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INVENTORY MANAGEMENT Definitions  Inventory-physical resource that a firm holds in stock.

intent of selling it or transforming it into a more valuable state  Inventory System- set of policies and controls and monitors levels of inventory

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Speculative Lot Sizing or Cycle Mistakes

How to Measure Inventory  Average Aggregate Inventory Value: how much of the company’s total assets are invested in inventory?  Weeks of Supply  Inventory Turnover (Turns) Reasons Against Inventory  Non-value added costs  Opportunity cost  Complacency  Inventory deteriorates, becomes obsolete, lost, stolen, etc. Inventory Costs
Procurement costs Carrying costs • Capital (opportunity) costs • Inventory risk costs • Space costs • Inventory service costs Out-of-stock costs • Lost sales cost • Back-order cost

Zero Inventory?  Reducing amounts of raw materials and purchased parts and subassemblies by having suppliers deliver them directly.  Reducing the amount of works-in process by using justin-time production.  Reducing the amount of finished goods by shipping to markets as soon as possible. Reasons for Inventories  Improve customer service  Economies of purchasing & production  Transportation savings  Hedge against future  Unplanned shocks (labor strikes, natural disasters, surges in demand, etc.)  To maintain independence of supply chain

Order Timing : Reorder Point (ROP) When inventory is depleted to ROP, order replenishment of quantity EOQ ROP = D X LT D = Demand rate per period LT = lead time in periods

• Order processing • Shipping • Handling • Purchasing cost: c(x)= $100 + $5x • Mfg. cost: c(x)=$1,000 + $10x

Nature of Inventory  Quality - inventory can be a “buffer” against poor quality; conversely, low inventory levels may force high quality  Speed - location of inventory has gigantic effect on Dependent Demand speed  items are raw materials, component parts, or  Flexibility - location, level of anticipatory inventory both subassemblies that are used to produce a finished have effects product.  Cost - direct: purchasing, delivery, manufacturing  MRP systems indirect: holding, stockout. HR systems may promote this-3 year postings Micro Issues Functional Roles of Inventory  Order Quantity : Economic Order Quantity (EOQ)  Transit Q = 2DCo/Ch  Buffer D = annual demand  Seasonal Co = ordering/setup costs  Decoupling Ch = cost of holding one unit of inventory

Independent Demand  items are finished products or parts that are shipped as end items to customers.  Forecasting plays a critical role  Due to uncertainty- extra units must be carried in inventory

Quantity Discount 1. Write out the total cost equation 2. Solve EOQ at highest price and no discounts 3. If Qmin falls in a range with a lower price, recalculate EOQ assuming holding cost for that range. Call this Q2. 4. Evaluate the total cost equation at Q2 at the next highest price break point. OR Use a spreadsheet Periodic Review Method  Q-system - each stock item reordered at different times - complex, no economies of scope or common prod./transport runs  P-system - inventory levels for multiple stock items reviewed at same time - can be reordered together Classifying Inventory Items : ABC Classification (Pareto Principle)  A Items: very tight control, complete and accurate records, frequent review  B Items: less tightly controlled, good records, regular review  C Items: simplest controls possible, minimal records, large inventories, periodic review and reorder

