined in the business case. The feasibilitystudy will also investigate whether the forecast costs are reasonable, the solution is achievable, the

risks are acceptable and the identified issues are avoidable.

Establish the terms of reference:After the business case and feasibility study have been approved, a

new project is formed. At this point, terms of reference are created. The terms of reference define the

vision, objectives, scope and deliverables for the new project. They also describe the organization

structure; and activities, resources and funding required to undertake the project. Any risks, issues,

planning assumptions and constraints are also identified.


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Appoint the project team:The project team is now ready to be appointed. Although a project manager

may be appointed at any stage during the life of the project, the manager will ideally be appointed

prior to recruiting the project team. The project manager creates a detailed job description for each

role in the project team, and recruits people into each role based on their relevant skills and

experience.

Set up a project office:The project office is the physical environment within which the team is based.Although it is usual to have one central project office, it is possible to have a virtual project office with

project team members located around the world. A project office environment should include:

Equipment, such as office furniture, computer equipment, stationery and materials; Communications infrastructure, such as telephones, computer network, e mail, Internet access,

files storage, database storage and backup facilities;

Documentation, such as a project methodology, standards, processes, forms and registers; Tools, such as accounting, project planning and risk modeling software.

Perform a phase review: At the end of the initiation phase, perform a phase review. This is basically acheckpoint to ensure that the project has achieved its objectives as planned."

Project Planning

Once the scope of the project has been defined in the terms of reference, the project enters the

planning phase. This involves creating a:

Project plan outlining the activities, tasks, dependencies and timeframes;

Resource plan listing the labor, equipment and materials required; Financial plan identifying the labor, equipment and materials costs; Quality plan providing quality targets, assurance and control measures; Risk plan highlighting potential risks and actions to be taken to mitigate those risks; Acceptance plan listing the criteria to be met to gain customer acceptance; Communications plan describing the information needed to inform stakeholders; Procurement plan identifying products to be sourced from external suppliers.

"At this point the project will have been planned in some detail and is ready to he executed."

"By now, the project costs and benefits have been documented, the objectives and scope have been

defined, the project team has been appointed and a formal project office environment established. It is

now time to undertake detailed planning to ensure that the activities performed during the execution

phase of the project are properly sequenced, resourced, executed and controlled.


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Create a project plan: The first step in the project planning phase is to document the project plan.

A work breakdown structure' (WBS) is identified which includes a hierarchical set of phases, activities

and tasks to be undertaken to complete the project. After the WBS has been agreed, an assessment of

the level of effort required to undertake each activity and task is made. The activities and tasks are

then sequenced, resources are allocated and a detailed project schedule is formed. This project plan is

the key tool used by the project manager to assess the progress of the project throughout the project

life cycle.

Create a resource plan:Immediately after the project plan is formed, the level of resource required =

to undertake each of the activities and tasks listed within the project plan will need to be allocated.

Although generic resource may have already been allocated in the project plan, a detailed resource

plan is required to identify the:

Type of resource required, such as labor, equipment and materials; Quantity of each type of resource required; Roles, responsibilities and skill sets of all human resource required;

Specifications of all equipment resource required; Items and quantities of material resource required.

A schedule is assembled for each type of resource so that the project manager can review the resource

allocation at each stage in the project.

Create a financial plan:A financial plan is created to identify the total quantity of money required to

undertake each phase in the project (in other words, the budget). The total cost of labor, equipment

and materials is calculated and an expense schedule is defined which enables the project manager to

measure the forecast spend versus the actual spend throughout the project. Detailed financial planning

is an extremely important activity within the project, as the customer will expect the final solution to

have been delivered within the allocated budget.

Create a quality plan:Meeting the quality expectations of the customer can be a challenging task. To

ensure that the quality expectations are clearly defined and can reasonably be achieved, a quality plan

is documented. The quality plan:

Defines the term 'quality' for the project. Lists clear and unambiguous quality targets for each deliverable. Each quality target provides a

set of criteria and standards to be achieved to meet the expectations of the customer.

Provides a plan of activities to assure the customer that the quality targets will be met (in otherwords, a quality assurance plan).

Identifies the techniques used to control the actual quality level of each deliverable as it is built(In other words, a quality control plan).

Not only is it important to review the quality of the deliverables produced by the project, it is also

important to review the quality of the management processes that produced them. A quality plan will

summarize each of the management processes undertaken during the project, including time, cost,

quality, change, risk, issue, procurement, acceptance and communications management.


