Module 1

Project
A project is defined as a sequence of tasks that must be completed to attain a certain outcome. According
to the Project Management Institute (PMI), the term Project refers to ” to any temporary endeavor with a
definite beginning and end”. Depending on its complexity, it can be managed by a single person or
hundreds.
Characteristics of a project
A project is a set of interdependent tasks that have a common goal. Projects have the following
characteristics:
1. A clear start and end date – There are projects that last several years but a project cannot go on
forever. It needs to have a clear beginning, a definite end, and an overview of what happens in
between.
2. A project creates something new – Every project is unique, producing something that did not
previously exist. A project is a one-time, once-off activity, never to be repeated exactly the same
way again.
3. A project has boundaries – A project operates within certain constraints of time, money, quality,
and functionality. We’ll see more about this in later sections.
4. A project is not business as usual – Projects are often confused with processes. A Process is a
series of routine, predefined steps to perform a particular function, say, expense reimbursement
approvals. It’s not a one-off activity. It determines how a specific function is performed every single
time.
The diverse nature of projects
Projects come in a wide range of shapes and sizes. A project can:
• Be big: Like the construction of the Hoover Dam, take years to complete, and have a humongous
budget.
• Be small: Like your weekend project of installing a pathway in your lawn
• Involve many people: Like planning a wedding
• Just yourself: rearranging the photos in your wedding album
Types of projects
Projects can be diverse in the ways in which they are implemented. Here are some examples of projects:
1. Traditional projects: These are run sequentially in phases. These phases are typically initiation,
planning, execution, monitoring, and closure. Most high-cost infrastructure projects make use of
traditional project management.
2. Agile projects: These are used mainly in software development. They are people-focused and
adaptive. They also typically have short turnaround times.
3. Remote projects: Remote project management is usually used by distributed teams that seldom
meet in person. Handling freelance contributors is an example of a remote project.
4. Agency projects: Agency projects are outsourced to an agency that is likely to have projects with
multiple clients. Marketing and design projects are commonly outsourced to agencies.
The boundaries of a project
Every project operates within certain boundaries called constraints:
• Project scope • People
• Project schedule • Resources.
All of these project constraints depend on what the project aims to achieve and when. The outcome of a
project results in deliverables. Anything that’s produced during the project’s development such as
documents, plans, and project reports is considered a deliverable. A deliverable may also be the result of
the project itself.
Having a final deliverable, as well as a finite timespan, distinguishes project management from business-
as-usual operations. Since projects are unlike routine operations, most people involved are those who
usually don’t work together. Sometimes, the professionals involved will come from different organizations
and geographies. If the desired outcome is achieved on time and within budget, a project is considered to
be a success.
Project life cycle – 5 Phases
Often, projects are divided into five project phases each of which comes with a distinct set of tasks,
objectives, and a particular deadline. Dividing a project into different phases enables teams to stay on track
throughout their entire life cycle.
1. Initiation
The first phase in a project’s life cycle is called project initiation. Here, a project officially launches. It is
named, and a broad plan is defined. Goals are identified, along with the project’s constraints, risks, and
shareholders. At this point, shareholders decide if they want to commit to the project.
Depending on the project, studies may be conducted to identify its feasibility. For IT projects, requirements
are usually gathered and analyzed during the initiation phase.
This phase involves making the case for the project to convince the project stakeholders. A Project
Initiation Document (PID) is created with basic information about the project including probable resource
use and feasibility.
The project initiation phase marks the onset of projects. Typically, a project will be initiated in response to
an opportunity that needs to be explored or a problem to be solved. By then, a cost-benefit analysis should
have been conducted.
Part of the cost-benefit analysis includes conducting a feasibility study, defining the project scope,
establishing the project deliverables, and the stakeholders involved to build a business case.
In this phase, the project charter becomes the most critical document as it outlines:
• The vision and mission of the business
• Goals of the project and the value it will deliver to the business
• A list of all the stakeholders involved in the project
• Project deliverables
• Project scope and budget
• Anticipated risks
Once all these details have been verified and the project approved, the project officially kicks off, project
teams assemble, and planning begins.
2. Planning
A roadmap that will guide teams from creating a project plan throughout the project’s execution and closure
phases is developed comprehensively during the planning stage. Deadlines must be set, and resources must
be allotted. Breaking down tasks into smaller, manageable activities makes it easier to manage project
risks, costs, quality, time, and so on.
This phase occurs once a project has received approval from stakeholders. This is a critical phase that
involves a myriad of tasks including contingency planning, allocating tasks, and planning resource sharing.
At the same time, breaking down tasks into digestible pieces will empower everyone involved to
accomplish the project on time and stay within budget.
During project planning, it is essential for the project manager to understand the project requirements and
objectives. The planning phase is the most critical stage for any project as planning impacts the project’s
risk and outcomes.
During the planning phase, a project plan is developed to provide all stakeholders with the roadmap for the
project. It outlines all the activities, tasks, timelines, roles, costs, milestones, deliverables, and other
dependencies required to execute the project successfully.
The project plan is crucial during the execution, monitoring, and closing phases of the project as it details
not only the project goals and objectives but also the ‘how to’ and the ‘who does what’ during
implementation.
The following documents are prepared during the planning phase:
• Scope statement
• Work breakdown structure (WBS)
• Project plan
• Project schedule
• Change request management
• Communication plan
• Project quality plan
• Acceptance plan
3. Execution
The project plan is implemented during the project execution phase. At this point, teams will work on the
deliverables to ensure that the project meets the necessary requirements.
Everyone usually gathers for a meeting to mark the official start of the project, where teams can get
acquainted with each other and discuss their roles in the success of the project. Modes of communication
and project management tools are identified before the project plan is executed.
This is the phase when the actual work happens. Periodical reviews are conducted to ensure that execution
happens within schedule. In addition, team members familiarize themselves with the necessary status
meetings and reports that will be conducted throughout this phase to collect project metrics. The project
execution phase is a critical point in a project’s life cycle as it will help everyone determine if their efforts
will ultimately be fruitful or not.
Project planning and execution are two of the essential phases in achieving the goals of a project. The
execution phase is typically the longest and takes up the biggest allocation of resources as the actual
implementation of the project is done. At this point, controlling the project’s resources, monitoring the
project’s progress, and maintaining clear communication among all the stakeholders becomes crucial.
The project team uses the WBS and the project schedule to execute the tasks outlined in the project plan.
Also, frequent team meetings are held to report the project progress, evaluate variances in the project, as
well as address change requests, and update the project plan in case of any. The project manager ensures
that he keeps all stakeholders up to date on the project’s progress through status reports. Communication
should be appropriate as indicated in the communication plan. Once the deliverables have been produced,
the final product delivered and accepted by the customer following the acceptance criteria, the project is
ready for closure
4. Monitoring and Controlling
The project monitoring and controlling phase happen at the same time as the execution phase. It’s the job
of the project manager to oversee operations and make sure that everything is headed in the right direction,
according to plan.
Monitoring happens in tandem with execution. Constant monitoring by the project manager is required to
ensure that work goes on minus hiccups. Aside from overseeing the project’s performance, project
managers have to monitor resources, manage risks, head status meetings, and reports, etc. If unforeseen
issues arise, the project manager may have to make adjustments to the plans, as well as the project schedule.
Even though monitoring and control are intended to check the entire project management process, it is
handier during the execution phase. Monitoring and controlling are done to ensure that the project moves
in the right direction and within the defined scope. When the project progresses as planned, the risk is
minimized. Ideally, monitoring the project’s actual performance is compared against the planned
performance and the appropriate course of action taken in the event that there is a variance.
5. Closing
The final phase of the project management life cycle known as the project closure phase isn’t as simple as
delivering the output itself. Project managers have to record all deliverables, organize documents in a
centralized location, and hand over the project to the client or the team responsible for overseeing its
operations during the project closure phase.
This phase involves the important final tasks in the project including project delivery to the client and
documenting the learnings from the project. Not only that, but teams come together for a final meeting to
discuss the insights they’ve learned and to reward the hard work of each member.
The project is closed after it has achieved its goals and the product is ready for release and delivery to the
client. This last phase is also known as the follow-up phase, where the project manager and the teams come
together to discuss the project events and insights in a closing meeting. They will recap the entire life cycle
to draw lessons and takeaways from it, identify strengths and opportunities for improvement, and document
them alongside other project data for future reference.
Sometimes, the project is closed before completion, mainly due to failure.
A Project is Considered Successful When
Simply put, a successful project is one that is completed on time, within the budget, and having achieved
its objective(s).
Here are seven pointers of a successful project.
1. Completed on time or before time
2. Executed within the budget
3. Objectives are met
4. Meets or exceeds the expectations of the stakeholders
5. Arising issues were addressed proactively
6. Output is beneficial to the user
7. Positive feedback from the project execution team about how the project was run
 Module 2
Project management knowledge areas
Project Management Institute (PMI) has divided the large field of project management into 10 more
digestible parts, which it calls the 10 project management knowledge areas in its A Guide to the Project
Management Body of Knowledge (PMBOK).
Project management knowledge areas coincide with the process groups, which are project initiation, project
planning, project execution, monitoring and controlling, and project closing. These are the chronological
phases that every project goes through.
The knowledge areas take place during anyone of these process groups. You can think of the process groups
as horizontal, while the knowledge areas are vertical. The knowledge areas are the core technical subject
matter, which are necessary for effective project management.
Effective project management requires planning, communication, and task management. But do you know
all the main project management knowledge areas and how they work together?
These 10 project management knowledge areas will provide you with the essential information and skillsets
you need to run smoother projects, delight your stakeholders, and fight fewer fires.
The ten knowledge areas, each of which contains some or all of the project management processes, are:
1. Project Integration Management: the processes and activities needed to identify, define,
combine, unify, and coordinate the various processes and project management activities within the
project management process groups.
2. Project Scope management: the processes required to ensure that the project includes all the work
required, and only the work required, to complete the project successfully.
3. Project Schedule Management: the processes required to manage the timely completion of the
project. Until the 6th edition of the PMBOK Guide this was called "Project Time Management"
4. Project Cost Management: the processes involved in planning, estimating, budgeting, financing,
funding, managing, and controlling costs so that the project can be completed within the approved
budget.
5. Project Quality Management: the processes and activities of the performing organization that
determine quality policies, objectives, and responsibilities so that the project will satisfy the needs
for which it was undertaken.
6. Project Resource Management: the processes that organize, manage, and lead the project team.
Until the 6th edition of the PMBOK Guide this was called "Project Human Resource Management"
7. Project Communications Management: the processes that are required to ensure timely and
appropriate planning, collection, creation, distribution, storage, retrieval, management, control,
monitoring, and the ultimate disposition of project information.
8. Project Risk Management: the processes of conducting risk management planning, identification,
analysis, response planning, and controlling risk on a project.
9. Project Procurement Management: the processes necessary to purchase or acquire products,
services, or results needed from outside the project team. Processes in this area include Procurement
Planning, Solicitation Planning, Solicitation, Source Selection, Contract Administration, and
Contract Closeout.
10. Project Stakeholder Management: the processes required to identify all people or organizations
impacted by the project, analyzing stakeholder expectations and impact on the project, and
 developing appropriate management strategies for effectively engaging stakeholders in project
decisions and execution.
Each of the ten knowledge areas contains the processes that need to be accomplished within its discipline
in order to achieve effective project management. Each of these processes also falls into one of the five
process groups, creating a matrix structure such that every process can be related to one knowledge area
and one process group.
Project Integration Management
Project integration management is a project management knowledge area that helps teams work together
more seamlessly. Integration management brings together various processes, systems, and methodologies
to form a cohesive strategy.
To accomplish this, trade-offs must be made. Project goals need to be the guiding star when determining
when and where these trade-offs will take place. They also require buy-in from the full project team and
all stakeholders. Everyone won’t get what they want, but the result will be a project completed on time and
within budget.
Benefits of project integration management.
Achieving project integration of teams and processes can be challenging. However, there are several key
benefits for the progression of your projects.
• Increased accountability from team members.
Aligning project goals means team members should be 100% sure of their responsibilities, and aware of
the importance in managing each one. As team members take on more responsibility, communication loses
clutter and becomes more focused.
• Increasing efficiency.
Integration management means taking an overview across all project teams and analyzing where you can
make efficiencies. Making the most of the resources at your disposal could help save time on tasks and
improve productivity, ensuring team members always have something to do.
• Clearly defined roles with no surprises.
Once a project manager has fully fleshed out the strategy, there should be no (initial) margin for error. Each
team will be aware of its main aims and objectives, and therefore which is responsible for delivering its
part.
Project integration management steps.
Before implementing project integration management processes, you must first gain a clear understanding
of current systems, processes, and methodologies utilized by every team in the project. As a project moves
forward, there are eight primary integration management steps and milestones with corresponding
deliverables:
1. Project charter 5. Manage project knowledge
2. Scope statement 6. Monitor and control project work
3. Project management plan 7. Perform integrated change control
4. Direct and manage project work 8. Close project or phase
 • Developing a project charter.
Traditionally, the project sponsor or project manager writes the project charter. It serves multiple purposes
throughout the project life cycle.
This high-level document provides the project manager with the authority to execute the project and likely
won’t require adjustment as work proceeds. It also outlines the initial roles and responsibilities of all team
members and establishes goals and project deliverables.
• Write the scope statement.
Scope statements fulfill one of the most important project aspects — outlining everything included in the
project. It provides a framework for all tasks, which teams execute those tasks, and what deliverables are
needed. While these scope statements occasionally shift throughout the life of a project, it’s vital to keep
them as accurate as possible from the beginning to avoid scope creep.
• Develop a project management plan.
The project management plan brings all aspects of the planning phase together into a single document. It
includes elements such as:
• Project goals • Work breakdown structure
• Budget • Stakeholder management plan
• Risks • Change management plan
• Scope
This fixed plan should not change without a formal change request.
• Direct and manage project work.
Teams complete most of the work associated with a given project in this step of integration management.
This involves:
• Managing resources
• Executing on the work
• Creating changes where necessary
Review performance against project goals throughout the project’s life to make necessary changes and
keep things on track. To avoid scope creep, communicate and stay transparent with every team and
department involved. Use the scope statement as a guidepost to achieve the original intent of the project.
• Manage project knowledge.
What your teams learn as they work on projects can be an invaluable tool for the future. Capturing this
information is an important part of the project integration process. Make the most of the information
available to smooth out the execution. Record anything new you’ve learned in a ‘Lessons Learned
Register’, so the organization can benefit from learnings to make efficiencies on future projects.
Discern the differences between tacit and explicit knowledge and record as much of both as you can. This
way workers don’t need the benefit of psychic powers to grab it from a colleague if they have any questions.
a. Tacit knowledge – The knowledge workers retain without context. That is, without knowing how
they know.
b. Explicit knowledge – The knowledge workers have that can be asked for and formally recorded.
 • Monitor and control project work.