production. VCR cassettes (they are ejected if inserted incorrectly). inkjet cartridges.’ Forms of Waste: • Overproduction • Waiting time • Transportation • Processing • Inventory • Motion • Product Defects Inventory as a Waste • Requires more storage space • Requires tracking and counting • Increases movement activity • Hides yield.only make and ship what is needed JIT Goals (throughout the supply chain) • Eliminate disruptions • Make the system flexible • Reduce setup times and lead times • Minimize inventory • Eliminate waste Waste Waste is ‘anything other than the minimum amount of equipment. which are absolutely essential to add value to the product.a form of stopping quality problems at their source) and Poka-Yoke(failproofing: Examples are gasoline nozzles. scrap. or purchases of stock are made only when it has been signaled that there is a need for product downstream  requires shorter order cycle time. not order givers • Classic Organizational View Service Level Achieved • Item fill rate (IFR): the probability of filling an order for 1 item from current stock • Weighted Average Fill Rate (WAFR): multiply IFR for each stock item on an order weighted by the ordering frequency for the item JUST-IN-TIME/LEAN PRODUCTION A repetitive production system in which the processing and movement of materials and goods occur just as they are needed! Pre-JIT: Traditional Mass Production • JIT Organization View Post-JIT: “Lean Production” Planning and Control Systems • “Small” JIT • Stable and level schedules – Mixed Model Scheduling • “Push” versus “Pull” . space. materials. etc) • Minimum setups Personnel and Organizational Elements • Workers as assets • Cross-trained workers • Greater responsibility at lower levels • Leaders as facilitators. and rework problems • Increases risk of loss from theft. often more frequent. damage. parts. lower volume orders  determine stock requirements to meet only most immediate planning period (usually about 3 weeks) Manufacturing planning and control Tighter coordination along the supply chain Goods are pulled along. and worker’s time. obsolescence Building Blocks of JIT • Product design  Standard parts  Modular design  Quality • Process design • Personnel and organizational elements Process Design • “Focused Factories” • Group Technology • Simplified layouts with little storage space • Jidoka (Stop everything when something goes wrong.on-hand) Response-Based System  replenishment.• Anticipatory Inventory Control  determine requirements by forecasting demand for the next production run or purchase  establish current on-hand quantities  add appropriate safety stock based on desired stock availability levels and uncertainty demand levels  determine how much new production or purchase needed (total needed .

Design or revise business process components to improve results. Empty box sent back. Assembly. Decide where to apply changes. Traditional engineering Short time to define the product Long time to design and redesign the product  Long overall design time Key to shorten the overall design time • define the product better • document the design process better  Shorter overall design time A. develop and implement product programs that meet predetermined objectives. • CHECK :.Analyze the differences to determine their cause. • Pain relief provided • Products and services • Product:-tangible items produced. Signal to pull another full box into Workcenter B. Testability.What something does not what something is – Began at General Electric Company during World War II. • DO :. Quality from engineering perspective To ensure quality.– –    o o o o Kanban Systems (Uses simple visual signals to control production) Examples: empty slot in hamburger chute empty space on floor kanban card Workcenter B uses parts produced by Workcenter A When a container is opened by Workcenter B. Maintenance . Traditional Product Development Cycle (PDCA) • PLAN :. people.Measure the results of the new processes and compare the results against the expected results to ascertain any differences. Producibility. DEFINITIONS OF QUALITY General – No single definition ISO 9000 . It allows for errors and redesigns to be discovered early in the design process when the project is still in a more abstract stage. services. Putting the Squeeze on Resources INTRODUCTION TO QUALITY Quality is a dynamic state associated with products. raw materials and component parts – Solution • Suitable replacements for skilled labor. its kanban card is removed and sent back to Workcenter A. The basic premises for concurrent engineering – all elements of a product’s life-cycle should be taken into careful consideration in the early design phases – The preceding design activities should all be occurring at the same time. Function :. y D T C X Implementing JIT = = = = = number of kanban cards demand per unit of time lead time container capacity fudge factor C. How Many Kanbans? Objective :The degree of compliance of a process or its outcome with a predetermined set of criteria. – Problem • Shortage of skilled labor. – Elements of a product’s life-cycle: Functionality.  Value can therefore be increased by either improving the function or reducing the cost.  Value in VE is defined as the ratio of function to cost. both product and process design should be done efficiently.Implement the new processes. environment. Concurrent Engineering is a product development process in which appropriate disciplines are committed to work interactively to conceive. raw material and components – Results achieved • Reduced costs and/or improved product quality Function ( s) Value  Cost Subjective : The level of perceived value reported by the person who benefits from a process or its outcome. Environmental impact. • Service :-refer to work done for clients or stakeholders that does not result in the creation of tangible deliverables. process that meets or exceeds customer expectation Quality measurement B. • ACT :. Disposal and recycling Value engineering (VE)  is a systematic method to improve the "value" of goods or products and services by using an examination of function. which are presumed essential to the ultimate value it provides • • Formulation of a medication approve. or concurrently.