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Create a risk plan:The next step is to document all foreseeable project risks within a risk plan. This

plan also identifies the actions required to prevent each risk from occurring, as well as reduce the

impact of the risk should it eventuate. Developing a clear risk plan is an important activity within the

planning phase, as it is necessary to mitigate all critical project risks prior to entering the execution

phase of the project.

Create an acceptance plan: To deliver the project successfully, you will need to gain full acceptance

from the customer that the deliverables produced by the project meet or exceed requirements. An

acceptance plan is created to help achieve this, by clarifying the completion criteria for each

deliverable and providing a schedule of acceptance reviews. These reviews provide the customer with

the opportunity to assess each deliverable and provide formal acceptance that it meets the

requirements as originally stated.

Create a communications plan:Prior to the execution phase, it is also necessary to identify how each

of the stakeholders will be kept informed of the progress of the project. The communications plan

identifies the types of information to be distributed to stakeholders, the methods of distributing the

information, the frequency of distribution, and responsibilities of each person in the project team for

distributing the information.

Create a procurement plan: The last planning activity within the planning phase is to identify the

elements of the project to be acquired from external suppliers. The procurement plan provides a

detailed description of the products (that is, goods and services) to be acquired from suppliers, the

justification for acquiring each product externally as opposed to from within the business, and the

schedule for product delivery. It also describes the process for the selection of a preferred supplier (the

tender process), and the ordering and delivery of the products (the procurement process).

Contract the suppliers:Although external suppliers may be appointed at any stage of the project, it is

usual to appoint suppliers after the project plans have been documented but prior to the execution

phase of the project. Only at this point will the project manager have a clear idea of the role of

suppliers and the expectations for their delivery. A formal tender process is undertaken to identify a

short list of capable suppliers and select a preferred supplier to initiate contractual discussions with.

The tender process involves creating a statement of work, a request for information and request for

proposal document to obtain sufficient information from each potential supplier and select the

preferred supplier. Once a preferred supplier has been chosen, a contract is agreed between the

project team and the supplier for the delivery of the requisite products.

Perform a phase review: At the end of the planning phase, a phase review is performed. This is a

checkpoint to ensure that the project has achieved its objectives as planned.


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Project Execution

In much of the literature, and in training programs, project management is all about project planning

while project execution gets short shrift.

This phase involves implementing the plans created during the project planning phase. While each planis being executed, a series of management processes are undertaken to monitor and control the

deliverables being output by the project. This includes identifying change, risks and issues, reviewing

deliverable quality and measuring each deliverable produced against the acceptance criteria. Once all

of the deliverables have been produced and the customer has accepted the final solution, the project is

ready for closure


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The execution phase is typically the longest phase of the project in terms of duration. It is the phase

within which the deliverables are physically constructed and presented to the customer for acceptance.

To ensure that the customer's requirements are met, the project manager monitors and controls the

activities, resources and expenditure required to build each deliverable. A number of management

processes as shown are undertaken to ensure that the project proceeds as planned.

Build the deliverables:This phase involves physically constructing each deliverable for acceptance bythe customer. The activities undertaken to construct each deliverable will vary depending on the type

of project being undertaken. Activities may be undertaken in a 'waterfall' fashion, where each activity is

completed in sequence until the final deliverable is produced, or in an 'iterative' fashion, where

iterations of each deliverable are constructed until the deliverable meets the requirements of the

customer.

Regardless of the method used to construct each deliverable, careful monitoring and control processes

should be employed to ensure that the quality of the final deliverable meets the acceptance criteria set

by the customer.

Monitor and control: While the project teams are physically producing each deliverable, the projectmanager implements a series of management processes to monitor and control the activities being

undertaken by the project team. An overview of each management process follows.

Time Management: Time management is the process of recording and controlling time spent by staff n

the project. As time is a scarce resource within projects, each team member should record time spent

undertaking project activities on a timesheet form. This will enable the project manager to control the

amount of time spent undertaking each activity within the project. A timesheet register is also

completed, providing a summary of the time spent on the project in total so that the project plan can

always be kept fully up to date.

Cost management: Cost management is the process by which costs/expenses incurred on the project

are formally identified, approved and paid. Expense forms are completed for each set of related project

expenses such as labor, equipment and materials costs. Expense forms are approved by the project

manager and recorded within an expense register for auditing purposes.

