forecasting

Estimating project time and cost

Posted on by david598fall15

Project cost and timelines are usually the hottest topics when a project is initially rolled out. Let me start by stating I am no Project Manager nor pretend to be, but I have lead and assisted numerous projects throughout my career. One of the burning questions my managers have seem to always ask is “when will I have this completed and how much is it going to cost?” From my experience he was always more concerned with getting the project completed on time than cost. Not to say that cost was not important, as long as the expenditures were in reason. In manufacturing as in any other industry the customer comes first and is the main focus of everyone in the company. As we know estimating cost can be either from the bottom up or the top down. In my opinion bottom up approach is preferred because it is usually the project manager or project engineer that will be see the project through. I know in my field of manufacturing you don’t have top level managers on the production floor. They are knowledgeable but operations is a completely different world than engineering, sales, or marketing.

As I mentioned earlier completion time and meeting deadlines is what top managers are looking at when projects are in process. I used a critical path analysis chart to help with my estimation for completing a project. The project consisted of relocating a family of speakers that logistically makes since to assemble on the west coast. Considering most of the raw components we buy for this speaker are from the west cost and the finished assembly is primarily sold to customers in that region. We decided to relocate this product family to the Anaheim plant. So this project from a operations stand point consisted of transferring all the purchased and manufactured components from Illinois to California and setting up a work cell.  So the critical path chart made a lot of since for this project because so many part numbers needed to be transferred, equipment needed to be purchased, testing equipment needed to be fabricated, along with standard work and training documents.

So when I had my completion date estimated and total cost of all invoices for this project. I presented it to my manager and his manager. Unfortunately the project was not completed until two months after my estimation, for reasons that were out of my control. from an operations stand point everything was ready to go. My manager understood that and knew I had completed all my task. All Project managers struggle with the same dilemmas and that is estimating how much a project will cost and how long will it take to complete the deliverables. I wanted to see what project managers in the field had to say on this topic so I visited the PMI website. Click on the link below to see what they had to say. Also feel free to leave a comment on your experiences with estimating.

http://www.pmi.org/Learning/knowledge-shelf/project-estimating.aspx

 

 

Whats more exclusive then 6 hand made Ferraris?

Posted on by Marco

The only way to manufacture a more exclusive product then six handmade Ferrari’s is by making the purchase of each car invitation only.

 

In the past week of class we learned about the different manufacturing processes used to make products.  Between process focus, repetitive focus, product focus and mass customization we learned the pros and cons of each set up. What we are looking at here is a highly specialized and customizable version of process focus manufacturing. Ferrari, as we all know, likes to operate in a process focus environment targeting most affluent consumers on the market. Ferrari is tied to high price high quality products, just like the Rolex example in class.  All of us assume a Ferrari is among the highest quality product on the market, even when placed side by side with many of its supercar counterparts.

 

Ferrari, with the six new Sergio cars, took product focus to the extreme. They traded in on their name to entice potential customers to pay upwards of a million dollars for the new line cars.  Instead of worrying about forecasting or any type of market research, Ferrari built a car with the intention they would sell effortlessly.  The result in an invitation-only model has clearly paid off for Ferrari, as all six Sergio’s have already been sold. While the identities of the new owners are kept confidential, we are told the invitations were given to previous loyal Ferrari owners.

 

With this heavy process focus comes the ability for massive customization options.  Along with the usual online customizations that can be implemented into manufacturing, such as colors and finishes, the team went above and beyond to meet consumer satisfactions. After the purchase of a new Sergio, a life size clay model of the car is created so buyers know exactly what they are getting.

 

I personally think this is a great way to manufacture a car for optimal appeal.  The ultra-rich pride themselves on the exclusivity of the items they own. Ferrari took a shortcut to creating a uniquely exclusive product with a one of a kind manufacturing and sales model.  Being this highly process focused I cannot see anyone who bought this car having even the slightest bit of buyers remorse.  I also think that creating a clay model of the car to aid the customer’s options in the customization process is ingenious.  Many times when customizing a product online some parts do not come out exactly as intended.  Unfortunately color and sizing mishaps can happen due to computer monitor resolutions or bugs with rendering software.  Ferrari found an exact way to replicate the final product allowing so that every little customer specific nuance is included in their one of a kind Sergio.