Deming deadly disease 1. Assurance . Excessive medical costs for employee health care 7. accurate performance introduce variation.customer get all they asked for 10. End awarding business on the basis price tag. Create constancy of purpose towards improvement. Multiple suppliers mean variation between feedstocks. Juran – Fitness for use where fitness is always defined by the customer Frederick Smith – Performance to the standard expected by the customer – To the customer this means “ best value for money” – Example FEDEX Attributes of Product Quality (Garvin (1984) from Harvard University) 1. Excessive costs of warrantees Joseph M Juran • Based on three processes. Professionalism :. merit rating or annual review 4. he worked at Western Electric’s.productive in 5.Include every one in the company to accomplish the transformation.’ • The emphasis of his work is on . After World War II. Constantly improve the system :-Constantly strive to reduce variation. Institute training on the job :-If people are inadequately 1. 2. Service Reliability . because it prevents workers from acting in the as individuals. or smells.whether the service brings feelings of pleasure. Early in his career. 6. 12.Eliminate quotas for production.Eliminate exhortations for the workforce. etc. Lifespan before replacement. it has to be planned. Eliminate slogan :. Reliability -The probability a product functions over time (Measure of reliability: mean time to first failure) 4. 7. Build quality into the product in the first place. 3. Running a company on visible figures alone 6. (It is a subjective dimension of quality) 8. 11. and this will facilities and equipment. Lack of constancy of purpose 2. The latter is quota. 7. Break down barriers between departments :-the concept of the 'internal customer'. • Control versus breakthrough • Project-by-project improvement  W Edwards Deming 14 points for Management: 1. enjoyment. Put everybody to work :. Improve leadership :-Deming makes a distinction between leadership and mere supervision. tastes. Availability :. Emphasis on short-term profits 3. Deming went to Japan under government sponsorship to assist with a population census 9. During World War II. 3. Eliminate work standards :. Conformance-Conformance is the degree to which a product's design and operating characteristics meet established standards. competence. Institute education and self-improvement 14. 5. 2.the skill. etc. Serviceability-Serviceability is the speed. or satisfaction QUALITY THEORIES AND TOOLS William Edwards Demming     Deming is perhaps the best-known quality pioneer.– ISO = the International Organization for Standardization – ISO 9000 = Set of standards for quality management – Quality should be defined relative to a set of requirements Joseph M. His approach to quality was statistically based.Drive out fear :. Perceived Quality -Subjective perceptions based on brand are easily accessible or obtainable organization's best interests. competence. feels. Responsiveness . Attributes of Service Quality 6. rather than merely expect the workforce to do so. Completeness :. focus on the system morale. sounds.dependability. Instead. Replace short-term reaction with long-term planning.S. Evaluation of performance.physical elements of the service such as trained.and targetprovide prompt service. 4.the degree to which customers are treated the long term. Aesthetics-How a product looks.the willingness to help customers and 7. Tangibles . that each department serves not the management. defense industries to improve the quality of military items through statistical processes. and ease of repair. 10. but the other departments that use its outputs. Features -Extra items added to the performance which supplement their basic functioning 3. It encourages delivery of poor-quality goods. 6. * Pareto Law identified by Juran * Pareto Law was named according to Italian economist Vilfredo Pareto • Philosophy: ‘Quality does not happen by accident. based. 5. Performance . Remove barriers to pride :. completed on time 9.Management by fear is counter. Adopt the new philosophy :-The implication is that management should actually adopt his philosophy. Empathy . advertising. Pleasantness :. they will not all work the same way.product's primary operating characteristics. 2. or character expected of a professional 8.Remove barriers that rob people of pride of workmanship 13. Durability -It is a measure of product life. he worked with U.the ability to inspire trust and confidence 8. Timeliness :. Move towards a single supplier for any one item. Mobility of management 5.customers waiting time. Cease dependence on inspection to achieve quality. 4.