Quality management: Quality is defined as the extent to which the final deliverable conforms to the

customer requirements. Quality management is the process by which quality is assured and controlled

for the project, using quality assurance and quality control techniques. Quality reviews are undertaken

frequently and the results recorded on a quality review form.

Change management: Change management is the process by which changes to the project scope,

deliverables, timescales or resources are formally requested, evaluated and approved prior to

implementation. A core aspect of the project manager's role is to manage change within the project.

This is achieved by understanding the business and system drivers requiring the change, identifying the

costs and benefits of adopting the change, and formulating a structured plan for implementing the

change. To formally request a change to the project, a change form is completed. The status of all

active change forms should he recorded within a change register.

Risk management: Risk management is the process by which risks to the project are formally

identified, quantified and managed. A project risk may be identified at any stage of the project by

completing a risk form and recording the relevant risk details within the risk register.


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Issue management: Issue management is the method by which issues currently affecting the ability of

the project to produce the required deliverable are formally managed. After an issue form has been

completed and the details logged in the issue register, each issue is evaluated by the project manager

and a set of actions undertaken to resolve the issue identified.

Procurement management: Procurement management is the process of sourcing products from anexternal supplier. Purchase orders are used to purchase products from suppliers, and a procurement

register is maintained to track each purchase request through to its completion.

Acceptance management: Acceptance management is the process of gaining customer acceptance for

deliverables produced by the project. Acceptance forms are used to enable project staff to request

acceptance for a deliverable, once complete. Each acceptance form identifies the acceptance criteria,

review methods and results of the acceptance reviews undertaken.

Communications management: Communications management is the process by which formal

communications messages are identified, created, reviewed and communicated within a project. Themost common method of communicating the status of the project is via a project status report. Each

communications message released is captured in a communications register.

Perform a phase review: At the end of the execution phase, a phase review is performed. This is a

checkpoint to ensure that the project has achieved its objectives as planned.

Project Closure

Project closure involves releasing the final deliverables to the customer, handing over projectdocumentation to the business, terminating supplier contracts, releasing project resources and

communicating the closure of the project to all stakeholders. The last remaining step is to undertake a

post implementation review to quantify the level of project success and identify any lessons learnt for

future projects.

Following the acceptance of all project deliverables by the customer, the project will have met its

objectives and be ready for closure. Project closure is the last phase in the project life cycle, and must

be conducted formally so that the business benefits delivered by the project are fully realized by the

customer.


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Perform project closure: Project closure, or 'close out', essentially involves winding up the project.

This includes:

Determining whether all of the project completion criteria have been met; Identifying any outstanding project activities, risks or issues; Handing over all project deliverables and documentation to the customer; Canceling supplier contracts and releasing project resources to the business; Communicating the closure of the project to all stakeholders and interested parties.

A project closure report is documented and submitted to the customer and/or project sponsor for

approval. The project manager is responsible for undertaking each of the activities identified in the

project closure report, and the project is closed only when all the activities listed in the project closure

report have been completed.

Review project completion: The final activity within a project is the review of its success by an

independent party. Success is determined by how well it performed against the defined objectives andconformed to the management processes outlined in the planning phase. To determine how well it

performed, the following types of questions are answered:

Did it result in the benefits defined in the business case? Did it achieve the objectives outlined in the terms of reference? Did it operate within the scope of the terms of reference? Did the deliverables meet the criteria defined in the quality plan? Was it delivered within the schedule outlined in the project plan? Was it delivered within the budget outlined in the financial plan?

To determine how well the project conformed, an assessment is made of the level of conformity to the

management processes outlined in the quality plan. These results, as well as a list of the key

achievements and lessons learnt, are documented within a post-implementation review and presented

to the customer and/or project sponsor for approval."


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4. What are the seven principles of SCM?

Principle 1: Segment customers based on the service needs of distinct groups and adapt thesupply chain to serve these segments profitably.

Principle 2: Customize the logistics network to the service requirements and profitability ofcustomer segments.

Principle 3: Listen to market signals and align demand planning accordingly across the supplychain, ensuring consistent forecasts and optimal resource allocation.

Principle 4: Differentiate product closer to the customer and speed conversion across thesupply chain.

Principle 5: Manage sources of supply strategically to reduce the total cost of owning materialsand services.

Principle 6: Develop a supply chain-wide technology strategy that supports multiple levels ofdecision making and gives a clear view of the flow of products, services, and information.