This entails the consistent tracking and reporting on progress of the work to stakeholders. It ensures they
have a clear ongoing idea of:
▪ Where the project is heading
▪ Whether it’s on schedule
▪ And on (or preferably under) budget
This aspect of the process is unique, in that it doesn’t really follow during the order we’ve specified.
Instead, it’s something that can be performed throughout the process, to ensure each stage is on track.
Measure performance against the project management plan as a whole, so you get the best overview of
where work may stray off-scope or off schedule.
• Perform integrated change control.
Change control spans the life of a project. The project plan, goals, and scope statement are integral assets
in this iterative process. Never jeopardize the primary project goals with revisions made during this process
and take corrective action when any change strays too far from the plan. Request and document any changes
through an official process and avoid ad-hoc changes to minimize scope creep. The project manager
appoints members of a control board who help evaluate change requests and outline next steps.
• Close project or phase.
This is where successful projects wrap up. This step involves reviewing various aspects of the project and
documenting findings to a reference archive. Some project teams find it useful for each member to rate the
project execution and management in an official post-mortem review meeting.
Project Scope Management
In today’s fast-paced, modern workplace, work is increasingly completed and managed digitally and
remotely, with communication spread across multiple mediums. In the midst of all this chaos, it is
imperative to have an effective project scope management plan in place.
Project scope management is the process that defines and outlines all of the work that is included within a
project, including its:
• Objectives • Deadlines
• Tasks • Budgets
• Outputs
It’s an essential part of the project planning process and clearly determines what you and your team will
need to do in order to deliver a product, service, or result with specified functions and features. It includes
everything that must go into a project, as well as what defines its success. Without a comprehensive scope
management plan, there’s a good chance your team is doing work that’s unnecessary to complete the project
at hand or even wasting time thinking about what they should be doing next.
The importance of project scope management.
The project scoping process is essential to keeping your work on track, regardless of setbacks, variables
and ad hoc requests that may impact the process.
For example, many of us may start a project with a clear plan, but influential stakeholders, clients and
colleagues may have a different idea of what success looks like. What’s more, business priorities can shift
throughout the course of a project and throw it off course.
A solid scope management process can help you strike the right balance between outcomes, expectations
and business priorities. It helps you keep discipline in your project and ensure it stays true to its initial
concept.
By learning how to manage project scope effectively, you can:
a. Ensure your project sticks to deadline, budget and specification.
b. Avoid scope creep, when your project swerves outside of its agreed parameters.
c. Decide on what is and isn’t needed for your project in advance.
d. Identify elements of your project that may be subject to change.
Steps of project scope management.
To help you get your team working on more of the right work, here’s a step-by-step guide to some key
project scope management processes.
1. Plan Your Scope.
When you start project planning, you want to gather input from all of the project stakeholders. This
stakeholder management stage is essential, as together you will decide and document how you want to
define, manage, validate, and control your project scope.
The scope management plan also includes information on how you will:
•Handle unforeseen circumstances – You can outline how you will deal with ad-hoc projects
throughout, including how resource will be allocated and timelines amended.
• Accept project deliverables – How agreed deliverables will be accepted and processed by your
team – outlining roles and responsibilities for who is handling this.
• Come up with other key elements – How you will come up with some of the other key
elements, including a work breakdown structure (WBS) and a scope statement.
2. Get a handle on your requirements management.
This process will give you a clear idea of what your stakeholders want and how you’re going to manage
their expectations. You will need to document exactly what is required in terms of status updates.
Think about how often:
• Check-ins are needed with the client
• The client wants to be informed of deliverable status
• Communications need to be sent and in what format
This information can be gathered through focus groups, interviews, or surveys, and by creating prototypes.
Use our requirements management process to help you avoid frustrating hurdles throughout the project and
understand the differences between scope, requirements and expectations.
3. Define Your Scope.
With your project scope in place, you’re ready to define exactly what is in and out of scope for your project
with a project scope statement. This serves as a guide throughout the project and forms the backbone of
your project scoping process.
Team members should be able to refer to it, and easily be reminded of what is and is not involved in that
specific job. This is also helpful when someone is asked to work on an area that is outside of a project’s
scope.
Scope statements often include:
• Justification. Why is the project happening in the first place?
• Goals. What are you seeking to achieve?
• Deliverables. A breakdown of deliverables and who will be responsible for them.
• Expected results. When the project is complete, what will change? Think about your original
justification here and back it up with projections and data.
• Assumptions. What are you relying on to make your project happen? Consider availability of
teams, budgets, materials, training etc.
• Inclusions and exclusions. Finally, what is in and out of the scope of your project? It’s good
to drill down into specifics here.
4. Create a Work Breakdown Structure (WBS).
Based on your project scope statement and the documents created during requirements collection, you’ll
want to build a Work Breakdown Structure, which is essentially the entire project broken down into smaller
individual tasks. Deliverables are clearly defined, providing the project manager and the team with several
more manageable units of work. A streamlined operational system of record makes creating a WBS simple.
In Workfront’s enterprise work management platform, for instance, it’s easy to standardize and automate
forms, tasks, and workflows. Your team can work faster and more efficiently, knowing they are working
on the correct tasks, in order to complete a project.
5. Validate Your Scope.
This is where your deliverables are reviewed by whoever needs to approve them, whether it be:
• Customers • Managers
• Stakeholders • All three
It’s important to have a plan in place for exactly how project deliverables will be accepted as complete. At
the end of this process, you’ll accept deliverables, change requests, or project document updates.
With an operational system of record, you’re able to set up the scope validation process ahead of time so
that each deliverable is automatically submitted for approval by whoever needs to see it.
You can skip the long, confusing email chains and avoid unnecessary meetings. While stakeholders can
see completed tasks for a project all in one place and be immediately notified when a task is awaiting
approval.
6. Control Your Scope.
Monitoring and controlling is essential throughout the project. A project’s status should be monitored from
start to finish to ensure that it is being executed according to your project scope management plan.
You never know when the scope may need to change, or a customer may add new requirements. In order
to prevent scope creep, project managers should compare performance reports with the project
requirements. Using Workfront, any gaps will be easy to spot and change, quickly getting the project back
on track.
Tips for project scope management.
• Be as clear as possible when wording your scope. Once it has been drafted, re-read it to ensure there
is no ambiguity anywhere. This can help avoid misinterpretations by stakeholders and reduce
follow-up questions.
• Invite as many team members as possible to collaborate during the drafting stage. If more people
are contributing, a greater number of team members will know exactly what is required from the
project.
• Ensure there are zero alterations to the scope once the project has begun. Making amends can
muddy the waters a little and potentially lead to things like increased scope and confusion among
those working on the project.
Implementing project scope management processes.
Implementing these project scope management processes takes a fair amount of time and effort. But in the
long run, they will save you time, money, and headaches.
A good scope management plan involves open communication between all the stakeholders and team
members involved in a project. This results in fewer unwelcome surprises and miscommunications
throughout. Everyone knows and understands exactly what work is involved and can easily stay focused
on the right deliverables.
❖ Project Time Management
Project time management involves analyzing and developing a schedule and timeline for project
completion. Formalized time management processes provide a buffer for things like unexpected roadblocks
and under or over-estimated project timelines.
Time management plans determine what tasks to adjust, and how to allocate and manage resources
throughout the project.
How project managers define project time management varies, and techniques differ between project
management methodologies. For instance, an agile marketing method might need tasks that can fit into
short sprints as requirements change. Managers using Kanban methodologies, on the other hand, might
plan time in more generous segments — allowing for smoother flow. Regardless of project type, the
definition of project time management involves setting time markers against your project and its tasks. It
means defining the time value of each task and allocating resource to each step.
The importance of project time management.
Project time management directly impacts the quality, scope, and cost of a project, making it one of the
most important project management knowledge areas. Managing time helps to secure project completion
on time and on budget. It also clarifies:
• How much time a project requires
• What stakeholders (internal and external) to involve
• And at what point to include their expertise
This process provides a framework for developing a sequence of activities, activity durations, resource
estimations and how these fit into the overall project management plan.
In project management, the time management phase is an important step — when you know what you
intend to deliver and why, time planning helps you get there smoothly. It gives each formerly abstract
subtask a value.
Correct timings are essential.
• Time planning allows you to set realistic deadlines
• Time is money, so managing it well helps boost your bottom line
• Time management can empower your teams to deliver projects on time
Benefits of project time management.
One of the primary benefits of project time management is it creates more time for teams and other
stakeholders to deliver on projects. Effective time management positively impacts the careers and personal
lives of everyone involved.
Additional benefits of time management in project management include:
1. Reduce stress with project time management.
Project completion plans reduce stress levels associated with meeting deadlines. When your teams know
timelines have been mapped out effectively, they can visualize the path to completion with confidence.
Accurate time estimates also reduce unnecessary pressure on an individual level and across your teams.
With good time management, you may find it easier to keep project scope in check, keeping your talent
focused on what’s important. When there’s also a change management plan in place, your people feel
empowered to dedicate the right time to the right tasks, even as processes shift.
2. Increase productivity with project time management.
Knowing what to prioritize increases productivity and allows you to focus on the most beneficial and
strategic needs. This works by giving your teams a sense of urgency, control and direction.
Each of your deliverables should align with a time investment estimate to serve as a guide. This should
prevent aspects of the work taking more time than they’re worth, keeping the knots of productivity tied
tight.
3. Make fewer project mistakes with time planning.
Focusing on only one aspect of a project helps get the right work done and prevents mistakes overall.
Incorporating time values into your project plan helps staff to understand the required investment for each
task. When there’s time planned for checks, this effect is heightened further still.
Great project time management helps you avoid last-minute rushes and meet lead time goals without
sacrificing quality.
4. Increase proficiency with better time management.
Having a timeline in place for projects provides a view into what teams need to work on and when. This
makes them and their organization more proficient across many areas. Effective time management in
project management allows managers to pull together the best talent for the required work. In turn, this
allows for specialization — delivery teams will soon know project details inside and out, reducing pressure
on you.
5. Create more opportunities with better time planning.
With the right approach, teams or departments can become more efficient at managing projects and
completing them on time and on budget. This may even generate further opportunities to manage additional
projects in the future.
What’s more, great project time planning techniques let you showcase your ability to manage ad-hoc
projects effectively on the side. Time management doesn’t mean tunnel vision — rather, it’s about making
accurate projections. This allows you to be flexible in positive ways.
6. Stay on budget with strong time management.
Everyone knows the phrase ‘time is money.’ Keeping a project on target not only ensures things stay on
budget, but keeps stakeholders happy that their investments are working in the most efficient, valuable
way.
For this to work best, consider implementing project monitoring and controlling processes. The sooner you
have accurate data on delivery, the sooner you can recalibrate if aspects of the work start to look
unprofitable.
7. Project time management helps you meet goals.
Time management plans help to achieve project goals as well as impact other personal and professional
goals. All of these benefits lead to increased efficacy and satisfaction across the board.
The main task for any project manager is to get professional projects done. Great time management makes
successful delivery more likely by reducing the risk of project overrun.
Project time management best practices.
• The Pareto Principle.
The Pareto Principle is also known as the 80/20 rule. This means 20% of your time should produce 80%
of your results. From the beginning, identify and highlight the tasks that provide the most value. If, at any
time, value and time fall out of balance, review the task priority and, if necessary, submit a formal change
request.
• Keep it simple.
It’s easy to overcomplicate tasks. Take a step back, evaluate the real ‘why’, and think of more focused
ways to accomplish a task. Concentrate efforts on the most effective methods for completing each given
task, while always keeping the end project goals in mind.
Ask:
o What’s involved?
o What resources do you need to get the job done?
And lean on internal teams to estimate timings. After all, they’re the experts in their fields.
• Observe and analyze time expenditure.
Regularly review time allocation across the board. Efficient use of all resources, especially human capital,
maintains project timelines and budgets. Great data insights help you review this more efficiently,
identifying patterns while there’s still time to claw back resources. For example, if the data shows that it
looks like you underestimated IT resource needs, recalculate and communicate.
• Act rather than worry.
It’s easy to spend time worrying if something is ‘good enough’ or if the team will really hit that deadline.
Drop the worry and take action. Do more research. Ask for an extension if needed and make the necessary
adjustments to get something done right.
• Break larger goals into subtasks.
At first, any large project seems daunting and difficult to figure out where to start. Take larger projects and
break them into smaller pieces and smaller tasks, providing a simpler way to start and prioritize a project.
When each of these has its own deadline and time allocation, it’s easier for everyone to stay within the
lines, reducing the risk of backlogs. Consider working in sprints.
Set daily, weekly, and monthly goals.
Setting goals helps to instil a sense of urgency. Set a monthly goal and work backward. Weekly and daily
goals should roll into each other. When teams and departments hit their daily and weekly goals, they meet
the entire month’s targets by extension.
• Plan for short breaks.
When breaking large tasks down into manageable pieces, make sure to plan time for breaks. Providing
much-needed, scheduled breaks keeps the mind fresh and the body energized. Your people are better placed
to stay on track when there’s breathing space built into the plan.
• Think strategically about team energy.
We should all work on the most important tasks during the most productive, energetic hours of the day,
and save other tasks for less-motivated portions of the day. A project manager’s job is to get the best work
from your people, so broaden your thinking beyond overambitious deadlines. Is it wise to plan so much
specialist software development work in a single week, and do those deadlines really need to be so close?
Asking questions like these helps you to keep things running smoothly.
Creating effective project timelines is an art and a science. Learn how to create a project timeline with our
step-by-step guide.
Five Time Management Strategies
There are many strategies to improve time management in project management. These five provide a good
starting point:
1. Set clear priorities – Rank your tasks in order of importance to ensure you follow an appropriate
activity sequence.
2. Introduce shorter deadlines – Bring forward deadlines so there’s leeway in case of any delays or
interruptions to tasks.
3. Delegate tasks effectively – Ensure relevant personnel are responsible for tasks within their area
of expertise.
 4. Reduce interruptions – Improve focus by managing external, environmental and other
distractions.
5. Plan with intention – Create to-do lists for each day of tasks intended to be complete, as a powerful
way to increase productivity.
Project Cost Management
Cost management in project management involves the planning, estimating and overall control of budget.
Cost management processes are in place to help project teams plan and control budgets during the project
life cycle.
While cost management overall is a complicated process and a critical project management knowledge
area, we can break it down into four processes:
1. Resource planning.
While resource management is in place to plan, allocate, and schedule the resources needed for each stage
of a project, resource planning looks specifically at the costs associated with each of these resources.
Because of the complexity of this process, a work breakdown structure (WBS) can help to simplify and
provide clarity.
Using your resource management software, identify what resources will be used to complete each item in
the WBS, determine the associated costs, and perform a cost-benefit analysis.
2. Cost estimation.
Cost estimation is the process of approximating the costs associated with each of the resources required for
all scheduled activities. It’s an important part of the cost management process.
