Chapter 14Managing Projects1Chapter Objectives

Chapter 14
Managing Projects
1
Chapter Objectives
Be able to:
Explain the difference between routine business activities and
projects.
Describe the five major phases of a project.
Construct a Gantt chart or project network diagram, and use
these tools to manage a project.
Describe some of the key features and advantages of project
management software.
Describe what the Project Management Institute is, and what
type of information can be found in the Institute’s Project
Management Body of Knowledge (PMBOK ®)
Copyright © 2016 Pearson Education, Inc.
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Introduction
Project – A temporary endeavor undertaken to create a unique
product, service, or result.

Projects have clear starting and ending points after which the
people and resources dedicated to the project are reassigned.
Projects are non-routine, can be large or small, and may be
difficult to manage.
Projects typically require significant levels of cross-functional
and interorganizational coordination.
© 2013 Project Management Institute
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The Growing Importance of
Project Management
Project Management – The application of knowledge, skills,
tools, and techniques to project activities to meet project
requirements.
Project Management is gaining importance as a management
discipline due to:
Companies accepting the fact that complex projects can be
managed well.
Professional organizations such as the Project Management
Institute have emerged.
The pace of strategic change has quickened.
The traditional role of middle management has shrunk.
© 2013 Project Management Institute
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Project Phases
Concept Phase
Project Definition Phase
Planning Phase
Performance Phase
Postcompletion Phase
Figure 14.1
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Project Phases
Concept Phase
The first of five phases of a project where project planners
develop a broad definition of what the project is and what its
scope will be.
Outputs – initial budget estimates, estimates of personnel
needed, and required completion dates.
Project Definition Phase
The second of five phases of a project where project planners
identify how to accomplish the work, how to organize for the
project, the key personnel and resources required to support the
project, tentative schedules, and tentative budget requirements.
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Project Phases

Planning Phase
The third of five phases of a project where project planners
prepare detailed plans that identify activities, time and budgets
targets, and the resources needed to complete each task, while
also putting into place the organization that will carry out the
project.
Performance Phase
The fourth of five phases of a project where the organization
actually starts to execute the plan.
Postcompletion Phase
The fifth of five phases of a project where the project manager
or team confirms the final outcome, conducts a
postimplementation meeting to critique the project and
personnel, and reassigns project personnel.
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Project Management Tools
Gantt charts – A graphical tool used to show expected start and
end times for project activities and to track actual progress
against these time targets.
Network Diagrams – A graphical tool that shows the logical
linkages between activities in a project.
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Example 14.1 - Courter Corporation
Courter Corporation makes high-end speakers that are used with
home entertainment systems.
Courter has designed a new speaker, the Gina3000, which is
louder and more reliable than Courter’s earlier model.
Management has outlined 10 activities that must be completed
before the Gina3000 speakers can be released for regular
production.
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14-10
Figure 14.2
Table 14.2
List of Activities
Gantt Chart
14
As time goes on, Courter can use a Gantt chart to check its
progress against the plan.
The shading represents how much of each activity has been
completed.
14-11

Figure 14.3
14
Network Diagrams
Critical-path method – A network-based technique in which
there is a single time estimate for each activity.
Program evaluation and review technique (PERT) – A network-
based technique in which there are multiple time estimates for
each activity.
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Constructing a Network Diagram
Identify each unique activity in a project by a capital letter that
corresponds only to that activity.
Represent each activity in the project by a node that shows the
estimated length. This style of network diagram is know as an
activity on node (AON) diagram.
If an activity has an immediate predecessor(s), show the
relationship by connecting the two activities with an arrow. The
network diagram consists of all the activity nodes and arrows
linking them together.
Determine the earliest start time (ES) and earliest finish time
(EF) for each activity by performing a forward pass.
Determine the latest finish time (LF) and latest starting time
(LS) for each activity by doing a backward pass.
Determine the critical activities and path(s) in the project.

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Constructing a Network Diagram
Critical activity – Project activity for which the earliest start
time and latest start time are equal. A critical activity cannot be
delayed without lengthening the overall project duration.
Network path – A logically linked sequence of activities in a
network diagram.
Critical path – A network path that has the longest, or is tied for
the longest, linked sequence of activities.
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Forward Pass
The determination of the earliest start and finish times for each
project activity.
Earliest Start Time (ES)
The earliest an activity can be started, as determined by the
earliest finish time for all immediate predecessors
ES = Latest EF for all immediate predecessors
Earliest Finish Time (EF)
The earliest an activity can be finished, calculated by adding the
activity’s duration to its earliest start time.
EF = ES + activity’s duration

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Backward Pass
The determination of the latest finish and start times for each
project activity.
Latest Finish Time (LF)
The latest an activity can be finished and still finish the project
on time, as determined by the latest start time for all immediate
successors.
LF = Earliest LS for all immediate successors
Latest Start Time (LS)
The latest an activity can be started and still finish the project
on time, calculated by subtracting the activity’s duration from
its latest finish time.
LS = LF – activity’s duration
Slack = amount of allowable delay in an activity
Slack = LS - ES
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Courter Corporation decides to follow the six steps to create a
network diagram of the Gina3000 project.
Step 1: Identify each unique activity in a project by a capital
letter that corresponds only to that activity
See Table 14.2

