UNIVERSITY OF GAZIANTEP
FACULTY OF ENGINEERING
DEPARTMENT OF INDUSTRIAL ENGINEERING
New Product Service & Business Development
IE 435
15.11.2013
SUBMITTED TO :
MURAT DURUCU
SUBMITTED BY :
BURÇİN AĞAN / 200961013
MESUT KORKUT / 200961046
SABRİ DÖNMEZ / 200961038
SEDA LEBLEBİCİ / 200961053
Table of Content
1.
What is Project Management? ........................................................................................................ 4
2.
Project Management Today ............................................................................................................ 5
3.
Characteristics of Project ................................................................................................................ 6
4.
Scope of Project............................................................................................................................... 7
5.
Application to new product development ...................................................................................... 7
5.1.
Work Breakdown Structure ..................................................................................................... 9
5.2.
Milestone Checklist ............................................................................................................... 10
5.3.
Gantt Chart ............................................................................................................................ 11
........................................................................................................................................................... 11
5.4.
Critical Path Analysis(CPA), Network Diagram ...................................................................... 11
5.5.
PERT(Program Evaluation and Review Techniques).............................................................. 13
6.
Risk Identification .......................................................................................................................... 14
6.1.
Brainstorming ........................................................................................................................ 14
6.2.
Delphi Technique ................................................................................................................... 14
6.3.
Interviewing........................................................................................................................... 14
6.4.
SWOT Analysis ....................................................................................................................... 15
7.
Risk Register .................................................................................................................................. 15
8.
Qualitative Risk Analysis ................................................................................................................ 15
8.1.
Probability/Impact Matrix ..................................................................................................... 16
8.2.
Top Ten Risk Item Tracking.................................................................................................... 16
8.3.
Expert Judgment.................................................................................................................... 17
9.
Quantitative Risk Analysis ............................................................................................................. 17
9.1.
Decision Trees and Expected Monetary Value (EMV) ........................................................... 17
9.2.
Simulation.............................................................................................................................. 18
9.3.
Sensitivity Analysis ................................................................................................................ 19
10.
General Risk Mitigation Strategies for Technical, Cost, and Schedule Risks ............................. 19
11.
From Risk Management to Enterprise Risk Management ........................................................ 20
12.
COSO-ERM Cube ........................................................................................................................ 20
13.
Risks in New Product Development .......................................................................................... 21
Figure 1 : The Project Lifecycle (phases) ................................................................................................. 4
Figure 2 : Project Management Tools and Techniques ........................................................................... 6
Figure 3: The Triple Constraints .............................................................................................................. 7
Figure 4:Work Breakdown Structure..................................................................................................... 10
Figure 5: Example of Milestone Checklist ............................................................................................. 10
Figure 6 : Gantt Chart Example ............................................................................................................. 11
Figure 7: Critical Path Method (CPM).................................................................................................... 12
Figure 8 : Arrow Diagram Method......................................................................................................... 13
Figure 9: Precedence Diagram Method................................................................................................. 13
Figure 10 . Sample Risk Register ............................................................................................................ 15
Figure 11: Risk Map ............................................................................................................................... 16
Figure 12 : Example of Top Ten Risk Item Tracking ............................................................................... 17
Figure 13: Decision Tree ........................................................................................................................ 18
Figure 14: Sensivity Analysis .................................................................................................................. 19
Figure 15: Types of Risks ....................................................................................................................... 19
1. What is Project Management?
Project management is the application of knowledge, skills, tools, and techniques to project
activities in order to meet or exceed stakeholder needs and expectations.
Figure 1 : The Project Lifecycle (phases)
Example: Project Phases on a Large Multinational Project
A United States construction company won a contract to design and build the first copper
mine in northern Argentina. There was no existing infrastructure for either the mining
industry or large construction projects in this part of South America. During the initiation
phase of the project, the project manager focused on defining and finding a project leadership
team with the knowledge, skills, and experience to manage a large complex project in a
remote area of the globe. The project team set up three offices. One was in Chile, where large
mining construction project infrastructure existed. The other two were in Argentina. One was
in Buenos Aries to establish relationships and Argentinean expertise, and the second was in
Catamarca—the largest town close to the mine site. With offices in place, the project start-up
team began developing procedures for getting work done, acquiring the appropriate permits,
and developing relationships with Chilean and Argentine partners.