Principle 7: Adopt channel-spanning performance measures to gauge collective success inreaching the end-user effectively and efficiently.

Principle 1:Customer segmentation, also referred to as market segmentation, is the practice of segmenting

customers, or potential customers, into groups of individuals with common characteristics. By

gaining a better overall understanding of customers, then grouping them into categories,

companies are able to better optimize marketing programs and allocate marketing dollars moreeffectively. It is also explained as a marketing technique that targets a group of customers with

specific characteristics, i.e. a particular group that has its own distinct customer profile and buyer

characteristics so that for marketing purposes, it can be targeted separately from other segments of

the market.


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Segments made should adhere to the following rules:

It is distinct from other segments (heterogeneity across segments), It is homogeneous within the segments (exhibits common attributes), It responds similarly to a market stimulus and it can be reached by a market intervention. It uses statistical techniques called factor analysis and cluster analysis to combine attitudinaland demographic data to develop segments that are easier to target.Value-based segmentation: Its a common practice today to segment customers based on the

needs of the customer and overall business value. While this strategy is less scientific than the

other approach, companies that have been successful at assessing groups of consumers both in

terms of the revenue they generate and the costs of establishing and maintaining relationships

have been reaping great rewards.

Advantages:


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Principle 2:

Customize the logistics network to the service requirements

and profitability of customer segments. Companies have

traditionally taken a monolithic approach to logistics

network design in organizing their inventory, warehouse,and transportation activities to meet a single standard. For

some, the logistics network has been designed to meet the

average service requirements of all customers; for others, to

satisfy the toughest requirements of a single customer

segment.

Principle 3:

Listen to market signals and align demand planning accordingly across the supply chain,

ensuring consistent forecasts and optimal resource allocation.

Forecasting has historically preceded silo by silo, with multiple departments independently

creating forecasts for the same productsall using their own assumptions, measures, and level

of detail. Many consult the marketplace only informally, and few involve their major suppliers in

the process. The functional orientation of many companies has just made things worse, allowing

sales forecasts to envision growing demand while manufacturing second-guesses how much

product the market actually wants.

Such independent, self-centered forecasting is incompatible with excellent supply chainmanagement.

Exhibit 2 illustrates the difference that

cross supply chain planning has made

for one manufacturer of laboratory

products. As shown on the left of this

exhibit, uneven distributor demand

unsynchronized with actual end-user

demand made real inventory needs

impossible to predict and forced highinventory levels that still failed to

prevent out-of-stocks. Distributors

began sharing information on actual

(and fairly stable) end-user demand

with the manufacturer, and the

manufacturer began managing

inventory for the distributors. This

coordination of manufacturing

scheduling and inventory deployment decisions paid off handsomely, improving fill rates, asset

turns, and cost metrics for all concerned.


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Principle 4:Differentiate product closer to the customer and speed conversion across the supply chain.

Manufacturers have traditionally based production goals on projections of the demand for

finished goods and have stockpiled inventory to offset forecasting errors. These manufacturers

tend to view lead times in the system as fixed, with only a finite window of time in which toconvert materials into products that meet customer requirements.

While even such traditionalists can make progress in cutting costs through set-up reduction,

cellular manufacturing, and just-in-time techniques, great potential remains in less traditional

strategies such as mass customization.

Principle 5:Manage sources of supply strategically to reduce the total cost of owning materials and

services. Determined to pay as low a price as

possible for materials, manufacturers havenot traditionally cultivated warm

relationships with suppliers. The best

approach to supply is to have as many

players as possible fighting for their piece of

the piethat's when you get the best

pricing.

Excellent supply chain management requires

a more enlightened mindsetrecognizing,

as a more progressive manufacturer did: Our supplier's costs are in effect our costs. If we forceour supplier to provide 90 days of consigned material when 30 days are sufficient, the cost of

that inventory will find its way back into the supplier's price to us since it increases his cost

structure. While manufacturers should place high demands on suppliers, they should also

realize that partners must share the goal of reducing costs across the supply chain in order to

lower prices in the marketplace and enhance margins. The logical extension of this thinking is

gain-sharing arrangements to reward everyone who contributes to the greater profitability.

Some companies are not yet ready for such progressive thinking because they lack the

fundamental prerequisite. That is, a sound knowledge of all their commodity costs, not only for

direct materials but also for maintenance, repair, and operating supplies, plus the money spent

on utilities, travel, temps, and virtually everything else. This fact-based knowledge is the

essential foundation for determining the best way of acquiring every kind of material and

service the company buys.

