Indian Institute of Management Raipur

Operations Management Compendium

Compiled by

Team OPEP
Contents

1. Operations Management ........................................................................................................................ 3

2. Supply Chain Management .................................................................................................................. 20
3. Service Operations ................................................................................................................................ 31
4. Project Management ............................................................................................................................. 40
5. Operations Research ............................................................................................................................. 49

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 1. Operations Management

Operations Management
Operations management (OM) is the set of activities that creates value in the form of goods
and services by transforming inputs into outputs. It refers to the administration of business practices
to create the highest level of efficiency possible within an organization. It is concerned with
converting materials and labor into goods and services as efficiently as possible to maximize the
profit of an organization.

Lead Time
The time taken for placing and receiving an order. In other words, Lead time is the amount
of time that elapses between when a process starts and its completion. Lead time is examined
closely in manufacturing, supply chain management and project management, as companies want
to reduce the amount of time it takes to deliver products to the market
There are 3 types of Lead times:

1. Procurement Lead Time

2. Production Lead Time
3. Delivery Lead Time

Productivity
Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as
labor and capital)
Productivity = (Units produced /Inputs used)

Also note efficiency is necessary but not a sufficient condition for productivity .In fact, both
effectiveness and efficiency are necessary in order to be productive

 Partial Productivity is the ratio of output to one class of input.

 Total factor Productivity is the ratio of net output to sum of associated labor and capital
(factor) inputs. The net output here is sometimes called value-added output.
 Total Productivity is the ratio of total output to the sum of all input factors. This is a
holistic measure which takes into consideration the joint and simultaneous impact of all
the input resources on the output, such as manpower, materials, machines, capital, energy,
etc.

Note:
Production is not equal to Productivity

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  Production is concerned with the activity of producing goods and services.
 Productivity is concerned with the efficiency and effectiveness with which these goods and
services are produced.

Theory of Constraints
The Theory of Constraints is a methodology for identifying the most important limiting
factor (i.e. constraint) that stands in the way of achieving a goal and then systematically improving
that constraint until it is no longer the limiting factor. (Ex: Bottlenecks in manufacturing industry).

How long should

Time Goal it take to
complete
Triple
What should be
constraints Cost Goal the cost
Theory
What is the
Scope Goal project tryng to
accomplish

Performance Measurement
Financial
 Net profit - an absolute measurement in dollars
 Return on investment - a relative measure based on investment
 Cash flow - a survival measurement

Operational
 Throughput – the rate at which money is generated by the system through sales
 Inventory – all the money that the system has invested in purchasing things it intends to
sell
 Operating expenses – all the money that the system spends to turn inventory into
throughput
Time Components of Production Cycle
 Setup time is the time that a part spends waiting for a resource to be set up to work on this
same part.
 Process time is the time that the part is being processed.
 Queue time is the time that a part waits for a resource while the resource is busy with
something else.
 Wait time is the time that a part waits not for a resource but for another part so that they
can be assembled together.

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  Idle time is the unused time. It represents the cycle time less the sum of the setup time,
processing time, queue time, and wait time.

Forecasting
Forecasting is the process of making predictions of the future based on past and present
data and analysis of trends. Businesses utilize forecasting to determine how to allocate their
budgets or plan for anticipated expenses for an upcoming period of time. It is an educated guess,
trying to reduce the error.

Types of Forecasts
 Economic forecasts – Address Business cycle (ex: inflation rate, money supply)
 Technological forecasts – Predict technological change and new product sales
 Demand forecasts – Predict existing product sales
Steps in Forecasting
1. Determine the reason
2. Establish a time horizon (Short term(up to 1 year)– Quantitative and Long term(5 years or
more) – Qualitative)
3. Select a forecasting techniques
4. Gather and analyze data (Source of data is important)
5. Prepare the forecast
6. Monitor the forecast

Forecasting
Techniques

Qualitative Time-Series Causal

Models Methods Methods

Delphi Moving Regression

Methods Average Analysis

Jury of
Exponential Multiple
Executive
Smoothing Regression
Opinion

Sales force Trend

composite Projections

Consumer
Decomposition
Market Survey

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Qualitative Methods
 Delphi Method – an iterative group process where (possibly geographically dispersed)
respondents provide input to decision makers
 Jury of Executive Opinion – collects opinions of a small group of high-level managers,
possibly using statistical models for analysis
 Sales Force Composite – individual salespersons estimate the sales in their region and the
data is compiled at a district or national level
 Consumer Market Survey – input is solicited from customers or potential customers
regarding their purchasing plans