Cost estimating forecasts the cost of completing a project within a defined scope. Given that scope tends
to shift throughout the life of a project, cost estimation is not a one-time process.
Effective cost management requires project managers to keep abreast of budgetary changes during a
project’s lifespan. These estimations sum up all the costs involved in successfully completing a project.
To get a good estimate at the costs, you can use one of the following techniques:
• Analogous estimating – Past projects should inform the cost estimate, here. Analogous estimations
use previous, similar projects as a reference point for costing up the new one.
• Parametric modeling – Mathematical formulas, based on Regression Analysis or Learning Curve
models, inform potential project cost estimations.
• Bottom-up estimating – Costs are based on known quantities, such as individual work or item cost
and duration or time spent on individual tasks.
3. Cost budget.
Cost estimations lead directly into cost budgets. Here, you’ll work out the base costs and any
additional requirements for the project.
A good project budget will help you make key decisions with respect to the project schedule and resource
allocation constraints.
These budgets should account for everything from direct labor costs, to material costs, factory costs,
equipment costs, administrative costs, and software costs.
To set the cost budget, consider the following techniques:
• Cost aggregation – This requires you to aggregate or combine costs from an activity level to a
work package level. The final sum of the cost estimates is applied to the cost baseline.
• Reserve analysis – With this cost management method, you create a buffer or reserve to protect
against cost overruns. The degree of protection should be equivalent to the risk foreseen in the
project. The buffer is part of the project budget, but not included in the project baseline.
• Historical data – Under this technique, you use estimates from closed projects to determine the
budget of the new project. This is very similar to analogous estimation.
• Funding limit reconciliation – Here, you adhere to the constraints of a funding limit. This is based
on the limited amount of cash dedicated to your project. To avoid large variations in the expenditure
of project funds, you may need to revise the project schedule or the use of project resources.
4. Cost control.
Good project managers should have a constant eye on cost and potential scope creep. This includes being
vigilant for times when costs vary from estimations. Cost control also involves informing the stakeholders
of cost discrepancies that vary too much from the budgeted cost.
Controlling the budget means being aware of the:
• Original budget • Actual costs
• Approved costs • Committed costs
• Forecasted costs
Budget control involves being aware of and acting on changes and issues as and when they occur.
To effectively control project costs, consider these tools and techniques:
• Earned value management – This uses a set of formulas to help measure the progress of a project
against the plan. It integrates schedule, scope and costs to measure project success against planned
and actual values. Benefits include measuring cost alongside other factors.
• Forecasting – This uses a project’s current financial situation to project future costs. The forecast
is based on budgeted cost, total estimated cost, cost commitments, cost to date, and any over or
under budgeted costs. It can be useful as part of the controlling and monitoring phase.
• To-Complete Performance index (TCPI) – A cost management tool that represents the level of
project performance needed for future work to meet the budget. Useful to make decisions about
efficiency when a project is under way. A TCPI figure above 1.0 indicates your project is running
above budget.
• Variance analysis – A technique that involves analyzing the differences between the budget and
final cost projections.
• Performance reviews – These are used to check the health of a project. A performance review
includes an analysis of project costs, schedule, scope, quality and team morale. This may help to
gain a broader view — for instance, if you suspect an unprofitable project will cause talent drain in
the long term.
By learning how to estimate expenses, determine budgets, and control costs, you can be a better project
manager and leader. Effective cost management will help you get projects done on time and under budget,
the golden ticket for any successful project manager.
Why is cost management important?
In project management, the cost management process is an important tool to keep profits healthy, reducing
the risk your project could become unviable. When you define what healthy finances look like, it’s easy to
make decisions in real time when work is underway.
Ask yourself:
• Does an aspect of the work need scaling back?
• Do you need to cut investment in a low-priority area?
The earlier these questions are answered, the more opportunity there is for a project manager to recalibrate
and preserve return on investment (ROI).
The importance of cost management comes into play from the very beginning of the project lifecycle,
however. This is because costs and budgets affect key project decisions — from the people you hire to the
materials you use.
When a project doesn’t stay within budget, it can remain incomplete, harming a project manager’s
reputation. In a worst-case scenario, mismanaged costs can make an organization unviable.
Great project cost management lets you generate data to share with stakeholders. When you view this using
intuitive software, it’s easy to lift insights for future project plans.
The benefits of implementing project cost management.
The project cost management process empowers you to plan a project well, make informed decisions once
activities are underway, and measure success.
Keep track of multiple types of project cost, including:
• Direct costs – These include money earmarked for software fees and other mission-critical
overheads.
• Indirect costs – In business, indirect costs are a fact of life. Each individual project contributes to
your organization’s electricity bill, for instance.
• Fixed costs – One-off fees may be considered fixed, since they aren’t linked to time management.
• Variable costs – This type of cost rises if a project is extended or delayed. Staffing costs are a
common example.
• Sunk costs – These are purchases that have already been made, effectively the cost is deemed to
be sunk.
Understanding each can help you to differentiate and find ways to make savings.
The challenges of project cost management.
When elements of your project plan change, the corresponding cost figures will alter too. Losing grip of
your project’s scope is a fast way to also lose track of costs, putting your entire project at risk.
Accurate cost management also requires schedule and cost integration. Communication can be key for this.
Ask your finance analysts to provide direction to managers responsible for aspects of project delivery, and
for teams to report back on issues in turn. If tasks are stretching beyond timelines in the original plan, this
should be reflected in a project manager’s calculations right away.
Finally, when reporting is slow or inaccurate, it makes the above aims harder to achieve. Check figures for
accuracy regularly to avoid surprises.
Methods of Cost Estimation
The three main methods of estimating cost are the:
• Expert judgement – The quickest and involves asking expert people or groups to provide insight.
They may use data on past projects also.
• Parametric estimating – Uses statistical information about the relationship between variables and
may use an algorithm to map past project data onto current plans.
• Analogous estimating – something of a half-way house between the above two methods. Uses
values such as scope, duration and project-specific measures from past activities. The actual costs
in previous projects help to shape estimates.
Project Quality Management
Project quality management is the process of continually measuring the quality of all activities and taking
corrective action until the team achieves the desired quality. Quality management processes help to:
• Control the cost of a project
• Establish standards to aim for
• Determine steps to achieve standards
Effective quality management of a project also lowers the risk of product failure or unsatisfied clients.
Project quality management plan.
Most project managers intend to create the best possible product or service. But even the most skilled,
educated teams, with the most modern tools, may fail without the right project quality management plan in
place.
Measuring quality may seem like something you can’t do until after the project is complete. However,
project quality management should be planned from the beginning and monitored throughout with these
three quality management processes:
• Quality planning • Quality control
• Quality assurance
Quality planning.
A good quality management plan starts with a clear definition of the goal of the project. First, be clear on
what the product or deliverable is supposed to accomplish. Then, ask yourself:
• What does it look like?
• What is it supposed to do?
• How do you measure customer satisfaction?
• How do you determine whether the project was successful?
Answering these questions and others will help you identify and define quality requirements, allowing you
to discuss the approach and plans needed to achieve those goals.
This includes:
 • Assessing the risks to success
• Setting high standards
• Documenting everything
Also key is defining the methods and tests to achieve, control, predict, and verify success. Be sure to include
quality management tasks in the project plan and delegate these tasks to workgroups and/or individuals to
report and track quality metrics.
Quality assurance.
Quality assurance provides evidence to stakeholders that all quality-related activities are being done as
defined and promised. It ensures safeguards are in place to guarantee all expectations regarding quality
outputs will be met.
Quality assurance is done to the products and services delivered by a project, as well as the processes and
procedures used to manage the project. The team can do this through systems such as a process checklist
or a project audit.
Quality assurance tests use a system of metrics to determine whether the quality management plan is
proceeding acceptably. By using both qualitative and quantitative metrics, you can effectively measure
project quality with customer satisfaction.
These tests or quality audits will help you predict and verify the achievement of goals and identify the need
for corrective actions. Quality assurance tests will help you map quality metrics to quality goals, allowing
you to report on the status of quality at periodic project review meetings.
Quality control in project management.
Quality control involves operational techniques meant to ensure quality standards. This includes
identifying, analyzing, and correcting problems. While quality assurance occurs before a problem is
identified, quality control is reactionary. It occurs after a problem has been identified and suggests methods
of improvement.
It measures specific project outputs and determines compliance with applicable standards. It also identifies
project risk factors, their mitigation, and ways to prevent and eliminate unsatisfactory performance.
Quality control can also ensure the project is on budget and on schedule. You can monitor project outputs
through peer reviews and testing. By catching any deliverables failing to meet the agreed standards
throughout, you can simply adjust direction rather than having to entirely redo certain aspects.
Benefits of project quality management:
• Quality products. Ensuring you and the project team check the quality of the project means the
product will go through multiple development processes. This will help to deliver a final product
that meets customer expectations.
• Customer satisfaction. Tackling problems in real-time and communicating with the customer will
ensure they’re up to date and aware of any issues. Incremental customer feedback can also help you
to deliver a better final product.
• Increased productivity. With a project quality management system everyone knows deadlines and
what is needed in advance. Having set deadlines, meetings, and reports can influence the project
team to hit targets early to keep the project on track.
 • Financial gains. Projects can run over budget if good quality management is absent. By having the
three processes in place — planning, assurance, and control — you can tackle problems before they
cut into your budget.
• Removes silos. Boost collaboration between teams with project quality management tools. Being
able to easily see where each team is up to and using meetings to discuss feedback between
departments can remove departmental silos.
Quality management tools.
Affinity diagrams.
Affinity diagrams generate, organize, and consolidate information concerning a product, process, complex
issue, or problem. It expresses ideas without quantifying them (brainstorming sessions).
Process decision program charts.
Process decision program charts see the steps required for completing a process and analyzing the impact.
These charts help to identify what could go wrong and help plan for these scenarios.
Interrelationship diagrams.
SixSigmaDaily defines interrelationship diagrams as diagrams that show cause-and-effect relationships.
These diagrams identify variables that occur while working on a project and what parts of the project those
variables might affect.
Prioritization matrices.
Use these during brainstorming sessions to evaluate issues based on set criteria to create a prioritized list
of items. It helps to identify what issues may arise and determines the problems to prioritize to meet
objectives.
Network diagrams.
A visual representation of a project’s schedule. This helps plan the project from start to finish. It illustrates
the scope and the critical path of the project. The two types of network diagrams are:
• Arrow diagram
• Precedence diagram
Matrix diagrams.
A matrix diagram is used to analyze data within an organization’s structure. It shows the relationships
between objectives, factors, and causes that exist between rows and columns that make up the entire
matrix. There are multiple types of matrices to use, depending on the number of items and groups of items
to analyze.
The different matrix diagrams and their use cases:
• L-shaped matrix. Creates a relationship between two items.
• T-shaped matrix. Creates a relationship between three groups of items.
• Y-shaped matrix. Creates a relationship between three groups of items, but it is displayed in a
circular diagram.
• C-shaped matrix. Creates a relationship within three groups of items, and it is displayed in 3D.
 • X-shaped matrix. Creates a relationship between four groups of items.
Quality management software.
Project quality management is multifaceted. Your team must:
• Clearly understand the quality expectations
• Determine how you will measure whether you’re meeting those expectations
• Implement any necessary changes along the way
The ideal work management platform allows you to track these aspects in one easy-to-use place.
Project Resource Management
Resource management in project management involves managing and assigning your organization’s
resources like budgets, capacity, and team members. To be successful at resource management, you must
provide the following:
Insights: Resource management relies on granular insights into what your team is working on and how
long it takes them to complete each task.
Priorities: Priorities management for the project and expectations must be articulated clearly and shared
to the relevant stakeholders and team members.
Tracking: Status updates need to be tracked throughout the project life cycle.
Resource management gives your team the ability to work on the right work at the right time. In project
management, the resource management process happens in two stages: resource planning and resource
scheduling.
Resource planning
The resource planning phase of resource management is where you identify the necessary resources for the
project. You won’t be assigning tasks to any team members at this stage of the process, or allocating
budget—just laying the foundation.
Forecasting your resources includes considering “what if” scenarios. This will ensure you know how other
priorities and project timelines will be affected. When you utilize resource planning as a part of
your resource management plan, you avoid blown budgets, miscommunication, and a lot of frustration
across tasks and teams.
Resource scheduling
In the scheduling phase of your resource management’s management plan, you will check your needs
against availability. Using the forecasted resources like time, budget, and skills from the planning phase
you will now be able to determine where there is overlap with your team’s current projects and workload.
Using the resource forecasts and team availability in your resource management software, you can now
assign tasks based on the individual skills and abilities of your team. When your team is working on
something they are good at, they are happier and more engaged in their work, which improves project
turnaround.
Benefits of project resource management
The benefits of resource management can’t be overstated. Without a resource management plan, you may
be dealing with missed deadlines, overworked team members, and frustrated stakeholders. Resource
management ensures your team is efficient, your stakeholders have the proper visibility, and your costs are
managed. The benefits of project resource management include:
• Increased visibility into team member utilization
• Ability to make adjustments on the fly
• Increased project risk awareness
• Improved engagement morale
Tips to improve your resource management
1. Develop a strategic breakdown structure
No matter what stage your business is in, take the time to create a Strategic Breakdown Structure where
you align each of your goals with measurements. Following are a few questions you could ask yourself to
get started:
• What are you trying to accomplish?
• How will you measure success?
• Are you working on the right things?
• What’s not going to help you succeed?
Measure your results as you go and adjust your resource management plan along the way. You should keep
your company’s and team’s strategic initiatives as your North Star, guiding all of your efforts, because you
can’t manage what you don’t measure.
2. Take the time to gather project requirements
Getting the information about a project before it kicks off will enable you and your team to plan and manage
resources effectively for the full scope of any project. Depending on the type of work you’re doing, your
project input form will likely be different, but should focus on the end goal you’re working to accomplish,
including:
• Strategic alignment
• Relevant deadlines and milestones
• Project goals and success metrics
• Budget
• Actionable learnings from prior projects
• Key competitors and approach
• Approvers required throughout the project
Don’t be afraid to invest time upfront into your requirements gathering, because everything you document
before you launch into the project will be time (and sanity) saved along the way.
3. Plan for the unplanned
We all hate ad hoc requests, but in some industries and companies, they come with the territory. A last-
minute opportunity might arise that requires support, or a market shift may make your planned activities
obsolete (such as warm weather when you’re planning a marketing blitz advertising coats).
Whatever the reason, ad hoc requests happen. The typical response, though, is that they completely derail
your work—making you and your team miserable. Instead, plan for ad hoc work to come your way as a
part of your resource management plan. If you are tracking your team’s work, you can come up with a
good idea of how much time typically goes to last-minute requests. If that number is 20%, then account for
it in your resource plans. Yes, that means you’ll likely only be able to schedule team members at 60%
utilization (80% utilization is typically given to a full-time employee), but you’ll have a more realistic view
of what your team can actually accomplish.
