2-G-1 Perform project management activities representing the supply management organization
Supply management and project management are integrally related. Supply management is defined as the identification, acquisition, access, positioning, management of resources and related capabilities the organization needs or potentially needs, in the attainment of its strategic objectives. (ISM, Glossary, 2006.) Supply management activities include disposition/ investment recovery, distribution, inventory control, logistics, manufacturing supervision, materials management, packaging, product/ service development, purchasing/ procurement, quality, receiving, strategic sourcing, transportation/traffic/shipping and warehousing. (ISM, 2001.)
Project management, on the other hand, is defined as the application Of knowledge, skills, tools and techniques to project activities to meet project requirements. (PMI, 2004.) Thus, project management can be considered as a method •or approach for conducting many of the supply management activities.
Supply management and project management can be viewed from two perspectives. First, supply management activities are typically executed as projects. For example, the supply management department of a high-tech computer organization may be faced with establishing a second source of supply for a critical commodity, material or service. This supply management activity, establishing a second source of supply, may be treated as a project within the organization, and the use of project management processes will be instrumental in the. success of this effort. Second, many projects managed by an organization typically require some extent of supply management activities, such as sourcing in support of a larger enterprise-wide project. For example, this same computer organization may have received a contract to develop a unique laptop for the Department of Defense to be used in battlefield operations. The fulfillment of the contract requirements will be considered a major project, which includes some supply management activities, such as the negotiation and award of subcontracts for various subcomponents or subsystems of the laptop computer.
Given these two perspectives, supply management and project management continue to be closely related. Regardless of the perspective one takes on project management, all project life cycle activities typically fall into one of the five project management process groups - initiation, planning, execution, monitoring and controlling and closing. This task will discuss these project management process groups as they relate to supply management activities.
1) Project initiation
These processes are related to defining and authorizing the project or project phase. (PMI, 2004.) For supply management activities, project initiation processes typically focus on needs identification or problem definition, which involves determining project feasibility, proposing a project solution and obtaining project approval and authorization.
A) Root cause analysis -This process includes conducting root cause analyses to define the problem that the project will solve or identify the needs for which the project will provide a solution. These analyses include the following:
1.0 Strength, weaknesses, opportunity, threats (SWOT) analysis - SWOT analysis is a strategic planning approach to assessing an organization's strengths, weaknesses, opportunities and threats. See Tasks 1-F-1, 2-A-1-, 2-C-2 and 3-A-2 for additional discussions on SWOT analysis.
2.0 Kepner-Trego rational process analysis - Kepner-Trego is defined as systematic procedures developed to apply critical thinking to information, data and experience for the purpose of solving problems, making decisions, anticipating future problems and appraising situations. (ISM Glossary, 2006.) Kepner-Trego includes four steps: situational appraisal, problem analysis, decision analysis and potential problem/ opportunity analysis.
3.0 Six Sigma process analysis - Six Sigma is an approach used to systematically improve processes by eliminating defects or non-value-added activities.
4.0 Business case analysis -This is an approach to analyzing a business case for a proposed project. A business case is a structured proposal for business improvement that functions as a decision package for organizational decision-makers. (ISM Glossary, 2006.) The business case should include the reasons for the proposed project, the estimated costs, expected benefits, an analysis of alternatives to the project and the expected risks.
5.0 Alternative analysis -This is the part of a business case analysis• that analyzes the various alternatives to a proposed project.
6.0 Project feasibility analysis -This is a preliminary analysis to determine the feasibility of a proposed project in order to be approved. One area of the feasibility analysis would include the financial evaluation of the proposed project using such tools as net present value, internal rate of return and payback period calculations.
6.1 Net present value (NPV), internal rate of return (IRR), payback period - NPV analysis is a capital budgeting technique used to equate the discounted cash flows against the initial investment for the project. (Kerzner, 2006.)
IRR analysis is a capital budgeting technique that calculates the discount rate that equates the discounted cash flows of the project with the "initial investment. (Kerzner, 2006.)
Payback period analysis is the period of time needed for a project to recover its initial investment, based on the cash inflows. (Kerzner, 2006.)
7.0 Stakeholder analysis -This is an analysis of the stakeholders involved in a proposed project. Stakeholders may include customers, sponsors, project team members, and anybody else who may have an interest in the outcome of the project.
Once the need or requirement has been identified and the project is selected, it is important that the organization develops a project charter, which formally authorizes the project, designates the project manager and project team and commits sufficient resources to the project effort.
8.0 Project charter- The project charter is the document that formally authorizes the formation of the project and provides the project manager with the authority needed to execute the project activities. (PMBOK, 2004.)
8.1 Project charter approval process -The project charter approval process is conducted as a result of the project alternative analysis and project selection process (PMBOK, 2004).The project charter is issued by the project sponsor, typically external to the project organization. The project sponsor should be high enough in the organization that is appropriate based on the project's funding.
2) Project planning These processes define project objectives and plan the course required to obtain the project's scope and objectives. (PMI, 2004.) For supply management related projects such as major procurement actions, project planning involves supply management activities such as procurement planning and solicitation planning.
