ADVANCED CONCEPTS OF PROJECT MANAGEMENT ASSIGNMENT 1 CRITICAL CHAINELIYAHU M GOLD RATT PART 1: SUMMARY OF BOOKPART 2: QUESTION /ANSWER SANCHAY NAYAKANUNOY MOHARERGANESH GARIMELLAVARUN BODDU CEQS A 2PART 1: SUMMARY OF BOOKDanielPullman, the chairmen and CEO of Gene modem asks Isaac Levy to form up a thinktank, a team to find solution for the endangering threat to their company. Markwas chosen the group leader. The qualities a leader have is to handleconstructive criticism, sensible enough to deal with impractical criticism andknowledgeable. The problem was that the life span of their product is veryshort and it indicates to shrink more in future. Product development is roughlytwo years in spite of all the efforts.
So the aim was to cut the developmenttime drastically.Rick wasgiven to teach project management in executive MBA program. On his first day hewas asked by a student to define project. By theoretical definition a projectis a set of activities which has a clear start and end, aimed to achieve aparticular objective. A general issue is that most of the time project didn’tfinish on time or within budget. Managers used to hire more people or useexpensive subcontractors to meet the schedule but it definitely causes over budgetor else they reduce the original project specification targeted. So finding theofficial and unofficial reasons of overrun may help.
The exampleFred thrown in class is due to sixteen point two percent budget overrun thepayback time extended from three to five years. Now payback is the time periodon which original investment can be covered up. Three reasons they highlightedfor this are 1) bad weather condition 2) unforeseen difficulties faced bysuppliers 3) longer negotiation.
That was the classic way of blaming externalworld. The unofficial reasons are 1) forced unrealistic schedule to start 2)choosing cheaper vendor even though they are less reliable 3) late training ofplant workers 4) loose supervision 4) too many wasteful meetings. Mark comes upwith a conclusion that lower level people are blamed more internally ratherthan externally. Usually top managers see the overall picture while the lowerlevel managers are known with every actual detail. Uncertainties are the reasonof unrealistic situation.
Cheap vendors are chosen to cut cost without noticingtheir reliability as they are not able to cope up with uncertainties. Oneshould embed safety in time estimate for each and every step of the project.Goingthrough the articles for his research, Rick found a very important issue whichis ‘overrun and overdue’ in projects. He explained Jim about discovered patternin the class that the lower the position of the manager the more criticism hehas to face both inside and outside the company. Another important point Rickfound is that the payback period was extended and almost doubled. This can’t beonly because of budget overrun.
There must be delay in completing the project.As an example Rick mentioned that they chose cheap vendors over reliable ones,which is the prime cost of delay, just to save 5% money on machines which isless than 3% of the total project cost. The mentality of the companies is somuch into saving money that they forgot the main intention is to make money notto save money.Whilediscussing with the students in the class, Rick makes them familiar with PERTand grant charts. Grant charts involves decisions when to start each pathunlike PERT. While critical path is the longest path on which any delay willcause project delay but main discussion was on the other paths whether tochoose early start or late start. Early start involves loosing focus due to toomany activities at a time while late start involves unnecessary risk ofdelaying the project.
Late start are justified from investment point of view topostpone until they are really necessary but it becomes as important ascritical path because it doesn’t have any time slack. Measuring the project isalso important. We should change the way we measure a project. Measurementshould take the manager to the point it needs attention. But in recent times,measurement drives the project leader to another way which is damaging. JohnnyFisher during his presentation on Theory of Constraints (TOM) highlighted histhoughts on three most important breakthrough of TOM as New managementphilosophy, new research method and robust application.
Two most necessaryconditions he comes up with are controlling cost and protecting throughput.Both are necessary. We can’t be satisfied with one without another. He viewsthe company as physical chain. All the departments linked with one another. Improvementof any particular link automatically improves the overall organization that isglobal improvement. We should strengthen the weakest chain.