Causal Models
 Causal models use variables or factors that might influence the quantity being forecasted
 The objective is to build a model with the best statistical relationship between the
variable being forecast and the independent variables
 Regression analysis is the most common technique used in causal modeling

Time Series Methods

Time-series models attempt to predict the future based on the past
A time series typically has four components
1. Trend (T) - It is the gradual upward or downward movement of the data over time
2. Seasonality (S) - It is a pattern of demand fluctuations above or below trend line that repeats at
regular intervals
3. Cycles (C) are patterns in annual data that occur every several years
4. Random variations (R) are “blips” in the data caused by chance and unusual situations

Simple Moving Averages

The simple moving average model assumes an average is a good estimator of future behavior.

Ft = (At-1+At-2+At-3+…. +At-n)
n
Ft = Forecast for the coming period
N = Number of periods to be averaged
At-1 = Actual occurrence in the past period for up to “n” periods
Measures of Forecast Accuracy
Forecast Error = Actual Value – Forecast Value
1. Mean Absolute Deviation (MAD)

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 MAD = ∑ |Forecast Error|
n
2. Mean Squared Error, MSE = ∑(error)2
n
Exponential Smoothing
Exponential Smoothing assigns exponentially decreasing weights as the observation get older.
New Forecast = Last Period’s forecast + α (Last period’s actual demand – Last period’s forecast)
α = Smoothing constant (0 < α < 1)
Ft = α At-1 + (1- α) Ft-1
A= Actual demand

Process Design and Layout

Economic layouts will be implemented to meet the following requirements
1. Product Strategy – Product design and volume
2. Process Strategy – process equipment and capacity
3. Human Resource Strategy – quality of work life
4. Location Strategy – building and site constraints
Objectives of layout
 Minimize material and handling costs
 Utilize space and labor efficiently
 Eliminate bottlenecks
 Reduce manufacturing cycle time or customer service time
 Eliminate waste or redundant movement
Different types of layouts
1. Process Layout – machines grouped by process they perform
 In manufacturing engineering, process layout is a design for the floor plan of a
plant which aims to improve efficiency by arranging equipment according to its
function
2. Product Layout – linear arrangement of workstations to produce a specific product
 Product layout refers to a production system where the work stations and
equipment are located along the line of production, as with assembly lines.
3. Fixed Position Layout – used in projects where the product cannot be moved
 In a fixed position layout, personnel, supplies, and equipment are brought to the
site where the product will be assembled, rather than the product being moved
through an assembly line or set of assembly stations

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  Examples: Building construction, Ship and airplane.

Group Technology
Technique for identifying and bringing together related or similar components in a
production process in order to take advantage of their similarities by making use of the inherent
economies of flow production methods

Cellular Layouts
1. Identify families (groups) of parts with similar flow paths (processing requirements)
2. Organize machines into cells based on part families
3. Arrange cells so material handling is minimized
4. Locate large shared machines at point of use
By implementing Group technology and cellular layouts we can observe a reduction in
production lead time, labor, tooling, setup time, order time delivery and paper work.

The disadvantages of using Cellular layouts - expanded training and scheduling of workers
and increased capital investment.

Jobbing
Special products and services completed and undertaken within a company’s own facilities:
the analysis phase of a management consultancy assignment or tool making. Products and services
are unique and typically with low repetition. It involves custom work, such as a one-off product
for a specific customer or a small batch of work in quantities usually less than those of mass-
market products

Batch Production
When the number of products or services grows, the repeat nature of the processing
requirements are better provided by a batch process. The object in question is created stage by
stage over a series of workstations, and different batches of products are made
Example: Used in bakery

Production Line
A production line is a set of sequential operations established in a factory whereby
materials are put through a refining process to produce an end-product that is suitable for onward
consumption; or components are assembled to make a finished article.

