Marketing with an un-safe product

An important phrase, as written by Kotler & Armstrong (2010) is “Responsible marketers must consider whether their actions are sustainable in the longer run”. When faced with the dilemma of having marketed an unsafe product, you will need to consider the fact that if the product is already on the market and it is known to be unsafe – it is probably safe to assume that the fact that it is an unsafe product will come to surface and, in my opinion,  the aim should be to cope with the bad press in a way that curves the negative image and hopefully builds a sustainable result.

Kotler & Armstrong (2010, p.609) outline this exact dilemma with it’s example on McDonalds and the bad press received due to their food being cooked in oils filled with trans-fats. McDonalds in turn has found a new source of food oil that is trans-fat free and does not sacrifice the taste of their french-fries (Kotler & Armstrong, 2010). Along with this they have also released additional product lines that cater for healthy eating (salads, etc).

While we also have the example as outlined by Kotler & Armstrong (2010, p. 613) of Hardee’s, a fast food chain that, at the time of a particularly health conscious media age (with focus on obesity and fast foods), released a new, incredibly high in calories (1410 calories) burger – with the attitude that their target consumer is able to choose between right and wrong; I personally do not see this as being a wiser decision than that of McDonalds.

The development of the safer alternative should be marketed well, and if the “unsafe” product is not a consumable product, I would consider allocating some of the budget towards allowing a discounted or free trade in for owners of the older models. With the devleopment of the safer, newer alternative, improvements on its eco-friendliness above and beyond it’s safety improvement should also be considered; if not, I would also consider the option of going the CSR (corporate social responsibility) route and donating a percentage of profits to a cause. While this may hurt current profits, the positive and honest image portrayed as “caring for the consumer” should aide in improving long term relationships.

I do not think that trying to ignore the fact that an unsafe product was released to the market would be beneficial in the long term, as that comes across as being un-trustworthy/underhanded – and trust is an important facet of any relationship, which definitely includes business.

References

Kotler, P. & Armstrong, G. (2010) Principles of Marketing. 13th (Global) ed. Boston: Pearson Education, Inc.

Competition in the Global Market

There are a number of factors influencing todays global competition, both positive and negative. The global market has expanded tremendously in the past 20 odd years, according to Kotler & Armstrong (2010, p.578) the number of multinational corporations has grown from 30 000 to over 60 000.

One of the factors that contribute to the global competition is that of foreign legislation and taxes on entering their markets. A particularly extreme example is outlined by Kotler & Armstrong (2010, p.580) where China has imposed restrictions on foreign entities opening banking institutions in China. The Chinese government has put requirements on foreign entities only to have US$ 50 million in operating capital each year per branch as well as limiting the number of branches that are opened to one per year. These limitations have made the idea of expanding into the Chinese banking industry something that is not feasible for a foreign entity.

On the contrary to the above situation which is a negative implication on globalising one’s business, there are also a number of trade agreements that encourage cross-border trade by lowering or removing duties/taxes on import and export or the entry of foreign business into a local sector.

However, these are not considered positive by all; Global Exchange (2011) describes their fight against “bi-lateral trade agreements” as a move towards the vision of “global economic integration that values worker’s rights, fair trade, and environmental protection over corporate profits”. The trade agreements currently in place according to Global Exchange (2011) are:

NAFTA – North American Free Trade Agreement which includes Canada, Mexico and the United States

FTAA – Free Trade Area of the Americas; this is planned to expand NAFTA to include a new zone from Argentina to Alaska.

CAFTA – Central American Free Trade Agreement. This is the same model as NAFTA but for Central America.

AFTA – As above but for the Andean nations of South America.

With organizations trying to stop the free trade agreements due to their claims on job losses and a negative impact on the economy this also increases the risks of moving towards globalization, if the free trade zones are discontinued many globalized businesses will be adversely affected.

Another free trade zone is that of the European Union (EU), Kotler & Armstrong (2010) have described this union as reducing the barriers between member countries on products, services, finances and labour. Another positive movement for the EU has been the recent adoption of the Euro currency across numerous EU member states.

Other factors covered by Kotler & Armstrong (2010) are those of cultural barriers. Cultural barriers include language barriers and there have been a number of cultural and language faux pas from even the largest companies, for example: Nike’s depiction of a famous basketball player “crushing” a number of Chinese cultural figures (Kotler & Armstrong, 2010, p.585).

