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

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MGSM 890MGSM 890Operations ManagementOperations Management

Session 7 - Scheduling & Control of Operations & ProjectsSession 7 - Scheduling & Control of Operations & Projects

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This Evening’s ProgramThis Evening’s Program

• Scheduling & Control – Concepts & TechniquesScheduling & Control – Concepts & Techniques

• Information Systems in Managing OperationsInformation Systems in Managing Operations

• Enterprise Resources Planning (ERP) conceptsEnterprise Resources Planning (ERP) concepts

• Scheduling & Controlling ProjectsScheduling & Controlling Projects

• In-class Activities:In-class Activities:

– Problems 2, 5 on pp 639-640 in Chase et alProblems 2, 5 on pp 639-640 in Chase et al

– Problems 1, 2 & 4 on pp 89-90 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 Case study analysis (“Keep patients waiting? Not in My Office” on pp 643 - 644) Office” on pp 643 - 644)

• Case Study for the week: The Rise & Demise of an Case Study for the week: The Rise & Demise of an Excellent TeamExcellent Team

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What is Planning & Control?What is Planning & Control?

Supply of products &

Services

The organisation’s

resources

Planning & Planning & ControlControl

The activities which The activities which reconcile supply & reconcile supply &

demanddemand

Demand for products &

Services

The organisation’s

customers

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P&C as a Function of the Volume P&C as a Function of the Volume Variety MatrixVariety Matrix

VolumeVolume

VarietVarietyy

Short planning horizonShort planning horizon

Timing decisions importantTiming decisions important

Detailed plansDetailed plans

Long planning horizonsLong planning horizons

Volume decisions importantVolume decisions important

Aggregated plansAggregated plans

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Planning and Control FunctionsPlanning and Control Functions

• LoadingLoading How much to produce?How much to produce?

• SequencingSequencing In what order?In what order?

• SchedulingScheduling When to produce?When to produce?

• ControllingControlling Are we on plan?Are we on plan?

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Loading – Comparing Demand Loading – Comparing Demand with Available Capacitywith Available Capacity

Maximum Time Available

Normal Time Available

Planned Time Available

Planned Running Time

Available Time

Actual Running time

Not worked

Set-ups

Down Time

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LoadingLoading

Finite LoadingFinite Loading

Possible to limit the loadPossible to limit the load eg GPeg GP

Necessary to limit the loadNecessary to limit the load eg aircrafteg aircraft

Infinite LoadingInfinite Loading

Not possible to limit the loadNot possible to limit the load eg hospitaleg hospital

Not necessary to limit the loadNot necessary to limit the load eg queue or eg queue or flexible capacityflexible capacity

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SequencingSequencing

Various sequencing rules can be deployed:Various sequencing rules can be deployed:

• Customer priority;

• Due DateDue Date

• LIFO – last in first outLIFO – last in first out

• FIFO – first in fist outFIFO – first in fist out

• Longest operation time firstLongest operation time first

• Shortest operation time firstShortest operation time first

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SchedulingScheduling

Forward SchedulingForward Scheduling

Start work as soon as job arrivesStart work as soon as job arrives

Advantage of flexibility, labour utilisationAdvantage of flexibility, labour utilisation

High inventory costsHigh inventory costs

Backward SchedulingBackward Scheduling

Start work to finish when job is requiredStart work to finish when job is required

Advantage of lower inventory costsAdvantage of lower inventory costs

Higher riskHigher risk

JIT basedJIT based

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Job Mon 5th

Tue 6th

Wed 7th

Thu 8th

Fri9th

Mon 12th

Tue 13th

Table

Chairs

Units

ProgressSchedule Time now

Gantt ChartsGantt Charts

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ControllingControlling

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

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Managing Enterprise SystemsManaging Enterprise Systems

Customers Suppliers Managers and Stakeholders

Employees

Human resource

management applications

Reporting applications

Sales force and customer service

reps

Central

database

Service applications

Sales and delivery

applications

Back office administration and

workers

Financial applications

Manufacturing applications

Inventory and supply

applications

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What is ERP?What is ERP?

• Enterprise Resources PlanningEnterprise Resources Planning

oror

• Eternal Revenue Provider?Eternal Revenue Provider?