Project Management
Project: A project is a complex effort, made up of interrelated tasks, to be completed within a
limited time frame and budget, with a well-defined set of objectives

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Types of Projects
1. Industrial Projects
2. Infrastructure projects
3. Organizational and development projects

Project Scheduling
The main purpose of project scheduling is to put the project activities in a timeframe and also to
ensure feasible implementation and fastest completion.
Work breakdown structure (WBS): A breakdown of the total project task into components.
WBS Terminology
1. Activity: A task or work package performed over a period of time.
2. Relationships/Precedence: Dependencies that exist between activities.
3. Duration: Length of the period of time to complete a task.
4. Early Start: The earliest an activity can start based on project logic.
5. Late Start: The latest an activity can start without delaying a project completion.
6. Early Finish: The earliest an activity can finish based on early start and duration.
7. Late Finish: Latest an activity can finish without delaying a project completion.
8. Float: The amount of time an activity can be delayed without delaying the project finish
date.
9. Total Float: The amount of time that a pathway may be delayed from it's early start
without delaying the project finish date.
10. Critical Path: The longest time period from start to completion of a project; also the
shortest total length of the project

Time Estimates

Deterministic times
 A single time estimate is used for each activity. This is taken from experts who have prior
knowledge and experience of the activity.
Probabilistic times
 Three time estimates (optimistic, most likely and pessimistic) are commonly used for each
activity based on the consensus of the group.

Critical Path Method

Critical Path: The specific set of sequential tasks upon which the project completion date
depends” or “the longest full path” (The longest time period from start to completion of a project;
also the shortest total length of the project).

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The process of determining and optimizing the critical path is known critical path method. Non-
CP tasks can start earlier or later w/o impacting completion date

Slack Analysis
In critical path method (CPM), the difference between the length of a path and the critical
path is known as Slack. If an activity has zero slack, it is on the critical path

Note: Refer numerical

Program Evaluation Review Technique

PERT is a method to analyze the involved tasks in completing a given project, especially
the time needed to complete each task, and to identify the minimum time needed to complete the
total project
Differences between CPM and PERT
PERT CPM
PERT is a project management technique, CPM is a statistical technique of project
used to manage uncertain activities of a management that manages well defined
project activities of a project.
A technique of planning and control of time A method to control cost and time
Focuses on Event Focuses on Activity
Deterministic Model Probabilistic Model
Appropriate for High precision time estimate Appropriate for Reasonable time estimate

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Total Quality Management
TQM is defined as an organization wide effort to develop the systems, tools, techniques, skills and
mindset required to establish a quality assurance system that is responsive to emerging market
needs.

Cause and effect diagram

Histogram
A diagram consisting of rectangles whose area is proportional to the frequency of a variable and
whose width is equal to the class interval

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Pareto chart: A Pareto chart, named after Vilfredo Pareto, is a type of chart that contains both
bars and a line graph, where individual values are represented in descending order by bars, and the
cumulative total is represented by the line

Pareto chart

Defect concentration diagram

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Inventory Planning and Control
Types of Inventory:

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Inventory Costs

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Inventory Control Systems
1. Continuous review system
2. Periodic review system

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Six Sigma Qualtiy Control
Setting up a process control system:
1. Choose the characteristic for process control
2. Choose measurement method
3. Choose appropriate sampling procedure
4. Choose type of control chart
5. Compute control limits
6. Plot the data and analyse it
A control chart is a graphical representation of the process status in terms of UCL, LCL, process
average and the plot of the sample data.

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 2. Supply Chain Management
Supply Chain Management: Definition
"Supply chain management is the integration of key business processes from end-user
through original suppliers that provides products, services, and information that add value for
customers and other stakeholders"
In simple words, supply chain management involves the management of the flow
of goods and services, involves the movement and storage of raw materials, of work-in-
process inventory, and of finished goods from point of origin to point of consumption.

Typical Structure of supply chain

SCM essentially ensures three flows

1. Product Flow/ Service Flow
2. Information Flow
3. Finance Flow

Product Flow is the movement of goods from supplier to customers and customer to manufacturer
in case of any customer returns or service requirements.

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Information Flow covers updating the status of the delivery as well as sharing information
between supplier and manufacturer. It happens on a real time basis to ensure demand is met with
correct supplies.

The finance flow is the result of first two flow that encompasses credit terms, payment schedules
and consignment and the title ownership arrangements.

Supply Chain Network Structure

Downstream

Upstream

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Logistic vs. Supply Chain
Logistic Management deals with planning, implementing and controlling resourceful, to
and fro flow and storage of merchandise and services between the point of manufacture and the
point of utilization in order to congregate customer necessities.

On the other hand, Supply chain management incorporates all the manufacturing
operations, scheduling and inventory control and resourceful management, location planning along
with information technology so as to coordinate purveyors, the company, and customers.

Logistics Supply Chain

Physical Bond/ Connectivity Holistic View
Satisfies market Creates market
Ensures product delivery Ensures demand is met with correct supply
Free flow of product , information and funds Facilitates the flow
Synonymous with flow within and between Leads to Integration
Ensures cost effectiveness Ensures competitiveness

Reverse Logistics
It is the process of moving goods from their typical final destination for the purpose of
capturing value, or proper disposal. Remanufacturing and refurbishing activities also may be
included in the definition of reverse logistics. Growing green concerns and advancement of green
supply chain management concepts and practices make it all the more relevant.