4. Know how long things take
This one is really simple—track how long it takes you to complete repeatable work projects. Track time
over both hands-on time (hours worked) and duration (over what period of time). You’ll likely be surprised
at how you were under-allocating time for projects, assuming they have fewer steps and take less time than
they actually do. Once you know how long things take, it’s much easier to accurately forecast resources to
get them done.
5. Create your prioritization methodology
There are a lot of ways to prioritize—around departmental and company goals, against opportunities that
arise, or to the requests of the boss. At the end of the day, it’s best to take all of these into consideration.
Consider the following as you create your team’s prioritization methods:
Balance strategic alignment: how do the requests align to the strategic mission of your team or
department?
Urgent vs. important: there are those requests that are absolutely urgent; and those that are important—
how do you identify the fine line between both?
Relative effort: it’s common for people to bring requests that “will only take 5 minutes” in order to get
things slipped through the system (and they rarely really take 5 minutes). Have an idea of the relative effort
needed to accomplish your commonly requested tasks so that you can schedule the requests properly.
6. Change is hard
Any change you make to the way you manage a project’s resources requires a mind shift from your team.
And change is really hard. Don’t skimp on giving your team members leeway to process and react to the
change in their own way. Most should quickly embrace a system that will let them work fewer weekends,
but you could have push-back. Following are the tips that Erica shared to navigate the change process:
Communicate: Define what you want people to do differently. Visibly and transparently change your
intake, prioritization and resource management behaviors. Let everyone see how you’re doing things
differently.
Model: Live the change – leadership models the new behavior. Get executive/leadership buy-in for
more structured intake process, prioritization, and resource management
Reinforce: Rewards and consequences are the most powerful levers you have. Reward those who follow
suit (call-out in company meetings, spot awards, “good job”, etc.) and ensure there are consequences for
the “old behaviors” (chaotic/randomized work isn’t funded/supported, for example).

Project Communications Management

Communications management in project management outlines the processes and procedures needed to
ensure that information and data throughout the life of a project are properly collected, stored, and
distributed across the project team.
Communications management process
There are 3 primary steps in the communications management process:
• Plan communications
• Manage communications
• Control communications
Plan communications
You can start managing your project’s communication strategy by creating a communications management
plan. The communications management plan needs to document communications requirements throughout
the life of a project. Some of these requirements include:
Cadence: How frequently are updates going to be sent out?
Audience: Who will project communications be sent out to? Is there a different group for different types
of communications?
Purpose: Will progress reports be sent out at each milestone? Will change requests be shared with all
stakeholders?
Channel: What channels will be used for communication?
The communications management plan should include as much detail as possible so that there are clear
expectations set and all stakeholders are on the same page.
Manage communications
Now that all stakeholders have agreed on the communications management plan, the project manager needs
to ensure that project communications follow those guidelines. The communications plan should be seen
as a living document throughout the life cycle of a project, but any changes should be communicated to the
project team.
Control communications
Not all stakeholders find relevance in every project detail. Because of this, only include stakeholders on
communications when necessary. Create sub-groups of stakeholders to decide what types of
communications they need to receive. These include project status, project performance, risks, costs, and
others. Being effective in controlling communication streamlines project management and saves project
leaders and team members from getting irrelevant updates and emails.
Communication Tools
Part of the communications management plan is to define which channels will be used for various types of
messages. Here are some helpful tools to facilitate these communications:
Instant messaging
While it is one of the more informal messaging channels, instant messaging provides a streamlined, real-
time way of communicating with the project team. If you are looking to get immediate feedback, these
tools can be effective.
One of the downsides to using instant messaging is that the conversations happen in a vacuum. It is up to
the project manager to ensure that any relevant details from these conversations make its way into the
primary system of record for the project.
Instant messaging options:
• Slack • Spark
• Google Meet • Adium
• Jabber • Microsoft Teams
Email
Unlike instant messaging, email is an effective channel for more formal project updates being sent out to
multiple stakeholders. Progress reports, performance updates, and change updates are examples of
messages traditionally sent through email.

Project Risk Management

Risk management is the process of mitigating the potential negative impact unforeseen events can have on
a project's cost, time table, or other resources. As risk is an unavoidable part of project management, it
needs to be accounted for from start to finish on all projects.
All projects face risks. Risks can in large part be mitigated to some degree by taking the time to develop a
project risk management process to help ensure threats have a limited effect on the project outcome while
maximizing opportunities. A skilled project manager understands the potential effects that risks can have
on their projects, and manages them accordingly, ultimately resulting in improved odds for project success.
Risk management occurs in 5 steps:
1. Risk planning
2. Risk identification
3. Risk analysis
4. Risk response plan
5. Risk monitoring
Risk planning
From the start, you have to put a risk plan in place. Like all project planning, risk planning is done
iteratively, and never at a single point in time. A project manager should document a risk management
plan with a defined approach. This includes how risks will be identified and scored, along with how
contingencies and their owners will be determined and assigned.
Risk identification
To forgo this exercise is to forgo risk management all together. If project managers do nothing else for the
benefit of their project with regard to risk, they should at least conduct a risk identification assessment.
Risk analysis
In order to know which of the now identified risks require subsequent management, analysis of the threats
and opportunities is needed. For our purposes, project risk analysis is done two ways, qualitative risk
analysis, and quantitative risk analysis. The latter is where a score or weight is assigned to each risk based
on probability and potential impact, so it is known if further management is necessary. This is put into a
Risk Register (see example below). An integral part of project risk analysis is risk tolerance, as some risks
may require no further action beyond their identification, while others, which may be more likely, will
require a contingency plan of action.
Risk response plan
Risk response planning combines our efforts thus far into a viable risk response for each threat and
opportunity we've identified as falling within the range of our risk tolerance threshold. Risk response
planning increases the probability and/or impact of opportunities identified within the predetermined
tolerance range of our risk register, and reduces the probability and/or impact of any threats.
There are four mitigation strategies to consider when developing a Risk Response Plan for both threats
and opportunities.
Response to threats:
Avoid: change plans
Mitigate: reduce the probability and/or impact of the threat on the project
Transfer: assign the risk to someone else
Accept: do nothing
Response to opportunities:
Exploit: make the opportunity more likely
Enhance: increase the value of the opportunity to the project
Share: partner with someone who can capture the opportunity
Accept: do nothing
Risk monitoring
The last step is risk monitoring. The project manager monitors the risk register, executing on response
plans, as well as documenting subsequent threats and opportunities as they become known throughout the
project life cycle.
Risk planning is like any other project planning process, and is never really done until the project itself is
complete; therefore, a project manager's risk monitoring is finished only when the project is complete.

Project Procurement Management

Procurement management is a term that describes the process of managing and optimizing a project’s
budget as it applies to the goods, services, and resources you’ll need to complete your project. Examples
of resources include raw materials, building space, hosting, independent contractors, and intellectual
property, many of which will be provided by third party vendors.
The team member in charge of procurement management, often the project manager, ensures resources
are purchased, rented, or otherwise obtained as smoothly as possible. Priorities may include keeping costs
low, selecting quality inputs, and selecting preferred vendors.
In many cases, procurement management requires negotiating with independent contractors and resolving
disputes that may delay the project. In other cases, developing resources in-house might be preferable due
to lower costs, faster turnaround times, or concerns regarding intellectual property ownership. It’s during
the procurement management process that the project manager determines whether working with a third
party is advantageous in the long run.
The project procurement management process
The project procurement management process includes three phases: procurement management planning,
conducting procurements, and controlling procurements.
Procurement management planning
After determining that working with a third party is preferable to developing resources internally, the first
step in your project procurement management plan is to send a request for proposal (RFP) to potential
business partners. The RFP should outline your project’s requirements and ask contractors to submit bids
and other information regarding their products or services. Include your highest priorities and expectations
in your RPF, so everyone is on the same page.
When deciding between contractors, consider each company’s price, reputation, and responsiveness. You
may want to bring in experts to help you evaluate each organization’s bids and capabilities. Don’t rush the
decision, especially if you’re looking to form a long-term relationship.
Conduct procurements
Once you choose the best contractor for the job, draw up a legal contract to solidify your agreement. One
common approach is to create a master service agreement that governs your overall relationship, with
smaller statements of work describing the details for each project.
Often, you’ll need to negotiate your agreements with third parties. Carefully review the contract’s terms,
indemnification provisions, and warranties. We recommend working with a business attorney to help
protect your interests.
Control procurements
Once you’ve signed the final legal documents, regularly monitor your relationship with each third-party
contractor. Unreliable vendors can result in low-quality final products, delays, and cost overruns.
While a contract can protect you in court as a last resort, you can avoid problems down the road by
assigning someone to carefully oversee each vendor’s contributions and make sure they’re fulfilling your
expectations. This oversight might include regularly scheduled meetings and quality-control inspections.
Preventing a misunderstanding is much easier than cleaning up a disaster.
You’ll also need regular systems for payment, acceptance of deliverables, reviews and approvals, and
dispute resolution. An enterprise work management platform can help simplify the process and clarify
each party’s accountabilities and expectations.
The project manager’s role in procurement management
While the project manager may oversee some aspects of procurement, they may delegate many functions
to other individuals. For example, the project manager might provide crucial input when choosing a vendor
and negotiating documents but assign responsibility for administering the relationship to a subordinate.
All team members should keep the project manager in the loop when making major decisions.
Procurement management is essential to your project’s success
When you plan, conduct, and administer your procurement processes with care and attention, you ensure
your team members have access to the goods, services, and resources they need to complete your project
on time, on spec, and on budget.

Project Stakeholder Management

Stakeholder management involves how project status, costs, and roadblocks are communicated to those
stakeholders to increase visibility, navigate change in project direction, and manage expectations. Project
stakeholders are individuals who are involved in your project, or whose interests may be impacted as a
result of project execution or successful project completion.
The stakeholder management process helps project managers keep change front of mind while making it
less threatening. The stakeholder management plan is an important reminder for every interaction project
manager have with direct or indirect stakeholders as it helps them maintain practical connection between
the project and daily operations.
Stakeholder identification
Stakeholder identification cannot be underestimated. It's a big task. Stakeholder identification is often
difficult but must be done thoroughly for the project manager to know who's who and put in place strategies
to manage conflicting needs and expectations, and help stakeholders transition to a different way of
working.
The key facets of stakeholder identification are:
Stakeholder landscape
Here you're creating a picture of who's who with regards their functions, ie., corporate, internal and
external functions.
Stakeholder positions
Now it's time to identify individuals in each group and rank them as high, medium, or low in terms of
their:
• Ability to disrupt change
• Current understanding
• Required understanding
• Current commitment
• Required commitment
• Required support
Stakeholder management approach
This is effectively a power vs. interest matrix, which helps determine the strategy to adopt for engaging
with them.
Stakeholder map
Now your stakeholder management plan becomes more solid. With individuals listed in each functional
group you can add their key concerns, the management approach you're taking, and key artefacts for their
input or validation during the project.
Review stakeholders
Review and adjust or use what makes sense for you and your project. The effort applied to this work gives
a solid foundation for developing the communication plan, acts as input to the risk management plan, and
sets the scene for all on the project team. It also gives you a reference baseline for transitioning people and
processes as the project moves through its life cycle.
 Module 3
Nature and Scope of Production and operations Management
Production and Operations Management (POM) is the branch of management that is concerned with the
planning, organizing, and controlling of the production process. POM is responsible for ensuring that
goods and services are produced efficiently and effectively, in order to meet customer demand and
maximize profitability.
The scope of POM includes the following areas:
1. Design of products and services: POM involves the design of products and services that meet
customer needs and preferences. This involves the selection of materials, manufacturing processes,
and the design of the production system.
2. Planning and control of production: POM is responsible for the planning and control of the
production process. This includes forecasting demand, scheduling production, and managing
inventory levels.
3. Quality control: POM is responsible for ensuring that goods and services meet the required quality
standards. This involves the implementation of quality control processes and the use of quality
control tools and techniques.
4. Supply chain management: POM is responsible for managing the entire supply chain, from raw
materials to finished products. This involves managing suppliers, transportation, and distribution.
5. Maintenance and repair: POM is responsible for the maintenance and repair of production
equipment and facilities. This involves ensuring that equipment is maintained in good working
order and that repairs are carried out quickly and efficiently.
The nature of POM is multidisciplinary and involves a range of activities, including engineering,
economics, mathematics, and statistics. POM is concerned with the efficient and effective use of resources,
including labor, capital, and materials, in order to produce goods and services that meet customer needs
and preferences. POM is also concerned with ensuring that the production process is safe, environmentally
sustainable, and socially responsible.
Production Systems
A production system is a set of processes, resources, and technologies used by an organization to transform
inputs into finished products or services. The production system can be applied in both manufacturing and
service industries and involves a series of activities aimed at delivering goods or services to customers.
The production system includes several components, such as raw materials, equipment, facilities, labor,
and management. These components are organized and coordinated to achieve the desired output
efficiently and effectively. The production system also involves the planning, scheduling, and control of
the production process to ensure that it meets quality standards, delivery schedules, and cost targets.
The type of production system used by an organization depends on the nature of the product or service,
customer demand, the volume of production, and the available resources. Different types of production
systems include continuous, intermittent, mass, job shop, cellular, and project production systems.
Overall, the production system is an essential part of any organization that aims to deliver high-quality
products or services to its customers. A well-designed production system can help to increase productivity,
reduce costs, and improve customer satisfaction.
Types of production system
There are several types of production systems used in manufacturing and service industries. These
production systems can be categorized based on various criteria, such as the volume of production, the
product variety, the level of automation, and the degree of customization. Here are some common types
of production systems:
1. Continuous production system: A continuous production system is used for the production of
large quantities of identical products. The production process is highly automated and operates
continuously without any interruptions. Examples of continuous production systems include oil
refineries, chemical plants, and steel mills.
2. Intermittent production system: An intermittent production system is used for the production of
small batches of customized products. The production process is not continuous, and each batch
may require different processes and materials. Examples of intermittent production systems include
custom furniture manufacturing and printing presses.
3. Mass production system: A mass production system is used for the production of large quantities
of standardized products. The production process is highly automated, and products are produced
on an assembly line. Examples of mass production systems include car manufacturing and
consumer electronics production.
4. Job shop production system: A job shop production system is used for the production of
customized products. The production process is highly flexible and can be adapted to meet the
unique requirements of each product. Examples of job shop production systems include machine
shops and custom manufacturing.
5. Cellular production system: A cellular production system is used for the production of small
batches of products. The production process is organized into self-contained cells, with each cell
responsible for producing a specific product or part. Examples of cellular production systems
include cell phone manufacturing and computer assembly.
6. Project production system: A project production system is used for the production of large,
complex products such as buildings, ships, and airplanes. The production process is highly
customized, and each project requires a unique set of processes, materials, and resources.
These are some of the most common types of production systems used in manufacturing and service
industries. The type of production system used depends on the specific requirements of the product or
service being produced, as well as other factors such as the volume of production, the level of automation,
and the degree of customization.