• Exaggerated Requirements Promise?Exaggerated Requirements Promise?

• Extremely Repetitive Pandemonium?Extremely Repetitive Pandemonium?

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Where did ERPs come from? Where did ERPs come from?

• Early IT systems (1960s – 1980s) were primarily stovepipe Early IT systems (1960s – 1980s) were primarily stovepipe (standalone) systems(standalone) systems

• Organisations began to recognise the need for sharing Organisations began to recognise the need for sharing information across the enterpriseinformation across the enterprise

• Organisations began to focus on resources and their costsOrganisations began to focus on resources and their costs

• Organisations had to optimise the utilisation of their scarce Organisations had to optimise the utilisation of their scarce resourcesresources

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Where did ERPs come from Where did ERPs come from (cont.)?(cont.)?

• Integration of information / processes and systems became a Integration of information / processes and systems became a requirementrequirement

• MRP (Material Requirements Planning) systems evolvedMRP (Material Requirements Planning) systems evolved

• Then MRP II (Manufacturing Resources Planning) systems came Then MRP II (Manufacturing Resources Planning) systems came on the sceneon the scene

• But what was needed was something which could manage the But what was needed was something which could manage the business from end-to-end (i.e. as per the Value Chain) business from end-to-end (i.e. as per the Value Chain)

ERP systems were seen as the solutionERP systems were seen as the solution

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What were the Promised Benefits?What were the Promised Benefits?

• Cost reductionCost reduction

• Increased productivityIncreased productivity

• Reduced cycle timesReduced cycle times

• Increased quality & customer serviceIncreased quality & customer service

• Managerial benefitsManagerial benefits

• Organisational benefitsOrganisational benefits

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What is the Reality?What is the Reality?

• The average ERP implementation costs around $US11 The average ERP implementation costs around $US11 million and takes around 23 months to completemillion and takes around 23 months to complete

• Almost two-thirds of organisational management consider Almost two-thirds of organisational management consider that their ERP systems may hurt the organisation that their ERP systems may hurt the organisation

• The average large system is finished overall a year late and The average large system is finished overall a year late and costs almost twice as much as the original estimate.costs almost twice as much as the original estimate.

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What are the Problems?What are the Problems?

• Poor project managementPoor project management

• Lack of commitment by senior managementLack of commitment by senior management

• Poor governance of the implementation (the Lego Box Poor governance of the implementation (the Lego Box effect)effect)

• Focus on processes rather than informationFocus on processes rather than information

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What are the Problems (cont.)?What are the Problems (cont.)?

• Poor, inadequate understanding of the business and its Poor, inadequate understanding of the business and its information requirementsinformation requirements

• Inefficient & ineffective business processesInefficient & ineffective business processes

• ““Not Invented Here” syndromeNot Invented Here” syndrome

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What are the Problems (cont.)?What are the Problems (cont.)?

• Poor fit between the tools, technology and the Poor fit between the tools, technology and the requirementsrequirements

• Lack of appreciation / recognition of the cascade effect in Lack of appreciation / recognition of the cascade effect in ERP systemsERP systems

• Underestimation of the effort required – resources, skills, Underestimation of the effort required – resources, skills, communication, technology, training, post-implementation communication, technology, training, post-implementation support, etc.support, etc.

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One of the biggest problems One of the biggest problems however is . . .however is . . .

• The Lack of Proper Change Management over:The Lack of Proper Change Management over:

–The projectThe project

–The corporate culture The corporate culture

–The people, andThe people, and

–The existing business processesThe existing business processes

And communicating the changes effectivelyAnd communicating the changes effectively

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The Solution The Solution

Seven things Seven things MUSTMUST be done right: be done right:

• PlanningPlanning

• Senior Management CommitmentSenior Management Commitment

• User Involvement & TrainingUser Involvement & Training

• Business AnalysisBusiness Analysis

• Project ManagementProject Management

• Change Management, andChange Management, and

• Constant CommunicationConstant Communication

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The OpportunitiesThe Opportunities

If you get your ERP system right, you can:If you get your ERP system right, you can:• Reduce order-to-shipment times by 50% (Colgate-Palmolive)Reduce order-to-shipment times by 50% (Colgate-Palmolive)

• Increase efficiencies of coal handling by more than 20% (DBCT)Increase efficiencies of coal handling by more than 20% (DBCT)

• Obtain improved timeliness of information, greater accuracy, Obtain improved timeliness of information, greater accuracy, better monitoring, quicker response for information requests and better monitoring, quicker response for information requests and achieve competitive advantage (Philips, Shell, Orica)achieve competitive advantage (Philips, Shell, Orica)

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The Opportunities (cont.)The Opportunities (cont.)

• Improved supply-demand linkages between remote locations and Improved supply-demand linkages between remote locations and local offices (Unilever)local offices (Unilever)

• Improved international operations - multiple tax structures, Improved international operations - multiple tax structures, currencies, accounting practices, etc. (Deutsche Bank)currencies, accounting practices, etc. (Deutsche Bank)

• 42% ROI in 2 years (Houston Independent School District)42% ROI in 2 years (Houston Independent School District)

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In Summary . . .In Summary . . .

• ERP Systems can provide enormous benefits – but at a ERP Systems can provide enormous benefits – but at a costcost

• Done badly, ERP Systems can cost millions (see recent Done badly, ERP Systems can cost millions (see recent press re Crane)press re Crane)

• At worst, the organisation can go belly upAt worst, the organisation can go belly up

• ERP systems don’t just support the business – they ARE ERP systems don’t just support the business – they ARE the businessthe business

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ExercisesExercises

• pp 639-640 Chase et alpp 639-640 Chase et al– Problem 2 – Scheduling Hotel ReceptionistsProblem 2 – Scheduling Hotel Receptionists

– Problem 5 – Scheduling a list of jobsProblem 5 – Scheduling a list of jobs

• pp 89-90 Chase et alpp 89-90 Chase et al– Problem 1 – prepare a CPM diagramProblem 1 – prepare a CPM diagram

– Problem 2 – Scheduling using CPMProblem 2 – Scheduling using CPM

– Problem 4 – CPM for a construction projectProblem 4 – CPM for a construction project

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Case Study – Keep My Patients Case Study – Keep My Patients Waiting? Not in My OfficeWaiting? Not in My Office

1.1. What features of the appointment scheduling system were What features of the appointment scheduling system were crucial in capturing “many grateful patients”?crucial in capturing “many grateful patients”?

2.2. What procedures were followed to keep the appointment What procedures were followed to keep the appointment system flexible enough to accommodate the emergency system flexible enough to accommodate the emergency cases, and yet able to keep up with the other patients’ cases, and yet able to keep up with the other patients’ appointments?appointments?

3.3. How were special cases such as latecomers and no-shows How were special cases such as latecomers and no-shows handled?handled?

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Case Study – The Rise and Case Study – The Rise and Demise of an Excellent TeamDemise of an Excellent Team

• What motivated the team up to the Documentation stage?What motivated the team up to the Documentation stage?

• What happened then?What happened then?

• What forces were acting on the group?What forces were acting on the group?

• What lessons can be learned here?What lessons can be learned here?

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Project Planning and ControlProject Planning and Control

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Volume -Variety MatrixVolume -Variety Matrix

Projects

VolumeVolume

VarietyVariety

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Matrix of Project TypesMatrix of Project Types

ComplexityComplexity

UncertaintyUncertainty

WeddingWedding

Military Military CampaignCampaign

Building an Building an AircraftAircraft

Oil ExplorationOil Exploration

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What is a Project?What is a Project?

• Unique set of objectivesUnique set of objectives

• Definite start point and end pointDefinite start point and end point

• Governed by scope, cost and time goalsGoverned by scope, cost and time goals

• Aim to achieve results and disbandAim to achieve results and disband

• Contract to on-going managementContract to on-going management

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What is Management?What is Management?

• The Purpose of Management is to plan, lead, organise The Purpose of Management is to plan, lead, organise and control (Fayol, 1916)and control (Fayol, 1916)– leadership of a team;leadership of a team;

– determination of team objectives;determination of team objectives;

– communication control of a team with its client or sponsor;communication control of a team with its client or sponsor;

– comparison of achievement against set objectives;comparison of achievement against set objectives;

– authority to change what a team is doing; and;authority to change what a team is doing; and;

– resolution of conflict.resolution of conflict.

• Planning and control are the core of project managementPlanning and control are the core of project management

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Job Design in a Project Job Design in a Project EnvironmentEnvironment

• Project teamProject team

- Individuals from different departments within company- Individuals from different departments within company

• Matrix structureMatrix structure

- Team structure with members from different functional - Team structure with members from different functional areas, depending on skills neededareas, depending on skills needed

• Project managerProject manager

- Leader of project team- Leader of project team

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Objectives in a Project Objectives in a Project EnvironmentEnvironment

TimeTimeCostCost

QualityQuality

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Project Planning ToolsProject Planning Tools

• Gantt ChartsGantt Charts

• Critical Path Method (CPM)Critical Path Method (CPM)

• Program Evaluation and Review Technique (PERT)Program Evaluation and Review Technique (PERT)

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Gantt ChartGantt Chart

• Also known as a bar chartAlso known as a bar chart

• Named after Henry Gantt (World War I shipbuilding)Named after Henry Gantt (World War I shipbuilding)

• Very useful for showing:Very useful for showing:– Amount of time involvedAmount of time involved

– Sequence of activitiesSequence of activities

– Dependencies between activitiesDependencies between activities

• Can also be used for:Can also be used for:– Tracking progress of the projectTracking progress of the project

– Scheduling resources to activitiesScheduling resources to activities

– Identify milestones (major review points) for the projectIdentify milestones (major review points) for the project

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3311 55 77 99MonthMonth

Activity

Design house andobtain financing

Lay foundation

Order and receivematerials

Build house

Select paint

Select carpet

Finish work

Gantt ChartGantt Chart

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20 4 6 8Month

Activity

Design house

Lay foundation

Order and receivematerials

Build house

Select paint

Select carpet

Finish work

Resources Resources requiredrequired

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CPMCPM

• Critical Path Method (CPM)Critical Path Method (CPM)– Du Pont & Remington-Rand (1956)Du Pont & Remington-Rand (1956)

– based on based on deterministicdeterministic task times task times

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Critical PathCritical Path

• A path is a sequence of connected activities A path is a sequence of connected activities running from start to end nodes in networkrunning from start to end nodes in network

• The critical path is the path with the longest The critical path is the path with the longest duration in the networkduration in the network

• A project cannot be completed in a shorter time A project cannot be completed in a shorter time than the time of the critical paththan the time of the critical path

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Activities OrganisedActivities OrganisedIn a ProjectIn a Project

•Activity on ArrowActivity on Arrow

•Activity on NodeActivity on NodeActivity 1 Activity 2

Activity 1Activity 1

Node 1Node 1 Node 2Node 2

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Project PlanningProject PlanningActivities in SeriesActivities in Series

1 32Construct forms Pour concrete

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Project PlanningProject PlanningActivities in ParallelActivities in Parallel

1 32Construct formsConstruct forms Pour concretePour concrete

4Build wallsBuild walls

Dummy activityDummy activity

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Project Plan For A HouseProject Plan For A House

1 2 4 6 7

3

5

32

0

1

61

1

1

Lay foundationLay foundation

Design house Design house and obtain and obtain financingfinancing

Order and Order and receive receive materialsmaterials

DummyDummy

Finish Finish workwork

Select Select carpetcarpet

Select Select paintpaint

Build Build househouse

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PERTPERT

Project Evaluation & Review Technique (PERT)Project Evaluation & Review Technique (PERT)

- First used by US Navy- First used by US Navy- Booz, Allen & Hamilton- Booz, Allen & Hamilton- Task time estimates are not deterministic, - Task time estimates are not deterministic, but have some but have some probability distributionprobability distribution

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PERTPERT

(1,3,4)(1,3,4) (3,4,6)(3,4,6)

(optimistic time, most likely time, pessimistic time)(optimistic time, most likely time, pessimistic time)

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Mean time = t (opt) +4 t (likely) + t (pess)Mean time = t (opt) +4 t (likely) + t (pess)

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Variance = ( t(pess) - t(opt) ) Variance = ( t(pess) - t(opt) )

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Project Mean = Sum of Activity MeansProject Mean = Sum of Activity Means

Project Variance = Sum of Activity VariancesProject Variance = Sum of Activity Variances