roughly 80% of the effects comes from 20% of the causes – It is first observed by the Italian economist Vilfredo Pareto that 80% of the land in Milan was owned by 20% of the population. 1 . • Believed that. • Juran’s beliefs on quality can be derived from: – management is largely responsible for quality – quality cannot be consistently improved unless the improvement is planned. Appraise conformance to standards 3. 3. Koura Ishikawa * Basic tool of quality 1. Quality control is the responsibility of all workers and all divisions 6. Quality planning – Identify who the customers are – Determine the needs of those customers – Translate those needs into our language – Develop a product that can respond to those needs – Optimize the product features so as to meet our needs and customer need 2. Pareto Charts. 1. “firms must make everyone responsible for statistical analysis and interpretation” to be successful Philip Crosby • Described by some as the ‘Father of Quality Circles’ and • Focuses on customer satisfaction as a measure of quality as a founder of the Japanese quality movement control . Set quality standards 2. – planned improvement must be specific and measurable • He defines quality as ‘fitness for use or purpose’ – It is suggested that this definition is better than conformance to specification’. Quality control – Prove that the process can produce the product under operating conditions with minimal inspection – Transfer the process to Operations. since a dangerous product could conform to all specifications but still be unfit for use. • The Pareto Principle p helps you realize that the majority of results come from a minority of inputs • Assertions – “Quality begins with education and ends with education” – “The first step in quality is to know the requirements of the customer” – “The ideal state of quality control is when inspections is no longer necessary” A Pareto chart is a type of chart that contains both bars and – “95% of problems in a company can be solved by the 7 a line graph. 95% of the problems in a company can be solved by the 7 tools of quality 11. not the symptoms 5. Scatter Diagrams. and the cumulative total is • Histograms. Top management must not show anger when facts are presented to subordinates 10. represented by the line Run Charts. Flow Charts/Process • It is used to identify the vital factors that are causing Maps. Act when standards are not met 4. The overall method of Feigenbaum can be reduced to four steps process 1. The first step in quality is to know the requirements of the customer 3. Quality improvement – Develop a process which is able to produce the product – Optimize the process Pareto Principle – is suggested by Juran and he named it after Italian economist Vilfredo Pareto – It states that. Put quality first and set your sights on long-term objectives 8. for many events. • an American quality control expert and businessman • He originated the approach to quality known as Total Quality Control (TQC) • Philosophy For quality improvement – all functions in an organization should be involved in the quality process – quality should be built into the product rather than failure being inspected out. Quality begins with education and ends with education 2. Control Charts most of the quality problems Armand Feigenbaum • Concentrating improvement efforts on these few will Wrote a TQC book and proposed a three step have a greater impact and be more cost effective than process for quality improvement: undirected efforts. Do not confuse the means with the objectives 7. Marketing is the entrance and exit of quality 9. The ideal state of quality control is when inspections is no longer necessary 4. Remove the root causes. Plan to make improvements • Commenced his career as a chemist. held a doctorate in engineering and was an emeritus professor at Tokyo University.– planning – organizational issues – management’s responsibility for quality – the need to set goals and targets for improvement • ‘Management controllable defects account for over 80% of the total quality problems’. Data without dispersion information are false data.Quality leadership 2.Quality technology 3. where individual values are represented in tools of quality(data analysis tools): descending order by bars. Cause and Effect Diagrams.Organizational commitment For quality improvement he outlined 19 steps of TQC with emphasis on organizational involvement.

Hold a zero‐defect day to let all employees realize that there has been a change 10. Trains all employees to actively carry out their part of the Q improvements 9. Establish a committee for zero defect program 8. among these: – Make it clear management is committed to Q – Form Q improvement teams with representatives from each department – Raise Q awareness among all staff • Identify the problem • Brain storm the causes of the problem • Classify the causes by common factors into categories • Use the fishbone diagram to illustrate the cause and effect Q improvement through Crosby’s 14 steps 1. etc. Fishbone Diagram – It is a graphical technique for grouping ideas about the causes of a given quality problem – It helps to identify both the primary and secondary causes of a problem – Procedure for developing the fishbone diagram: Two distinct processes with different centers. Take formal actions to correct problems identified through various steps 7. Establish quality councils to communicate on a regular basis.• Zero Defect (ZD) = ““Do it right first time Do time”” • Also introduced 14 steps to improve quality. cycle. From Q improvement teams with representatives from each department 3. Make it clear that management is committed to Q 2. Establish a committee for zero defect program 12. Determine how to measure where current and potential Q problem lie 4. Raise the Q awareness & personal concern of all employees 6. easily using run charts • Run chats can also be used to track improvements that have been put into place • An average line can be added to a run chart to observe movement of data away from the average Scatter plot • Scatter plot is used to investigate a possible relationship between two variables that relate to the same event • A straight line of best fit is often included • Scatter plots can be used to determine the type of relationships that occur in a process – Positive correlation – Negative correlation . Do it all over again. Encourage individuals to establish improvement goals for themselves and their groups 11. Evaluate the cost of Q and explain it use as a management Tool Histogram 5. Trains all employees to actively carry out their part of the Q improvements 13. Process is ill defined Run Chart • Run charts display process performance over time • It is easy to spot upward and downward trends. 14. Identify between the two processes.

