Chapter 3 FARE 3310.docx

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Food Agricultural and Resource Economics
FARE 3310
Getu Hailu

Chapter 3 Operations Management Project Management The Importance of Project Management  Project management involves 3 phases: Planning, scheduling & controlling  Projects that take months or years to complete are usually developed outside of the normal production system  Organizations within the firm may be set up to handle such jobs and are often disbanded once project is complete Project Planning Project Organization: An organization formed to ensure that programs (projects) receive the proper management & attention  Some firms will have one some wont  For companies with several large projects (i.e. construction firm), this is an effective way to assign people and resources needed The project organization works best when… 1. Work can be defined w/ specific goal & deadline 2. Job is somewhat unique 3. Work contains complex interrelated tasks 4. Project is temporary but critical 5. Cut across organizational lines The Project Manager  The manager heading the project coordinates activities w/ other departments and reports directly to top management They are responsible for making sure that…  all necessary activities are finished in proper sequence & on time  The project comes in on budget  Project meets quality goals  People assigned to the project receive the motivation, direction & info needed to do their jobs Ethical Issues Faced in Project Management  How PMs act establishes the code of conduct for the project  Often deal with gifts from contractors, pressure to alter status reports to mask reality of delays, false reports for charges of time & expenses & pressure to compromise quality to meet bonus  Use Project Management Institutes ethical code is a good process to establish standards Work Breakdown Structure Work Breakdown Structure: A hierarchal description of a project into more & more detailed components  Breaks down its components into subcomponents and financially into a set of activities & their related costs  Gross requirements for people supplies & equipment are also estimated in this planning process  Work breakdown structure typically decreases in size from top to bottom e.g Level 1. Project 2. Major tasks in the project 3. Subtasks in major tasks 4. Activities to be completed Project Scheduling  Sequencing & allotting time to all project activities  How much time, people & materials each activity will take at each stage in production are decided Gantt Chart: A popular type of project schedule used to schedule resources and allocate time  Low cost means of helping managers make sure that activities are planned, order of performance is documented, activity times estimated, & overall project time is developed  See page 61 for examples  CPM & PERT, 2 widely used network techniques have the ability to consider precedence relationship & interrelationships between activities & resources which Gantt charts cant.  Scheduling is computerized and ideal for bigger projects Project Controlling  Involves monitoring resources, costs, quality & budgets  Using feedback loop to revise the project plan & having ability to shift resources to where their needed most Many different computerized PERT/CPM programs are available that will report… 1. Detailed cost breakdowns for each tasks 2. Total program labor curves 3. Cost distribution tables 4. Functional costs & hour summaries 5. Raw materials & expenditure forecasts 6. Variance reports 7. Time analysis reports 8. Work status reports Project Management Techniques: PERT & CPM PERT (Project evaluation & review technique): A PM technique that employs 3 time estimates for each activity Critical path method (CPM): A PM technique that uses only 1 time factor per activity The Framework of PERT & CPM PERT & CPM both follow 6 basic steps… 1. Define project & prepare the work breakdowns structure 2. Develop relationship among the activities 3. Draw the network connecting the activities 4. Assign time and/or cost estimates to each activity 5. Compute the longest time path through the network (critical path)  Finding the critical path is major part of controlling the project  The activities on the path identify tasks that will delay the entire project if not completed on time 6. Use network to help plan, schedule, monitor & control the project Network Diagrsts & Approaches  The 1 step in a PERT or CPM network is to divide the entire project into activities in the work-breakdown structure 2 approaches for drawing a project network… (See pg. 64 for examples) 1. Activity on node (AON): A network diagram in which nodes designate activities 2. Activity on arrow (AOA): A network diagram in which arrows designate activities Dummy Activity: An activity having no time that is inserted into a network to maintain the logic of the network  AOA approach sometimes needs these to clarify relationships  Consumes no time or resources Has completion time of 0 and is shown geographically by a dashed line Determining the Project Schedule  Once network has been drawn the project schedule can be determined  Need to plan the starting & ending time for each activity Critical Path Ana
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