During the planning phase, the project team developed an integrated project schedule that
coordinated the activities of the design, procurement, and construction teams. The project
controls team also developed a detailed budget that enabled the project team to track project
expenditures against the expected expenses. The project design team built on the conceptual
design and developed detailed drawings for use by the procurement team. The procurement
team used the drawings to begin ordering equipment and materials for the construction team;
to develop labor projections; to refine the construction schedule; and to set up the construction
site. Although planning is a never-ending process on a project, the planning phase focused on
developing sufficient details to allow various parts of the project team to coordinate their
work and to allow the project management team to make priority decisions.
The execution phase represents the work done to meet the requirements of the scope of work
and fulfill the charter. During the execution phase, the project team accomplished the work
defined in the plan and made adjustments when the project factors changed. Equipment and
materials were delivered to the work site, labor was hired and trained, a construction site was
built, and all the construction activities, from the arrival of the first dozer to the installation of
the final light switch, were accomplished.
The closeout phase included turning over the newly constructed plant to the operations team
of the client. A punch list of a few remaining construction items was developed and those
items completed. The office in Catamarca was closed, the office in Buenos Aries archived all
the project documents, and the Chilean office was already working on the next project. The
accounting books were reconciled and closed, final reports written and distributed, and the
project manager started on a new project.
2. Project Management Today
Today, Modern Project Management has emerged as a premier solution in business
operations. Large and small organizations recognize that a structured approach to planning
and controlling projects is a necessary core competency for success.
International organizations such as the Project Management Institute(PMI) and the
International Project Management Association (IPMA) promote project management by
providing professional development .
Figure 2 : Project Management Tools and Techniques
3. Characteristics of Project
Projects have a purpose: Projects have clearly-defined aims and set out to produce clearlydefined results. Their purpose is to solve a "problem”, and this involves analyzing needs
beforehand. Suggesting one or more solutions, a project aims at lasting social change.
Projects are realistic: Their aims must be achievable, and this means taking account both of
requirements and of the financial and human resources available.
Projects are limited in time and space: They have a beginning and an end and are
implemented in (a) specific place(s) and context.
Projects are complex: Projects call on various planning and implementation skills and involve
various partners and players.
Projects are collective: Projects are the product of collective endeavours. They involve
teamwork and various partners and cater for the needs of others.
Projects are unique: Projects stem from new ideas. They provide a specific response to a need
(problem) in a specific context. They are innovative.
Projects are an adventure: Every project is different and ground-breaking; they always
involve some uncertainty and risk.
Projects can be assessed: Projects are planned and broken down into measurable aims, which
must be open to evaluation.
Projects are made up of stages: Projects have distinct, identifiable stages
4. Scope of Project
Figure 3: The Triple Constraints
In project management, the term scope has two distinct uses- Project Scope and Product
Scope. Scope involves getting information required to start a project, and the features the
product would have that would meet its stakeholders requirements.
Project Scope
The work that needs to be accomplished to deliver a product, service, or result with the
specified features and functions.
Product Scope
The features and functions that characterize a product, service, or result.
Notice that Project Scope is more work-oriented, (the hows,) while Product Scope is more
oriented toward functional requirements. (the whats.) If requirements are not completely
defined and described and if there is no effective change control in a project, scope or
requirement creep may ensue.
5. Application to new product development
Our purpose here is to outline a quick and dirty approach to selecting, organizing, and
scheduling a new product project from scratch. The following process includes many of the
traditional project planning and control steps, simplified and “demystifi ed” for practice use.
Organizing a project from scratch involves five basic steps:
1. Work breakdown structure
2. Milestone checklist
3. Gantt chart schedule
4. Network diagram, Critical Path Analysis
5. PERT (Program Evalution and Review Techniques)
Tablo 1: New Product Development
5.1.
Work Breakdown Structure
Before the process begins, the company defi nes a generic work breakdown structure (WBS).