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Responsive vs. Efficient Supply Chain
Responsiveness can be defined as the “ability to react purposefully and within an
appropriate time-scale to customer demand or changes in the marketplace, to bring about or
maintain competitive advantage” (Holweg, 2005, p. 605).

In contrast, a supply chain would be considered efficient if the focus is on cost reduction
and no resources are wasted on non-value added activities (Naylor, Naim and Berry, 1999, p. 108).

Efficient supply chain is suitable for functional products whereas responsive supply chain
is more suitable for innovative products.

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Functional vs. Innovative Products

Fit between product and supply chain

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Bullwhip effect in Supply Chain
What is "Bullwhip Effect”?
The bullwhip effect is a distribution channel phenomenon in which forecasts yield supply
chain inefficiencies. It refers to increasing swings in inventory in response to shifts in customer
demand as you move further up the supply chain. The concept first appeared in Jay
Forrester's Industrial Dynamics (1961) and thus it is also known as the Forrester effect. The
bullwhip effect was named for the way the amplitude of a whip increases down its length. The
further from the originating signal, the greater the distortion of the wave pattern.
Causes of Bullwhip Effect
There are four major reasons for the Bullwhip Effect. They are:
1. The inaccurate forecasts of demand called “demand signal processing”.
2. Rationing of the products by the manufacturer to retailers due to some limitations in
production called the “rationing game”.
3. The ordering policy used by retailers called “order batching”.
4. Discounts and seasonal price variations.
Remedies of Bullwhip Effect
Possible remedies to quantify and reduce bullwhip effect are:

1. Reducing Uncertainty :
Centralizing the demand information can reduce uncertainty to a great extent. This will
make the customer demand and forecasted retailer’s demand visible to all partners of the supply
chain. This reduces forecasting error. Here data needs to be made available to all the links in the
chain.

2. Reducing Variability :
Frequent variation in product prices results in a pseudo increase or decrease in demand
thereby introducing the variation into the system. If a product is offered for a consistent price as
in EDLP (everyday low pricing), the Bullwhip Effect can be reduced to a considerable extent.

3. Lead Time Reduction :

In forecasting, safety stock levels and reorder points are a function of lead-time; reduction
in lead-time reduces the variation. Systems such as cross docking and EDI (Electronic Data
Interchange) can reduce both the ordering lead-time and the information lead time.

4. Strategic Partnering and Buying :

Strategic partnering reduces the lead-time to a great extent. Information sharing in
strategic partnering reduces variation in the system. This can be achieved by the use of a concept
called VMI (Vendor Managed Inventory).

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5. Advanced Information Technology :
Advances in information technology has made the concept of information at your fingertips
possible. E-Commerce eliminates the intermediaries such as the retailer from the system and gives
the point-of-sale demand to all the supply chain partners. Elimination of the intermediaries, called
disintermediation reduces the variation in the system to a large extent.

Logistics, Transportation and Management

Introduction to logistics
Logistics management is the part of supply chain management that plans, implements,
and controls the efficient, effective forward, and reverse flow and storage of goods, services, and
related information between the point of origin and the point of consumption in order to meet
customer's requirements.

Inbound logistics is one of the primary processes of logistics, concentrating on purchasing

and arranging the inbound movement of materials, parts, and/or finished inventory from suppliers
to manufacturing or assembly plants, warehouses, or retail stores.

Outbound logistics is the process related to the storage and movement of the final product
and the related information flows from the end of the production line to the end user.

Distribution Network Design

Distribution refers to the steps taken to move and store a product from the supplier stage
to a customer stage in the supply chain. Distribution is a key driver of the overall profitability of a
firm because it directly impacts both the supply chain cost and the customer experience. Good
distribution can be used to achieve a variety of supply chain objectives ranging from low cost to
high responsiveness. As a result, companies in the same industry often select very different
distribution networks.