What do think of having this low of a production run?
How to do you think the clay models influenced sale?
Ferrari Sergio

http://www.cnbc.com/id/102123753#.

5 for Forecasting: How Nick Leddy Lost his Roster Spot

Posted on by brenna30131f14

The Chicago Blackhawks and Chicago Bulls faced very different situations this summer.

The Bulls decorated the United Center in hopes of landing free agent Carmelo Anthony
The Bulls decorated the United Center in hopes of landing free agent Carmelo Anthony

The Bulls created an elaborate presentation at the United Center as they tried to lure Carmelo Anthony away from the New York Knicks while the Chicago Blackhawks offered some of their best players to other teams. The core reason for these differences was the accuracy of salary cap forecasting within the specific leagues.

The NHL fell victim to bad forecasting in 2014. Early in the year, the commissioner predicted a $71.1 million salary cap for the upcoming season. General Managers across the league began to plan their roster moves accordingly. It wasn’t until months later, when the actual figures came in, that the league realized it had overestimated the growth of the revenues; the hard salary cap would instead only be $68 million. The $3.1 million difference didn’t affect teams that conservatively reacted to the forecast, but teams like the Blackhawks found themselves needing to eliminate nearly $3 million worth of payroll. So as the team practiced all summer, the atmosphere was not one of anticipation and excitement but rather apprehension, knowing a significant player would need to be traded.   Ultimately, Nick Leddy lost his spot on a championship team because the league falsely predicted the growth of their revenues.

Both Johnny Boychuk and Nick Leddy lost their roster spots on championship teams because of poor forecasting.
Both Johnny Boychuk and Nick Leddy lost their roster spots on championship teams because of poor forecasting.

In contrast, the NBA did not suffer from bad forecasting. They were not perfectly accurate, as is expected, but they conservatively expected a 4.5% increase. By not relaying an unrealistic expectation to the general managers, the league prevented premature dealings by teams. Plus, on three separate occasions throughout the year, the league adjusted their forecast to improve its accuracy. The eventual salary cap was a 7.7% increase from the previous year. This left the Chicago Bulls with extra, unexpected cap space to try to recruit top free agents—a much preferable problem than having to shed payroll.

General Managers have to find the balance between optimistic forecasts and reality. The NHL should’ve considered the effect of the lockout shortened season as well as the decline of the Canadian dollar when they predicted a forecast that followed the record growth trend from previous years.  The NBA did a much better job of using environmental signs such as market values of sold teams to predict their league growth.  In the years to come, I’d expect NHL managers to be more hesitant in relying on initial forecasts, and perhaps adopt NBA strategies in approaching salary cap forecasts.

CapGeek.com shows the relationship between each NHL team and the salary cap. This specific image shows how restrictive the 2014 salary cap is for certain teams.
CapGeek.com shows the relationship between each NHL team and the salary cap. This specific image shows how restrictive the 2014 salary cap is for certain teams.

The salary cap in certain leagues is an absolute maximum accompanied by severe penalties for violations. It makes it even more consequential when a forecast is overestimated. Some teams will wait until the cap is released to sign players while other teams sign players based on forecasts. It poses the question: Which is the preferred scenario? New York Jets fans are currently complaining because their team lacks talent despite having nearly $20 million in cap space to be spent while Blackhawks fans were upset with having to trade Leddy in order to be under the cap. Which scenario would you prefer your favorite team be in? Do you rely on the forecast and deal with the consequences of inaccuracy or wait until the actual cap is set to make important decisions and risk missing out on top talent?

Sources:

http://www.habseyesontheprize.com/2014/3/6/5478362/what-the-new-projection-of-a-68-million-dollar-salary-cap-shows-about

http://espn.go.com/nba/story/_/id/10808291/nba-salary-cap-projected-rise-nearly-5-million

Images: Capgeek.com

https://blog-blogmediainc.netdna-ssl.com/upload/SportsBlogcom/45330/0840882001412450673_filepicker.jpg

http://www.trbimg.com/img-53b49beb/turbine/ct-bulls-blackhawks-court-stars-haugh-spt-0703-001/2048/2048×1365

 

FORD is really “Shifting into Gear!”