Relationship of production system with other Systems in Organizations
The production system is an integral part of any organization and is closely related to other systems within
the organization. Here are some of the relationships that the production system has with other systems in
organizations:
 1. Marketing system: The marketing system is responsible for identifying customer needs and
preferences, developing marketing strategies, and promoting products and services to customers.
The production system is closely related to the marketing system as it is responsible for producing
goods and services that meet customer needs and preferences.
2. Financial system: The financial system is responsible for managing the financial resources of the
organization. The production system is closely related to the financial system as it is responsible
for ensuring that production is carried out efficiently and cost-effectively.
3. Human resources system: The human resources system is responsible for managing the
organization's workforce. The production system is closely related to the human resources system
as it requires skilled workers and effective management to carry out production efficiently.
4. Information system: The information system is responsible for managing the flow of information
within the organization. The production system is closely related to the information system as it
requires accurate and timely information on customer demand, inventory levels, and production
schedules to operate effectively.
5. Quality management system: The quality management system is responsible for ensuring that
goods and services meet the required quality standards. The production system is closely related to
the quality management system as it is responsible for producing goods and services that meet
these standards.
Overall, the production system is an integral part of the organization and is closely related to other systems
within the organization. Effective coordination between these systems is necessary to ensure that the
organization operates efficiently and effectively.
Functions of Production and material management
The functions of production and material management are essential in ensuring that a company operates
efficiently and effectively. These functions include:
1. Planning: Production and material management involves developing a comprehensive plan for the
production process. This includes identifying the resources required for production, setting
production goals, and developing a timeline for production.
2. Scheduling: Once a production plan has been developed, the next step is to create a production
schedule. This involves determining when specific tasks will be completed, how long they will
take, and what resources will be required.
3. Procurement: Material management is responsible for procuring the materials required for
production. This involves identifying suppliers, negotiating prices, and ensuring that the materials
are delivered on time.
4. Inventory Management: Material management is also responsible for managing inventory levels
to ensure that the company has the necessary materials on hand to meet production needs. This
involves monitoring inventory levels, ordering materials when necessary, and disposing of excess
inventory.
5. Quality Control: Production management is responsible for ensuring that the production process
meets quality standards. This involves developing quality control processes, monitoring production
processes, and identifying areas for improvement.
 6. Maintenance: Production management is responsible for ensuring that production equipment and
machinery are maintained and repaired as needed. This involves developing maintenance
schedules, coordinating repairs, and ensuring that equipment is functioning properly.
7. Cost Control: Both production and material management are responsible for controlling costs
associated with the production process. This involves identifying areas where costs can be reduced,
monitoring production costs, and developing cost-effective production processes.
Overall, the functions of production and material management are essential in ensuring that a company
can produce high-quality products efficiently and effectively. Effective production and material
management can lead to increased productivity, reduced costs, and improved customer satisfaction.
Forecasting as a planning tool
Forecasting is an important planning tool that helps businesses to anticipate future demand for their
products or services. It involves using historical data and other relevant information to make predictions
about future demand, sales, and revenue.
There are several benefits of using forecasting as a planning tool, including:
1. Better Resource Allocation: Forecasting enables businesses to allocate resources more
effectively. By anticipating future demand, businesses can plan their production, staffing, and
inventory needs accordingly, which can help to minimize waste and maximize efficiency.
2. Improved Decision Making: Accurate forecasting can help businesses make informed decisions
about production, marketing, and investment. By having a clear understanding of future demand,
businesses can make more informed decisions about product development, advertising, and capital
expenditures.
3. Improved Customer Service: Forecasting can also help businesses to improve customer service
by ensuring that they have sufficient inventory on hand to meet customer demand. This can help
to prevent stockouts and backorders, which can damage customer relationships.
4. Cost Savings: By anticipating future demand, businesses can reduce their inventory costs by only
ordering the materials and supplies they need to meet demand. This can help to minimize waste
and reduce storage costs.
5. Increased Profitability: Accurate forecasting can help businesses to increase profitability by
enabling them to optimize production, pricing, and marketing strategies. By anticipating future
demand, businesses can make more informed decisions about pricing and promotional activities,
which can help to boost sales and revenue.
In summary, forecasting is an important planning tool that enables businesses to anticipate future demand
and make informed decisions about resource allocation, production, marketing, and investment. By using
accurate forecasting, businesses can improve efficiency, reduce costs, and increase profitability.
Forecasting types and methods
There are several types of forecasting and methods used by businesses to make predictions about future
demand and trends. Here are some common types and methods:
1. Qualitative Forecasting: Qualitative forecasting methods are based on expert opinions and
subjective judgments. This type of forecasting is often used in situations where there is limited
 historical data or where the future is uncertain. Some common qualitative methods include market
research, surveys, and expert opinions.
2. Quantitative Forecasting: Quantitative forecasting methods are based on mathematical models
and historical data. This type of forecasting is often used when there is a large amount of historical
data available and when past trends can be used to make predictions about the future. Some
common quantitative methods include time-series analysis, regression analysis, and econometric
models.
3. Time-Series Forecasting: Time-series forecasting is a quantitative method that involves analyzing
historical data to identify patterns and trends over time. This method is often used to make
predictions about future demand based on past sales data.
4. Delphi Method: The Delphi method is a qualitative forecasting method that involves soliciting
opinions from a group of experts through a series of questionnaires. The responses are then
analyzed and used to make predictions about future trends.
5. Scenario Planning: Scenario planning is a qualitative forecasting method that involves developing
several possible scenarios for the future and analyzing the potential impact of each scenario on the
business. This method is often used in situations where the future is uncertain and multiple
outcomes are possible.
6. Judgmental Forecasting: Judgmental forecasting is a qualitative method that involves using
expert opinions and judgment to make predictions about the future. This method is often used when
there is limited historical data available or when the future is uncertain.
Overall, the type of forecasting method used will depend on the situation and the availability of data. By
using a combination of qualitative and quantitative methods, businesses can make more accurate
predictions about future demand and trends, which can help to improve planning and decision-making.
Facility Planning
Facility planning is the process of designing, organizing, and configuring the physical space and
infrastructure of a facility to meet the needs of its occupants and users. The objective of facility planning
is to optimize the use of space, equipment, and other resources to support the operations and activities of
the organization.
Facility planning involves several key steps, including:
1. Needs Assessment: The first step in facility planning is to assess the needs of the organization and
its users. This involves identifying the activities and functions that will take place in the facility,
as well as the space and equipment requirements for each activity.
2. Site Selection: Once the needs of the organization are identified, the next step is to select an
appropriate site for the facility. Factors to consider include the location, accessibility, zoning
regulations, and environmental impact.
3. Design and Layout: The design and layout of the facility are critical components of facility
planning. This involves creating a floor plan that maximizes the use of space and promotes efficient
flow of people, equipment, and materials. The layout should also take into account safety,
accessibility, and aesthetics.
 4. Equipment and Technology: Facility planning also involves selecting the appropriate equipment
and technology to support the activities and functions of the organization. This includes selecting
equipment that is compatible with the facility's infrastructure and meets the needs of users.
5. Maintenance and Operations: The final step in facility planning is to develop a plan for
maintenance and operations. This involves creating a schedule for routine maintenance and repairs,
as well as developing protocols for emergency situations.
Overall, facility planning is an important process that helps organizations to create a physical space that
supports their operations and activities. By carefully assessing the needs of the organization and its users,
selecting an appropriate site, designing an efficient layout, selecting appropriate equipment and
technology, and planning for maintenance and operations, organizations can optimize their use of space
and resources to achieve their goals.
Facilities location decisions
Facilities location decisions involve determining the best location for a new facility or the relocation of an
existing one. This decision is critical to the success of the business as it can impact several aspects, such
as transportation costs, access to raw materials, labor availability, market reach, and competition.
Here are some key factors to consider when making facilities location decisions:
1. Proximity to Market: The location should be easily accessible to the target market. This can
reduce transportation costs and lead times, and allow the business to respond quickly to customer
demand.
2. Transportation: The location should have good transportation links, such as highways, ports,
airports, and rail lines. This can reduce transportation costs and lead times, and allow the business
to efficiently transport goods and materials.
3. Labor Availability: The location should have an adequate supply of skilled and unskilled labor.
This can reduce labor costs and ensure that the business has access to the required talent.
4. Cost of Living: The cost of living should be reasonable in the location. This can reduce labor costs
and improve employee retention.
5. Access to Raw Materials: The location should be close to sources of raw materials. This can
reduce transportation costs, lead times, and ensure a consistent supply of materials.
6. Government Regulations: The location should be in compliance with local, state, and federal
regulations. This can avoid legal and regulatory issues that can impact the business's operations.
7. Competition: The location should not be in close proximity to competitors. This can reduce the
risk of market saturation and price competition.
Overall, facilities location decisions are complex and involve considering several factors that can impact
the business's success. By carefully evaluating these factors and conducting thorough research and
analysis, businesses can make informed decisions and select the optimal location for their facilities.
Types of facility or Plant location
There are several types of plant location, and the choice of location depends on the type of business and
the objectives of the plant. Here are some common types of plant location:
 1. Urban Location: This type of plant location is located in urban areas and offers advantages such
as access to transportation networks, labor pools, and proximity to markets. Urban locations may
also have higher costs for land, taxes, and utilities.
2. Rural Location: This type of plant location is located in rural areas and offers advantages such as
lower costs for land, taxes, and utilities. Rural locations may also have challenges such as limited
access to transportation networks and labor pools.
3. Suburban Location: This type of plant location is located in suburban areas and offers advantages
such as access to transportation networks, labor pools, and proximity to markets. Suburban
locations may have advantages such as lower costs than urban areas but higher costs than rural
areas.
4. Coastal Location: This type of plant location is located near a coastline and offers advantages
such as access to transportation networks, proximity to markets, and availability of ports for
exporting and importing goods. Coastal locations may also have challenges such as exposure to
natural disasters like hurricanes and rising sea levels.
5. Inland Location: This type of plant location is located away from a coastline and offers advantages
such as lower costs for land, taxes, and utilities. Inland locations may also have challenges such as
limited access to transportation networks and labor pools.
6. Foreign Location: This type of plant location is located in a foreign country and offers advantages
such as lower labor costs, access to new markets, and proximity to suppliers. Foreign locations
may also have challenges such as cultural differences, language barriers, and political instability.
The relative advantages and disadvantages of these types of plant location can vary depending on the
specific business and industry. Factors such as cost, access to transportation networks, labor pools,
markets, and regulatory environment should be carefully considered when selecting a plant location.
 Module 4
Facility layout planning
Facility layout planning is the process of designing the physical layout of a facility to optimize the flow of
materials, products, and people through the facility. The goal of facility layout planning is to maximize
efficiency and productivity while minimizing waste, delays, and costs. Here are some key steps in facility
layout planning:
1. Define objectives: The first step in facility layout planning is to define the objectives of the facility.
This involves understanding the specific needs of the business and the industry, as well as the goals
of the facility.
2. Gather data: The next step is to gather data about the facility, such as the size and shape of the
building, the location of doors, windows, and other openings, and the location of utilities and other
infrastructure.
3. Analyze data: Once the data has been collected, it should be analyzed to identify the strengths and
weaknesses of the existing layout, as well as potential opportunities for improvement.
4. Develop alternative layouts: Based on the data analysis, alternative layouts should be developed
and evaluated. These layouts may be created using computer-aided design (CAD) software,
physical models, or a combination of both.
5. Evaluate alternatives: The alternative layouts should be evaluated based on criteria such as
efficiency, productivity, safety, and cost. The best layout should be selected based on the criteria
and the objectives of the facility.
6. Implement the layout: Once the best layout has been selected, it should be implemented. This
may involve rearranging equipment and workstations, adding or removing walls or partitions, and
modifying utilities and other infrastructure.
7. Monitor and adjust: Finally, the new layout should be monitored and adjusted as needed to ensure
that it is achieving the desired results. This may involve making small changes to the layout or
implementing larger changes over time.
Facility layout planning can be a complex process, and it is important to involve key stakeholders such as
employees, managers, and contractors in the planning process to ensure that all perspectives are
considered.
Facility Layout and its objectives for manufacturing operations
1. Minimizing material handling: One of the main objectives of facility layout is to minimize the
distance that materials must be transported within the facility. This reduces material handling costs,
minimizes the risk of damage to the products, and improves efficiency.
2. Optimizing space utilization: Another objective of facility layout is to optimize the use of
available space within the facility. This can be achieved by using space-saving equipment and
workstations, and by arranging equipment and materials in a way that minimizes wasted space.
3. Improving workflow: Facility layout can also be used to improve the flow of work through the
facility. This involves arranging equipment and workstations in a logical sequence, and minimizing
the need for workers to backtrack or retrace their steps.
 4. Enhancing communication: Facility layout can also enhance communication between workers
and departments within the facility. This can be achieved by placing workstations and support areas
in close proximity to each other, and by providing clear signage and instructions throughout the
facility.
5. Improving safety: Another objective of facility layout is to improve safety within the facility. This
involves designing the layout to minimize the risk of accidents and injuries, and ensuring that
workers have adequate space and equipment to perform their jobs safely.
6. Reducing costs: Finally, facility layout can be used to reduce costs within the facility. This can be
achieved by minimizing material handling and transportation costs, optimizing space utilization,
and improving efficiency and productivity.
Overall, the objective of facility layout in manufacturing operations is to create a well-organized, efficient,
and safe facility that maximizes productivity and minimizes costs.
Principles of Facility Layout
There are several key principles that should be considered when designing a facility layout:
1. Flow: The flow of materials, products, and people through the facility should be carefully
considered when designing the layout. The goal should be to create a logical, efficient flow that
minimizes the need for material handling and transport.
2. Space utilization: Space utilization is a critical consideration in facility layout. The layout should
make the most efficient use of available space while also providing adequate space for equipment,
workstations, and people.
3. Flexibility: The facility layout should be designed with flexibility in mind, to accommodate
changes in production processes, product lines, and customer demand.
4. Safety: Safety should be a top priority when designing the facility layout. The layout should
minimize the risk of accidents and injuries by providing adequate space, clear signage, and safety
features such as guardrails and safety barriers.
5. Communication: Communication is essential in a manufacturing facility, and the layout should
be designed to facilitate communication between workers and departments. This can be achieved
by placing workstations and support areas in close proximity to each other, and by providing clear
signage and instructions throughout the facility.
6. Environment: The facility layout should be designed to create a comfortable, productive work
environment. This can be achieved by providing adequate lighting, ventilation, and temperature
control.
7. Cost: Cost is an important consideration in facility layout design. The layout should be designed
to minimize material handling and transportation costs, optimize space utilization, and improve
efficiency and productivity.
By following these principles, manufacturers can design a facility layout that is efficient, safe, and cost-
effective, and that supports the production process and the goals of the business.