Factors Influencing Distribution Network Design

At the highest level, performance of a distribution network should be evaluated along two
dimensions
1. Customer needs that are met
2. Cost of meeting customer needs
Measures that are influenced by the structure of the distribution network are
1. Response time
2. Product variety
3. Product availability
4. Customer experience
5. Order visibility
6. Return ability

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Distribution Models
Direct Shipping Network
 The buyer structures his transportation network so that all shipments come directly from
each supplier to each buyer location.
 The routing of each shipment is specified and the supply chain manager only needs to
decide on the quantity to ship and the mode of transportation to use. (tradeoff between
transportation and inventory costs)
 Used if demand at buyer locations is large enough

Advantage
 Eliminates intermediate warehouses and simple in operation and coordination.
 The transportation time from supplier to buyer location is short because each shipment
goes direct.

Direct shipping with milk run

A milk run is a route on which a truck either delivers product from a single supplier to
multiple retailers or goes from multiple suppliers to a single buyer location.
 A supplier delivers directly to multiple buyer locations on a truck or a truck picks up
deliveries destined for the same buyer location from many suppliers.
 Major decision supply chain manager has to decide on the routing of each milk run.

Advantages
 Eliminates intermediate warehouses.
 Lower transportation cost and increases utilization by consolidating shipments to multiple
locations on a single truck.

All Shipments via Central DC

Suppliers do not send shipments directly to buyer locations. The buyer divides locations
by geographic region and a DC is built for each region. Suppliers send their shipments to the DC
and the DC then forwards appropriate shipments to each buyer location. Dc plays two roles - one
is to store inventory and the other is to serve as a transfer location.
Advantages
 DCs can help reduce supply chain costs when suppliers are located far from the buyer
locations and transportation costs are high.
 Allows a supply chain to achieve economies of scale for inbound transportation to a point
close to the final destination, because each supplier sends a large shipment to the DC that
contains product for all locations the DC serves.

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  Because DCs serve locations nearby, the outbound transportation cost is not very large.
Cross docking at DCs help to reduce inventory and saves handling costs. (Used for
products with large, predictable demands).

Shipping via DC Using Milk Runs

 Can be used from a DC if lot sizes to be delivered to each buyer location are small.
Advantages
 Reduce outbound transportation costs by consolidating small shipments.

Tailored Network
Here transportation uses a combination of cross-docking, milk runs, and TL and LTL
carriers, along with package carriers in some cases.

 Requires significant investment in information infrastructure to facilitate the coordination.

Advantages
 Allows for the selective use of a shipment method to minimize the transportation as well
as inventory costs.

Pros and Cons of Different Transport Networks

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Other Distribution network in practice
Cross Docking
Cross-docking is a practice in logistics of unloading materials from an incoming semi-
trailer truck or railroad car and loading these materials directly into outbound trucks, trailers, or
rail cars, with little or no storage in between.

Advantages

 Streamlines the supply chain, from point of origin to point of sale

 Reduces labor costs through less inventory handling
 Reduces inventory holding costs by reducing storage times and potentially eliminating the
need to retain safety stock
 Products reach the distributor, and consequently the customer, faster
 Reduces or eliminates warehousing costs
 May increase available retail sales space
 Less risk of inventory handling

Disadvantages

 Potential partners may not have the necessary storage capacities

 An adequate transport fleet is needed to operate
 A computerized logistics system is needed
 Additional freight handling can lead to product damage
 Labor costs are also incurred because the moving and shipping of stock happens

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Trends in supply chain
1. http://cerasis.com/2016/01/04/2016-supply-chain-trends/
2. http://www.supplychain247.com/article/10_supply_chain_trends_for_the_next_10_years

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 3. Service Operations
Definition
A service is an activity or series of activities of more or less intangible nature that
normally but not necessarily, take place in interactions between customer and service employees
and/or physical resources or goods and/or systems of the service providers, which are provided
as solutions to customer problems.

Most authorities consider the services to include all economic activities whose output is
not physical product or constriction, is generally consumed at the time it is produced and
provides added value in forms (such as convenience, amusement, timeliness, comfort or health)
that are essentially intangible concerns of the first purchaser.

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Classification by Configuration
 B2C Services
 B2B Services
 Government Services
 Not for profit Services
 Internal Services
 C2C Services

Distinctive Characteristics of Service Operations

 Intangibility
 Perishability
 Heterogeneity
 Simultaneity
 Transferability
 Cultural Specificity

Intangibility: Services that deal with human psychology. No patent protection.

Ex: Décor in a restaurant, Elevator music.

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Perishability: Services that cannot be stored for later use or sale. Need to match supply with
demand.
Ex: Off-Season offers, Discount coupons.
Heterogeneity: Variation between two services or in the same service from day-to-day or
customer-to-customer.
Ex: Life Insurance, Flight Reservations.