Posted on by spr1313emeador

Recently, Ford Motor Company has a announced they are putting a greater focus on their SUV and crossover cars to prepare for the future. You might ask, why? Well according to forecasts by IHS Automotive, one in five cars sold around the world annually in 2018 will be either a SUV or crossover. There is about 14 million vehicles sold world wide annually and a specific model taking up 20% of an entire market is a very large number.

Now after reading this article, I almost felt like I was ready the weekly courier, and analyzing the market conditions report from our simulation. Its really remarkable how this article pertains to the methods and leanings of the game we played in class.

ford

Ford’s SUV and crossover sales were up 37%, which also outpaced the industry increase of 17%. This is exactly what we tracked in the statistics segment of the segment analysis. Ford is clearly putting a focus on a specific segment of the market, or in our game “product type.” The amount of models of SUVs and crossovers has risen from 180 to 370 from 2000 to the current day. This market is becoming very competitive and in the simulation we would have to go into R&D and tweak our product to become better and have an edge. We would also encounter situations where we would have to buy more capacity in our plant to account for higher demand. Ford is doing exactly this. The article states, “…Where it is spending $700 million to expand.” Ford has announced it will continue producing their crossover product, The “Edge”, and expand its production capacity by spending $700 million dollars in Oakville, Ontario where the car is produced. Ford ships this model to over 60 countries, which obviously can be concluded the demand is very high. This scenario right here is exactly like the decisions we had to make within the simulation, adjusting capacity to meet demand and forecasts, along with the segment demand fluctuations.

Just to show exactly how intense this increase in market demand for these SUV’s and midsized crossover is, utility cars sales grew 10% and crossover sales grew 16% last year totaling about 2.2 million units…but that’s just in North America! In 2000 1.8 million units of utility vehicles were sold outside North America, today that number is now 10 million!

Obviously the future of the automotive industry is leaning in a specific direction. I think it is very interesting to see how Ford Motor Company is planning all of this now, and how closely this scenario relates to our simulation. How do you think this market preference for SUV’s and crossovers will affect the industry as a whole? Do you think this will create entry points for new automotive companies? What do you think will happen to all the inventory of the less preferred sedan and cope model type of cars?

Article Source: http://www.usatoday.com/story/money/cars/2014/02/16/ford-world-suv-shift-from-cars/5497343/

-Evan Meador

Wanted: Competant Project Managers

Posted on by seanv598

Over the past few years there has been a significant push, especially in the United States on the importance of math and science education for the young.  There has been an understanding that emerging nations like India and China have passed the United States in graduating engineers and scientists from the university.  The math and science shortage has been felt in places like the UK, U.S. , and even Australia.  The latest stories have spotlighted the skills shortage overall in the Project Management field.

The shortage in very good, and competent project managers has significant implications for large scale projects moving forward.  The downside of having issues with project management is the reality that project overruns and extending time estimates on projects have negative effects for progress in building and other projects.  Scope creep is an effect that starts to affect large scale projects.

The article spotlights some findings that they studied in India with the help of PMI India and KPMG.  India is in a building phase in their country life cycle.  Lots of new infrastructure is needed to handle the more than 1 billion people that inhabit their country.  People will start to expect certain amenities as people start to gain a little bit of wealth and move towards the middle class.

There is an expected 1 trillion dollars in infrastructure that will be spent in the next four years.  80% of the developers of the different projects are unable to find good project managers to execute this increased infrastructure build.  The study that KMPG facilitated found that “some projects are delayed by external factors such as land acquisition or regulatory approvals which are beyond the control of the executing agency, a majority of projects are delayed by factors that can be controlled at the project level through proper planning and project management.”

While this article focuses on India, it seems to me that this is a world wide problem.  Just like there is an aversion to math and science all over the world, project managers have become something that has been very hard to find.  Project managers have a lot of responsibility on different projects.  They are forced to be “experts” in statistical analysis, manufacturing, operations, and forecasting among other things.  They need to be able to multi-task on many different jobs to be successful.

The long term effect of a shortage of math and science and project management could be catastrophic.  China is ahead of the curve by having 106 universities that focus on project management and their skills.  All countries need to focus its efforts on these skills in order to keep up with proper infrastructure.  We are getting to a point in America where we need new bridges and roads, and if every project we have continues to have scope creep, we will put our economy into a further tailspin.

Do you think that having a skills shortage for project managers is a problem?  What are the long term implications? How do you fix this problem?