It is important to understand all of the markets you are entering into, cultural borders and language borders are often very important and firms that include this in their market research and product strategy are definitely intensifying the competition (such as LG distributing their brightly coloured fridges to the Indian public, Kotler & Armstrong (2010)).

References

Global Exchange (2011) Global Trade Agreements [Online]. Available from:  HYPERLINK “http://www.globalexchange.org/campaigns/globaltrade/”http://www.globalexchange.org/campaigns/globaltrade/ (Accessed: 16 July 2011).

Kotler, P. & Armstrong, G. (2010) Principles of Marketing. 13th (Global) ed. Boston: Pearson Education, Inc.

The Marketing Mix

Firstly, I would like to summarise what the Marketing Mix is, as explained by Kotler & Armstring (2010, p.36) “marketing mix: the set of marketing tools the form uses to implement its marketing strategy”. The tools that make up the marketing mix can be categorised into 4 major groups, also known as the “4 P’s of Marketing”, these are (Kotler & Armstrong, 2010):

  1. Product: This is the service/product/item that the firm is marketing to fulfill a specific need.
  2. Price: The value that the firm will be charging for the “Product”.
  3. Place: How will the firm make the “Product” available to it’s target consumers.
  4. Promotion: The method in which the firm will convince the target consumers to purchase the “Product”, what “validates” the purchase of this product?

The Marketing Mix is driven by the Marketing Strategy, as explained by Kotler & Armstrong (2010, p.72). The Marketing Strategy consists of identifying the target consumer/demographic for the product – this is known as “Market Segmentation” in which different groups of consumers are identified according to their needs (Kotler & Armstrong, 2010). Once the Market Segmentation has been performed the firm must perform Market Targeting; in which the Market Segments are evaluated and the most attractive market segments are identified. The final step is to decide on the Positioning. This is where the firm aims to position their product in a desirable place so that it will appeal to the target consumers needs (Kotler & Armstrong, 2010).

As we can more clearly see now, after the marketing strategy has been done the marketing mix is a much clearer objective to achieve; we, in essence, have roughly defined, or at least researched for grounds (price is often based on place), all 4 of our P’s. Boulding et al (1994) have researched the possibilities of advertising, promotion and sales force achieving differentiation in marketing; in their paper they introduce two conflicting views

  1. Marketing communications themselves “induce differentiation”, which in turn reduces price competition and raises the barriers to entry (introduced by Bain, 1956). This is said to be consistent with the belief that communications themselves help position and enhance a product and its features (Boulding et al, 1994).
  2. Marketing communications reduce the “research costs” of the consumer (between different brands) and therefore reduces differentiation (introduced by Nelson, 1974 – Boulding et al, 1994). This is said to curve the market towards price comparisons being the basis for product review.

Boulding et al’s (1994) research came to the conclusion that the uniqueness of your communications is what defines the success of the marketing strategy. Based on your marketing mix, if your price is a common ground with competitors, then it is not unique and should not be heavily conveyed otherwise differentiation will not be achieved. However, price is something that can definitely create differentiation if your prices are lower than your competitors. Boulding et al (1994) also concluded from their research that for firms pricing above the industry average, current promotion activities decreased future differentiation while increased future price competition whereas the current  sales activities increased future differentiation while they decreased future price competition.

Simply said, adjusting each of the 4 P’s to make your specific mix unique is the key to gaining differentiation, but, as Boulding et al (1994) have pointed out, the long term reactions to the current actions must be considered, not just the immediate spikes/drops in demand.

References

Boulding, W., Lee, E. & Staelin, R. (1994) ‘Mastering the mix: Do advertising, promotion, and sales force activities lead to differentiation?’, Journal of Marketing Research (JMR), 31, 2, pp. 159-172, EBSCOhost [Online]. Available from: http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=9411112937&site=eds-live&scope=site (Accessed: 9 July 2011).

Kotler, P. & Armstrong, G. (2010) Principles of Marketing. 13th (Global) ed. Boston: Pearson Education, Inc.

How cultural environment impacts the marketing of clothing

I would like to discuss how the cultural environment impacts the marketing of clothing.