A) Procurement planning process - Procurement planning involves the process of identifying which business needs can be best met by procuring products or services- outside the organization. This process involves determining whether to procure, how to procure, what to procure, how much to procure and when to procure. (Garrett and Rendon, 2005.) This process includes:
1.0 Solicitation planning and process- Solicitation planning involves the process of preparing the documents • needed to support the solicitation. This process involves documenting program requirements and identifying potential sources. (Garrett and Rendon, 2005.) This process includes:
• Determining contract type - Contracts are typically categorized by cost, fixed price and time and materials.
• Developing the invitation for bid (IFB), request for quote (RFQ) or request for proposal (RFP) -The solicitation documents are generally invitation for bid, request for quotation or request for proposal.
• Determining proposal evaluation criteria and contract award strategy - Evaluation criteria are those used to evaluate the supplier's bids or proposals. The contract award strategy includes lowest price/ technically acceptable, or other than the lowest priced bid, based on the evaluation criteria.
• Structuring contract terms and conditions -The terms and conditions refer to the clauses in the contract that govern the contractor's and buyer's obligations in performing the contract.
• Finalizing solicitation -Work breakdown structure (WBS) is a project management technique for defining and organizing the total scope of a project using a hierarchal tree structure. A well-designed WBS describes planned outcomes, not actions. Statement of work (SOW) outlines the specific services a contractor is expected to perform and is discussed below in 2.1.
2.0 Scope development -The requirement or scope of a project is a description of the work to be accomplished in the project. It describes the nature and extent of the project and outlines the conditions under which the work is to be performed.
2.1 Statement of work (SOW) -The SOW is that part of the solicitation documents that describes that part of the project that will be accomplished by the supplier. The SOW generally indicates the type, level and quality of service, as_ well as the time schedule required. See Task 1-A-1 for more information on SOW
3.0 Project team roles and responsibilities - Based on the SOW and the related work breakdown structure, the project team must be assigned specific roles and responsibilities for performing the project.
3.1 Responsibility assignment matrix (RAM) -The RAM is a tool used to assign project team members with specific roles and responsibilities with respect to the project effort. The RAM typically assigns project team members to specific sections of the project work breakdown structure (WBS).
4.0 Budget development -The budget is the cost estimate, broken down by cost categories, as well as the "WBS elements, for performing the activities of the project.
5.0 Schedule development -The schedule is a time phased plan for performing the activities of the project. The time-phased spending plan is a planned schedule for incurring the estimated costs associated with the project budget.
5.1 Critical path -The critical path is generally that path of the network of project activities that determines the length of the project schedule.
6.0 Risk management- Risk management is the process used by the project team for conducting risk planning, risk identification, risk analysis, risk response planning and risk monitoring and control, throughout the life of the project. See Exam 3, Section 3-B for a further discussion on risk.
6.1 Risk matrix -The risk matrix is a risk analysis tool for assessing a risk based on an event's probability of occurring and the impact of that risk event.
7.0 Organizational structures - Organizational structures for the project can include functional, matrix and projectized types of organizational structures.
7.1 Functional, matrix, projectized- Projects can be performed by entities organized in a functional organizational structure in which departments are based on functional areas (accounting, engineering, finance, supply management, marketing).
A matrixed organizational structure reflects project roles, responsibilities and authority shared by functional department members and project managers.
A projectized organizational structure has greater degrees of independences and authority, with the project manager having full authority over the project team members.
8.0 Project plan approval process -The project plan approval process involves the approval of all projects to include the project budget, schedule and performance requirement. The project plan establishes the project baseline, in terms of cost, schedule and performance objectives.
This project baseline will then be used to measure actual project progress against project planned estimates.
3) Project execution
The processes discussed in this section integrate people and resources to carry out the project effort. (PMI, 2004.) For supply management activities such as procurement and contracting, project execution involves implementing the supply management plans developed during project planning. This can involve executing the solicitation and source selection phase of the procurement process.
A) Selection process -The solicitation process involves obtaining information (bids and proposals) from the prospective suppliers on. how project needs can be met. (Garrett and Rendon, 2005.) This process includes:
• Conduct pre-proposal conference -A pre-proposal conference is typically conducted after the solicitation document is issued but before contractor proposals are received. This conference is used to answer any questions that interested offerors may have on the solicitation documents or the project.
• Conduct advertising, if applicable - Many organizations will advertise supply management project opportunities in order to have access to the latest technologies and market capabilities. Many government agencies (city, county, state and federal) are required by law to advertise some procurement opportunities.
• Develop and maintain qualified bidders list- Qualified bidders are those suppliers that have met a certain level of qualifications (quality, technical, etc.) as required by the buying organization.
1.0 Source selection process -The source selection process involves receiving bids or proposals and applying the proposal evaluation criteria to select a supplier. (Garrett and Rendon, 2005.) This process includes:
• Apply evaluation criteria to management, cost and technical bids or proposals.
