1. (M) Chapter 12 MANGT 662 (A): Procurement, Logistics and Supply Chain Design Purchasing and Supply Chain Analysis (1/2)

2. Chapter Overview A set of tools and techniques that support effective purchasin g and supply chain management Project management Learning curve analysis Value analysis/Value engineering Quantity discount analysis 2

3. Project Management “Project” is defined as series of tasks that … Requires completion of specific objectives Has defined start and stop dates Consumes resources, particularly time, personnel, and budget Operates with limited resources MANGT653 (Business Project Management) 3

4. Project Examples in Supply Management Developing new products Developing and implementing new management information systems Implementing value analysis recommendations Developing sourcing strategy Initiating supplier performance improvement plans 4

5. Defining Project Success Within allocated time and budget At proper performance or specification level determined by project’s stated goals and objectives At level specified by customer, user, or management With minimal or only mutually agreed- upon changes Without disturbing main work flow of organization 5

6. Six Phases of a Project Concept Project definition Planning Preliminary studies Performance Post- completion 6

7. Step 1. Concept Phase Initiate broad discussion of project Develop broad concept or definition of project Identify broad constraints Create initial budget estimates If project is feasible, move to next phase 7

8. Step 2. Project Definition Phase Develop project description in greater detail How to accomplish work How to organize project Personnel required Tentative timing schedules Tentative budget, personnel, resource requirements 8

9. Step 3. Planning Phase Develop detailed plans that identify … Tasks Timing milestones Budgets and resources Create organization to effectively manage project 9

10. Step 4. Preliminary Studies Phase A final phase before actually executing the project Validate the assumptions made in the project plan through … Literature reviews Field interviews Data collection 10

11. Step 5. Performance Phase Execute the project’s plan Control via periodic monitoring Report work results on continuous basis The longest of the six phases in terms of time and resources consumed 11

12. Step 6. Post-Completion Phase Confirm final project results meet expectations Conduct post-implementation meeting to discuss strengths and weaknesses Reassign personnel Restore equipment and facilities Document project files for future reference 12

13. Project Planning and Control Techniques Gantt Charts Critical Path Method (CPM) Use when there is single known time for each activity with no variance Program Evaluation and Review Technique (PERT) Use where time estimates are variable or uncertain Most likely vs. pessimistic vs. optimistic 13

14. Gantt Charts Visually display tasks and times associated with a project Advantages Relatively inexpensive to develop and use Can convey great deal of information Disadvantages Difficult to use and maintain for complex projects CPM/PERT are popular control techniques for complex projects 14

15. Gantt Chart Example TASK \ WEEK12345678910111213141516171819202122 Define supplier equipment and technology requirements Ready equipment for transfer Transport equipment to supplier Install and test equipment Train supplier personnel Ramp up to full production 15

16. CPM/PERT 16 Graphically display the precedence relationships & sequence of activities Estimate the project’s duration Identify critical activities that cannot be delayed without delaying the project Critical Path Method (CPM) Use when there is single known time for each activity with no variance Program Evaluation and Review Technique (PERT) Applies to projects where time estimates are variable or uncertain

17. Network Diagrams 17 Activity-on-Node (AON): Uses nodes to represent the activity Uses arrows (or arcs) to represent precedence relationships

18. Network Diagram Example for CPM 18 “Cables By Us” is bringing a new product on line to be manufactured in their current facility in existing space. The owners have identified 11 activities and their precedence relationships. Develop an AON for the project.

19. 19 Step 1: Define the project

20. 20 Step 2: Diagram the network

21. 21 Step 3: Add deterministic time estimates and connected paths

22. 22 Step 3 (cont’d): Calculate the project completion times The longest path (ABDEGIJK) limits the project’s duration (project cannot finish in less time than its longest path) ABDEGIJK is the project’s critical path.

23. Definitions Early start (ES) Earliest point in time an activity can begin Late start (LS) Latest point in time an activity can begin without delaying entire project Early finish (EF) Earliest time project can finish given expected activity time “ES + expected activity time” Late finish (LF) Latest time activity can finish without delaying entire project “LS + expected activity time” Slack Maximum amount of leeway in activity that will not delay the project Calculated as “LF – EF” (or “LS – ES”) Activities not on critical path will have slack. 23

24. 24 ES, EF network

25. 25 LS, LF network

26. 26 Calculating slacks

27. Revisiting “Cables By Us” Example for PERT 27 Each activity in PERT has three time estimates: Optimistic (O), Pessimistic (P), and Most likely (M)

28. 28 Using beta probability distribution to calculate expected activity time (ET) durations A typical beta distribution is shown below, note that it has definite end points

29. 29 The expected time for finishing each activity is a weighted average

30. 30 Calculating expected activity times

31. 31 Network diagram with expected activity times

32. 32 Estimated path durations through the network ABDEGIJK is the expected critical path & the project has an ex pected duration of 44.83 weeks.

33. 33 Adding ES and EF to network

34. 34 Adding LS and LF to network

35. 35 Using probabilistic time estimates offers the advantage of predicting the probability of project completion dates. Now we need to calculate the variance for each activity. The variance of the beta probability distribution is: where p: pessimistic activity time estimate o: optimistic activity time estimate Estimating the Probability of Completion Dates

36. 36 Project activity variance

37. 37 Variances of each path through the network

38. 38 When you know: 1) the expected completion time and 2) its variance You can calculate the probability of completing the project in “X” weeks with the following formula: where D T : the specified completion date EF Path : the expected completion time of the path Calculating the Probability of Completing the Project in Less Than a Specified Time

39. 39 Use the z values in Appendix E (available at Canvas “Modules” >> “Lecture Slides and Readings) to determine probabilities. E.g.) Probability for path 1 is: