MB0028 - Production and Operations Management - Completed

PRODUCTION
AND
OPERATIONS MANAGEMENT
MB0028
SET – 2
MBA – 2nd SEM
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 2 Roll Number:

Assignment MBA 2nd Semester Subject: MB0028
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 its
purposes 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 center’s 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.

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 inspection
procedures. 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.

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 organization’s 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 the
organization.
8. Lack of effective project team integration between clients, the supplier team and the
supply chain.

1. Lack of clear links between the project and the organization’s key strategic
priorities, including agreed measures of success.
 Do we know how the priority of this project compares and aligns with our other
delivery 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 lead
times, 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 interdependencies
between projects, the benefits, and the criteria against which success will be
judged?
 If the project traverses organizational boundaries, are there clear governance
arrangements to ensure sustainable alignment with the business objectives of all
organizations involved
 Are all proposed commitments and announcements first checked for delivery
implications?
 Are decisions taken early, decisively, and adhered to, in order to facilitate
successful delivery?
 Does the project have the necessary approval to proceed from its nominated
Minister 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 the
business change and business benefits are delivered?
 Does the SRO have a suitable track record of delivery? Where necessary, is this
being optimized through training?

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 stakeholder
requirements?
 Does the business case take account of the views of all stakeholders including
users?
 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 any
conflicting 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 and
responsibilities? 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 the
total 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 help
ensure successful and timely delivery?

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-enabled
projects)?
 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 during
development is avoided?
 Have enough review points been built-in so that the project can be stopped, if
changing 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 or
failing to deliver at all?
6. Evaluation of proposals driven by initial price rather than long-term value

for 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 financial
factors against quality and security of delivery?
 Does the evaluation approach take account of business criticality and
affordability?
 Is the evaluation approach business driven?

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 agrees
that it is achievable?
 Have we asked suppliers to state any assumptions they are making against their
proposals?
 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 making
sourcing decisions on a piecemeal basis?
 Are the processes in place to ensure that all parties have a clear understanding of
their roles and responsibilities, and a shared understanding of desired outcomes,
key terms and deadlines?
 Do we understand the dynamics of industry to determine whether our
acquisition 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 team
and the supply chain.
 Has a market evaluation been undertaken to test market responsiveness to the

requirements being sought?
 Are the procurement routes that allow integration of the project team being
used?
 Is there early supplier involvement to help determine and validate what outputs
and 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 notes
Office of Government Commerce,
Trevelyan House, 26 - 30 Great Peter Street, London SW1P 2BY
Service Desk: 0845 000 4999 E: ServiceDesk@ogc.gsi.gov.uk

Explanatory Notes
1. An acquisition-based project is one which has a significant element dependent on the supply of
goods 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 cost
and 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, fitness
for purpose to meet user
Example of Failed Projects
FBI Virtual Case File

Source: IEEE http://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.

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.

Bharti Airtel & MTN Deal
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 world’s fourth largest telco spanning 24
countries and 200 million subscribers.
Complexity
South African government’s 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 or
losses. 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.

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

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 final
recommended 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 feasibility
study 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.

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 a
checkpoint 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.

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 other
words, 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.

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.

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 plan
is 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

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 by
the 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 project
manager 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.

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 an

external 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. The
most 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 project
documentation 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.

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 and
conformed 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."

4. What are the seven principles of SCM?
 Principle 1: Segment customers based on the service needs of distinct groups and adapt the
supply chain to serve these segments profitably.
 Principle 2: Customize the logistics network to the service requirements and profitability of
customer segments.
 Principle 3: Listen to market signals and align demand planning accordingly across the supply
chain, ensuring consistent forecasts and optimal resource allocation.
 Principle 4: Differentiate product closer to the customer and speed conversion across the
supply chain.
 Principle 5: Manage sources of supply strategically to reduce the total cost of owning materials
and services.
 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.
 Principle 7: Adopt channel-spanning performance measures to gauge collective success in
reaching 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 more
effectively. 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.

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 attitudinal
and demographic data to develop segments that are easier to target.
Value-based segmentation: It’s 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:

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 products—all 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 chain
management.
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 high
inventory 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.

 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 to
convert 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 have
not 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 pie—that's when you get the best
pricing.”
Excellent supply chain management requires

a more enlightened mindset—recognizing,
as a more progressive manufacturer did: “Our supplier's costs are in effect our costs. If we force
our 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 suppliers—soliciting 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.

 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 integrated
systems 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, the

system must be able to handle day-to-
day transactions and electronic
commerce across the supply chain and
thus help align supply and demand by
sharing information on orders and daily
scheduling.
o From a mid-term
perspective, 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.

First, they measure service in terms of the perfect
order—the 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 that
requires a multi-functional account team, small
daily shipments, or special packaging. Traditional
accounting tends to mask the real costs of the
supply chain—focusing 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 cross
company boundaries.
The blueprint requires rigorous assessment of the entire supply chain—from 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 essential
foundation for prioritizing and sequencing initiatives, establishing capital and people
requirements, and getting a complete financial picture of the company's supply chain—before,
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 trouble
coping 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 for
managing 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.

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 & Gamble coined 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

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.

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.

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 Ford’s 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

The classic example is Henry Ford’s auto chassis Line.
 Before the “moving assembly line was introduced in 1913, each chassis was assembled by one
worker 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 a
warehousing 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 factors
taken 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.

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 customer’s 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 or
rides 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 also
horizontally along the aisle.
3) Part to Picker – these are mechanized systems here a storage / retrieval device carries the trays
or 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 made
which 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 are
used 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

 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


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PRODUCTION

MBA – 2nd SEM

Name Mohammed Roohul Ameen

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Absolutely necessary to be close

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1. Incidence of Project Failure

2. Common Reasons for Project Failure

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

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 Have we identified the right stakeholders?

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

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6. Evaluation of proposals driven by initial price rather than long-term value

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 Has a market evaluation been undertaken to test market responsiveness to the

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Example of Failed Projects

FBI Virtual Case File

Implementers: SAIC (Science Applications International Corp)

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Technology Infrastructure prescribed by Legislation

Big bang approach with new rule sets introduced

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Codenamed ‘Project Green’ by Bharti Airtel

Legislative, Corporate laws

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Phases of the project management life cycle:

The project life cycle:

According to Method123® Project

There are four key phases within the

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• A detailed description of the problem or opportunity;

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 Equipment, such as office furniture, computer equipment, stationery and materials;

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

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 Type of resource required, such as labor, equipment and materials;

 Defines the term 'quality' for the project.

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Procurement management: Procurement management is the process of sourcing products from an

Communications management: Communications management is the process by which formal

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 Did it result in the benefits defined in the business case?

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

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 It is distinct from other segments (heterogeneity across segments),

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Customize the logistics network to the service requirements

Exhibit 2 illustrates the difference that

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Excellent supply chain management requires

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o For the short term, the

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Second, excellent supply chain managers

Deriving maximum benefit from activity-based costing requires sophisticated information