Clothing is a large aspect of fashion and the fashion industry is one of the most prominent industries in the world, I think we can all agree on that. Although there are many different cultures in the world, we tend to generalise the global differences to eastern culture and western culture. Eastern culture has always tended to being the more modest, or conservative, when it comes to clothing while the West is renound for the “less is more” look amongst women mainly, and has a wide range of predominantly casual attire for men (of course, this is a vast generalisation).

Gökarıksel (2009) discusses in a paper on the Turkish fasion industry about how, after a fashion show, the designer (Tebkir, Turkey’s leading producer of women’s Islamic attire) was criticised by local tabloids for “seducing” the consumers “through the use of young, attractive models” (Gökarıksel, 2009). Gökarıksel goes on to talk about how many Islamic scholars and journalists have written about how “veiling-fashion” goes against the Islamic principles of “israf” (waste) and “frown upon the display involved in modelling and fashion”.

Another good example is in Brazil. Artigas & Calicchio (2007) did a study on the Brazillian consumer with regards to purchasing of clothing. Brazil poses itself a potential “dream” to any retailer according to Artigas & Colicchio (2007), but their study has shown that Brazillians are far more likely to buy from local suppliers than multinational “big brand suppliers”. In their study, Artigas & Colicchio (2007) asked Brazillian consumers whether they trusted local brands more than international and 81% of the respondents agreed that local is better, as well as being of a higher quality. Another question posed was whether or not they were ok with purchasing on credit, more than 60% of the respondents were in agreement that credit purchases are acceptablel; this contrasts to 30% in India, 24% in Russia and 13% in China (Artigas & Colicchio, 2007).

Another angle to look at is the culture that goes with a brand itself. Thinking locally, in South Africa (where I live), we have a number of brands that are themselves associated with a certain economic demographic (as described by Kotler & Armstrong, 2010, p41 in their Best Buy example). For example, we have PEP stores which is one of the lowest price clothing retailers and caters to the low-income consumers whereas there are shops like Levi’s which is more middle class and Diesel Clothing or Fabiani which caters to the high earning consumers.

Through all of these examples that have been outlined above, marketing the clothing products will potentially be completely different. Marketing to an Islamic, female culture will be very different than marketing to a high-incomed Fabiani customer in South Africa, which will also contrast when marketing to a credit-friendly, locally loyal consumer in Brazil. Whether or not the clothes are in-fact the same style and the same brand, the marketing of them must be carefully based around the culture and demographic; the “Place” P in the 4 P’s of Marketing – Product, price, place and promotion (Kotler & Armstrong, 2010, p.36).

References

Artigas, M, & Calicchio, N 2007, ‘Brazil: Fashion conscious, credit ready’, McKinsey Quarterly, 4, pp. 76-79, EBSCOhost [Online]. Available from: http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=27602588&site=ehost-live&scope=site (Accessed: 9 July 2011).

Gökarıksel, B. (2009) ‘New transnational geographies of Islamism, capitalism and subjectivity: the veiling-fashion industry in Turkey’, Area Mar2009, 41 (1), pp.6-13, EBSCOhost [Online]. Available from: http://search.ebscohost.com/login.aspx?direct=true&db=s3h&AN=36218720&site=ehost-live&scope=site (Accessed: 9 July 2011).

Kotler, P. & Armstrong, G. (2010) Principles of Marketing. 13th (Global) ed. Boston: Pearson Education, Inc.

The JIT / Just In Time Technique

JIT or Just-in-Time is focused on rapid throughput as well as reducing inventory to provide improvements on operations. JIT provides “lean operations” that supply or receive only the materials needed, only at the time they are needed (Heizer & Render, 2009).

The techniques involved in JIT are outlined by Heizer & Render (2009) and can be outlined as follows:

1)     Suppliers – JIT involves reducing the number of vendors and focuses on good relationships between suppliers. Focused on quality products and making sure that goods are delivered when needed.

2)     Layout – JIT focuses on maximising usage of space. By grouping similar products together you can ensure a larger amount of production gets done in a smaller space (aided by machinery capable of doing tasks for more than one product). JIT also focuses on reducing the distance required for transportation of products/materials therefore the requirement for storage is also reduced (also due to the fact that JIT aims to reduce inventories to only what is required).