• Evaluate the bids or proposals based on the evaluation criteria stated in the solicitation document.
• Negotiate with suppliers.
• Execute contract award strategy.
• Based on the proposal/bid evaluation, award the contract using the contract award strategy stated in the solicitation document.
2.0 Project team management- For supply management activities, project monitoring and control-• ling involves managing the project team. This involves ensuring proper communication flow among project team members as well as generating project performance reports for use in measuring project performance.
3.0 Change management - Change management as defined in the ISM Glossary involves making changes in a planned or systematic fashion through the use of methods, models and practices common to the multidisciplinary body of knowledge surrounding the task• of managing planned or unplanned change. Chang~ management involves managing the changes that occur during the project, and administering the contract with the contractor. Changes to the initial project plan and baseline (cost, schedule and performance) objectives may occur during the project activities. Ensuring a controlled and disciplined change management process during project monitoring and control is essential to project success. Change management includes ensuring a disciplined project change control process.
4) Project monitoring and control
These processes measure and monitor the project effort in order to identify variances from the project plan so that corrective actions can be implemented. (PMI, 2004.) This involves the contract administration phase of the procurement process.
A) Contract administration process -The contract administration process involves ensuring that each party's performance meets the contractual requirements. (Garrett and Rendon, 2005.) This process includes conduct pre-performance conference. A pre-performance conference is conducted after contract award but prior to contractor performance, as an activity to kick-off the project effort with the selected contractor. This is typically a project kick-off meeting to establish project protocols with the selected contractor.
1.0 Performance measurement tools -Earned value management, schedule analysis and budget analysis are used to measure the contractor's performance.
1.1 Earned value management, schedule analysis, budget analysis -. The earned value management (EVM) approach is an integrated method for assessing the s11:pplier's project effort in terms of meeting cost, schedule and performance objectives. EVM calculates cost variance, schedule variance and the amount of earned value, based on work performed, costs incurred and .schedule used. Using these metrics, EVM can the determine cost performance and schedule performance indices as well as estimate at completion.
Schedule analysis compares planned schedule with actual schedule status. The results of schedule analysis include a determination of schedule variance.
Budget analysis compares planned budget estimates with actual budget estimates. The results of budget analysis include a determination of cost variance.
2.0 Change •control processes -A project/ contract change control process is needed to control changes to the project baseline (cost, schedule and performance objectives) and contract SOW and terms and conditions (see change management above).
3.0 Risk monitoring process - Project management includes conducting risk management activities to monitor and control project risk. Risk monitoring and control use various techniques such as earned value management, schedule analysis and budget analysis These techniques are used to assess the results. Of executed risk responses, or the identification of any new or emerging project risks.
4.0 Performance management reporting – Performance management reporting involves managing and reporting the supplier's cost, schedule and performance results of the contract effort. This reporting is used to • monitor and control the project's progression through the project life cycle. At each project milestone review, the project status, as reported in the performance management reports, is used to assess the project performance and determine if the project should proceed to the next milestone.
4.1 Triple constraints (cost, schedule and performance) -The triple constraints of cost, schedule and performance are the parameters of the project objectives that must be managed by the project team. (PMBOK, 2004.) The project status is based on the project baseline, specifically the cost, schedule and performance requirements of the project. The cost, schedule and performance requirements constitute the triple constraints of the project.
4.2 Milestone reviews- Project milestones are used to review project progress at specific events in the project life cycle. Milestone reviews may be used to approve the advancement of the project into the next phase of the project.
5.0 Project management software programs - Complex projects typically need formal and disciplined project management processes. These processes are usually supplemented with the use of project management software programs to aid in the initiating, planning, execution, monitoring and controlling and closing of projects.
5) Project closure
Project closure processes formalize the acceptance of the project effort, either a product or service, and bring the project to an end. (PMI, 2004.) For supply management activities such as procurement and contracting, project closing involves formally closing the project activities related to the contract, and documenting the project and contract files to reflect the project results. This involves conducting contract closeout activities.
A) Contract closeout processes.- Contract closeout is the process of verifying that all administrative matters are concluded on a contract that is otherwise physically complete. (Garrett and Rendon, 2005.) This process includes:
1.0 Property dispositions process- Projects may involve the use of property and equipment from other organizations. Project closure activities include the disposition of project property in accordance With organizational or contractual requirements.
2.0 Final product/ service acceptance - Final product/service acceptance includes the buying organization's processes and documentation related to the receipt and final acceptance of the contractor's products and services, as •specified in the contract.
3.0 Final payment process - Final payment process includes the buying organization's processes and documentation related to executing the final payment for the contractor's products and services, as specific in the seller's invoice and the contract.
B) Best practice and lessons learned identification -A database of project and contract best practices (what worked well) and lessons learned (what did not work well) should be established to help the organization plan and manage future projects and to improve project management processes.
C) Post project audit procedure -A project audit is typically conducted to assess the completed project in terms of project methods, procedures, records, properties, budgets, actual costs and contractor performance.