With their marketplace position and industry structure in mind, manufacturers can then

consider how to approach supplierssoliciting short-term competitive bids, entering into long-

term contracts and strategic supplier relationships, outsourcing, or integrating vertically.

Excellent supply chain management calls for creativity and flexibility.


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Principle 6:Develop a supply chain-wide technology strategy that supports multiple levels of decision

making and gives a clear view of the flow of products, services, and information.

To sustain reengineered business processes (that at last abandon the functional orientation of

the past), many progressive companies have been replacing inflexible, poorly integratedsystems with enterprise-wide systems. Yet too many of these companies will find themselves

victims of the powerful new transactional systems they put in place. Unfortunately, many

leading-edge information systems can capture reams of data but cannot easily translate it into

actionable intelligence that can enhance real-world operations.

o For the short term, thesystem must be able to handle day-to-

day transactions and electronic

commerce across the supply chain and

thus help align supply and demand bysharing information on orders and daily

scheduling.

o From a mid-termperspective, the system must facilitate

planning and decision making, supporting

the demand and shipment planning and

master production scheduling needed to

allocate resources efficiently.

o To add long-term value,the system must enable strategic analysis

by providing tools, such as an integrated

network model, that synthesize data for use in high-level what-if scenario planning to

help managers evaluate plants, distribution centers, suppliers, and third-party service

alternatives.

Despite making huge investments in technology, few companies are acquiring this full

complement of capabilities. Today's enterprise wide systems remain enterprise-bound, unable

to share across the supply chain the information that channel partners must have to achieve

mutual success.

Principle 7:

Adopt channel-spanning performance measures to gauge collective success in reaching the end-

user effectively and efficiently.

To answer the question, How are we doing? most companies look inward and apply any

number of functionally oriented measures. But excellent supply chain managers take a broader

view, adopting measures that apply to every link in the supply chain and include both service

and financial metrics.


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First, they measure service in terms of the perfect

orderthe order that arrives when promised,

complete, priced and billed correctly, and

undamaged. The perfect order not only spans the

supply chain, as a progressive performance

measurement should, but also view performance

from the proper perspective, that of the

customer.

Second, excellent supply chain managers

determine their true profitability of service by

identifying the actual costs and revenues of the

activities required to serve an account, especially

a key account. For many, this amounts to a

revelation, since traditional cost measures rely on

corporate accounting systems that allocate

overhead evenly across accounts. Such measures

do not differentiate, for example, an account thatrequires a multi-functional account team, small

daily shipments, or special packaging. Traditional

accounting tends to mask the real costs of the

supply chainfocusing on cost type rather than

the cost of activities and ignoring the degree of control anyone has (or lacks) over the cost

drivers.

Deriving maximum benefit from activity-based costing requires sophisticated information

technology, specifically a data warehouse. Because the general ledger organizes data according

to a chart of accounts, it obscures the information needed for activity-based costing. By

maintaining data in discrete units, the warehouse provides ready access to this information.

To facilitate channel-spanning performance measurement, many companies are developing

common report cards. These report cards help keep partners working toward the same goals by

building deep understanding of what each company brings to the partnership and showing how

to leverage their complementary assets and skills to the alliance's greatest advantage. The

willingness to ignore traditional company boundaries in pursuit of such synergies often marks

the first step toward a pay-for-performance environment.

Translating Principles into Practice

Companies that have achieved excellence in supply chain management tend to approach

implementation of the guiding principles with three precepts in mind:

Orchestrate improvement efforts

The complexity of the supply chain can make it difficult to envision the whole, from end to end.

But successful supply chain managers realize the need to invest time and effort up front in

developing this total perspective and using it to inform a blueprint for change that maps

linkages among initiatives and a well-thought-out implementation sequence. This blueprint also

must coordinate the change initiatives with ongoing day-to-day operations and must crosscompany boundaries.


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The blueprint requires rigorous assessment of the entire supply chainfrom supplier

relationships to internal operations to the marketplace, including customers, competitors, and

the industry as a whole. Current practices must be ruthlessly weighed against best practices to

determine the size of the gap to close. Thorough cost/benefit analysis lays the essentialfoundation for prioritizing and sequencing initiatives, establishing capital and people

requirements, and getting a complete financial picture of the company's supply chainbefore,

during, and after implementation.

