1. Operations Management
PBSB 813 Contact 1
Johan Jordaan
jordaan.johan@nwu.ac.za

2. Operations &
productivity (1)
Topics covered: Contact 1
Global
envi-
ronment &
strategy (2)
Managing
projects (3)
Forecasting
demand (4)
Product
design (5)
Quality
management
(6)
Process
design (7)
Location
decisions
(8)
Layout
decisions(9)
Job design &
work mea-
surement(10)
Supply chain
management
(11)
Inventory
management
(12)
Scheduling
(13 & 15)
MRP & ERP
(14)
JIT & Lean
operations
(16)
Maintenance
& reliability
(17)
Study school
Contact 1
Contact 2
Contact 3
Contact 4
Contact 5
Contact 6
Contact 7

3. Outcomes for today's contact
• Evaluate real project performance scientifically
• Demonstrate a thorough understanding of the
concepts by applying project management theory
to real-life organisations.
• Apply and integrate different project
management techniques to plan your group
assignment.
• Understand different forecasting approaches
• Demonstrate your understanding by applying
different forecasting methods in real-life
organisations

4. Chapter 3
Project management

6. What is a project?
• What do the following have in common?
– Development of MS Windows 8 or Apple IOS 8.1
– Introduction of a new Mathematics syllabus in all
the schools in South Africa
– Building a soccer stadium
– Designing and introducing a new cosmetics range
– Arranging a fun run to raise funds for a church
– Organising a birthday party for your child

7. Common elements
• One major output
• Series of related tasks
• Limited resources (money, skills, etc.)
• Limited time horizon
• Require good planning, scheduling and control
• Labour intensive (?)
• Require a firm hand and good organising skills
You could come up with many more.

8.  Planning
 Objectives
 Resources
 Work break-down
schedule
 Organization
 Scheduling
 Project activities
 Start & end times
 Network
 Controlling
 Monitor, compare, revise, action
Project Management Activities

9. Types of project
structures
Pure project
(Building road)
Functional
project (R&D)
Matrix project
(Project team
across org)
President
R&D Engineering Production
Proj
A
Proj
B
Proj
C
Proj
D
Proj
E
Proj
F
Proj
G
Proj
H
Proj
I
+
• Boss has authority
• One boss only
• Good communication
• Commitment
_
• Duplicate resources
• Ignore org goals
• Little transfer of skills
• After project: What now?
+
• Members: Several projects
• Expertise stay in function
• Home after project
• Concentration of knowledge
President
R&D Engineering Production Marketing
Manager
Project A
Manager
Project B
Manager
Project C
_
• Focus only on functions
• Low motivation
• Focus on project, not client
+
• Communication between functions
• Clear responsibilities
• Little duplication of resources
• Home for team members
• Focus on greater organisation
_
• Too many bosses
• Hardest shouter gets
resources
• Chance for sub-optimisation

10. • Work Breakdown Structure (WBS)
• Project control charts
– PERT
– Gantt
• Critical path scheduling
Project management tools

11. Work Breakdown Structure
Level
1. Project
2. Major tasks in the project
3. Subtasks in the major tasks
4. Activities (or work packages)
to be completed

12. Work Breakdown Structure
Figure 3.3
Level ID
Level Number Activity
1 1.0 Develop/launch Windows 8
2 1.1 Develop of Graphical user interfaces
2 1.2 Ensure compatibility with earlier
Windows versions
3 1.21 Compatibility with Windows ME
3 1.22 Compatibility with Windows XP
3 1.23 Compatibility with Windows 2000
4 1.231 Ensure ability to import files

13. A Simple Gantt Chart
Time
J F M A M J J A S
Design
Prototype
Test
Revise
Production

14. Critical path method (CPM)
• Types of critical path methods
– CPM with single time estimation
– CPM with three activity estimates
– Time cost models

15. You are planning to build a garage
Develop a CPM diagram and determine the duration of the critical
path and slack on all activities.
Activity Name Predecessor Time (days)
1 Draw plans and get approved A None 60
2 Buy material B A 2
3 Dig and build foundations C B 4
4 Build walls and floor D C 5
5 Plaster E D 3
6 Have trusses made F A 8
7 Erect roof and ceiling G E,F 5
8 Connect electricity H E,G 2
9 Paint I H 3