Simultaneity: Serviced and produces at the same time. Need for physical presence of the
customer. Interaction creates customer perceptions of quality.
Ex: Franchise Models.
Transferability: Customer expectations are transferable from one service to another. Ex: Token
systems, queues etc. in McDonalds & ICICI.
Cultural Specificity: Culture influences the expectations and behavior of customers as well as
service providers.
Ex: Kirana stores preferred over hypermarkets.

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Service Strategic Vision
Strategic Service Vision/ Service Strategic Vision (SSV) comprises of four basic elements.

Target market
 What are common characteristics of important market segments?
 What dimensions can be used to segment the market, demographic, psychographic?
 What needs does each have?
Service Concept

 What are important elements of the service to be provided sated in terms of results
produces for customers?
 How are these elements supposed to be perceived by the target market segment by the
market in general, by employees, by others?
 How do customers perceive the service concept?

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Operating Strategy:
 How the company should be structured in order to meet the service concept?
 Where would be the most investment of money and effort?
 How will quality and cost be controlled? Measures? Rewards? Incentives?

Service Delivery System

 Dealing with people
 Choice of technology, equipment, layout, procedures
 Capacity planning

Customer Value Equation

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Service Package
A service package is defined as a bundle of goods and services that is provided in some
environment and consists of the following elements.
 Explicit Services
 Implicit Services
 Supporting facilities
 Facilitating Goods
 Information

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Explicit Services: Benefits readily observable by the senses, the essential or intrinsic features.
Examples are quality of meal, attitude of the waiter, on-time departure.

Implicit Services: Psychological benefits or extrinsic features which the consumer may sense only
vaguely. Examples are privacy of loan office, security of a well-lighted parking lot.

Supporting Facility: The physical resources that must be in place before a service can be sold.
Examples are golf course, ski lift, hospital, and airplane.

Facilitating Goods: The material consumed by the buyer or items provided by the consumer.
Examples are food items, legal documents, golf clubs, and medical history.

Information: Operations data or information that is provided by the customer to enable efficient
and customized service. Examples are patient medical records, seats available on a flight, customer
preferences, and location of customer to dispatch a taxi.

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Servicescape
This concept was developed to emphasize the impact of the physical environment in
which a service process takes place. The concept of servicescape can help assess the difference
in customer experience between a fast-food franchise restaurant and a small, family-run
restaurant.

Roles of Service scape

 Important elements used in positioning a service organization.
 Package: ‘wrap’ the service and convey what is ‘inside’
o Conveys expectations
o Influences perceptions

 Facilitator: Facilitates the flow of the service delivery process.

 Socializer: Helps to convey expected roles, behaviors, and relationships
 Facilitates interaction between
o Customers and employees
o Customers and fellow customers
o Employees and fellow employees
 Differentiator: Sets provider apart from competition in the mind of the consumer

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 4. Project Management
Project
“A temporary endeavor undertaken to create a unique product, service or result”
Key Characteristics of Projects:
- A project has boundaries, so its extent is defined.
- A project is a one-time effort, usually requiring finite resources.
- There are distinct start and end dates for projects.
- Technically feasible, Commercially viable, Politically suitable and Socially acceptable
Example: Construction of IIM Raipur Campus in Naya Raipur.

Project Management
“The application of knowledge, skills and techniques to execute projects effectively and
efficiently. It’s a strategic competency for organizations, enabling them to tie project results to
business goals – and thus, better compete in their markets”
Guidelines for managing a project
 Set a clear Goal
 Determine the Objectives
 Establish Checkpoints, Activities, Relationships, and Time estimates
 Create a Schedule
 Develop people individually and as a team
 Reinforce the commitment and excitement of people
 Proper communication among the individuals connected with the project
 Vitalize people by building agreements
 Empower stakeholders

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Triple Constraint of Project Management

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Few Examples

1. During an automotive engineering project, an unexpected budget cut is imposed on your project
after the company posts poorer than expected 4th quarter financial results.
Impact: Scope is cut, quality is reduced, and the schedule is pushed back so that cheaper resources
can be found. The most significant constraint, in this case, is the cost (the money the company is
willing to spend).

2. During a project to create a new mobile phone handset, your customer asks that the launch date
is brought forward two weeks to coincide with a major industry show.

Impact: Costs increase as more people are added to meet the new deadline. Some features of the
product are removed and put into a phase two release to reduce delivery time and meet the new
launch date. The most significant constraint, in this case, is time (project schedule).

