Project Management Book of Knowledge, Research Paper Example

Abstract

Project management incorporates many tools and techniques to facilitate the opportunity for the success of a project implementation.  When developing a project there are three areas of concern including scope, schedule and cost of the project. By utilizing the best practice framework outlined by the Project Management Book of Knowledge (PMBOK) the project team will have the best environment to adhere to the client’s requirements while also meeting the time and cost demands.  This project will encapsulate the entire project lifecycle to decide whether or not to sustain or end operations.  The business is operating at average capacity and producing products that could potentially result in positive revenue and profit for the organization.

Operations Decision

Recently the managing consultation team was brought in to the organization to determine whether to cease operations for the current production or to provide guidance on how to continue the production.  The primary objective is to understand the entire operation and to provide not only a decision on whether to continue or cease operations but also how to follow through with those activities.  Each will require a significant amount of effort to ensure the processes are completed with diligence and provide the appropriate responses to the circumstances.  Currently there are 100 workers employed by the organization.  These 100 workers work 20 (twenty) days per month to produce 6000 units.  The average daily wage of each worker is $70.00 USD brining the cost for work effort to $7000 for labor.  The price of the firm’s output is $32 and the variable costs equal $2,000 per day.  The marginal cost of the very latest output was $30.  In order to fully understand what this data represents it is imperative to calculate specific formulas to gain a greater understanding.  These include:

• Total Variable Cost = (Number of Workers * Worker’s Daily Wage) + Other Variable Costs—(100*70)+$2000=$9000
• Average Variable Cost = Total Variable Cost / Units of Output per Day

=9000/6000=1.5

• Worker Productivity = Units of Output per Day / Number of Workers

=6000/100=60

It is understood that the total costs, fixed cost plus variable costs, exceed the total revenue generated by the production of 6000 units.  The variables in the equations are the amount of time worked, number of workers utilized, daily average rate and the cost in which the item is ultimately sold.  The main problem with this scenario is making the appropriate decisions to adjust the cost of production with the amount of revenue generated.  Within the confines of this scenario it must be understood how long the organization can operate until the modifications to the inputs of the production can be put in place to make a significant difference to the bottom line.  Within this organization, there is the opportunity to increase the amount of days worked but that would come at a cost of possible overtime expense and negotiations with the union that is governing the hourly workers.  The labor could also be laid off to reduce the amount of variable cost that is based on labor but that would require the remaining work force to produce at a higher rate.  This scenario would not be feasible if there were not operational actions taken to reduce waste in the process by the way of lean management activities.  The immediate goal is to refocus the efforts on not only changing the costs that are going into the production but an effort must be established to refrain from unnecessary costs and increased efficiency.

The current environmental factors includes a macro view of the business including industry, competition, marketing analysis, new products and the company’s internal operations.  The best way to conduct a macro-level environmental scan is to look at the political, economic, social and technological factors impacting the business operations.  The highest area of impact includes the technological factors of the operations.  The ability to increase the rate of production based on production efficiencies includes the increased capability of technological and procedural improvements.  The current production rates are not going to be able to increase the amount of profit margin required for sustained operations.  The ability to increase the output without directly impacting the cost of production is essential to prolonged production capability.

Lean management and Six Sigma are often used to better the organizational efforts to increase productions, capability, efficiencies or effectiveness (Pettersen, 2009). Lean management is used to reduce waste and improve efficiency of a process while Six Sigma is utilized for the reduction in variances and improved performance. For example with lean management the focus could be on processing times, improving safety, utilization of resources and process improvements. These increases in efficiencies will not help prevent products from failing quality checks or missing other specifications on the requirements. In essence, Six Sigma methodologies push the organization to make the product exactly the same without defects every single time. It does not mean that the process is efficient but it does force defects from the operation. Lean management is a great place to reduce the waste in the processes before implementing a Six Sigma approach (Hanover, 2006).

The goal of implementing a lean management methodology is to help eliminate the processes, actions or lack of actions that are causing waste throughout the process. Lean management is a set of tools designed to help eliminate the multiple areas of waste and ultimately drive a manufacturing process that produces quality products to the consumer. Lean is a set of tools that can help provide the necessary means of reducing waste through the manufacturing process. This set of tools focus on eliminating the different kinds of waste which are transportation, inventory, motion, waiting, overproduction, over processing and defects. Implementing the lean management methodology includes designing of the lean process, training, awareness, communication, lean leadership, tool box preparedness, continuous improvement, cultural awareness, philosophical buy-in and team management (Vernvi, 2007).  In the short term, the organization must restructure their cultural actions to take on the lean methodology.

If the leadership decided to eliminate the production capability there are many actions required by management.  The first is to either determine to sell off the capability or to cease operations and realign the limited resources.  The decisions are based upon how to manage the capital and operating assets, the talent within the organization as well as the contractual obligations the organization has entered into in order to sustain activities.  The management would need to prepare the organization for a massive change that could end in mass layoffs, plant closure and a mass exodus of employees once there is a hint of closure.  The management would need to provide the capability, based upon organizational needs, to move talent to other areas of the organization and to limit the cost incurred by shuttering a facility.

The projects to sustain the operations would need to be established and specific project based on efficiency, production increases, effectiveness, cost-reduction and other projects aimed at continual process improvement for the production team will need to be implemented to make the production cost effective and profit in the black.  The plan to increase profitability will be based on creating a more effective and efficient manufacturing and production process (Holweg, 2007).  The immediate short-term focus is to limit the amount of loss that is incurred on the production line.  This will be accomplished by a series of temporary or voluntary lay-offs and non-paid vacations.  In order to provide talent to the project teams, some of these key members will be transitioned to the lean management operations.  If the operations does not complete the assigned activates to reduce the variable costs and increase efficiency of the operations the production will need to cease to operate or sold to another organization.

References

Hanover, B. (2006). Deliciously lean – a mouth-watering introduction to lean manufacturing for printing professionals and sandwich makers alike. SGIA Journal Fourth Quarter 2006. Retrieved from: http://tpslean.com/pdfs/introtolean.pdf.

Holweg, M. (2007). The genealogy of lean production. Journal of Operations Management 25 (2): 420–437.

Pettersen, J. (2009). Defining lean production: some conceptual and practical issues. The TQM Journal, 21(2).

Vernvi, B. (2007). Where are the real problems in manufacturing? Retrieved from: http://americanmachinist.com/Classes/Article/ArticleDraw.aspx?HBC=iCopyright&NIL=False&CID=71108&OASKEY.