( Measure of Riskiness)( Measure of Riskiness)

PERTPERT

22

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PERT ExamplePERT Example

11

22

33

6644

55

DummyDummy

System System TestingTesting

RecruitingRecruiting

System System developmentdevelopment

Equipment Equipment installationinstallation

Equipment testing Equipment testing and modificationand modification

Off-lineOff-line

TrainingTraining

On-job On-job trainingtraining

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PERTPERT

1.1. Nominate the Critical Path for this project?Nominate the Critical Path for this project?

2.2. What is the mean duration of the Critical Path?What is the mean duration of the Critical Path?

3.3. What is the variance of the Critical Path duration?What is the variance of the Critical Path duration?

4.4. Could there be a better path than the Critical Path?Could there be a better path than the Critical Path?

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PERTPERT

Optimistic Likely Pessimistic Mean Var

InstallationInstallation 11 2 2 6 6 2.52.5 .69.69

RecruitingRecruiting 1 4 51 4 5 3.73.7 .44.44

System developmentSystem development 1 2 41 2 4 2.22.2 .25.25

Equip. testingEquip. testing 22 3 3 8 8 3.73.7 1.01.0

Off-line trainingOff-line training 4 5 84 5 8 5.35.3 .44.44

On-job training On-job training 2 5 72 5 7 4.84.8 .69.69

System testingSystem testing 2 4 82 4 8 4.34.3 1.01.0

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PERT ExamplePERT Example

11

22

33

6644

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DummyDummy

System System TestingTesting

4.3, 1.04.3, 1.0

RecruitingRecruiting

3.7, .443.7, .44

System developmentSystem development

2.2, .252.2, .25

Equipment Equipment installationinstallation

2.5, .692.5, .69

Equipment testing Equipment testing and modification and modification 3.7, 1.03.7, 1.0

Off-lineOff-line

TrainingTraining

5.3, .445.3, .44

On-job On-job trainingtraining

4.8, .694.8, .69

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Which Is the Critical Path?Which Is the Critical Path?

TimeTime

ProbabilityProbability

Path1Path1

1-2-4-5-61-2-4-5-6

Path 2Path 2

1-3-4-5-61-3-4-5-6

Mean=11.0Mean=11.0

Var=2.38Var=2.38Mean=13.8Mean=13.8

Var=1.57Var=1.57

8.628.62 13.3813.3812.2312.23 15.3715.37

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Project Management . . .Project Management . . .

• Is more than just the numbersIs more than just the numbers

• Is not the same as Managing the ProjectIs not the same as Managing the Project

• Don’t forget the human factorDon’t forget the human factor

• The success of a project is (usually) inversely proportional The success of a project is (usually) inversely proportional to its size and timeframe to its size and timeframe

• Need exit champions just as much as they need project Need exit champions just as much as they need project championschampions

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Project Management – Project Management – The Problems & PitfallsThe Problems & Pitfalls

• Focus on quantitative aspectsFocus on quantitative aspects

• Project Reification – blind faithProject Reification – blind faith

• Failure to adequately carry out critical project Failure to adequately carry out critical project reviewsreviews

• Throw more resources at the problemThrow more resources at the problem

• What was the objective again?What was the objective again?

Royer, Isabelle (2003), “Why Bad Projects Are so Hard to Kill”, Royer, Isabelle (2003), “Why Bad Projects Are so Hard to Kill”, Harvard Harvard Business ReviewBusiness Review, 81(2), pp48-56, 81(2), pp48-56

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Good Project Management must Good Project Management must include & appreciate the include & appreciate the

importance of:importance of:

• Business ImpactBusiness Impact

• Risk ManagementRisk Management

• Issue Management Issue Management

• Documentation ManagementDocumentation Management

• Change ManagementChange Management

• Resource ManagementResource Management

• Communications ManagementCommunications Management

• Scope ManagementScope Management

Matta, Nadim F & Ashkenas, Ronald N, (2003), “Why Good Projects Fail Anyway”, Matta, Nadim F & Ashkenas, Ronald N, (2003), “Why Good Projects Fail Anyway”, Harvard Business ReviewHarvard Business Review, 81(9), pp109-114, 81(9), pp109-114