Main Article:

http://articles.economictimes.indiatimes.com/2013-07-08/news/40443485_1_land-acquisition-projects-lakh-crore

Supporting Docs:

http://www.bbc.co.uk/news/education-18957712

http://www.math.vcu.edu/g1/journal/Journal7/Part%20I/Sterling.html

http://www.theaustralian.com.au/opinion/editorials/remedying-our-skills-shortage/story-e6frg71x-1226267136876

Hog-wild for Factory Farming: Hot Dogs Made in China

Posted on by spr1324rzieman

As the Chinese population and economy continue to grow, safer and more efficient industrialization practices are necessary to keep up with the demands of a hot dog hungry China. This is not an exaggeration as China is “the world’s largest consumer of pork.” A recent takeover of Smithfield Foods by Shuanghui Holdings Ltd., “China’s biggest meat processor,” will provide valuable insight into industry practices that are commonplace in the U.S. Current processing methods in China lack quality control as the majority of meat is produced by small farms that process less than 500 hogs per year.

From Hog to HotdogThese “conditions on smaller farms can be squalid, with a lot of physical contact between farmers and animals, which can transmit disease.” This type of environment can become a breeding ground for contamination leading to outbreaks of diseases like swine flu and foot-and-mouth disease, having major health implications on Chinese consumers. Authorities blame irresponsible farming practices and the disjointed meat processing system that is not easy to “regulate and makes it more difficult to avoid bad practices.”

In contrast, the highly sophisticated and streamlined systems of pork production in the U.S. is often viewed negatively by Americans and referred to as “factory farming.” Smithfield’s facilities have the “capacity to slaughter as many as 110,000 hogs a day,” and most U.S. farms are much larger than their Chinese counterparts, raising over 2,000 hogs annually. Ironically, these modern processing techniques are the envy of Chinese authorities who are looking to utilize the “expertise of Smithfield’s management team to enhance its pork-processing facilities.” Skeptics claim that the Shuanghi-Smithfield partnership “will exacerbate such problems as complex supply chains and food-contamination risks.”

Although the trend in U.S. agriculture is to go “back to the start” as expressed in marketing campaigns by environmentally conscious companies like Chipotle Mexican Grill, this is not the reality in China. As health out-breaks are more widespread in this Asian country and regulation lacking, efforts to “control food safety” and create more modernized processing methods are a welcomed site.

In such an industry, operational expertise will prove essential in restructuring the pork processing system in China. They will likely face challenges like determining adequate process and capacity design for farming facilities and distribution channels; forecasting to meet the demands of a growing population; Slaughter Pigs in Chinaand improving inefficient and broken supply chains. Improved product quality will likely be most prominent and follow a manufacturing-based definition as increased standards will ensure a safer finished product.

On a personal note, I am an advocate for more naturally produced food in smaller farming environments, yet I understand that the demands and current conditions in China are quite different from the U.S. All criticism aside, the majority of the U.S. population relies on the safe meat supply provided by corporations like Smithfield to ensure peace-of-mind at the dinner table. How do you think that the new deal between Shuanghi and Smithfield will impact Chinese and U.S. consumers, respectively. Will the Chinese citizens have a similar sentiment toward industrialized farming practices in future decades?

Article Source

 

 

Reebok: Using CrossFit to Fire Up the Intensity

Posted on by spr1333cpassage

reebok

Many of us have heard of the fairly new workout brand CrossFit that has been sweeping the world for the past decade or so (2000). Some of you may even participate in the ultra intensified fitness regiments at your local CrossFit gym, or “boxes” as the growing cult has come to call them.  For those of you who are unfamiliar with CrossFit, it is an exercise program that advocates a mix of aerobic exercise, body weight exercise, gymnastics, and Olympic weight lifting that requires an individual to “to keep up the intensity, each and every time.” What does CrossFit have to do with total quality management within a corporate conglomerate you ask?