The generic WBS defi nes the company’s prescribed technical and project process cycle for a
given family or programs of projects. This is the standard for every project life cycle designed
to deliver product and services and includes a set of generic tasks, linkages, and defi nitions,
which represents the company’s learning system based on past performance.
First level: The deliverable. The fi rst step in defi ning the work necessary to produce the
deliverable is to complete a work breakdown structure from the top (the deliverable) down to
the third or fourth level of tasks. We will do this in outline form. The WBS is like an
“organization chart of the work.” At the top is the product or output of the project, and
everything below it builds “up” to the product. The product at the top represents the fi nal
product or service outcome of the project, performing to specifi cation and accepted by the
sponsor, client, and/or user. In our case, it is the building itself. The “building” at the top of
the WBS implies a fi nished product accepted by the user or customer.
Second level: Summary tasks. The second level across the organization chart of the
deliverable includes the fi ve or six basic “chunks” of high-level work that serve as the basic
components of the project, the summary tasks that are integrated at the end of the project to
complete the job. For our building project, these chunks of work might include the
architectural drawing, building supplies, ventilation systems, water, and electrical systems.
(For a software project, these chunks might include hardware platform, software, interfaces,
training program, and fi nancing. For a health management system, they might include the
clinic population, health information system, medical personnel, space, and equipment.)
Third level: Subtasks. The third level includes a breakdown of the summary tasks already
outlined into two or more sub-tasks that would be necessary to complete to produce the
second-level summary task. For our building project, under the summary task “architectural
drawing,” this might include three tasks—get an architect, prepare preliminary blueprint, and
check against standard blueprint template.
Fourth level: Work package. The fourth level is another level of detail at the real tasking
level—the work package. These are the individual tasks assigned to 116 Chapter Three team
members. For instance, breaking down the summary task “get an architect” to the fourth level,
we identify nine work packages: build list of candidate architects, develop criteria for
selection, screen candidates, interview candidates, conduct reference checks, compile
candidate information, distribute candidate information, convene meeting, and conduct
process of selection.
Figure 4:Work Breakdown Structure
5.2.
Milestone Checklist
This is one of the best tools the project manager can use to determine whether he or she is on
track in terms of the project progress.The project manager does not have to use expensive
software to track this. The project manager can use a simple Excel template to do this job.
The milestone checklist should be a live document that should be updated once or twice a
week.
Figure 5: Example of Milestone Checklist
5.3.
Gantt Chart
A time chart devised by Henry Gantt in 1917, an American engineer. A Gantt chart is a
horizontal bar chart used for project scheduling. Each activity or task is depicted as a block
over time, actual performance is recorded in real time and compared to planned deadlines
necessary for achieving completion.
Figure 6 : Gantt Chart Example
Use of Gantt Charts as a Tool





Can be used to plan time scale for a project
Can be used to estimate resources required
Graphical illustration of a schedule of tasks to complete e.g. ideal wall chart for the
office and easy to visualise and interpret at meetings
Helps to plan, coordinate, and track specific tasks for a project
Good for small projects when the number of tasks or activities are small and not
complex e.g. good for simple projects.
5.4.
Critical Path Analysis(CPA), Network Diagram
Gantt charts are a poor time management tools when projects are lengthy and complex. There
often exists in large projects a high interdependency between various tasks e.g. some activities
cannot start, until others have been completed first, therefore many activities are interrelated.
Gantt charts in these circumstances are less desirable because they do not display or indicate
interdependencies. Network (or critical path) analysis can display more logically the
sequence and timing of each activity, they communicate interdependency and a more effective
time management tool for large and complex projects.
Critical Path Method (CPM) is a project management technique that analyzes what activities
have the least amount of scheduling flexibility (i.e., are the most mission-critical) and then
predicts project duratio schedule based on the activities that fall along the “critical path.”
Activities that lie along the critical path cannot be delayed without delaying the finish time for
the entire project.