Types of plant layouts
There are several types of plant layouts that manufacturers can choose from, depending on their specific
needs and the characteristics of their production processes. Here are some of the most common types of
plant layouts:
1. Process layout: In a process layout, similar processes or operations are grouped together. This type
of layout is used when a variety of products are produced in small quantities, and the processes
involved in producing them are similar.
2. Product layout: In a product layout, the production line is arranged in a specific sequence, with
each workstation performing a specific task in the production process. This type of layout is used
when a large quantity of a single product is being produced.
3. Fixed position layout: In a fixed position layout, the product is too large or too heavy to move, so
the workers and equipment are brought to the product. This type of layout is used for large
construction projects, such as building a ship or an airplane.
4. Cellular layout: In a cellular layout, similar machines or workstations are grouped together to
create a self-contained production cell. This type of layout is used when a variety of products are
produced in small to medium quantities, and the processes involved in producing them are
dissimilar.
5. Hybrid layout: A hybrid layout is a combination of two or more of the above layout types. This
type of layout is used when there are different products or processes involved in production, and a
combination of layouts is needed to optimize production efficiency.
Each type of plant layout has its own advantages and disadvantages, and manufacturers must carefully
consider their specific needs and production processes when choosing the best layout for their facility.
Factors influencing plant layout changes
Plant layout changes may be necessary due to a variety of factors, including:
1. Changes in production processes: If the production processes change, the plant layout may need
to be adjusted to accommodate the new processes.
2. Changes in product design: If the design of the product changes, the plant layout may need to be
modified to accommodate the new product.
3. Changes in production volume: If the volume of production changes, the plant layout may need
to be adjusted to optimize production efficiency.
4. Changes in technology: As new technologies are developed, they may require changes in the plant
layout to accommodate new equipment or production methods.
5. Changes in market demand: If market demand changes, the plant layout may need to be modified
to increase or decrease production capacity.
6. Safety and environmental concerns: If safety or environmental regulations change, the plant
layout may need to be modified to ensure compliance with these regulations.
7. Cost reduction: If cost reduction is a priority, the plant layout may need to be redesigned to
optimize the use of space and equipment.
 8. Company expansion or relocation: If the company expands or relocates, the plant layout may
need to be modified to accommodate the new location or size of the facility.
9. Lean manufacturing initiatives: If the company is implementing lean manufacturing initiatives,
the plant layout may need to be redesigned to reduce waste and improve efficiency.
Overall, plant layout changes are driven by a variety of factors, and manufacturers must carefully evaluate
their specific needs and goals when considering changes to the plant layout.
Time and Motion Study
Time and motion study is a technique used in industrial engineering to improve productivity by analyzing
and optimizing work processes. It involves breaking down a work process into individual tasks and then
analyzing each task to identify ways to make the process more efficient.
The primary objective of time and motion study is to determine the optimal way to perform a task, in terms
of the time required and the number of movements or motions involved. The study involves the following
steps:
1. Selecting the task to be studied: A specific task is selected for study, based on its relevance to the
overall work process.
2. Observing the task: The task is observed, and the time taken for each movement or motion is
recorded. This helps to identify any unnecessary movements or motions that can be eliminated or
reduced.
3. Analyzing the task: The task is analyzed to identify ways to improve efficiency, such as
simplifying the process, changing the work sequence, or using tools and equipment to reduce the
time taken.
4. Developing the new method: Based on the analysis, a new method is developed, which is designed
to be more efficient than the original method.
5. Testing the new method: The new method is tested to ensure that it is more efficient than the
original method, and any necessary adjustments are made.
6. Implementing the new method: The new method is implemented, and the process is continuously
monitored to ensure that the improvements are sustained.
The benefits of time and motion study include increased productivity, reduced costs, and improved quality.
By optimizing work processes, organizations can reduce the time and effort required to complete tasks,
which in turn reduces costs and improves efficiency. Additionally, by eliminating unnecessary movements
and motions, organizations can improve worker safety and reduce the risk of injury.
Work Study in Management Science
Work study is a management science technique used to analyze work processes and identify ways to
improve efficiency, reduce waste, and increase productivity. It involves analyzing work processes,
measuring their performance, and identifying opportunities for improvement.
There are two main types of work study techniques: method study and work measurement.
1. Method Study: Method study is a technique used to analyze work processes and identify ways to
improve their efficiency. The technique involves breaking down a work process into individual
 tasks, analyzing each task to identify any unnecessary movements or steps, and then developing a
new, more efficient method for performing the task.
2. Work Measurement: Work measurement is a technique used to measure the time taken to perform
a task. It involves using time and motion studies to analyze work processes and identify ways to
reduce the time taken to perform tasks, while still maintaining quality and safety.
The benefits of work study include increased productivity, reduced costs, and improved quality. By
analyzing work processes and identifying opportunities for improvement, organizations can reduce waste,
improve efficiency, and increase output. Additionally, by reducing the time taken to perform tasks,
organizations can increase productivity and reduce costs. Work study also helps to ensure that work is
performed safely and to the required standard, thereby improving quality and reducing the risk of errors
or accidents.
Overall, work study is a valuable technique for improving work processes and increasing productivity. By
using a structured approach to analyze work processes, organizations can identify and implement changes
that lead to significant improvements in efficiency, quality, and cost-effectiveness.
Maintenance Management
Maintenance management refers to the process of managing and maintaining equipment, machinery, and
facilities in a manner that ensures they remain operational and productive over their lifespan. Effective
maintenance management is essential for organizations that rely on machinery and equipment to produce
goods and services.
The main objectives of maintenance management include:
1. Maximizing equipment reliability and availability: This involves ensuring that equipment is
maintained in a manner that prevents breakdowns and maximizes uptime.
2. Minimizing equipment downtime: This involves minimizing the time it takes to repair equipment
when it breaks down.
3. Minimizing maintenance costs: This involves optimizing maintenance processes and schedules
to minimize costs while ensuring equipment reliability.
4. Improving equipment performance: This involves implementing changes to equipment or
maintenance processes to improve efficiency, productivity, and quality.
Maintenance management can be divided into several areas, including preventive maintenance, predictive
maintenance, corrective maintenance, and shutdown maintenance.
1. Preventive maintenance: This involves performing maintenance tasks on equipment at regular
intervals to prevent breakdowns and extend equipment lifespan.
2. Predictive maintenance: This involves using data and analytics to predict when equipment will
require maintenance, allowing for maintenance to be scheduled in advance and minimizing
downtime.
3. Corrective maintenance: This involves repairing equipment when it breaks down, either through
in-house maintenance or outsourcing to external contractors.
4. Shutdown maintenance: This involves performing maintenance tasks that cannot be completed
during normal operation, such as major repairs or upgrades.
 5. Reactive (run-to-failure) maintenance: it is a type of maintenance strategy where equipment or
systems are only repaired or replaced when they break down or fail. This approach is often used
when the cost of preventive maintenance is deemed too high or when the consequences of failure
are not significant.
6. Predetermined maintenance: it is a maintenance strategy where maintenance activities are
scheduled at fixed intervals, regardless of the condition of the equipment or system. This approach
is often used for equipment that has a known and predictable failure pattern.
Effective maintenance management requires a structured approach that includes planning, scheduling,
execution, and evaluation of maintenance activities. It also involves a focus on continuous improvement,
with regular evaluation and analysis of maintenance processes to identify opportunities for improvement.
By managing maintenance effectively, organizations can reduce downtime, increase productivity, and
minimize costs while ensuring the reliability and availability of equipment and facilities.
Introduction to Lean operations and elimination of 7 wastes
Lean operations is a business management philosophy that focuses on maximizing efficiency and
minimizing waste in all areas of a company's operations. It was first developed by Toyota in the 1950s and
has since been adopted by many companies across a range of industries.
At its core, lean operations is about continuous improvement, with a focus on reducing the seven types of
waste: overproduction, waiting, defects, overprocessing, excess inventory, unnecessary motion, and
unused talent. By identifying and eliminating these types of waste, companies can improve efficiency,
reduce costs, and increase customer satisfaction.
Lean operations also emphasizes the importance of empowering employees at all levels of the organization
to identify and solve problems. This means creating a culture of continuous improvement, where everyone
is encouraged to identify opportunities for improvement and make changes to processes and systems.
Some of the key principles of lean operations include:
• Value: Identifying the value that the customer places on a product or service
• Flow: Ensuring that the value is delivered smoothly and efficiently
• Pull: Creating a system where production is driven by customer demand
• Continuous improvement: Striving to constantly improve processes and eliminate waste
Overall, the goal of lean operations is to create a streamlined, efficient, and customer-focused organization
that is able to quickly adapt to changing market conditions and customer needs.
One of the central tenets of lean operations is the identification and elimination of the seven types of waste,
also known as "muda." These wastes are defined as any activity or process that does not add value to the
customer and can include:
1. Overproduction: Producing more than what is needed or producing products ahead of demand,
leading to excess inventory and higher costs.
2. Waiting: Delays in production or service delivery due to inefficiencies in the process or waiting
for input from others, leading to lost time and customer dissatisfaction.
 3. Defects: Products or services that do not meet customer requirements or have defects, leading to
rework, delays, and increased costs.
4. Overprocessing: Performing unnecessary steps or adding unnecessary features that do not add
value to the customer, leading to wasted time and resources.
5. Excess inventory: Keeping more inventory on hand than necessary, leading to increased storage
costs, decreased cash flow, and higher risk of obsolescence.
6. Unnecessary motion: Performing unnecessary or inefficient movements in the production or
service delivery process, leading to wasted time and increased risk of injury.
7. Unused talent: Not utilizing the skills and abilities of employees, leading to underutilization of
resources and missed opportunities for improvement.
By identifying and eliminating these wastes, businesses can reduce costs, improve efficiency, and enhance
customer satisfaction. The process of waste elimination involves continuous improvement, where
employees at all levels are encouraged to identify and address areas of inefficiency in their processes.
In summary, lean operations and the elimination of the seven wastes are critical components of business
success, allowing organizations to improve efficiency, reduce costs, and increase customer satisfaction.
5S of housekeeping
The 5S methodology is a system of housekeeping and workplace organization that originated in Japan and
has been widely adopted in various industries around the world. The 5S's stand for:
1. Sort: The first step is to sort through all the items in the workplace and keep only what is necessary
for the operation. Everything else should be removed or stored away. This helps to reduce clutter
and make it easier to find what is needed.
2. Set in Order: Once everything has been sorted, the next step is to arrange the necessary items in
a logical and efficient manner. Tools, equipment, and materials should be stored in designated
locations and labeled clearly so that they can be easily found and accessed when needed.
3. Shine: The third step is to clean and maintain the workplace regularly. This includes not only
cleaning surfaces and equipment but also inspecting them for signs of wear and damage, so that
they can be repaired or replaced as needed.
4. Standardize: The fourth step is to establish standard operating procedures for maintaining the
workplace. This includes creating a schedule for cleaning and maintenance, as well as documenting
procedures and training employees to follow them consistently.
5. Sustain: The final step is to sustain the gains made through the first four steps by making 5S a
regular part of the organization's culture. This involves ongoing training and communication with
employees to reinforce the importance of workplace organization and maintain a clean, efficient,
and safe working environment.
By implementing the 5S methodology, organizations can improve productivity, safety, and quality while
reducing waste and costs. It can also help to promote a culture of continuous improvement and employee
engagement.
 Module 5
Quality management
Quality management is the process of ensuring that a product or service meets or exceeds customer
expectations by implementing a set of procedures and standards. It involves all aspects of a business,
including design, production, delivery, and customer service.
There are several key principles of quality management, including:
1. Customer focus: The needs and expectations of the customer are the primary focus of quality
management.
2. Leadership: Effective leadership is essential in establishing a culture of quality within an
organization.
3. Continuous improvement: A commitment to ongoing improvement is critical in achieving and
maintaining high levels of quality.
4. Involvement of people: All employees should be engaged in the process of quality management
and encouraged to contribute to continuous improvement efforts.
5. Process approach: Quality management is a system of interconnected processes that work
together to deliver a high-quality product or service.
6. Systematic approach to management: Quality management should be integrated into all aspects
of an organization's operations, including planning, resource allocation, and performance
evaluation.
7. Factual approach to decision making: Decisions should be based on data and facts, rather than
assumptions or opinions.
There are also several tools and techniques that are commonly used in quality management, including:
• Total Quality Management (TQM): A comprehensive approach to quality management that
focuses on continuous improvement, customer satisfaction, and employee involvement.
• Six Sigma: A data-driven approach to quality management that aims to eliminate defects and
reduce variability in processes.
• ISO 9001: A set of international standards that provide a framework for quality management
systems.
• Statistical process control (SPC): A method for monitoring and controlling processes using
statistical tools to identify and eliminate variations.
Overall, quality management is an important aspect of business success, as it helps to ensure that products
and services meet or exceed customer expectations, leading to increased customer satisfaction and loyalty.
Quality characteristics of goods and services
Quality characteristics of goods and services refer to the attributes or features that determine the level of
quality in a product or service. While some characteristics may be specific to either goods or services,
many are applicable to both. Here are some common quality characteristics:
 1. Performance: This refers to how well a product or service performs its intended function or
purpose. For example, a car that reliably starts and runs smoothly is said to have good performance.
2. Durability: The ability of a product or service to withstand wear and tear over time. For example,
a durable pair of shoes should last longer than a cheaper, less durable pair.
3. Reliability: The consistency and predictability of a product or service. For example, a reliable
internet service provider will consistently provide a stable and fast internet connection.
4. Conformance: The degree to which a product or service meets established standards or
specifications. For example, a manufacturing company that produces products that consistently
meet customer specifications has high conformance.
5. Aesthetics: The overall appearance, feel, and sensory appeal of a product or service. For example,
a beautifully designed and well-packaged product may be considered high-quality due to its
aesthetics.
6. Features: Additional features or options that enhance the functionality or performance of a product
or service. For example, a car with advanced safety features may be considered high-quality due
to its additional features.
7. Serviceability: The ease with which a product or service can be repaired or maintained. For
example, a service that offers quick and efficient repairs for electronic devices may be considered
high-quality due to its serviceability.
8. Responsiveness: The ability of a company or service to respond quickly to customer needs or
inquiries. For example, a customer service representative who responds quickly to customer
complaints and resolves issues efficiently is said to have good responsiveness.
Overall, the quality characteristics of goods and services are essential for meeting customer needs and
expectations, building customer loyalty, and ensuring business success.
Tools and techniques for quality improvement:
here are many different tools and techniques that can be used for quality improvement, some of the most
common ones include:
1. Plan-Do-Check-Act (PDCA) Cycle: This is a four-step iterative process of continuous
improvement that involves planning, implementing, evaluating, and adjusting processes to achieve
better results.
2. Six Sigma: A data-driven approach to quality improvement that uses statistical analysis to identify
and eliminate defects and reduce variability in processes.
3. Total Quality Management (TQM): A comprehensive approach to quality management that
involves all employees in the organization in a continuous effort to improve quality and meet
customer needs.