3. During a software development project, your customer increases the scope. The client asks that
new features be added to the software after learning that a competitor's product will be in direct
competition with their own. It is important the product includes these new features if it is to
compete successfully.

Impact: The budget and schedule increase as a result of pushing up the final delivery date. More
people are added to minimize disruption to the project schedule, thereby increasing the project's
overall cost. The most significant constraint, in this case, is scope (features of the product).

Project Life Cycle:

Initiation Planning Execution Closure

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Initiation Phase

 Detailed description of the problem or opportunity

 List of the alternative solutions available
 Analysis of the business benefits, costs, risks and issues
 Description of the preferred solution
 Summarized plan for implementation
Planning Phase

 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

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Execution Phase

- Longest phase of the project in terms of duration

- Project manager should monitor and control the activities, resources and expenditure
required to build each deliverable
- Progress is continuously monitored and appropriate adjustments are made and recorded as
variance from the original plan
- Status reports should always emphasize the anticipated end points in terms of cost,
schedule and quality of deliverables
- Quality of deliverables should be reviewed and measured against the acceptance criteria

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Closure

Perform project Review project

closure completion

 Evaluate whether all of the project completion criteria are met

 Identifying any outstanding project activities, risks or issues
 Handing over all project deliverables and documentation to the customer
 Cancelling supplier contracts and releasing project resources to the business
 Communicating the closure of the project to all stakeholders and interested parties

Work Based Structure (WBS), Organization Based Structure (OBS) and

Responsibility Matrix

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Work Based Structure:
 An hierarchical outline (map) that identifies the products and work elements involved in a
project
 Defines the relationship of the final deliverable (the project) to its sub-deliverables, and in
turn, their relationships to work packages
 Best suited for design and build projects that have tangible outcomes rather than process-
oriented projects
 WBS is the basis for project planning, scheduling, budgeting, monitoring and control

Organization based structure:

 Depicts how the firm is organized to discharge its work responsibility for a pro

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 

 Ties organizational units to cost control accounts

Responsibility Matrix

 Obtained by combining both WBS and OBS

 Provides information about the individuals responsible for various activities involved in a
project
Shows critical interfaces between units that may require managerial coordination

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 5. Operations Research
Operations research is a discipline that deals with the application of advanced analytical
methods to help make better decisions

Employing techniques from other mathematical sciences, such as mathematical

modeling, statistical analysis, and mathematical optimization, operations research arrives at
optimal or near-optimal solutions to complex decision-making problems. Because of its emphasis
on human-technology interaction and because of its focus on practical applications, operations
research has overlap with other disciplines, notably industrial engineering and operations
management, and draws on psychology and organization science. Operations research is often
concerned with determining the maximum (of profit, performance, or yield) or minimum (of loss,
risk, or cost) of some real-world objective.

Problems that can be addressed by OR include

 Critical path analysis or project planning: identifying those processes in a complex project
which affect the overall duration of the project
 Floor planning: designing the layout of equipment in a factory or components on a computer
chip to reduce manufacturing time (therefore reducing cost)
 Network optimization: for instance, setup of telecommunications networks to maintain
quality of service during outages
 Allocation problems
 Assignment Problems:
 Assignment problem
 Generalized assignment problem
 Quadratic assignment problem
 Weapon target assignment problem
 Transportation: managing freight transportation and delivery systems (Examples: LTL
shipping, intermodal freight transport, travelling salesman problem)
 Scheduling:
 Personnel staffing
 Manufacturing steps

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  Project tasks
 Network data traffic: these are known as queueing models or queueing systems.
 Sports events and their television coverage
Some of its practical uses are as follows
Applications of management science are abundant such as in airlines, manufacturing
companies, service organizations, military branches, and government. The range of problems and
issues to which management science has contributed insights and solutions is vast. It includes:

 Scheduling airlines, trains, buses etc.

 Assignment (assigning crew to flights, trains or buses; employees to projects)
 Network flows (managing the flow of water from reservoirs)
 Health service (information and supply chain management for health services)
 Game theory (identifying, understanding and developing the strategies adopted by
companies)