Step 2: Represent each activity in the project by a node that
shows the estimated length
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network diagram.
Step 3: If an activity has an immediate predecessor, show that
relationship by connecting the two activities with an arrow
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Figure 14.4
14
network diagram.
Step 4: Determine the earliest start time (ES) and earliest finish
time (EF) for each activity.
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Table 14.3
14

network diagram.
Step 5: Determine the latest finish time (LF) and latest start
time (LS) for each activity.
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Table 14.4
14
network diagram.
Step 6: Determine the critical activities and path(s) in the
project.
14-21
ACFGJ = 13 weeks
ACDEGJ = 17 weeks
ACDEHJ = 17 weeks
ACDEIJ = 17 weeks
BCFGJ = 14 weeks
BCDEGJ = 18 weeks
BCDEHJ = 18 weeks
BCDEIJ = 18 weeks
The activities in these critical paths have no slack.
The project should be completed in 18 weeks.
14

Crashing a Project – Shortening the overall duration of a project
by reducing the time it takes to perform certain activities.
List all network paths and their current lengths and mark all
activities that can be crashed.
Focus on the critical path or paths. Working one period at a
time, choose the activity or activities that will shorten all
critical paths at the least cost. The one rule is this: Never crash
an activity that is not on a critical path, regardless of the cost.
Doing so will not shorten the project; it will only add costs.
Recalculate the lengths of all paths and repeat step 2 until the
target project completion time is reached or until all options
have been exhausted.
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Use the following data to develop a schedule to complete the
project within 23 weeks:
Table 14.5
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Network Diagram:
Figure 14.6

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Calculate ES, EF, LS, and LF for each activity
Table 14.6
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Step 1 : List all network paths and their current lengths.
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Table 14.7
14
Step 2: Focus on the critical path or paths. Working one period
at a time, choose the activity(s) that will shorten all critical
paths at the least cost.
Activity B - shorten 1 week at a cost of $500
14-27

Table 14.8
14
Step 3: Recalculate the lengths of all paths and repeat step 2
until the target project completion time is reached or until all
options have been exhausted.
Activity G - shorten 1 week at a cost of $700
14-28
Table 14.9
14
Project Management Software
Microsoft Project
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Figure 14.7
Entering the Gina300 Project into Microsoft Project
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Microsoft Project
14-30
Figure 14.8
Gantt Chart for the Gina3000 Project
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30
Microsoft Project
14-31
Figure 14.9
Computer-Generated Network Diagram for the Gina3000 Project
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31
PMI and the Project Management
Body of Knowledge (PMBOK®)
PMI (Project Management Institute)

Sponsors education and certification
Sponsors conferences, research, special interest groups
Publishes Guide to the Project Management Body of Knowledge
(PMBOK®)
PMBOK®
Part I: Various business processes that organizations follow in
carrying out projects.
Part II: Nine knowledge areas applicable to nearly all projects.
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Managing Projects Case Study
Viva Roma!
14-33
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All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted, in any
form or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior written permission of
the publisher.
Printed in the United States of America.
14-34

34
Chapter 15
Developing Products and Services
1
Chapter Objectives
Be able to:
Describe the six dimensions of product design that are of
particular interest to operations and supply chain managers.
Describe the five phases of product and service development
and explain the difference between sequential development and
concurrent engineering.
Discuss the different roles played by areas such as marketing,
engineering and suppliers during the development process.
Describe some of the most common approaches to improving
product and service designs, including the Define-Measure-
Analyze-Design-Verify (DMADV) process, quality function
deployment (QFD), design for manufacturability (DFM), and
target costing.
15-2
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Introduction
Product Design – The characteristics or features of a product or
service that determine its ability to meet the needs of the user.
Product Development Process– The overall process of strategy,
organization, concept generation, product and marketing plan
creation and evaluation, and commercialization of a new
product.
© Product Development and Management Association
15-3
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Introduction
Four Reasons for Developing New Products and Services
New products or services can give firms a competitive
advantage in the marketplace.
New products or services provide benefits to the firm.
Companies develop new products or services to exploit existing
capabilities.
Companies can use new product development to block out
competitors.
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Operations and Supply Chain
Perspectives on Design

Repeatability
The design of products to be less sensitive to variations,
including manufacturing variation and misuse, increasing the
probability that they will perform as intended.
Testability
The ease with which critical components or functions can be
tested during production.
Serviceability
The ease with which parts can be replaced, serviced, or
evaluated.
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Production Volumes
Increased volumes due to developing a new product or service
can be handled by expanding a firm’s own operations by
building new facilities, hiring additional workers, buying new
equipment, or joint planning with key suppliers.
Product Costs
Obvious costs – Costs that are the easiest to see and manage.
Hidden costs – Costs that are not easy to track but can have a
major impact.
The number of parts in a product
Engineering changes
Transportation costs