He mentioned thereason of survival of fewer companies today is their nature of managing cost atthe start of the month and protecting throughput at the end. We can’tcompromise between these two. Throughputs are as important as managing costlike linkages are as important as the links. In order to find the weakest linkthe steps should be i.
Identify the system’s constraintii. Decide how to exploit the system’s constraint iii. Subordinate everything else to above decision iv.
Elevate the system’s constraint Johnny givesexample from his experience that why theory of constraints claims that the mainproblem which is constraint, many of our organizations belief that theassumption of cost world are only valid.As per Rick,almost no any project finishes on time or budget. And if they do, its becausethe original scope has been compromised.
PERT is aprobabilistic approach, used mostly in the project management more than inconstruction projects and is a 3-point approach method, which includesoptimistic time, pessimistic time and most likely time. Mostly it is used forR&D purpose as it gives the accurate time. Inconstruction projects, management necessitates awareness of modern management alongwith knowledge of the design & construction process. Every constructionproject has a definite set of aims & limitations.
Inconstruction projects, project management incorporates a set of purposes whichmay be proficient by executing a series of operations conditional on resourceconstraints. There are probable clashes between the stated objectives relatedto scope, cost, time and quality and the constraints forced on men, materialand monetary resources. These clashes should be resolved at the beginning of aproject by making the required tradeoffs or forming new substitutions. Afterwards,the purposes of project management for construction generally include thefollowing:1.
Descriptionof project objectives & plans including demarcation of scope, budgeting,scheduling, adapting performance necessities, and picking participants ofproject.2. Intensificationof efficient resource utilization – obtaining labor, materials & equipment according to the approved schedule 3. Applicationof numerous operations through appropriate management and control of planning,design, contracting, estimating, and construction.4. Usingeffective communications & mechanisms for resolving conflicts 5. Scope – to guaranteethat all the work required (and only the required work) 6.
Time – toprovide an effective project schedule.7. Cost – to recognizenecessary resources and upholds budget control. PART 2: QUESTION /ANSWERQUESTION: Are any of the reasons for increasing estimates obvious inconstruction sector projects? Explain?ANSWER:Inconstruction sector, increasing estimates is very common.
The concept of safetymargin is used in every sector, even in construction sector. If we considertime estimate, each activity already includes a particular buffer time (safetymargin) in general. Also contingency and management reserves are considered forsafety in order to compensate known delays and unknown delays. These are includedso that even though delays occur due to some other reasons, they cancompensate. In very rare cases, if the project is completed on time, the firmgets incentives for early completion than committed.But inpresent times, due to increased competitiveness in the present market, firmsare trying to reduce the margin to the minimum or even avoiding the margin.This is done so that firms win the bids due to early completion timecommitment. But, as everything doesn’t go as planned, many hurdles occur leadingto going beyond the committed time which results in liquidated damages.
InConstruction, while planning minute activities, the safety margin is includedbut very less. As the level goes up, like in Work Breakdown Structure, thesafety margin increases as the activity is treated as a separate deliverable. Theseestimates are added by considering the following aspects like material leadtimes, the successor and predecessor activities, availability of relatedmanpower and equipment, activities linked to it like MEP etc.
, interdependentactivities etc.In terms ofcost, the estimates of cost are a critical component of entire project,especially in construction. The profits/fate of the project depends on theestimation of cost in initial stages of the project. If there is any error oromission of any component to be considered, the entire project turns into ahectic problem.
So, whileestimating cost, the factor of safety to be considered should to be such thatthe expected profit of project do not be disturbed or the project should notloose competitive advantage during bidding. Whileestimating cost of the project, we need to consider the following:The initialset up required for the project, Indirect costs like office setups, staffaccommodations etc., the availability of materials and equipment nearby to theproject site, man power availability, etc., Climatic conditions of the project,Soil conditions of the project, Political and Economic factors of the projectlocation, projects in order book of the contractor etc. Increasingcost estimates may lead to other firms to gain advantage during bidding. So,any firm should only consider safety appropriately, weather it may be in termsof time or cost.