3)     Inventories – As mentioned above, JIT aims to reduce the amount of inventories on hand (ideally eradicating inventory all together except for what is needed to fulfil the current demand). This includes producing in smaller lot sizes thus allowing production cycles to be shorter.

4)     Scheduling – JIT techniques make sure that the schedules are communicated across all suppliers and focuses on performing tasks exactly to their required scheduling time. Using the “kanban” technique is also a feature of JIT, this is where inventories are moved through the process on a pull basis (in other words, only when they are needed by the next phase/step, will they be “pullded” to the next step).

5)     Preventative Maintenance – by maintaining systems and checking on systems on a daily basis, future problems are caught before they get to the point where they become serious.

6)     Quality Production – By making quality a top priority, JIT aims to make sure all suppliers, processes and personnel are of the highest quality therefore eliminating the chances of quality control issues.

7)     Employee Empowerment – By empowering employees to do multiple functions / “jobs” within the business, this allows for fewer employees as well as more flexible employees being able to perform multiple tasks.

8)     Commitment – All aspects of the organisation must be committed to the JIT process. Management, employees and suppliers should all be supported and committed to their functions within the process.

The diagram by Heizer and Render (2009, p.539) shows that by following these guidelines for JIT, assets are freed up due to the rapid movement, waste is decreased because of the high quality and due to the reduced costs involved in the whole process the savings can be passed on to the consumer. This, of course, results in a competitive advantage due to higher quality being achieved at lower costs and at faster times.

References

Heizer, J. & Render, B. (2009) Operations Management. Ninth Edition. Prentice Hall: New Jersey.

Material Requirements Planning (MRP), what is it and how do we perform it optimally?

MRP (material requirements planning) is a technique of assessing dependent demand by using a BOM (bill of material), inventory, expected receipts and a MPS (master production schedule) to determine the material requirements (Heizer & Render, 2009).

When we say “dependent” demand, we are referring to the production of an item that is dependent on certain parts. For example, the production of a motor car is dependent on parts like the engine, wheels, windows, body etc. Heizer and Render (2009) also note that, broadly speaking, “for any item for which a schedule can be established, dependent techniques should be used”.

In a paper by Anderson and Schroeder (1984) points out that MRP can and shouldn’t operate in isolation from the rest of the business (i.e. only in manufacturing). MRP Systems should expand to the other functional areas of a firm and information must flow freely between these areas.

The main functions included by Anderson and Schroeder (1994) include:

1)     Manufacturing
As we have discussed above the main focus behind MRP is on manufacturing. The MRP system is based on the type of product being manufactured, identified by using the Master Production Schedule and Bill of Materials (MPS and BOM). Manufacturing is the core process of developing the products.

2)     Engineering
The engineering function of the firm is where the BOM mentioned above comes from. Anderson and Schroeder use an example of a firm implementing MRP where the BOM from Engineering did not match up with the Manufacturing bills – It is important to make sure all data is correct and this is another reason why all areas of the firm should be involved in the system.

3)     Marketing
Marketing is important to MRP systems because this is where the main demand forecasts are coming from. As mentioned in Anderson and Schroeders (1994) example, marketing “provided the information on firm orders and a forecast for the system”.

4)     Finance
As we know the main point of just about any organisation is to maintain profitability and the MRP system is a tool used to optimise the materials required for production. Finance provides accurate reporting on the performance of the implemented MRP system.

5)     Personnel

At the heart of any organisation is its’ personnel. All personnel should be well educated in and understand the purpose of the MRP system.

Expanding on the last point, the study by Anderson and Schroeder (1994) outlined the implementation of an MRP system across two organisations; one successful and one not. The main reason for the unsuccessful implementation was the “degree of commitment to a system rather than to a concept” (Anderson & Schroeder, 1994).

Educating and training employees to understand the importance and exact steps and procedures involved in the MRP system is very important across the organisation as it affects all functions. 

References

Anderson, J. & Schroeder, R. (1994) ‘Getting Results from your MRP System’, Business Horizons, 27 (3), pp.57-64, ScienceDirect [Online]. DOI 10.1016/0007-6813(84)90028-4 (Accessed: 28 May 2011).