non‐quantifiable variation. • Special causes can be identified using tests such as: – Data point falling outside the control limit – steadily increasing or decreasing data points – Several data points in one side of the center line – Fourteen or more points alternating up and down Six Sigma • Six Sigma is a business management strategy originally developed by Motorola. • Six Sigma seeks to improve the quality of process outputs by identifying and removing the causes of defects and minimizing variations using quality management tools. includes the following main sections: – Quality Management System – Management Responsibility – Resource Management – Product Realization – Measurement Analysis and Improvement Global Competitiveness The Global Outlook • Better quality products and services will ensure higher recognitions in terms of global competitiveness • International trade known no boundary but subject to customers choice and demand plus other factors like political matter. quantifiable variation in a system • "special‐causes" are unusual. All of us are customers • “Global competition is played out by different rules and different stakes at each level” C. competitiveness can be defined as the set of institutions. it is used in many sectors of industry.K. usually the average of all the samples plotted – Upper and lower statistical control limits that define the constraints of common cause variations – Performance data plotted over time • The basic rule of statistical process control is: Variation from common‐cause systems should be left to chance. Prahalad and Gary Hamel • Customers groups set their own quality of product that meet their need Some Advantages of ISO certification • Customers in Europe and in Asia request different quality – Ensure that the development.99966% of the products manufactured are statistically expected to be free of defects (3. • ISO 9001:2000.4 defects per million). integrity and competency of the national standardization and accreditation system – To safeguard the interest of Malaysia at a regional and international levels in the fields of standardization and accreditation. the requirement standard. of products and services – Make life simpler by providing solutions to common problems In Malaysia. and cleaner. • All control chart types have three basic components – A centerline . but special causes of variation should be identified and eliminated. develop and promote national standards – To manage the national accreditation schemes in accordance to the international practices – To maintain credibility. manufacturing and supply and different specification of products and services are becoming more efficient. – Disseminate innovation – Safeguard consumers and users in general. • Sigma rating is used to measure the defect rate of a manufacturing process • A six‐sigma process is one in which 99. not previously observed.Flow chart • Graphical representation of a process • Steps in a process are shown with symbolic shapes and the flow of the process is indicated with arrows connecting the symbols. safer • According to World Economic Forum (WEF) (2009). – Facilitate trade between countries and make it fairer policies and factors that determine the level of productivity – Provide governments with a technical base for health of a country safety and environmental legislation • The twelve pillars of competitiveness – Share technological advances and good management practice . ISO Certification ISO 9000 is a family of standards developed to provide a framework around which a quality management system can be effectively implemented. the department of standards Malaysia (DSM) is mandated by the y government of Malaysia to function as the National Standards Body (NSB) as well as National Accreditation Body (NAB) The Main Objectives of DSM are: – To promulgate. historical. • Flowcharts can help – See whether steps of a process are logical – Uncover miscommunication ( process problems) – define boundaries of a process – Develop common base knowledge about a process Control Chart • Control charts are used to identify “common‐cause” and “special‐cause” variations in a process • "common‐cause" is the usual.