Well it just so happens that Adidas recently purchased Reebok back in 2006 and the company has been struggling mightily ever since the latter lost its decade long contract to outfit the National Football League last April to its biggest rival, Nike. This loss will reportedly cost Adidas an estimate of upwards to $250 million in lost revenue annually, a crushing blow to a company that was already being scrutinized for its purchasing of the floundering organization that had become Reebok. Reebok has also suffered heavy losses from lawsuits regarding their falsified health claims of their new “toning” shoes that deceived consumers. These allegations were brought forth by the Federal Trade Commission and required Reebok to pay nearly $25 million in total refunds. To top it all off, there has been turmoil within the infrastructure of the organization as an investigation has been prompted relating to alleged fraud by two former executives. However, there may be a silver lining yet for this once promising business transaction as Adidas hopes that sponsoring CrossFit using their newly affiliated business partner Reebok as its representative will not only reverse the current trend of posting a decline in sales the last three of five years, but also restore the brands image as a major powerhouse in the industry that is a force to be reckoned with.

adidas

Adidas continues to stand by there decision to purchase Reebok and hopes that their new two year deal with CrossFit will help them accomplish their goals that they set for themselves prior to their recent setbacks. In hopes of reaching the $3 billion objective for 2015, Adidas believes that their sponsorship of CrossFit will help speed up the process and provide them with some insurance they desperately need. The rapid growth of the CrossFit health craze is most certainly a positive sign for pulling Reebok out of the gutter as more than 3,000 gyms have popped up worldwide. The cult-like fitness routine seems it will continue to grow in popularity in the future as people gravitate towards the infectious atmosphere of the contagious motivation/energy and the promise of a complete workout in under 20 minutes. Will Adidas end up regretting their decision to purchase Reebok in the future? Or will the new addition of Reebok and the sponsorship of CrossFit pay off in the long run?

 

Source: http://www.businessweek.com/articles/2012-06-21/how-adidas-is-whipping-reebok-into-shape

 

Retail to E-tail

Posted on by spr1333rmortha

There are a lot of pros and cons to doing online shopping as opposed to in-store shopping. Online shopping seems like it only affects consumers by giving them a different medium to make their purchases but we fail to realize that it affects the sellers as well. Through online purchases, businesses gather a lot of data about consumers. Sellers can track which sections of items are the most popular, which products are the most viewed and for how long, and which products are most browsed at but not bought. This gives online sellers a competitive advantage over in-store sellers as they know more about their customers. And everyone knows that the understanding your customer is one of the most important factors in having a successful business. This is empowering in-store sellers to seek e-commerce level data.

The article talks about one company that brings customer tracking data to in-store businesses. This is in hopes of slowly bridging the competitive gap between in-store purchases and online purchases. How can they possibly get consumer data without changing the in-store purchase process? By simply observing the customers! Prism Skylabs specializes in in-store surveillance equipment that tracks customer movement. Prism installs special cameras that captures everything in the store and then is sent to the store’s computers where it is processed by Prism’s special software. The images of the actual shoppers are cut out to respect their privacy.

What is so different about Prism’s techniques than regular surveillance cameras? Prism’s software allows them to “look at which products are hot, which are being moved around and touched, and all kinds of data that allow merchandise teams to understand what is going on across a wide range of stores”. This allows the sellers to get information that the type of information that online sellers use to enhance their systems to get more purchases.

Who is using Prism? Right now, Prism has partnered up with 30 retailers. Retailers that Prism is working with include T-Mobile and Famous Footwear. Does it actually work?  A candy store in Oklahoma City was using Prism in their stores and after close observation they changed their premium display to low-selling seasonal candy rather than their famous candies that buyers usually take the time to look through the store to buy. This allowed the store to quantify the customer’s thoughts and make an effective decision in their operations.

Moreover, Prism is not the only data providing company that is emerging. Other companies are picking up on the importance and building unique strategies and techniques to sell to businesses. For example, Shopkick is an app which personalizes deals for a customer in real time as they walk through the store.

Is it worth it to sellers to invest in these data gathering companies?

How do you feel as a consumer towards this type of innovation? Do you feel that you will be making more beneficial purchases or do you feel manipulated by the sellers to buy their preferred products?

Link:http://www.businessweek.com/articles/2013-04-25/to-catch-up-with-e-tail-tools-to-track-shoppers-in-the-store

More Money & Less Features, Does Not Make Sense!

Posted on by f1222sghatila

More Money & Less Features, Does Not Make Sense!