4. Lean Manufacturing: A methodology that focuses on eliminating waste and increasing efficiency
in manufacturing processes.
5. Statistical Process Control (SPC): A method for monitoring and controlling processes using
statistical tools to identify and eliminate variations.
 6. Root Cause Analysis (RCA): A systematic approach for identifying the underlying cause of a
problem or defect and developing a plan to prevent it from occurring again.
7. Failure Mode and Effects Analysis (FMEA): A method for identifying potential failures or
defects in a product or process and developing a plan to prevent or mitigate them.
8. Poka-yoke: A method of mistake-proofing processes to prevent errors or defects from occurring.
9. 5S: A methodology for organizing and standardizing the workplace to improve efficiency and
reduce waste.
10. Kaizen: A continuous improvement approach that involves small, incremental changes to
processes to achieve better results.
By using these tools and techniques, organizations can identify areas for improvement, develop plans for
implementing changes, and monitor progress to ensure that quality standards are met or exceeded.
1. Check Sheets: A tool used to collect data in a systematic and organized way. It is often used to
track the frequency or occurrence of specific events or issues.
2. Histogram: A chart that shows the frequency distribution of data. It is used to analyze and
understand the variation in data.
3. Scatter Diagram: A chart that shows the relationship between two variables. It is used to identify
patterns and trends in data.
4. Cause and Effect Diagram (also known as Fishbone or Ishikawa diagram): A tool used to
identify and analyze the potential causes of a problem or issue. It is often used in root cause
analysis.
5. Pareto Chart: A chart that shows the relative frequency or size of problems or issues. It is used to
prioritize problems and focus on the most important issues.
6. Process Diagram: A visual representation of a process or workflow. It is used to analyze and
improve processes by identifying areas of inefficiency or waste.
7. Statistical Process Control (SPC) Charts: A set of charts used to monitor and control a process
over time. It is used to identify and eliminate variations in a process to maintain quality and
consistency.
By using these tools and techniques, organizations can better understand their processes and identify areas
for improvement. They can then develop and implement solutions to address these issues and continuously
monitor and refine their processes to maintain high levels of quality.
Quality assurance
Quality assurance (QA) is a process-focused approach to quality management that involves establishing
and maintaining a set of standards and procedures to ensure that products and services consistently meet
customer needs and expectations. It involves the following activities:
1. Defining Quality Standards: Quality standards are a set of measurable criteria that products and
services must meet to be considered acceptable.
2. Developing Quality Control Procedures: Quality control procedures are a set of processes and
methods used to ensure that products and services meet the established quality standards.
 3. Establishing Quality Metrics: Quality metrics are specific measures used to evaluate the quality
of products and services. Metrics may include customer satisfaction, defect rates, or other key
performance indicators.
4. Implementing Quality Control Processes: Quality control processes involve regularly
monitoring and evaluating products and services to ensure they meet the established quality
standards. This may involve inspections, audits, or other testing methods.
5. Continuous Improvement: The process of quality assurance is iterative and involves continuously
monitoring and improving processes to ensure that they are as efficient and effective as possible.
Quality assurance is an essential part of any organization's quality management system, as it helps ensure
that products and services consistently meet customer needs and expectations. By implementing effective
quality assurance processes, organizations can improve customer satisfaction, reduce costs, and increase
their competitiveness in the market.
Total quality management (TQM) model
Total Quality Management (TQM) is a comprehensive approach to quality management that involves all
employees in the organization in a continuous effort to improve quality and meet customer needs. The
TQM model consists of the following key elements:
1. Customer Focus: TQM begins with a focus on customer needs and expectations. This involves
understanding the needs of the customer and designing products and services that meet those needs.
2. Continuous Improvement: TQM involves a continuous effort to improve processes and eliminate
waste. This requires a commitment to ongoing training and development, and a willingness to make
changes as needed.
3. Employee Empowerment: TQM requires the involvement of all employees in the organization.
This means providing employees with the training, tools, and resources they need to do their jobs
effectively, and empowering them to make decisions and take ownership of their work.
4. Leadership Involvement: TQM requires strong leadership at all levels of the organization. This
involves setting a clear vision and direction, providing resources and support, and leading by
example.
5. Process Improvement: TQM focuses on improving processes to increase efficiency, reduce waste,
and improve quality. This involves using tools such as statistical process control, root cause
analysis, and process mapping to identify areas for improvement and develop solutions.
6. Strategic Planning: TQM requires a strategic approach to quality management. This involves
setting goals and objectives, developing plans to achieve those goals, and regularly monitoring
progress and making adjustments as needed.
7. Supplier Relationships: TQM involves building strong relationships with suppliers to ensure that
they meet the same high standards of quality as the organization.
By implementing the TQM model, organizations can create a culture of quality that drives continuous
improvement and helps them meet or exceed customer needs and expectations. TQM requires a long-term
commitment and a willingness to embrace change, but the benefits can be significant, including improved
customer satisfaction, increased efficiency and productivity, and reduced costs.
Service quality
Service quality refers to the extent to which a service meets or exceeds customer expectations. It is a
critical component of customer satisfaction, as customers are more likely to return to a business or
recommend it to others if they are satisfied with the quality of the service they receive. There are several
dimensions of service quality, including:
1. Reliability: This refers to the ability of a service provider to perform services dependably and
accurately, and to deliver them on time as promised.
2. Responsiveness: This refers to the willingness of a service provider to help customers and respond
to their needs in a timely manner.
3. Assurance: This refers to the knowledge and expertise of service providers, as well as their ability
to convey confidence and trust to customers.
4. Empathy: This refers to the ability of service providers to understand and connect with customers
on a personal level, and to demonstrate that they care about their needs and concerns.
5. Tangibles: This refers to the physical evidence of the service, such as the appearance and condition
of the facilities, equipment, and materials used.
Measuring and improving service quality involves a number of strategies, including customer feedback
and surveys, service benchmarking against industry standards, employee training and development, and
process improvement. By focusing on service quality, businesses can improve customer satisfaction,
increase loyalty and repeat business, and gain a competitive advantage in the marketplace.
Concept of Six Sigma and its application
Six Sigma is a data-driven approach to process improvement that aims to reduce defects and variability in
processes, products, and services. It was developed by Motorola in the mid-1980s and has since been
widely adopted by businesses in various industries.
The term "Six Sigma" refers to a statistical measure of quality that represents a process with only 3.4
defects per million opportunities. The Six Sigma methodology involves the following five phases,
commonly known as DMAIC:
1. Define: This phase involves defining the problem and setting goals for improvement. It involves
identifying customer needs and expectations, defining process boundaries, and establishing a
project plan.
2. Measure: This phase involves collecting data to measure the performance of the process and
identify areas for improvement. This includes establishing metrics, collecting data, and analyzing
the data to identify trends and patterns.
3. Analyze: This phase involves using statistical analysis to identify the root causes of defects and
variability in the process. This includes tools such as process mapping, cause-and-effect diagrams,
and statistical process control.
4. Improve: This phase involves developing and implementing solutions to address the root causes
of defects and improve the process. This may involve redesigning the process, developing new
procedures, or training employees.
 5. Control: This phase involves establishing controls to sustain the improvements made in the
previous phases. This includes monitoring the process, establishing metrics to track performance,
and implementing corrective actions when necessary.
The Six Sigma methodology has been applied in various industries, including manufacturing, healthcare,
and finance. Its application has resulted in improved quality, increased efficiency, and reduced costs for
businesses. Some of the key benefits of Six Sigma include:
1. Improved customer satisfaction by reducing defects and variability in products and services.
2. Increased efficiency by eliminating waste and streamlining processes.
3. Reduced costs by improving quality and reducing the need for rework and scrap.
4. Improved employee engagement and morale by empowering them to identify and solve problems.
Overall, Six Sigma is a powerful tool for process improvement that can help businesses achieve higher
levels of quality, efficiency, and customer satisfaction.
Juran’s quality trilogy
Juran's Quality Trilogy is a framework developed by quality management expert Joseph Juran that
provides a systematic approach for managing quality. It consists of three key components:
1. Quality Planning: This involves defining quality goals and objectives based on customer needs
and expectations. Quality planning focuses on identifying the critical processes and inputs that
impact quality and developing strategies to control and improve them. It involves establishing
quality metrics and developing a plan to measure and monitor performance against those metrics.
2. Quality Control: This involves monitoring and controlling the critical processes and inputs
identified in the quality planning stage. Quality control involves implementing tools and techniques
to measure and analyze process performance, identify defects and errors, and take corrective
actions when necessary. It also involves establishing and maintaining a system of quality standards
and procedures.
3. Quality Improvement: This involves using the data and feedback collected during quality control
to continuously improve the quality of the product or service. Quality improvement involves
implementing systematic problem-solving methodologies to identify the root causes of defects and
errors and develop solutions to eliminate them. It also involves developing and implementing
strategies to prevent the recurrence of defects and improve the overall performance of the process.
The Juran Quality Trilogy provides a comprehensive approach to managing quality that focuses on
customer needs and expectations. By using this framework, organizations can develop a systematic
approach to quality management that leads to continuous improvement, increased customer satisfaction,
and improved business performance.
Deming’s 14 principles
Deming's 14 Points for Management are a set of principles developed by quality management expert W.
Edwards Deming that provide a framework for improving organizational effectiveness and achieving long-
term success. The 14 principles are:
1. Create constancy of purpose for improvement of product and service.
 2. Adopt the new philosophy.
3. Cease dependence on mass inspection.
4. End the practice of awarding business on price alone.
5. Improve constantly and forever the system of production and service.
6. Institute training on the job.
7. Institute leadership.
8. Drive out fear.
9. Break down barriers between departments.
10. Eliminate slogans, exhortations, and targets for the workforce.
11. Eliminate numerical quotas for the workforce and numerical goals for management.
12. Remove barriers to pride of workmanship.
13. Institute a vigorous program of education and self-improvement.
14. Put everybody in the company to work to accomplish the transformation.
The principles are based on the belief that quality should be a top priority for organizations and that
achieving quality requires a shift in management philosophy and practices. They emphasize the importance
of continuous improvement, employee involvement, and the development of a culture of quality. By
adopting these principles, organizations can improve their processes, increase customer satisfaction, and
achieve long-term success.
PDCA cycle
The PDCA cycle is a continuous improvement framework developed by quality management expert
Walter A. Shewhart and popularized by W. Edwards Deming. It stands for Plan-Do-Check-Act and is also
known as the Deming cycle or the Shewhart cycle.
The PDCA cycle consists of four stages:
1. Plan: Identify the problem or opportunity for improvement, define the goals and objectives, and
develop a plan for achieving them.
2. Do: Implement the plan and carry out the activities as defined in the plan.
3. Check: Monitor and evaluate the results of the activities to determine if they are achieving the
desired goals and objectives. Collect data and analyze the results to identify any gaps or variances
from the plan.
4. Act: Take corrective actions to address any gaps or variances identified during the Check stage.
Adjust the plan as necessary based on the results and implement the changes.
The PDCA cycle is a continuous improvement process that helps organizations to achieve their goals by
making incremental improvements to their processes over time. It emphasizes the importance of planning,
implementing, monitoring, and adjusting to ensure that the desired results are achieved. By using this
cycle, organizations can continuously improve their processes and achieve higher levels of performance
and efficiency.
Quality circles
Quality Circles (QC) are small groups of employees who work together voluntarily to identify, analyze,
and solve work-related problems. Quality circles were developed in Japan in the 1960s as a key component
of Total Quality Management (TQM) and have since been adopted by organizations around the world.
The basic concept of Quality Circles is to involve employees in improving the quality of the organization's
products or services. The circle members meet on a regular basis to identify and analyze problems, generate
ideas, and develop solutions. The solutions are then implemented, and the results are evaluated to
determine their effectiveness.
Quality Circles provide a number of benefits to organizations, including:
1. Improved quality: Quality Circles help to identify and address quality problems before they become
major issues.
2. Increased employee involvement: Quality Circles provide employees with the opportunity to be
involved in decision-making and problem-solving, leading to increased motivation and job
satisfaction.
3. Improved communication: Quality Circles encourage communication and collaboration among
employees from different departments, leading to a better understanding of the organization's
processes and goals.
4. Cost savings: Quality Circles can identify ways to reduce waste, improve efficiency, and save costs.
5. Professional development: Quality Circles provide members with opportunities to develop their
skills and knowledge, leading to personal and professional growth.
Overall, Quality Circles provide a way to involve employees in improving the quality of the organization's
products or services, leading to increased customer satisfaction and business success.
Quality improvement and cost reduction
Quality improvement and cost reduction are often intertwined in the field of quality management.
Improving quality can help to reduce costs by eliminating waste, reducing rework and defects, and
improving efficiency. Similarly, reducing costs can often lead to improvements in quality by forcing
organizations to streamline their processes and focus on the most important activities.
Some ways that quality improvement can lead to cost reduction include:
1. Eliminating waste: By identifying and eliminating waste in processes, organizations can reduce
costs and improve efficiency. This can include reducing unnecessary steps, eliminating
bottlenecks, and optimizing workflows.
2. Reducing defects and rework: By improving quality, organizations can reduce the number of
defects and rework needed, which can save costs associated with scrap, rework, and customer
returns.
3. Improving customer satisfaction: By improving quality, organizations can increase customer
satisfaction and loyalty, which can lead to repeat business and referrals, ultimately reducing
marketing and sales costs.
On the other hand, some ways that cost reduction can lead to quality improvement include:
 1. Streamlining processes: By reducing costs and focusing on the most important activities,
organizations can streamline their processes and improve efficiency, which can improve quality.
2. Investing in technology and equipment: By investing in new technology and equipment,
organizations can improve their processes and reduce defects and rework.
3. Developing employee skills: By investing in employee training and development, organizations
can improve the skills and knowledge of their workforce, which can lead to improved quality and
efficiency.
In summary, quality improvement and cost reduction are two sides of the same coin in quality
management. By focusing on both aspects, organizations can achieve higher levels of quality and
efficiency, ultimately leading to improved customer satisfaction and business success.
Introduction to the current ISO for Production Management.
The current ISO standard for production management is ISO 9001:2015. This standard sets out the
requirements for a quality management system that an organization must have in place in order to
consistently provide products and services that meet customer and regulatory requirements. The standard
is applicable to all types of organizations, regardless of size or industry.
ISO 9001:2015 focuses on the following areas of production management:
1. Context of the organization: Organizations must consider their internal and external context,
including the needs and expectations of interested parties, in order to determine the scope of their
quality management system.
2. Leadership: Top management must demonstrate leadership and commitment to the quality
management system, and ensure that it is integrated into the organization's business processes.
3. Planning: Organizations must plan for the quality management system, including setting
objectives and developing plans to achieve them.
4. Support: Organizations must ensure that they have the resources, including personnel and
infrastructure, necessary to implement and maintain the quality management system.