Heizer, J. & Render, B. (2009) Operations Management. Ninth Edition. Prentice Hall: New Jersey.

 

How does higher quality lead to lower costs?

The answer to how higher quality can lead to lowered costs may seem fairly obvious. To explain the details behind this idea we should look at the details behind quality. Heizer & Render (2009) outline the costs of quality, or rather the costs that can occur if you have poor quality, as follows:

  • Prevention costs – training your staff to perform their tasks better and having programs to educate staff on improving quality.
  • Appraisal costs – the costs of “quality testing” the products produced. These appraisals can include, but aren’t limited to: product testing, product/service inspectors, quality assurance labs etc.
  • Internal failure – this is when a product or service is produced and fails or is defective. The internal aspect is that this is when the defective/failed product is detected before delivery to the customers. The product/service then needs to be scrapped or reworked.
  • External costs – similar to the situation above, usually a defective product or part of a product which occurs after the sale of the product or service. The costs involved in recalling, refunding and/or replacing the product or service.

Heizer & Render (2009) go on to show an example of General Electric’s recall of 3.1 million dishwashers due to a defective part, this recall ended up costing GE more than the value of all the washing machines. Another example provided by Heizer & Render (2009) show how Mercedes Benz’ lack of focus on quality led to a $600 million cost to company spent on warranties for faulty parts in their vehicles in a single year.

Fortunate to the consumer and perhaps not so fortunate to the organisation is that products and services can and generally are required to carry some sort of warranty or guarantee (such as the Consumer Protection Acts in many different countries – Wikipedia, 2011). If products are faulty or defective then consumers will return products which need to be repaired or replaced. In the cases where a warranty/guarantee is not available the lower quality will potentially damage the reputation of the organisation, which can end up in lost return and future customers. Heizer & Render also point out that poor quality delivery can also result in injuries, lawsuits, and increasing government legislation (which can be costly if processes are required by law).

One of the popular methodologies behind quality management is Six Sigma, which has the goal of “flawless performance” (TechRepublic, 2003). Six Sigma was developed by Motorola in the 1980s to deal with consumer complaints and increasing competition. To outline the processes behind Six Sigma, very broadly, we can consider them as follows (Heizer & Render, 2009)

  • Define the purpose, scope and outputs and required processes. Maintaining the idea of the customers definition of quality
  • Measure processes and collect data on the processes.
  • Analyse the collected data and ensure the results are repeatable as well as reproducible.
  • Improve the processes by modifying and/or redesigning them
  • Control the new processes and maintain performance and quality levels.

–        DMAIC

Another popular quality assurance protocol is HACCP (Hazard Analysis & Critical Control Points) used in food safety (FDA, 2011) in countries like the US, UK and for certain food stores here in South Africa (eg: Woolworths). HACCP can be summarised as food quality management “through the analysis and control of biological, chemical and physical hazards from raw material production” (FDA, 2011). My personal experiences dealing with food stores using HACCP and food stores that don’t use HACCP are like night and day. The quality is unrivalled and I feel quite safe that I’m practically guaranteed (term is used lightly) good quality, unspoiled and unmarked foods when using a HACCP controlled food store. The benefits of this can be equated to those mentioned above – lower returns (of items), lawsuits and health hazards.

References

FDA (2011) Hazard Analysis & Critical Control Points (HACCP) [Online]. Available from: http://www.fda.gov/food/foodsafety/hazardanalysiscriticalcontrolpointshaccp/default.htm (Accessed: 21 May 2011).

Heizer, J. & Render, B. (2009) Operations Management. Ninth Edition. Prentice Hall: New Jersey.

TechRepublic (2003) Six Sigma: High Quality can lower costs and raise customer satisfaction [Online]. Available from: http://www.techrepublic.com/whitepapers/six-sigma-high-quality-can-lower-costs-and-raise-customer-satisfaction/95607 (Accessed: 21 May 2011).

Wikipedia (2011) Consumer protection [Online]. Available from: http://en.wikipedia.org/wiki/Consumer_protection (Accessed: 21 May 2011).

What are the roles of an Operations Manager in addressing the major aspects of quality?