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Match with Existing Capabilities
A new product or service that allows a manufacturer to use
existing parts and manufacturing facilities is usually easier to
support than one that requires new ones.
Service that exploit existing capabilities are especially
attractive.
Companies should consider such factors as production volumes
and existing capabilities when designing new products or
services.
15-7
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7
The Development Process
Table 15.1
Phases of Product and Service Development
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Concept development phase – The first phase of a product

development effort where a company identifies ideas for new or
revised products and services.
Planning phase – The second phase of a product development
effort company where a company begins to address the
feasibility of a product or service.
Design and development phase – The third phase of a product
development effort where the company starts to invest heavily
in the development effort and builds and evaluates prototypes.
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Commercial preparation phase – The fourth phase of a product
development effort where firms start to invest heavily in the
operations and supply chain resources needed to support the
new product or service.
Launch phase – The final phase of a product development
effort. For products, this means “filling up” the supply chain
with products. For services, it can mean making the services
broadly available to the target marketplace.
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Sequential development – A process in which a product or
service idea must clear specific hurdles before it can go on to
the next development phase.

Concurrent engineering – An alternative to sequential
development in which activities in different development stages
are allowed to overlap with one another, shortening the total
development time.
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Figure 15.1
Concurrent Engineering
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Organizational Roles in
Product and Service Development
Engineering – Provide the expertise.
Marketing – Understand the marketplace.
Accounting – Play the role of “scorekeeper.”
Finance – Judge the financial impact and determine how to
acquire the needed capital.
Designers – Handle product design and create “identities” for
companies, environments, and service experiences.
Purchasing – Identify the best suppliers and sign them up early
in the process and act as a consultant for material supply
markets.
Suppliers – Bring opportunities for improvement, reduce
financial risks, help in the development process.

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Approaches to Improving
Product and Service Designs
DMADV (Define – Measure – Analyze – Design – Verify)
Define the project goals and customer deliverables.
Measure and determine customer needs and specifications.
Analyze the product or process options to meet the customer
needs.
Design the product or process.
Verify the new product or process.
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Quality Function Deployment (QFD) – A graphical tool used to
help organizations move from vague notions of what customers
want to specific engineering and operational requirements. Also
called the House of Quality
Left side - Lists customer requirements and their relative
importance to target customers.
Along the top - Lists specific product characteristics.
Main body - Shows how each of the product characteristics does
or does not support the customer requirements.
Roof - Shows synergies between some of the features.

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QFD matrices
First matrix: Customer requirements g Product
characteristics
Second matrix: Product characteristics g Product
specifications
Third matrix: Product specifications g Process
characteristics
Fourth matrix: Process characteristics g Process
specifications
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QFD Matrix for a Smartphone
Figure 15.2
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Using QFD Matrices to move from Customer Requirements to
Process Specifications
Figure 15.3
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Computer-aided design (CAD) system – An information system
that allows engineers to develop, modify, share, and even test
designs in a virtual world.
Computer-aided design/computer-aided manufacturing system
(CAD/CAM) – An extension of CAD where CAD-based designs
are translated into machine instructions, which are then fed
automatically into computer-controlled manufacturing
equipment.
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Design for manufacturability (DFM) – The systematic
consideration of manufacturing issues in the design and
development process, facilitating the fabrication of the
product’s components and their assembly into the overall
product.
Parts standardization
Modular architecture.

Design for maintainability (DFMt) – The systematic
consideration of maintainability issues over the product’s
projected life cycle in the design and development process.
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Design for Six Sigma (DFSS) – An approach to product and
process design which seeks to ensure that the organization is
capable of providing products or services that meet Six Sigma
quality levels.
In general, no more than 3.4 Defects Per Million Opportunities
(DPMO)
Design for the environment (DFE) – An approach to new
product design that addresses environmental, safety, and health
issues over the product’s projected life cycle during the design
and development process.
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Target costing – The process of designing a product to meet a

specific cost objective.
Setting the planned selling price and subtracting the desired
profit as well as marketing and distribution costs, thus leaving
the required target cost (design to cost)
Value analysis – The process that involves examining all
elements of a component, an assembly, an end product, or a
service to make sure it fulfills its intended function at the
lowest total cost.
Value = function/cost
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Typical questions asked by Value Analysis Team
Is the cost of the final product proportionate to its usefulness?
Does the product need all its features or internal parts?
Is there a better production method to produce the item or
product?
Can a lower-cost standard part replace a customized part?
Are we using the proper tooling, considering the quantities
required?
Will another dependable supplier provide material, components,
or subassemblies for less?
Are there equally effective but lower-cost materials available?
Are packaging cost reductions possible?
Is an item properly classified for shipping purposes to receive
the lowest transportation rates?
Are design or quality specifications too tight, given customer
requirements?
If we are making an item now, can we buy it for less (and vice
versa)?

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All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmi tted, in any
form or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior written permission of
the publisher.
Printed in the United States of America.
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