– Based on consensus • It is employed to translate customer expectations. Organize groups in an affinity diagram Conclusion • QFD – Effective management tool – Customer expectations are used to drive design process or to drive improvement in service industries Advantages & Benefits • Orderly way of obtaining information & presenting it • Shorter product development cycle • Considerably reduced start‐up costs • Fewer engineering changes • Reduced chance of oversights during design process Benefits of QFD •Improves Customer Satisfaction – Creates focus on customer requirements – Uses competitive information effectively – Prioritizes resources – Identifies items that can be acted upon – Structures resident experience/information Quality Functions Deployment •Reduces Implementation Time • Quality function deployment (QFD) is a planning tool used – Decreases midstream design changes to fulfill customer expectations.Intel producing microprocessors to fit the explosion of graphic programs on the net at a faster rate than the competing microprocessor developer – Process planning – Production planning – Service industries • When an organization decides to implement QFD. – The team leader needs to ensure that the meetings are run in the most efficient manner and that the members are kept informed. that can – Identifies actions at interfaces deployed through: – Creates global view out of details – Product planning •Provides Documentation – Part development – Documents rationale for design . in – Creates communication at interfaces terms of engineering or technical characteristics. engineering. Phrase the objective. Record all responses 3. • There are two types of teams: – Designing a new product – Improving an existing product • Time and inter‐team communication are two very important things that each team must use to their fullest potential • Team meetings are very important in the QFD process. • Constructing an affinity diagram requires four simple steps: 1. – New solutions are needed to circumvent the more traditional ways of problems solving. marketing. the QFD team needs to process the information.g. the project manager and team members need to be able to commit a significant amount of time to it. R&D and employee and customers Projection of customers future needs .e. especially in the early stages. the faster they learn and become productive employees Design for quality • Requires answer to set of questions : – What are the functions customer wants? – What are the capabilities of current products? – Are there better material available? – How much the product cost for successful marketplace? – What are critical attribute of performance? – How much performance does customer want? Design for Quality Products and Services Design process Design engineer need to brainstorm to generate ideas: . • Methods include: – Affinity diagrams – Interrelationship diagrams – Tree diagrams – Cause‐and‐effect diagrams • An Affinity Diagram should be used when: – Thoughts are too widely dispersed or numerous to organize. 2.Inhibitors to Competitiveness • Business/government related ‐7 deadly diseases by Deming • Education‐related factor –the higher the education the faster they become productive employees • Family‐related factor ‐the more motivated and knowledgeable they are. Group the responses 4. management. and production and – Avoids future application opportunities provides in depth evaluation of a product. – Is easy to assimilate – Adds structure to the information – Adapts to changes (a living document) – Provides framework for sensitivity analysis Organization of Information • Now. – Support for a solution is essential for successful implementation. the customer expectations and needs have been identified and researched. – Surfaces missing assumptions • QFD focuses on customer expectations or requirements. •Promotes Teamwork often referred to as the voice of the customer. It is a disciplined approach – Limits post introduction problems to product design. – Duration of the meeting will rely on where the team’s members are coming from and what needs to be accomplished.

