Chapter 3 – Project Management Review & Discussion Questions 2. What are some reasons project scheduling is not done well? Several problems with project scheduling are discussed at the end of the chapter. The uncertainties inherent in the activities comprising the network of any project make it necessary to update the schedule on a regular basis. Maintaining accurate time and cost estimates is often difficult and frustrating. Managing this evolving process requires a discipline that is not always available. 6. “Project control should always focus on the critical path.” Comment. In many project situations, it is not the activities on the critical path which cause problems, but rather noncritical activities, which, for various reasons, become critical. In the context of PERT, it may turn out that the activities on the critical path have small variances associated with them and can be treated as near certain. At the same time, activities off the critical path may have extremely large variances and, in fact, if not closely monitored, may delay the project. Thus, while project control must keep track of critical path activities, it may be more useful to focus on those activities which are not on the critical path but, for one reason or another, have a high degree of uncertainty associated with them. Along these lines, some authors have suggested that the critical path approach should be replaced by a critical activity approach in which simulation is used to estimate which activities are likely to become sources of project delay. These activities, rather than critical path, would become the focus of managerial control. Additionally, the critical path focuses on the time or schedule aspects of the projects. Certain activities could be "critical" because of cost or quality considerations. 8.What are some of the challenges that personnel face while working on a project team? What are some of the challenges faced by the project manager? Some of the issues faced by personnel are changing timeline pressures, working with people from other organizations or functions, changing requirements, working for multiple bosses and uncertainty about the future once the project is complete. Some of the issues faced by project manager include changing timeline pressures, working with functional managers, resource constraints such as unavailability of personnel or equipment, or financing, managing people from other organizations or functions, managing change requirements from the client, and managing the time-costscope requirements of the project. Chapter 3 – Project Management Problems: 2. a. b. A-B-D-E-H, also shown in the network above as the bold path. c. 15 weeks, 1+4+2+5+3. d. C, 3 weeks; F, 1 week; and G, 1 week. 6. a. A-C-D-F-G b. Activity Normal Time (NT) Crash Time (CT) Normal Cost (NC) Crash Cost (CC) NT-CT Cost/day to expedite A 7 6 $7,000 $8,000 1 $1,000 B 3 2 5,000 7,000 1 2,000 C 4 3 9,000 10,200 1 1,200 D 5 4 3,000 4,500 1 1,500 E 2 1 2,000 3,000 1 1,000 F 4 2 4,000 7,000 2 1,500 G 5 4 5,000 8,000 1 3,000 First, lowest cost activities to crash are A and E at $1,000 per day. E is not on the critical path, therefore select A. Critical path remains the same. Second, lowest cost activity on the critical path is C. Crash activity C. The critical path remains the same. Third, D and F are next lowest cost activities on the critical path. Both have a cost of $1,500 per day. Select D then F or reverse the order (F then D). F can not be reduced by two day because it would cause E to become part of a critical path. Summary of steps to reduce project by four days: Step Activity to crash Cost to crash Days saved 1 A $1,000 1 2 C 1,200 1 3 D (or F) 1,500 1 4 F (or D) 1,500 1 Chapter 4 – Strategic Capacity Management Review & Discussion Questions 5. Management may choose to build up capacity in anticipation of demand or in response to developing demand. Cite the advantages and disadvantages of both approaches. The strategy of building up capacity ahead of demand is a risk-taking stance. Investment is based on projections. This investment involves costs for new facilities, equipment, human resources, and overhead. If the demand materializes, the investment is worthwhile since the firm may capture a large amount of market share. If it does not materialize, the firm must redirect the invested resources. This strategy is most appropriate in high growth areas. If the demand materializes, but the capacity planning strategy is risk averse, i.e., building capacity only as demand develops, then most likely market share will be lost. The growth in demand will encourage new entrants, resulting in more competition. The risk averse strategy may be most appropriate for small firms who cannot afford to invest in unproven prospects. To prevent potential loss of market share, firms may choose to incrementally increase capacity to match the increase in demand. 6. What is capacity balance? Why is it hard to achieve? What methods are used to deal with capacity imbalances? In a perfectly balanced plant, the output of each stage provides the exact input requirement for the subsequent stage. This continues throughout the entire operation. This condition is difficult to achieve because the best operating levels for each stage generally differ. Variability in product demand and the processes may lead to imbalance, in the short run. There are various ways of dealing with capacity imbalances. One is to add capacity to those stages that are the bottlenecks. This can be achieved by temporary measures such as overtime, leasing equipment, or subcontracting. Another approach is to use buffer inventories so that interdependence between two departments can be loosened. A third approach involves duplicating the facilities of one department upon which another is dependent. 7. What are some reasons for a plant to maintain a capacity cushion? How about a negative capacity cushion? A plant may choose to maintain a capacity cushion for a number of reasons. If the demand is highly unstable, maintaining cushion capacity will ensure capacity availability at all times. Also, capacity cushions can be useful if high service quality levels are established. Some organizations choose to use capacity cushions as a competitive weapon to create barriers to entry for competitors. Negative capacity cushions may be maintained when demand is expected to decrease rapidly and capacity investment is high enough to discourage short run capacity acquisitions. Chapter 4 – Strategic Capacity Management Problems: 2. a. Unit 1st ten 2nd ten 3rd ten 4th ten 5th ten Ratio (Table B.1) Cost $2,500.00 1.0000 .7000 .5682 .4900 .4368 $2,500 x .7000 = $1,750.00 $2,500 x .5682 = $1,420.50 $2,500 x .4900 = $1,225.00 $2,500 x .4368 = $1,092.00 b. The price should be between the cost of the first twenty ($2,500 + $1,750 = $4,250), and the cost of the next twenty ($1,420.50 + $1,225.00 = $2,645.50) 5. a. Units 1 to 2 = 640/970 = 65.98% Units 2 to 4 = 380/640 = 59.37% Units 4 to 8 = 207/380 = 54.47% Average learning rate = 59.94% Round this to 60% b. From Table B.2 200 units = 12.090 -10 units = 3.813 8.277 Therefore, time for 190 more units = 970(8.277) = 8,029 hours b. For 1,000th unit from Table B.1: .0062(970) = 6.0 hours 10. Plastic Demand for plastic sprinklers Year 1 Year 2 Year 3 Year 4 97 115 136 141 48.5% 57.5% 68.0% 70.5% Machine requirements .485 .575 .680 .705 Labor requirements 1.94 2.30 2.72 2.82 Percentage of capacity used Bronze Demand for bronze sprinklers Year 1 Year 2 Year 3 Year 4 21 24 29 34 58.3% 66.7% 80.6% 94.4% Machine requirements 1.75 2.00 2.42 2.83 Labor requirements 3.50 4.00 4.84 5.66 Percentage of capacity used 14. For the small facility, NPV = .40 ($12 Million) + .60 ($10 Million) - $6 Million = $4.8 Million Do nothing, NPV = $0 For the large facility NPV = .40($14 Million) + .60($10 Million) - $9 Million = $2.6 Million Therefore, build the small facility.