Modelling the problem

Models, or idealized representations, are an integral part of everyday life. Common examples
include model airplanes, portraits, globes, and so on. Similarly, models play an important role in
science and business, as illustrated by models of the atom, models of genetic structure,
mathematical equations describing physical laws of motion or chemical reactions, graphs,
organizational charts, and industrial accounting systems. Such models are invaluable for
abstracting the essence of the subject of inquiry, showing interrelationships and facilitating
analysis.
Mathematical models are also idealized representations, but they are expressed in terms of
mathematical symbols and expressions. Such laws of physics as F = ma and E = mc2 are familiar
examples. Similarly, the mathematical model of a business problem is the system of equations and
related mathematical expressions that describe the essence of the problem.
Thus, if there are n related quantifiable decisions to be made, they are represented as
decision variables (say, x1, x2. . . xn) whose respective values are to be determined. The
appropriate measure of performance (e.g., profit) is then expressed as a mathematical function of
these decision variables (for example, P = 3x1 + 2x2 + . . . + 5xn). This function is called the
objective function. Any restrictions on the values that can be assigned to these decision variables
are also expressed mathematically, typically by means of inequalities or equations (for example,
x1 + 3x1x2 + 2x2 _ 10). Such mathematical expressions for the restrictions often are called
constraints.
The constants (namely, the coefficients and right hand sides) in the constraints and the
objective function are called the parameters of the model. The mathematical model might then say

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that the problem is to choose the values of the decision variables so as to maximize the objective
function, subject to the specified constraints.
Some widely used OR models

Assignment problem
The problem instance has a number of agents and a number of tasks. Any agent can be
assigned to perform any task, incurring some cost that may vary depending on the agent-task
assignment. It is required to perform all tasks by assigning exactly one agent to each task and
exactly one task to each agent in such a way that the total cost of the assignment is minimized.
Routing

Routing is the process of selecting best paths in a network. Routing is performed for many
kinds of networks, including the public switched telephone network (circuit switching), electronic
data networks (such as the Internet), and transportation networks. This article is concerned
primarily with routing in electronic data networks using packet switching technology.
Decision analysis
Decision analysis is the discipline comprising the philosophy, theory, methodology,
and professional practice necessary to address important decisions in a formal manner. Decision
analysis includes many procedures, methods, and tools for identifying, clearly representing, and
formally assessing important aspects of a decision, for prescribing a recommended course of action
by applying the maximum expected utility action axiom to a well-formed representation of the
decision, and for translating the formal representation of a decision and its corresponding
recommendation into insight for the decision maker and other stakeholders.
Game Theory
Game theory is "the study of mathematical models of conflict and cooperation between
intelligent rational decision-makers." Game theory is mainly used in economics, political science,
and psychology, as well as logic, computer science, biology and poker. Originally, it
addressed zero-sum games, in which one person's gains result in losses for the other participants.
Today, game theory applies to a wide range of behavioral relations, and is now an umbrella
term for the science of logical decision making in humans, animals, and computers.
Modern game theory began with the idea regarding the existence of mixed-strategy
equilibria in two-person zero-sum games and its proof by John von Neumann.
Queuing theory
Queueing theory is the mathematical study of waiting lines, or queues. In queueing theory
a model is constructed so that queue lengths and waiting time can be predicted. Queueing theory
is generally considered a branch of operations research because the results are often used when
making business decisions about the resources needed to provide a service.

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Scheduling
In operations research Johnson's rule is a method of scheduling jobs in two work centers.
Its primary objective is to find an optimal sequence of jobs to reduce make span (the total amount
of time it takes to complete all jobs). It also reduces the amount of idle time between the two work
centers. The method minimizes the make span in the case of two work centers. Furthermore, the
method finds the shortest make span in the case of three work centers if additional constrains are
met.

The technique requires several preconditions:

 The time for each job must be constant.
 Job times must be mutually exclusive of the job sequence.
 All jobs must go through first work center before going through the second work center.
 There must be no job priorities.

Stochastic Process
A stochastic process is a random process evolving with time. More specifically,
in probability theory, a stochastic process is a time sequence representing the evolution of
some system represented by a variable whose change is subject to a random variation. This is the
probabilistic counterpart to a deterministic process (or deterministic system). Instead of describing
a process which can only evolve in one way (as in the case, for example, of solutions of an ordinary
differential equation), in a stochastic, or random process, there is some indeterminacy: even if the
initial condition (or starting point) is known, there are several (often infinitely many) directions in
which the process may evolve.
In the simple case of discrete time, as opposed to continuous time, a stochastic process is
a sequence of random variables. The random variables corresponding to various times may be
completely different, the only requirement being that these different random quantities all take
values in the same space (the codomain of the function). One approach may be to model these
random variables as random functions of one or several deterministic arguments (in most cases,
the time parameter). Although the random values of a stochastic process at different times may
be independent random variables, in most commonly considered situations they exhibit
complicated statistical dependence.

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