Vice president’s comments on cost and schedule variance
The concerns of Spokane’s vice president were valid because the cost and schedule variances had gone up between the second and the third month. The total cost variances for all the work packages in the second month were $14,000, a figure that went up $25,000 in the third month, reflecting a -78% surge in the total cost variances. Also, the scheduled variances indicated by the vice president were correct, as it showed that the period between the second and the third month experienced a 45% slippage on schedules. However, the information on the table is not sufficient to determine the total cost and schedule overrun. To be able to estimate the total overrun, one needs the data on the total packages, as well as a smoothened record of the variances in the first three months.
The information the president failed to analyze
The vice president for Spokane failed to factor in the aspects of cost and scheduled performance index in arriving at the total cost and schedule overrun for the project. The understanding is that, for one to determine the total overrun, the performance index is used to peg the estimated cost on the general trend of variances. Though the data given is not enough for determining the project variance indices (both scheduled and cost variances), a rough estimate using the numbers in the second and third month projects that total cost overrun in the course of the whole project would be 16%, using the cost performance index for the second month. (Dwivedi, 2016).
Additional information on status report
The data for the first month would help the vice president to make a judgment on the possible causes of the variances in the project. Also, additional notes on the jump in variances for the work packages would help the vice president to understand the reasons behind the variances. For instance, for work package D, the earned value of the project was within limits, meaning that a lot was being achieved about the costs incurred, but the schedule variances were very high. Notes explaining why a lot was of value was earned with very little work being done would open up the manager to the complexities of the project.
Franklin electronics and their understanding of earned value management
Going by the way, Franklin Electronics missed monthly targets it would be very easy to say that they did not understand earned value management. The fact that they had submitted the lowest bid on the project and the pressure the actual costs were having on the earned values shows the failure of the company to make scientific estimates. At the current rate of variances, the contractor will end up losing money on the project, because the margins are very minimal.
Spokane Industries and project management
The response by the Spokane’s vice president on the schedule and cost variances and the guess on the total cost and schedule overrun shows a lack of deep understanding of project management. The focus should have been on the reasons behind slow execution, and a revisionist analysis of the cost estimates, and the reasons why the project was stalling. In addition to the rough guesses on cost and schedule overruns, Spokane should have adopted a collaborative approach, given that both companies were experimenting with the new method of project management.
Proper earned value management as replacement for interchange
Earned value management provides an opportunity for efficient project management and reduces the amount of time spent o discussions in interchange meetings. Detailed progress reports show direct comparisons between the project schedules and actual delivery, making the parties in the contract to keep track of the challenges and ways to improve the implementation process. Also, earned value management exerts pressure on the management to employ competent workers so as to meet the demands of clients. In the interchange meetings method, a lot of facts and realities get lost in the discussions, further frustrating the implementation process.
Franklin Electronics manager and what he should say in his defense
The product manager for Franklin Electronics can rest in the knowledge that the first three months were his first interactions with the earned value project management and that with time he will encourage his team members to fast track progress with the aim of reconciling planned schedules and values with earned value and actual costs. He would be well positioned if he accepted his failures and sought the cooperation of Spokane in ensuring that the project is delivered on schedule (Humphreys, 2016).
Proposal
Six Sigma process
The six sigma process is an approach used to enhance project management by focusing on the needs of the clients in the production process. The approach reiterates the importance of having the needs of the client in consideration when implementing the projects. That creates synergy between the players on either end of the bargain, by maximizing processes and production techniques in line with customer expectations on the product. The project is enhanced by following six key tenets as discussed in the following paragraphs.
First, the main feature in the sigma process is the reliance on processes and systemized activities. The understanding is that efficient processes result in high-quality products that satisfy the needs of customers. Secondly, the need to focus on customer needs comes in as a very important feature of the process, considering that customers have vague expectations that need to be translated into measurable actions. Driving projects on evidence serves as a reminder of the importance of data on project management. Decisions pinned on data are more reliable and consistent with the systemized processes, and more likely to produce results that were targeted by the action plans derived from actual needs of the project implementation (Mitchell, Ramamurthy, & Nagel, 2013).
Other key features in the Sigma process include rigorous project methodology, a feature that concentrates a lot of energy on the definition of scopes, determination of inputs and their relations with outputs, checking overtones in the production process as well as improving in areas that would bring better results in the process. The Sigma process insists on a project based analysis that aims at maximizing returns by reducing wastage and ensuring that cycles are compressed as much as possible. The need for reduction of variances oscillates around team set ups, and, hence; makes strong teams fundamental units for successful project management and production implementation (Gray & Anantatmula, 2009).
Problem with Franklin Electronics
The main problem with the Spokane contract on a labor-intensive product with Franklin Electronics is the fact that the companies were trying a new project management approach for the first time. As noted in the Sigma process, product development processes depend on efficiency and synergies between teams to succeed. Also, the ability to translate customer needs to deliverables does not come easy, and managers need to be at their best to get it right on the first attempt.
Successful implementation depends on the learning curve, where managers and product developers learn from their systems and real-time experiences to improve the efficiency of the project. For instance, knowing the actual costs of some of the packages in the project would involve trials. However, the projected magnitude does not allow for sufficient trials, a factor that contributes to the high variances between estimates and actual costs.