Figure 7: Critical Path Method (CPM)
Advantages of critical path analysis (CPA)



Identifies interrelationships between different tasks or activities
Resources can be planned and allocated from using it e.g. staff planning
Good communication and planning tool for time management
Disadvantages of critical path analysis (CPA)



Assumes a trade off between time and money but most staff cost could be a fixed not
variable cost
The complexity of the diagram will increase as more activities are included
Key uncertainties often exist when estimating the duration for activities, therefore can
be a poor prediction for elapsed time.
Network Diagram Methods
Arrow Diagram Method (Activity on arc)
Figure 8 : Arrow Diagram Method
Precedence Diagram Method (Activity on node)
Figure 9: Precedence Diagram Method
5.5.
PERT(Program Evaluation and Review Techniques)
The technique of PERT helps give better time estimation for a project, by accounting for the
uncertainty when predicting task durations. As an illustration, the project manager could
estimate the worse, best and most probable duration of time for each activity and then
determine an ‘average’ completion time. This can be undertaken by assigning probabilities to
the three estimates and calculating an ‘expected value’. The average time of each activity
would then be used to configure the elapsed time of the project.
As a conlusion, a project manager cannot execute his/her job without a proper set of tools.
These tools do not have to be renowned software or something, but it can pretty well be
simple and proven techniques to manage project work. Having a solid set of project
management tools always makes project managers' work pleasurable and productive.
6. Risk Identification
Risk identification is the process of understanding what potential events might hurt or
enhance a particular project.
Risk identification tools and techniques include:
 Brainstorming
 The Delphi Technique
 Interviewing
 SWOT analysis
6.1.
Brainstorming
Brainstorming is a technique by which a group attempts to generate ideas or find a solution
for a specific problem by amassing ideas spontaneously and without judgment.
 An experienced facilitator should run the brainstorming session.
 Be careful not to overuse or misuse brainstorming.
 Psychology literature shows that individuals produce a greater number of ideas
working alone than they do through brainstorming in small, face-to-face groups.
 Group effects often inhibit idea generation.
6.2.
Delphi Technique
The Delphi Technique is used to derive a consensus among a panel of experts who make
predictions about future developments.
 Provides independent and anonymous input regarding future events.
 Uses repeated rounds of questioning and written responses and avoids the biasing
effects possible in oral methods, such as brainstorming.
6.3.
Interviewing
Interviewing is a fact-finding technique for collecting information in face-to-face, phone, email, or instant-messaging discussions.
 Interviewing people with similar project experience is an important tool for identifying
potential risks.
6.4.
SWOT Analysis
SWOT analysis (strengths, weaknesses, opportunities, and threats) can also be used during
risk identification.

Helps identify the broad negative and positive risks that apply to a project.
7. Risk Register
The main output of the risk identification process is a list of identified risks and other
information needed to begin creating a risk register.
A risk register is:
 A document that contains the results of various risk management processes and
that is often displayed in a table or spreadsheet format.
 A tool for documenting potential risk events and related information.
 Risk events refer to specific, uncertain events that may occur to the detriment or
enhancement of the project.
Figure 10 . Sample Risk Register
8. Qualitative Risk Analysis
Assess the likelihood and impact of identified risks to determine their magnitude and priority.
Risk quantification tools and techniques include:
 Probability/impact matrixes
 The Top Ten Risk Item Tracking
 Expert judgment
8.1.
Probability/Impact Matrix
A probability/impact matrix or chart lists the relative probability of a risk occurring on one
side of a matrix or axis on a chart and the relative impact of the risk occurring on the other.


List the risks and then label each one as high, medium, or low in terms of its
probability of occurrence and its impact if it did occur.
Can also calculate risk factors: Numbers that represent the overall risk of specific
events based on their probability of occurring and the consequences to the project
if they do occur.
Figure 11: Risk Map
8.2.
Top Ten Risk Item Tracking
Top Ten Risk Item Tracking is a qualitative risk analysis tool that helps to identify risks and
maintain an awareness of risks throughout the life of a project.
 Establish a periodic review of the top ten project risk items.
 List the current ranking, previous ranking, number of times the risk appears on the
list over a period of time, and a summary of progress made in resolving the risk
item.
Figure 12 : Example of Top Ten Risk Item Tracking
8.3.
Expert Judgment
Many organizations rely on the intuitive feelings and past experience of experts to help
identify potential project risks.