Re-scheduling/ Updates.g. etc.000 .Needed for understanding of the business environment & making sure all necessary controls are incorporated into the Project Time or Schedule Control: Progress Monitoring Using . q). c..500. Defects • Environment of teamwork Liability/ Guarantee Period.3 Earn Value and S-Curve  Earn value analysis compares the cost value of work done with the value of work that should have been done (i. Defects List. Time control (Schedule Baseline. Quality project. monitoring and steering” a project so that the objectives will be met Time or Schedule Control is concerned with  Determining the current status of the project schedule  Determining if the project schedule has changed  Influencing the factors that create schedule changes  Managing the actual changes as they occur  Acting to bring expected cost overruns within acceptable limits 3. Project Comparison Bar Charts Charter (wrt cost.Mechanism e.).e.000 =RM 625.g.To ensure all ‘Plans” are being executed and strictly followed  Recording and monitoring cost performance to detect (Schedule Plan.g : Hand-over Document. Resource leveling. : Cos Benefit Analysis. EV = PC(actual) x BAC eg 25% x RM 2. Control Tests  Informing appropriate stakeholders of approved  Delivering stage changes . Performance Bond.1 Control systems throughout the project  Control systems / mechanisms must be provided at each stage of the project  Defining or Initiation Stage . As-built Drawings • Consensus decisions • Everything is preserved in writing 3.Mechanism e.To check the efficiency or quality of the product delivered 3. comparing it with a “baseline” (referenced/original) performance and monitoring and taking corrective measures should there be unacceptable deviation from the baseline  Or simply ”tracking. time and quality)  Assume the progress of the activity as a direct linear  Planning and Design Stage function of the elapsed time . Progress  Assuring that potential cost overruns do not exceed the Comparison Bar Charts. Benchmarking using models or prototypes or Cost Control mock structure  Influencing the factors that create changes to the cost  Execution (Construction / production) stage baseline .To ensure that the final product will satisfy the client and meet  Example: Road construction the specifications of the Project Charter .Mechanism e. Budget . the base-line)  Value of work done comprises of:  Indirect costs  Cost of materials delivered on sit  Cost of actual physical work on site  Earn value can also be presented in the form of S-curve –simpler and more widely used  S-curve examines and compares the value of work done with the actual value or progress – in terms of time (delays) or amount (over or under-achievement) Important Terms • Time-now is the date when progress is measured • Budget at Completion (BAC) is the original cost estimate indicating the funds required to complete work • Percentage Complete (PC) (planned) is the planned work progress up to time-now • Percentage Complete (PC) (actual) is the actual work progress up to time-now • Earned Value (EV) is the budgeted cost of work actually completed on that point of time (based on budgeted rates). Cost authorized funding periodically and in total for the control (Earn Value and S-curve).Mechanism e.g. Quality Plan) and understand changes from the cost baseline .2 Control During Construction/Production • Entire organization constantly aware of customer  Control during this stage is most important requirements  Two types of control • Marketing—specific sales points have been identified and  Time (Schedule) Control and can be stressed  Cost Control • Results in satisfied customers PROJECT CONTROL AND TERMINATION Control Definition  Measuring what is actually achieved in a project with regard to the OBJECTIVES (t. Cost Plan.

e. or can be occupied time or used despite some outstanding work to be . adequate time given for contractor to improve performance and adequate notice or warning letters given to terminate the contract.6 Control in Project Completion and Handing Over  If then project has been successfully completed.5 Control in Project Termination  The Project Manager will continuously monitor. Resource Leveling (RL) makes use of “floats” or time tolerances in the schedule to re-schedule resources and bring back any deviation of actual progress from schedule to within acceptable limits RL applies to resources which are hired i. Termination of the project.Planned Value (PV) is the portion of cost of work planned to have been spent between start date and time-now PV = PC (planned) x BAC • Actual Cost (AC) is the total actual cost incurred between the start date and time-now •    leveled i.4 Resource Allocation and Leveling PM must certify this  Resources of a project need to be  In construction projects.g. control and manage the project to ensure the good progress. will not cause inconvenience to the user or occupier. 3. together with a list of outstanding works and defects observed in project to be carried out or made good during a “Defects Liability Period” DLP is a guarantee period during which the contractor has to complete any outstanding works or carry out repairs to any defects in the completed facility. Performance Bond of the contract will also be forfeited.O. completion refers to ”Practical  scheduled i. The control mechanism used is “Certificate of Practical Completion” issued to the contractor. a Handing Over Document is prepared and signed by the client.a stage where the project constructed be allocated to a given task at the required has achieved its intended function.  The procedure for issuing notice of termination must follow conditions of contract e. if carried out. right amount of resources must Completion” . distributed accordingly at the required time to avoid or minimize fluctuations in day-to-day use. failing which the Performance Bond will be forfeited.e.This starts the handing over of responsibility to the client for the whole project. then 3. then PM may recommend to S. or some repair work which. completed.  But if PM finds the performance is very unsatisfactory and/or contractor is no longer capable of continuing the project. Upon completion of the the project. labour and equipment as the need for these resources fluctuates greatly as some activities start (requiring resources) while other finish (releasing resources) RL improves efficiency and minimize project cost (by optimizing labour usage and cost)     STEPS:  Determine critical path and floats from network or other techniques  Identify key resource and produce bar chart using network data  Plot histogram of resource demand  Reschedule timing of activities using float to obtain a more even demand profile  Redraw the resource profile S CURVE: 3.e.