16. Determine your start and finish times
for each step
Name Step
Prede-
cessor
Time
(days)
Earliest
start (ES)
Earliest
finish
(EF)
Latest
start (LS)
Latest
finish (LF)
A Plans None 60 0 60 0 60
B Material A 2 60 62 60 62
C Foundation B 4 62 68 62 68
D Walls & floor C 5 66 71 66 71
E Plaster D 3 71 74 71 74
F Trusses made A 8 60 68 66 74
G Erect roof E,F 5 74 79 74 79
H Electricity E,G 2 79 81 79 81
I Paint H 3 81 84 81 84

17. First draw the network
F(8) G(5)
Name Predecessor
Time
(days)
Earliest
start (ES)
Earliest
finish (EF)
Latest
start (LS)
Latest
finish (LF)
A None 60 0 60 0 60
B A 2 60 62 60 62
C B 4 62 68 62 68
D C 5 66 71 66 71
E D 3 71 74 71 74
F A 8 60 68 66 74
G E,F 5 74 79 74 79
H E,G 2 79 81 79 81
I H 3 81 84 81 84
Determine earliest start and earliest finish times
ES=0
EF=60
ES=60
EF=62
ES=62
EF=66
ES=66
EF=71
ES=71
EF=74
ES=60
EF=68
ES=74
EF=79
ES=79
EF=81
ES=81
EF=84
LS=0
LF=60
LS=60
LF=62
LS=62
LF=66
LS=66
LF=71
LS=71
LF=74
LS=66
LF=74
LS=74
LF=79
LS=79
LF=81
LS=81
LF=84
H(2)H(2)A(60) B(2)A(60) B(2) C(4) D(5) E(3)C(4) D(5) E(3) I(2)I(3)
G(5)
Slack=6 days

18. Example: Calculation of expected times
• Assume for step A the most likely time is 6
days, the most pessimistic time is 15 days and
the most optimistic time is 3 days
• Expected time
ET(A)= 3+4(6)+15
6
Weighted average with
most likely time counting
4x the other estimates

19. Example 2. Probability exercise
What is the probability that the project will be completed
in less than 53 days? (a-la Stats in MBA1)
p(t < D)
TE = 54
Z =
D - TE
cp
2

t
D=53

20. Time-cost models
• Basic assumptions: Relationship between
completion of activity and project cost
• Time-cost Models: Determine the optimum
profit in the trade-off between time and cost

21. Advantages of PERT/CPM
1. Especially useful when scheduling and
controlling large projects
2. Straightforward concept and not mathematically
complex
3. Graphical networks help highlight relationships
among project activities
4. Critical path and slack time analyses help
pinpoint activities that need to be closely
watched

22. Advantages of PERT/CPM
5. Project documentation and graphics point out
who is responsible for various activities
6. Applicable to a wide variety of projects
7. Useful in monitoring not only schedules but
costs as well

23. 1. Project activities have to be clearly defined,
independent, and stable in their relationships
2. Precedence relationships must be specified and
networked together
3. Time estimates tend to be subjective and are
subject to fudging by managers
4. There is an inherent danger of too much
emphasis being placed on the longest, or critical,
path
Limitations of PERT/CPM

24. A VERY useful project management site:
http://www.hyperthot.com/project.htm
• Project Management Principles
• What is Project Management?
• Project Management Training
• Starting a Project: Step by Step
• Scalable Methodology Guide
• Sample Project Management Policy
• Working with Microsoft ProjectTM
• Gantt Chart & Spend Plan in MS-EXCEL FREE Downloads!
• Project Management & ISO Compliance
• New Product Development Life Cycle Methodologies
• Project Management Institute - Activities & Certification
• Top 10 Reasons NOT to use Project Management
• The Spiritual Side of Project Management

25. Chapter 4
Forecasting demand

26. What is Forecasting?
 Process of predicting a
future event
 Underlying basis of
all business decisions
 Production
 Inventory
 Personnel
 Facilities
??