 Experts can categorize risks as high, medium, or low with or without more
sophisticated techniques.
 Can also help create and monitor a watch list, a list of risks that are low priority,
but are still identified as potential risks.
9. Quantitative Risk Analysis
Often follows qualitative risk analysis, but both can be done together. Large, complex projects
involving leading edge technologies often require extensive quantitative risk analysis.
Main techniques include:
 Decision tree analysis
 Simulation
 Sensitivity analysis
9.1.Decision Trees and Expected Monetary Value (EMV)
 A decision tree is a diagramming analysis technique used to help select the best
course of action in situations in which future outcomes are uncertain.
 Estimated monetary value (EMV) is the product of a risk event probability and the
risk event’s monetary value.
 You can draw a decision tree to help find the EMV.
Figure 13: Decision Tree
9.2.
Simulation
Simulation uses a representation or model of a system to analyze the expected behavior or
performance of the system.
 Monte Carlo analysis simulates a model’s outcome many times to provide a
statistical distribution of the calculated results.
 To use a Monte Carlo simulation, you must have three estimates (most likely,
pessimistic, and optimistic) plus an estimate of the likelihood of the estimate being
between the most likely and optimistic values.
9.3.
Sensitivity Analysis
Sensitivity analysis is a technique used to show the effects of changing one or more variables
on an outcome.
Figure 14: Sensivity Analysis
10.
General Risk Mitigation Strategies for Technical, Cost, and
Schedule Risks
Figure 15: Types of Risks
11.
From Risk Management to Enterprise Risk Management
12.
COSO-ERM Cube
As shown in the COSO (Committee of Sponsoring Organizations) ERM cube, enterprise risk
management (ERM) is a process to help achieve objectives across the enterprise:
Strategic,operations, reporting, and compliance. Eight interrelated components are identified,
and ERM is applied at all levels of the organization: entity, division, business unit, and
subsidiary.
13.
Risks in New Product Development
This topic describes the development and applicability of a risk reference framework (RRF)
for diagnosing risks in technological breakthrough projects. In contrast to existing risk
identification strategies, the RRF centers on an integral perspective on risk (i.e. business,
technological and organizational) and the assessment of risks in ongoing projects. The
resulting RRF consists of 12 main risk categories and 142 connected critical innovation issues
and has been developed for a globally operating company in the fast moving consumer goods
industry. It was found that to some extent different project members identified the same risks
and that saturation occurred in the number of new risk-issues brought to light. It is concluded
that a formal risk-assessment is worthwhile to enhance the success of breakthrough
innovation projects.
Sources :
1. T-Kit Project Management published by the Council of Europe in cooperation with the
European Union
2. http://bccampus.pressbooks.com/projectmanagement/chapter/chapter-7-the-projectlife-cycle-phases/
3. http://en.wikipedia.org/wiki/Scope_(project_management)
4. A Guide to the Project Management Body of Knowledge 4th Edition, Project
Management Institute Inc., © 2008
5. Risks in New Product Development Developing a Risk Reference Framework
Jimme A. Keizer, Jan-Peter Vos & Johannes I.M. Halman
6. Bruce Barkley - Project Management in New Product
Questions and Answers
Question 1: Give examples to quantitative and qualitative risk management techniques.
Question 2 : Why MS project is more important other project management softwares ?
Question 3: What is the difference between CPM and PERT?
Question 4: Which one of the following is not techniques of risk management?
Answer 1 :
Qualitative techniques:



Probability/impact matrixes
The Top Ten Risk Item Tracking
Expert judgment
Quantitative techniques:



Decision tree analysis
Simulation
Sensitivity analysis
Answer 2 : MS project is working with Windows operating system and Windows operating
system is more common operating system all over the world. For this reason MS project is
very important for managers.
Answer 3: PERT and CPM are very similar in their approach; however one important
distinction is usually made. CPM is only one estimation of duration time( but PERT is
estimated three duration of time (best, worst and most probable duration of time)
Answer 4:
A)
B)
C)
D)
E)
Avoidance
Acceptance
Transfer
Reduction
Divide the risk