OperationsManager.com (2010) explain the roles of an operations manager to “ensures smooth operation of various processes that contribute to the production of goods and services of an organization”. The following tasks, centred on managing the quality of the service the organisation is providing, are those that are required of an Operations Manager:

  • Ensuring that the tools used to produce goods and/or services are acceptable and are capable of delivering the required quality of service that is acceptable.
  • Liaising with the Quality Assurance personnel to maintain positive feedback on the quality of the produced service or goods from the clients.
  • Assuring that quality tools and equipment are bought/maintained according with the allocated budgets.
  • Managing the support services of the organisation to ensure the most efficient management of support. For example; making sure high quality servers are purchased to store large amounts of confidential data in the most secure manner.
  • Management of any third party relationships the organisation has. Making sure that the agreements with the third parties are sound and that the third parties are performing their duties to the quality expected, as well as keeping to the required procedure standards of the organisation to maintain the highest quality possible.

The Open University (n.d.) explains that “decision making is a central role of all operations managers”. The decisions that the operations manager are involved in are in the design, management and improvement of the operations of the organisation; all of these are directly related to the quality of the service or goods that the organisation provide. If the ops manager makes a poor decision on improving services – the quality that was attained prior to improvements could fall and potentially drive away potential and existing customers, the same goes for the design of a new product/service. If the management of operations are lacking then this could also result in poor service delivery (lower quality).

Heizer & Render (2009) explain the importance of forecasting by the use of forecasting metrics. An operations manager may use the forecasting tools to predict future patterns in service delivery requirements by using trend projections based on historical data (Heizer & Render, 2009). With these forecasting models the operations manager can pre-empt quiet or busy periods (for example: shopping spikes during Christmas holidays) thus ensuring the required resources are available to cope with the demand or lack thereof while maintaining a profitable operation.  Heizer & Render (2009) also point out that these forecast methodologies are not perfect and should always be monitored and maintained according with “new” historical data.

In summary and conclusion the roles that an operations manager play in addressing the major aspects of quality is comparable with their job function as a whole; they must ensure processes are kept to the required quality for the organisation while maintaining a profitable and manageable operation.

References

Heizer, J. & Render, B. (2009) Operations Management. Ninth Edition. Prentice Hall: New Jersey.

OperationsManager.com (2010) Operations Manager job description: daily tasks, roles, duties and responsibilities [Online]. Available from: http://www.operationsmanager.com/operations-manager-roles-in-the-company/jobs-roles-duties-and-responsibilities/ (Accessed: 21 May 2011).

The Open University (n.d.) The role of the operations manager [Online]. Available from: http://openlearn.open.ac.uk/mod/oucontent/view.php?id=397333&section=2.3 (Accessed: 21 May 2011).

When is the Objective Function more important than the Constraints, and vice versa?

Let’s start by identifying the two parts to this question, as explained by Heizer & Render (2009):

1)     Objective Function:  “A mathematical expression in linear programming that maximizes or minimizes some quantity (often profit or cost, but any goal may be used)”

2)     Constraints: “Restrictions that limit the degree to which a manager can pursue an objective”

Circumstances where the objective function is more important than the constraints:

A scenario where the objective function is more important can be where the objective is critical to the success of the project in the development phase. Heizer & Render’s (2009, p.591) example of “OM in Action” for Homart Development company illustrates such a situation (book not required, continue reading). For Homart to develop their new mall their objective of attaining 3 “anchor” stores is an important factor in the success of the mall. The anchor stores are the largest stores that will no doubt attract the most customers. It is based on these anchor stores that many other stores will decide to rent in the mall and where they will position themselves in relation to the types/positions of the anchor stores. If the objective function is to get 3 anchor stores as tenants and the constraints are the required square meters floor size and required monthly rental income then if a highly popular anchor store offers to be a tenant with a higher required floor size and a lower required rental, Homart may very well consider taking the offer due to the popularity/benefits of having that anchor store in their new mall.

To state this rule in general terms I would say that where the benefit of the objective outweighs the constraints, or the future success of the project relies upon the objective being met then the constraints may be overlooked.