27.  Short-range forecast
 Up to 1 year, generally less than 3 months
 Purchasing, job scheduling, workforce levels, job
assignments, production levels
 Medium-range forecast
 3 months to 3 years
 Sales and production planning, budgeting
 Long-range forecast
 3+ years
 New product planning, facility location, research and
development
Forecasting Time Horizons

28. Distinguishing Differences
Medium/long range forecasts deal with more
comprehensive issues and support management
decisions regarding planning and products, plants
and processes
Short-term forecasting usually employs different
methodologies than longer-term forecasting
Short-term forecasts tend to be more accurate
than longer-term forecasts

29. Influence of Product Life Cycle
 Introduction and growth require longer forecasts
than maturity and decline
 As product passes through life cycle, forecasts
are useful in projecting
 Staffing levels
 Inventory levels
 Factory capacity
Introduction – Growth – Maturity – Decline

30. Product Life Cycle
Best period to
increase market share
R&D engineering is
critical
Practical to change
price or quality image
Strengthen niche
Poor time to change
image, price, or quality
Competitive costs
become critical
Defend market
position
Cost control critical
Introduction Growth Maturity Decline
CompanyStrategy/Issues
Figure 2.5
Internet search engines
Sales
Xbox 360
Drive-through
restaurants
CD-ROMs
3 1/2”
Floppy
disks
LCD & plasma TVs
Analog TVs
iPods

31. Product Life Cycle
Product design and
development
critical
Frequent product
and process design
changes
Short production
runs
High production
costs
Limited models
Attention to quality
Introduction Growth Maturity Decline
OMStrategy/Issues
Forecasting critical
Product and process
reliability
Competitive product
improvements and
options
Increase capacity
Shift toward product
focus
Enhance distribution
Standardization
Less rapid product
changes – more
minor changes
Optimum capacity
Increasing stability
of process
Long production
runs
Product
improvement and
cost cutting
Little product
differentiation
Cost
minimization
Overcapacity in
the industry
Prune line to
eliminate items
not returning
good margin
Reduce capacity
Figure 2.5

32. Types of Forecasts
 Economic forecasts
 Address business cycle – inflation rate, money
supply, housing starts, etc.
 Technological forecasts
 Predict rate of technological progress
 Impacts development of new products
 Demand forecasts
 Predict sales of existing products and services

33. Strategic Importance of
Forecasting
 Human Resources – Hiring, training, laying off
workers
 Capacity – Capacity shortages can result in
undependable delivery, loss of customers,
loss of market share
 Supply Chain Management – Good supplier
relations and price advantages

34. Seven Steps in Forecasting
 Determine the use of the forecast
 Select the items to be forecasted
 Determine the time horizon of the forecast
 Select the forecasting model(s)
 Gather the data
 Make the forecast
 Validate and implement results

35. The Realities!
 Forecasts are seldom perfect
 Most techniques assume an underlying
stability in the system
 Product family and aggregated forecasts
are more accurate than individual product
forecasts

36. Forecasting Approaches
 Used when situation is vague and
little data exist
 New products
 New technology
 Involves intuition, experience
 e.g., forecasting sales on Internet
Qualitative Methods

37. Forecasting Approaches
 Used when situation is ‘stable’ and
historical data exist
 Existing products
 Current technology
 Involves mathematical techniques
 e.g., forecasting sales of color televisions
Quantitative Methods

38. Forecasting in the Service Sector
 Presents unusual challenges
 Special need for short term records
 Needs differ greatly as function of industry
and product
 Holidays and other calendar events
 Unusual events

39. Your assignment
• Step 1: Make sure you understand the concepts that are covered in this slide
show. If necessary, go through it again or study the textbook.
• Step 2: Prepare a one-page summary of the theory. Make sure it fits into the
template in the study guide.
• Step 3: Find out how project management and forecasting takes place in your
organisation. Give a one-page summary on the template.
• Step 4: Critique the way project management takes place in your organisation.
Where necessary, suggest improvements. Give a one-page summary on the
template.
• Step 5: Submit your three-page report on efundi before Thursday night 23:59.
This counts towards your individual assignment and your final pass mark!
• Step 6: For your group assignment, prepare a four-slide PowerPoint show:
Slide 1: Who is your community organisation? Slide 2: What community work
do they do? Slide 3: What is the nature of their business leg? Slide 4: A rough
project planning for your community project (rough enough to fit on one
slide). One group member must submit on efundi before Thursday night 23:59
as well!
• Names of documents as indicated in your study guide.