A critical step in the process is setting explicit outcome targets for revenue growth, asset

utilization, and cost reduction. (See Exhibit 5.) While traditional goals for costs and assets,

especially goals for working capital, remain essential to success, revenue growth targets may

ultimately be even more important. Initiatives intended only to cut costs and improve asset

utilization have limited success structuring sustainable win-win relationships among trading

partners. Emphasizing revenue growth can significantly increase the odds that a supply chain

strategy will create, rather than destroy, value.

Recognize the difficulty of change

Most corporate change programs do a much better job of designing new operating processes

and technology tools than of fostering appropriate attitudes and behaviors in the people who

are essential to making the change program work. People resist change, especially in companies

with a history of change-of-the-month programs. People in any organization have troublecoping with the uncertainty of change, especially the real possibility that their skills will not fit

the new environment.

Implementing the seven principles of supply chain management will mean significant change for

most companies. The best prescription for ensuring success and minimizing resistance is

extensive, visible participation and communication by senior executives. This means

championing the cause and removing the managerial obstacles that typically present the

greatest barriers to success, while linking change with overall business strategy.

Many progressive companies have realized that the traditionally fragmented responsibility formanaging supply chain activities will no longer do. Some have even elevated supply chain

management to a strategic position and established a senior executive position such as vice

president-supply chain (or the equivalent) reporting directly to the COO or CEO. This role

ignores traditional product, functional, and geographic boundaries that can interfere with

delivering to customers what they want, when and where they want it.


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5. Explain what is meant by bullwhip effect and how it could be prevented?

The bullwhip effect is the magnification of demand fluctuations, not the magnification of

demand. The bullwhip effect is evident in a supply chain when demand increases and decreases. The

effect is that these increases and decreases are exaggerated up the supply chain.

The essence of the bullwhip effect is that orders to suppliers tend to have larger variance than

sales to the buyer. The more chains in the supply chain the more complex this issue becomes. This

distortion of demand is amplified the farther demand is passed up the supply chain.

Proctor & Gamblecoined the term bullwhip effect by studying the demand fluctuations for

Pampers (disposable diapers). This is a classic example of a product with very little consumer demand

fluctuation. P&G observed that distributor orders to the factory varied far more than the preceding

retail demand. P & G orders to their material suppliers fluctuated even more.

Babies use diapers at a very predictable rate, and retail sales resemble this fact. Information is

readily available concerning the number of babies in all stages of diaper wearing. Even so P&G

observed that this product with uniform demand created a wave of changes up the supply chain due to

very minor changes in demand.

Example of the Bullwhip Effect


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The graphical representations above show the bullwhip effect between two supply chain

partners. It can be seen that the Distributor orders to the factory experience demand fluctuate far

more drastically than the retail demand. Over time as the Distributor builds inventory and fulfills

orders, it communicates very different demand levels to the upstream factory by the order amounts it

requests. This becomes more complicated the farther up the supply chain we go. Some of the reasons

that the bullwhip effect occurs include the following:

Over reacting to the backlog orders. Little or no communication between supply chain partners. Delay times between order processing, demand, and receipt of products. Order batching: method for reduction of ordering costs due to price discounts for bulk

ordering, transportation expense decrease by ordering full-truck loads, etc.

Limitations on order size (i.e. retailers can order products in cases of 10 from wholesaler;however, distributors receive orders in cases of 1,000)

Inaccurate demand forecasts. Free return policies.

How do costs increase?

Excess raw materials costs arise from the last minute purchasing decisions made to

accommodate an unplanned increase in demand. The result of these panicked buying periods is

an inventory of unused supplies. As these unused supplies grow, so do the associated costs.

Excess capacity during periods of low volume of demand is followed by inefficient

utilization and overtime expenses incurred during high demand periods. This is made worse by

the excess warehousing expenses that are incurred because of unused storage space, as well as

increases in shipping costs caused by premium rates paid for last minute orders.


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How to remedy the Bullwhip Effect

When the bullwhip effect is first identified in a supply chain, it is important to identify the

problem areas. The following areas are places in the supply chain that should be considered when

trying to decrease the bullwhip effect. Although many of these areas many seem like proper business

practices, the reality is that they diminish the efficiency of the supply chain. Once changes are made in

these areas, the productivity and timeliness of the supply chain will increase greatly and the bullwhip

effect will be dramatically lessened.