Circumstances where the constraints are more important than the objective function:

A situation where I would consider the constraints being more important than the objective function would be where the constraints are a valuable commodity that has a limitation that can be considered not-optional. Referring to Heizer & Render (2009, p.599) in their example of Cohen Chemicals (book not required, continue reading) where the organisation had an inventory of highly perishable raw materials that had to be used within the next 30 days to avoid wastage. While there may be situations where wastage of inventory is not an option it should be made high priority to use the raw materials the organisation has already purchased; more so than achieving the objective. In this situation, I am assuming that the outstanding orders have a certain leeway in which production is able to extend beyond the deadline; whereas the deadline for the raw materials to perish is non-negotiable.

The above example can be generally explained as; where the project has constraints that constitute to a greater loss than if the objective is not fully met (eg: needing to get rid of existing stock/inventories).

 

References

Heizer, J. & Render, B. (2009) Operations Management. Ninth Edition. Prentice Hall: New Jersey.

 

Using network diagrams to define your critical path in Project Management and Project Planning

Firstly I would like to introduce the two methods that use the network diagrams to give us a critical path in project management/planning.

1)     Critical path method (CPM)

2)     Program evaluation and review technique (PERT)

The network diagrams are constructed by generally following the steps in project plan. These steps can be considered as:

1)     Breaking the tasks of a project down into a Work Breakdown Structure (WBS), which involves breaking down the project into “its major subcomponents (or tasks)” (Heizer & Render, 2009), followed by breaking down the major components into sub-components and further into activities in which detailed task lists can be defined.

2)     Drawing up a Gantt Chart which represents the tasks on a chart that represents the time each task will take along a timeline, also showing overlaps where tasks may be done simultaneously. This chart will give a good overview of the timeline of activities to complete the project (Heizer & Render, 2009). The Gantt chart is actually one of the 3 alternative options after step 1, but if time permits it may be useful to prepare a Gantt chart as well. The PERT and CPM charts have an advantage over the Gantt charts as they offer a view of the relationships between activities and resources (Heizer & Render, 2009).

3)     The second of the 3 options mentioned in point (2) is to draw up a CPM network. CPM was developed in 1957 by DuPont to address the challenges in shutting down and restarting chemical plants (NetMBA, n.d.). CPM represents tasks in a project as different nodes in a network and links them together based on the beginning and ending of a task (linking the ending of one task to the beginning of another) (NetMBA, n.d.).

4)     The third of the 3 options is the PERT chart. It was developed in the late 1950s for the U.S Navy (NetMBA, n.d.) and tackles the major downfall of the CPM. The PERT chart follows the same steps of the CPM above and is represented in the same graphical method (a network); but takes into consideration the effect of time variations on a projects tasks (NetMBA, n.d.).

The major difference between PERT and CPM is that CPM gives each task (node) only one time estimate and PERT gives each task (node) 3 different time estimates when drawing up the network diagram (optimistic time, most likely time, pessimistic time).

To construct these charts there are 6 main steps involved (NetMBA, 2009):

1)     Identify activities and milestones (i.e. point 1 above)

2)     Identify the proper sequence of each activity (which follows which, etc. could use a Gantt chart of this).

3)     Construct the network diagram.

4)     Mark the time estimates for each activity on the network nodes of the diagram

5)     Determine the critical path

6)     Update the charts as the project progresses..

The critical path can be explained as determining the longest activity path in the project diagram by adding together the amount of time it takes to complete the tasks which rely on each other’s start and finish dates (NetMBA, n.d.). The critical  path measures the full calendar length of a project from start to finish, if tasks outside of the critical path change their timelines (within limits) it should not affect the critical path (NetMBA, n.d). By identifying the critical path we can also identify the amount of time that other paths on the project network can be delayed by without affecting the timeline of the project, this is called the “slack time” (NetMBA, n.d.).

I think it is safe to say that the reason why it’s called the “critical” path is because of the fact that that specific path defines the length that the project is going to take, therefore it is the most important path to monitor.

References

Heizer, J. & Render, B. (2009) Operations Management. Ninth Edition. Prentice Hall: New Jersey.

NetMBA (n.d.) CPM – Critical Path Method [Online]. Available from: http://www.netmba.com/operations/project/cpm/ (Accessed: 14 May 2011).

NetMBA (n.d.) PERT [Online]. Available from: http://www.netmba.com/operations/project/pert/ (Accessed: 14 May 2011).