Cause and effect
The main cause of the problems in the contract, the missed monthly targets, and incomplete reports is the fact that the parties did not have prior experience on the use of earned value project management. That made it difficult for the contractor to make a thorough bid that would secure Franklin Electronics on the implementation costs and real schedules. The conflict between attaining targets and making margins on the contract could be the main issue affecting the slow execution process and the lack of understanding of the earned value management system does not help matters.
While project forecasting is one of the key benefits of using the earned value management approach, erring on those forecasts can be detrimental to the project. Labor estimates can pose a challenge, given the difficulties of assigning duties on a project, compared with the reality of finding that the duties were not properly quantified. For the product manager at Franklin, missing all the targets in the first three months shows a conservative evaluation of the project while the tantrum from the Spokane vice president shows the over expectations of the customers (Garrone, Melacini, & Perego, 2016).
The effect of the issues above is a stalled project, budgetary pressures, and missed estimates. Schedule and cost variances, as noted in the project, are a sign of improper planning while the little margins show that the contractor underestimated the costs of the project. The worries of a complaining client would throw the relationship between the two companies into chaos, and successful collaboration may prove difficult in future. On the larger scale, missing targets of the project can have damaging effects on the plans of the client, as missed targets have the ripple effects of missed product roll outs to the market, a factor that may give competitors a competitive advantage.
Solution to the Franklin Electronics problem
The solution would be a rearranged contract that factors the problems faced in the implementation of the project. First, the parties in the contract should meet and agree on new project schedules and milestones with consideration of the budget. If Franklin has to deliver the products in good time, then it will also need to get a budgetary reallocation from Spokane. However, if such a deal cannot be worked out, then it means that the time provisions for the project should be revised to reflect the new realities of implementation (Sigma, 2015).
The interaction between the two companies should be increased through communication channels that make use of real-time processes and audits to improve the project management. Comparing requirements with the planned values would contribute to a better understanding of the project, and bring out innovativeness that would make the processes better and more responsive to client expectations. Other solutions would be compressing the cycles to prevent the scope of the project from creeping and making use of data from similar projects to estimate the rates of success and chances of failure (Fontaine, 2000).
New approach to tracking earned value and scope
Breaking down a project into activities makes it easy to measure the value of each activity at any given moment as well as estimate the minimum time that can be taken to achieve targets. That new approach would reduce the pressure of attaining certain targets at any given time as well as reduce the work packages and the time used in managing the project. Focusing on the deliverables helps a business to avoid periodical distractions coming from monthly reports.
New schedule and timeline
The project is operating with an 84% schedule performance index. That means the targets will not be achieved within the next 18 months as planned, hence the management needs an extension by a period of three months to complete the tasks. The recommended approach that will make use of activities instead of time periods to report on the project can help in achieving efficiency within the shortest time possible, by ensuring that there is a constant conversation on the implementation methods and key milestones.
Recommendations
Franklin Electronics can make the use of the project management principles to pass the knowledge of executing projects to all the employees. Analyzing data from product development, evaluating concepts like labor optimization and using rigorous methods to fast check processes can be valuable to the senior managers. An earned value management system can improve the overall project forecasting enables efficient communication and encourages teamwork. The new approaches would infuse intelligent methods into the decision making processes by the management and increase chances of success in future projects.
Discussing Earned Value Management system
The earned value management system creates value for the organization by providing an easy way to track progress and determine problem areas. Organizations using this approach benefit from reduced workload as well as increased productivity per employee. The new effectiveness boosts the morale of employees, promotes teamwork as well as an understanding of the product development processes.
Communicating the Earned Value Management system to the organization
The easiest way to implement the value system is to use it in as many projects as possible. The employees will learn on the job, and after a certain period, they will be experienced enough to understand project objectives from the managerial level. Holding workshops and seminars within the organization can help in creating the opinions of the employees of the new system while rewarding the best performers in the new system can encourage other employees to study the approach.
Reference
Dwivedi, U. (2016). Earned value management explained. Retrieved September 5, 2016, from https://www.projectsmart.co.uk/earned-value-management-explained.php
Fontaine, D. (2000). Earned value management symposium a success. INSIGHT, 2(4), 31–31. doi:10.1002/inst.20002431
Garrone, P., Melacini, M., & Perego, A. (2016). Reducing food waste in food manufacturing companies. Journal of Cleaner Production, 137, 1076–1085. doi:10.1016/j.jclepro.2016.07.145
Gray, J., & Anantatmula, V. (2009). Managing Six Sigma projects through the integration of Six Sigma and project management processes. International Journal of Six Sigma and Competitive Advantage, 5(2), 127. doi:10.1504/ijssca.2009.025165
Humphreys. (2016). Basic concepts of earned value management (EVM). Retrieved September 5, 2016, from https://www.humphreys-assoc.com/evms/basic-concepts-earned-value- management-evm-ta-a-74.html
Mitchell, R., Ramamurthy, A., & Nagel, R. (2013). Capital improvement program (CIP) cost & schedule management & tracking – process, systems, & people approach. Proceedings of the Water Environment Federation, 2013(8), 6279–6290. doi:10.2175/193864713813716471
Sigma (2015). Helping clients to optimize the manufacturing process. Retrieved from http://www.sigmaprocess.ca/