1. Demand Signal Processing Retailers often use realized demand as an indicator of future demand.

Inference and data dependency problems.

2. Rationing Gaming

Used when demand outstrips supply.

Rationing might indicate internal problems that limit meeting supply goals.

3. Order Batching Used because organizations are attempting to obtain benefits from large-volume pricing

discounts and reduced costs of transportation.

Can lead to large inventory volumes and misleading demand figures for upstream suppliers.

4. Price Variations

Used to position suppliers that are involved in market share wars with other suppliers.

Might cut off established relationships in efforts to shop around for a better price.


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6. What do you understand by Line Balancing? What is the importance of order

picking in material handling? Give suitable examples.

Line Balancing

Line and work cell balancing is an effective tool to improve the throughput of assembly lines and work

cells while reducing manpower requirements and costs. Assembly Line Balancing, or simply Line

Balancing (LB), is the problem of assigning operations to workstations along an assembly line, in such a

way that the assignment be optimal in some sense. Ever since Henry Fords introduction of assembly

lines, LB has been an optimization problem of significant industrial importance: the efficiency

difference between an optimal and a sub-optimal assignment can yield economies (or waste) reaching

millions of dollars per year.

LB is a classic Operations Research (OR) optimization problem, having been tackled by OR over several

decades. Many algorithms have been proposed for the problem. Everyone is doing the same amount of work Doing the same amount of work to customer requirement Variation is smoothed No one overburdened No one waiting Everyone working together in a BALANCED fashion


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The classic example is Henry Fords auto chassis Line.

Before the moving assembly line was introduced in 1913, each chassis was assembled by oneworker and required 12.5 hours.

Once the new technology was installed, this time was reduced to 93 minutes.

Order picking can be defined as the activity by which a small number of goods are extracted from awarehousing system, to satisfy a number of independent customer orders. Picking processes have

become an important part of the supply chain process. It is seen as the most labor-intensive and costly

activity for almost every warehouse, where the cost of order picking is estimated to be as much as 55%

of the total warehouse operating expense. As the order picking process involves significant cost and

can affect customer satisfaction levels, there have been increasing numbers of process improvements

proposed to help companies with this supply chain issue.

Production lines have a number of work centers in a particular sequence so that the material that gets

produced has to move further without encountering any bottlenecks. The quantities produced the rate

of production at each center, the number of operations and the total production required are factorstaken into account.

We use the principles of JIT and lean Manufacturing to achieve these. Linear programming, Dynamic

programming and other mathematical models are used to study these problems.


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The importance of order picking in material handling

Order picking is a process by which items or products for which supply is to be made have to be

retrieved from specific storage locations. It is found to take 60% of labor activities in a warehouse.

Since it is critical to the business to meet customers demands accurately, lot of attention is being given

to this aspect of operations. In the manufacturing arena, we desire to move towards small lot sizes,point of use delivery and cycle time reductions. Efficient order picking is necessary for being

competitive. In the supply chain, storage, retrieval, and delivery do not add value to the product, but

are necessary.

Types of equipments that help in bring efficiency to the process:

1) Horizontal Travel These are in the aisle, picker to part systems. The picker, a worker walks orrides a vehicle and pickers the item or product and puts into the vehicle, or conveyor. The

storage system could be pallet racks, shelves or gravity racks.

2) Person Abroad- In this system the picker is on a platform of a vehicle he can move up and alsohorizontally along the aisle.

3) Part to Picker these are mechanized systems here a storage / retrieval device carries the traysor bins to the person picking. More than one picker can also access the system.

4) Special equipment for high throughput and space efficiently special equipments are madewhich are in the form of movable shelves, rotary racks mobile shuttles that travel in lanes.

5) Workplace equipment items can be kept in work benches and be picked up. The carts areused to keep items for being picked up.

Before implementing any of these systems, a detailed study of alternatives, a plan for expansion or

reduction will have to be considered. Some of these factors are:

Material Properties Size, weight and nest ability Carton counts, pallet counts Fragility Value Environment [ temperature, humidity]

System Requirements Volume per product Number of orders to be shipped Response time Supporting processes [labeling, pricing] Growth factors


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Economic factors Investment required Product life Rate of return

Design considerations Total number of products that are to be stored Number of products received per shift Total number of retrieved per shift Labor force Variability of the product Management Information System

MB0028 - Production and Operations Management - Completed

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Transcript of MB0028 - Production and Operations Management - Completed