 

Any flight feels long because time wasted in traveling is just time wasted. Airlines are trying to figure out how to cut time and provide the best service. According to American Airlines and cutting time in placing the carry on baggage is too much trouble. They believe that due to the small compartments over the seat, there is typically not enough space and trying to accommodate carry on space has created many delays. The article says that the carry on spaces are always over booked due to people bringing a lot of access luggage. American Airline thinks by allowing only a small baggage like a purse that can be places under the seat is the way to do and people can check in everything else.

 

They are trying to do quality control for the time of luggage delays. Even though it only eliminates 2 minutes of the delay time, they think it will add up in the long run. In addition, there are cost savings because the luggage industry has created revenue in billions. I do not think this is a good strategy. The airline prices are continuously increasing due to the gas price and they are taking out amenities. I know when I travel I like doing it on Southwest because it’s cheap and allows luggage, other airlines  are more expensive and we have to pay additional for baggage. Even though it will eliminate some time in the flight, but that can be made up in other ways, such as boarding early. I think many people only carry a small luggage for a small distance and retrieving it in the luggage area would increase the traveler’s time. Also the issue to luggage getting lost is a big deal people have their carry on as their safety net and taking that away is a big deal.

 

Before American Airline makes this huge transition and purchasing, new aircraft they should construct many surveys to determine is this is worth it. Travelers want to get from point A to point B in as little hassle as possible and I believe this is just creating an unnecessary hassle. The airline will need to employ more people to put the baggage away and there is a change of loss baggage just to eliminate a 2 minute deplays. They should invest in creating a flow chart and figuring out where the problem is and eliminating or supplementing that feature. Quality control is improving quality overall not just making one area better and adding on problems in other areas.

 

What do you think are eliminating carry on luggage a good thing for American Airline to have? What would you prefer as a traveler?

 

http://www.businessweek.com/articles/2013-05-17/american-airlines-doesnt-want-your-bags-in-the-cabin#r=hpt-lst

 

Can You Have Your Cake and Eat It Too

Posted on by spr1311dferek

As I’m lounging on the sofa in the family room watching my husband decorate the cakes that he baked for both our moms on Mother’s Day, thoughts about how he plans the whole process are running through my head. While my husband wasn’t enthused about the interruption, I was busy asking him multiple questions regarding how to forecast future demand, how to manage quality and quantity, and finally what inventory method is used by businesses that produce wedding cakes.

Forecasting is a critical aspect of the business to effectively manage overhead costs, ingredient inventories and most importantly, volume projections to meet demand while maintaining a profitable business. To achieve desired profitability, the business should deliver a wide variety of designs at competitive prices.

In class, I had learned about five quantitative forecasting methods. The simplest method to forecast how many wedding cakes will be produced next month is looking back at the last month’s production quantity. Another forecasting model is using the moving averages forecast method. This method uses an average of the most recent periods of data to predict of how many wedding cakes need to be produced next period. For example, the bakery may use a 3-month moving average by adding the last 3-month production of wedding cakes and dividing by 3 months. However, to use this method, we would assume that the market for wedding cake demands is quite stable.

Next important aspect for a Wedding Cake business is how to efficiently manage the quantity and quality of the cakes. Higher quality of ingredients used during production will lead to a better reputation for the business and create higher customer satisfaction, leading to repeat customers. Moreover, business would save ingredient costs by purchasing larger volumes.

This reminded me of what I had recently learned in my class about product focus. Some bakery businesses focus on producing high volumes and low variety. For example, one business can focus on a niche market and produce only wedding cakes that will deliver a high volume but limited designs. But such a business will need to be highly completive in the market in order to be successful. On the other hand, another bakery might produce low volume of cakes, but cater to a much broader customer base such as birthdays, graduations, anniversaries, Bar Mitzvahs, etc.

Managing inventory of raw ingredients as well as finished goods is another critical aspect that has to be closely managed. The perishable nature of the products makes it very important to effectively manage inventory of seasonal products, while maintaining stocks for rush orders. Also, inventory management is crucial in maintaining business profitability by reducing waste of both raw ingredients and expired finished products.

Although I learned a great deal regarding the wedding cake industry from my husband, I”m still left with a few questions: What is the best way to forecast wedding cakes? What process strategies should be used by bakeries? Would it be more profitable to use process focus or mass customization strategy?

http://smallbusiness.chron.com/examples-management-strategies-cake-bakery-business-12208.html