5. Operation: Organizations must implement the processes necessary to produce products and
services that meet customer and regulatory requirements.
6. Performance evaluation: Organizations must monitor and measure their processes and products,
and evaluate the effectiveness of their quality management system.
7. Improvement: Organizations must continuously improve their quality management system,
including identifying and addressing nonconformities and implementing corrective actions.
ISO 9001:2015 is a widely recognized standard that can help organizations to improve their production
management processes, increase customer satisfaction, and reduce costs. By implementing a quality
management system that meets the requirements of ISO 9001:2015, organizations can demonstrate their
commitment to quality and improve their competitiveness in the marketplace.
Contribution of Quality Gurus
Quality gurus are individuals who have made significant contributions to the field of quality management.
They have developed new concepts, methodologies, and tools that have helped organizations to improve
their quality and efficiency. Some of the major quality gurus and their contributions are:
1. W. Edwards Deming: Deming is known for his work in Japan in the 1950s, where he introduced
statistical process control and helped to improve quality in Japanese industry. He also developed
the "Deming Cycle" or "Plan-Do-Check-Act" cycle, which is a framework for continuous
improvement.
2. Joseph Juran: Juran is known for his work in quality control and quality management, and he is
credited with developing the concept of "quality control circles". He also developed the "Juran
Trilogy" which includes quality planning, quality control, and quality improvement.
3. Philip Crosby: Crosby is known for his concept of "zero defects", which emphasizes the
importance of preventing errors and defects rather than correcting them after the fact. He also
developed the "Crosby Quality Management Maturity Grid", which is a framework for assessing
an organization's quality management practices.
4. Kaoru Ishikawa: Ishikawa is known for developing the "Ishikawa diagram", also known as a
fishbone diagram, which is a tool used to identify the possible causes of a problem. He also
emphasized the importance of quality control in all aspects of an organization, including design,
purchasing, and production.
5. Genichi Taguchi: Taguchi is known for his work in quality engineering, and he developed the
concept of "robust design", which involves designing products and processes that are less sensitive
to variations in inputs and outputs.
The contributions of these quality gurus have helped to shape the field of quality management and have
led to the development of new concepts, methodologies, and tools that are used by organizations around
the world to improve their quality and efficiency.
 Module 6
Productivity and different types of productivity
Productivity refers to the measure of efficiency with which a company utilizes its resources to produce
goods and services. It is an important indicator of the company's economic performance and
competitiveness in the market. There are different types of productivity measures that can be used,
including:
1. Labor productivity: This refers to the output per unit of labor, typically measured as units
produced per hour worked. It can be used to measure the efficiency of the company's workforce
and is often used to compare productivity levels between different companies or industries.
2. Capital productivity: This refers to the output per unit of capital investment, typically measured
as units produced per dollar invested. It can be used to measure the efficiency of the company's use
of capital, such as machinery, equipment, and technology.
3. Material productivity: This refers to the output per unit of material consumed. It is a measure of
the efficiency of the company's use of raw materials and other resources.
4. Total factor productivity: This refers to the output per unit of all inputs, including labor, capital,
and other resources. It is a more comprehensive measure of productivity that takes into account all
the resources used in the production process.
5. Multifactor productivity: This refers to the output per unit of a specific combination of inputs,
such as labor and capital. It can be used to measure the efficiency of a particular production process
or department.
6. Energy productivity: This refers to the output per unit of energy consumed. It is a measure of the
efficiency of the company's use of energy resources.
By measuring and improving productivity, companies can increase their efficiency, reduce costs, and
improve their competitiveness in the market.
Materials management
Materials management refers to the process of planning, organizing, and controlling the flow of materials
from the point of acquisition to the point of consumption. It involves managing the entire supply chain,
from suppliers to customers, and includes activities such as procurement, inventory management,
warehousing, transportation, and distribution.
Effective materials management is essential for optimizing the use of resources and minimizing costs.
Some of the key components of materials management include:
1. Procurement: This involves sourcing and acquiring materials from suppliers, negotiating
contracts, and managing relationships with vendors.
2. Inventory management: This involves managing the inventory of raw materials, work-in-
progress, and finished goods. It includes determining the optimal inventory levels, implementing
inventory control systems, and monitoring inventory turnover rates.
3. Warehousing: This involves managing the storage and handling of materials in warehouses,
including receiving, storing, and dispatching materials. It includes implementing efficient
 warehousing processes, such as slotting and cross-docking, to reduce handling costs and improve
inventory accuracy.
4. Transportation: This involves managing the transportation of materials from suppliers to the
production facility and from the production facility to customers. It includes selecting the most
appropriate mode of transportation, optimizing transportation routes, and managing transportation
costs.
5. Distribution: This involves managing the distribution of finished goods to customers. It includes
selecting the most appropriate distribution channels, managing inventory levels at distribution
centers, and optimizing delivery schedules.
By effectively managing materials, companies can improve their operational efficiency, reduce costs, and
improve customer satisfaction.
Role of Materials Management
The role of materials management is critical in ensuring that a company has the right materials, at the right
place, at the right time, and in the right quantity to support its operations. Effective materials management
can help to:
1. Optimize resource utilization: Materials management helps to ensure that resources are used
efficiently, minimizing waste and reducing costs.
2. Improve production planning: Effective materials management helps to ensure that the necessary
materials are available when they are needed, reducing the risk of delays and disruptions to
production.
3. Ensure product quality: Materials management plays a crucial role in ensuring that materials are
of the right quality and that they are handled and stored appropriately to prevent damage or
contamination.
4. Reduce inventory costs: Effective materials management can help to optimize inventory levels,
reducing the amount of capital tied up in inventory and minimizing the risk of inventory
obsolescence.
5. Improve supplier relationships: Materials management involves managing relationships with
suppliers, negotiating contracts, and monitoring supplier performance, which can help to ensure
that suppliers meet their commitments and provide quality materials at competitive prices.
6. Enhance customer satisfaction: Materials management helps to ensure that products are delivered
on time and meet customer expectations, improving customer satisfaction and loyalty.
Overall, effective materials management is essential for ensuring that a company operates efficiently,
effectively, and profitably. It plays a critical role in supporting the company's strategic objectives and in
maintaining a competitive edge in the market.
Purchase functions
The purchase function is responsible for sourcing and acquiring the goods and services that a company
needs to operate. This function is critical to the success of a business, as it ensures that the company has
access to the materials, supplies, and services it needs to produce its products or deliver its services.
The purchase function is responsible for several key activities, including:
 1. Identifying and evaluating suppliers: The purchase function is responsible for identifying
potential suppliers and evaluating their capabilities, quality, and pricing. This involves conducting
market research, soliciting bids and proposals, and negotiating contracts.
2. Placing orders and managing inventory: The purchase function is responsible for placing orders
with suppliers, tracking shipments, and managing inventory levels. This involves maintaining
accurate records of purchases and inventory levels, and ensuring that the company has the
necessary materials and supplies to meet its production and service delivery needs.
3. Managing relationships with suppliers: The purchase function is responsible for managing
relationships with suppliers, ensuring that they meet their commitments and providing feedback on
performance. This involves monitoring supplier performance, resolving issues and disputes, and
negotiating changes to contracts or pricing as needed.
4. Ensuring compliance with regulations: The purchase function is responsible for ensuring that
the company complies with all relevant regulations and standards related to purchasing and
procurement. This includes maintaining accurate records, conducting audits, and adhering to
ethical and legal standards.
Overall, the purchase function is critical to the success of a company, as it ensures that the company has
access to the materials, supplies, and services it needs to operate efficiently and effectively. By effectively
managing relationships with suppliers, maintaining accurate records, and ensuring compliance with
regulations, the purchase function can help to reduce costs, improve efficiency, and drive growth and
profitability.
Procurement procedures
Procurement procedures refer to the processes and steps involved in acquiring the goods and services that
a company needs to operate. These procedures typically include the following steps:
1. Identify the need: The first step in the procurement process is to identify the need for a particular
product or service. This may involve consulting with various departments or stakeholders within
the company to determine their requirements.
2. Develop specifications: Once the need has been identified, the procurement team must develop
specifications for the product or service required. This may involve determining the quality and
quantity of the product or service, as well as any other specific requirements.
3. Identify potential suppliers: The procurement team must then identify potential suppliers who
can meet the specifications developed in the previous step. This may involve conducting research,
soliciting bids, or consulting with industry experts.
4. Evaluate suppliers: Once potential suppliers have been identified, the procurement team must
evaluate them based on factors such as quality, price, and delivery times. This may involve
reviewing supplier proposals, conducting site visits, or performing background checks.
5. Negotiate contracts: Once a supplier has been selected, the procurement team must negotiate a
contract that specifies the terms of the purchase, including price, delivery times, and payment
terms.
6. Place orders: Once a contract has been negotiated, the procurement team can place orders with
the selected supplier.
 7. Receive and inspect goods: When the goods or services are delivered, the procurement team must
receive and inspect them to ensure that they meet the specifications outlined in the contract.
8. Process payments: Finally, the procurement team must process payments to the supplier based on
the terms of the contract.
Overall, following a well-defined procurement procedure can help ensure that a company acquires the
goods and services it needs at the right quality, quantity, and price, while also complying with relevant
regulations and ethical standards.
Vendor selection and development
Vendor selection and development is an important aspect of procurement and materials management. Here
are the key steps involved in the process:
1. Identify the need: The first step in vendor selection and development is to identify the specific
goods or services that need to be acquired.
2. Develop a list of potential vendors: Once the need has been identified, develop a list of potential
vendors who can supply the goods or services required.
3. Assess vendor capabilities: Assess the capabilities of each potential vendor based on criteria such
as quality, price, delivery time, customer service, and technical support.
4. Shortlist vendors: Based on the assessment, shortlist the top vendors who meet the criteria.
5. Request for proposal (RFP): Send an RFP to the shortlisted vendors, outlining the scope of work,
requirements, and evaluation criteria.
6. Evaluate vendor proposals: Evaluate the vendor proposals based on the criteria outlined in the
RFP.
7. Site visits and reference checks: Conduct site visits to assess the vendor’s capabilities, and check
references to verify the vendor’s performance and reliability.
8. Negotiate contract terms: Negotiate contract terms with the selected vendor, including price,
delivery time, quality standards, and payment terms.
9. Develop the vendor: Work with the vendor to improve their capabilities, such as through training
and development, process improvement, and joint problem-solving.
10. Monitor vendor performance: Continuously monitor the vendor’s performance to ensure they
are meeting the contractual obligations and expectations.
Effective vendor selection and development can help ensure that the company has reliable, high-quality
suppliers who can deliver goods and services on time and at a competitive price.
Vendor rating
Vendor rating is a process of evaluating the performance of suppliers based on predefined criteria. The
purpose of vendor rating is to identify the strengths and weaknesses of each vendor, and to ensure that
they are meeting the company’s expectations in terms of quality, delivery, cost, and service.
Here are the key steps involved in the vendor rating process:
 1. Define criteria: Define the criteria for evaluating the vendor’s performance. This can include
factors such as quality, delivery, cost, service, and innovation.
2. Assign weights: Assign weights to each criterion based on its importance to the company.
3. Collect data: Collect data on the vendor’s performance, such as delivery times, defect rates, and
customer feedback.
4. Calculate scores: Calculate the scores for each criterion based on the data collected and the
assigned weights.
5. Aggregate scores: Aggregate the scores for each criterion to calculate an overall vendor rating.
6. Review results: Review the results of the vendor rating to identify the strengths and weaknesses
of each vendor, and to identify opportunities for improvement.
7. Take action: Take action to address any issues identified in the vendor rating process, such as
improving communication, providing additional training or support, or developing a plan to
transition to a new vendor.
Vendor rating can help companies to build strong relationships with suppliers, improve the quality and
reliability of goods and services, and reduce costs by identifying areas for improvement. By continuously
monitoring and rating vendors, companies can ensure that they are getting the best value for their money
and building long-term partnerships with suppliers who can help them achieve their business goals.
Ethics in purchasing.
Ethics in purchasing refers to the principles and values that guide ethical behavior in the procurement
process. Ethics in purchasing involves ensuring that procurement decisions are made in a fair, transparent,
and ethical manner, and that they are based on the best interests of the organization.
Here are some key principles of ethics in purchasing:
1. Fairness: All procurement decisions should be made in a fair and equitable manner, without any
bias or favouritism towards any particular vendor.
2. Transparency: The procurement process should be transparent, with clear and open
communication between the buyer and the vendor.
3. Integrity: Procurement professionals should act with integrity and honesty at all times, and should
avoid any conflicts of interest or unethical behaviour.
4. Responsibility: Procurement professionals have a responsibility to ensure that goods and services
are procured at the best possible value for the organization, while also ensuring that vendors are
treated fairly and ethically.
5. Compliance: All procurement activities should comply with applicable laws, regulations, and
ethical standards.
6. Confidentiality: Procurement professionals should maintain confidentiality in all procurement-
related activities, including vendor information, pricing, and other sensitive information.
7. Professionalism: Procurement professionals should act in a professional and courteous manner at
all times, and should maintain the highest standards of ethical conduct.
In summary, ethics in purchasing is about maintaining the highest standards of ethical behavior in the
procurement process, and ensuring that all procurement decisions are made in the best interests of the
organization. By following these principles, procurement professionals can build strong relationships with
vendors, maintain the trust of stakeholders, and contribute to the long-term success of the organization.
Inventory Management
Inventory management is the process of managing a company's inventory of raw materials, work in
progress, and finished goods. The primary objective of inventory management is to ensure that the right
inventory is available at the right time, in the right quantity, and at the right cost.
Effective inventory management can provide a number of benefits to a company, including:
1. Improved customer service: By ensuring that the right inventory is available when needed,
companies can improve their customer service levels and meet customer demand more effectively.
2. Cost savings: By optimizing inventory levels, companies can reduce the costs associated with
carrying excess inventory, such as storage, insurance, and obsolescence.
3. Increased efficiency: Effective inventory management can help companies streamline their
operations and reduce waste, leading to improved efficiency and productivity.
4. Better decision-making: With accurate and up-to-date inventory data, companies can make better
decisions about procurement, production, and sales.
Inventory management involves a number of activities, including:
1. Forecasting demand: By analyzing historical sales data, market trends, and other factors,
companies can forecast demand for their products and plan their inventory levels accordingly.
2. Setting inventory levels: Based on demand forecasts and other factors, companies can determine
the appropriate inventory levels for each product.
3. Ordering and receiving inventory: Companies must ensure that they order the right amount of
inventory from suppliers and receive it in a timely manner.
4. Storing and organizing inventory: Inventory must be stored in a safe and organized manner, with
appropriate labeling and tracking systems in place.
5. Monitoring inventory levels: Companies must regularly monitor inventory levels to ensure that
they are in line with demand forecasts and make adjustments as needed.
6. Managing inventory obsolescence: Companies must take steps to prevent inventory from
becoming obsolete, such as regularly reviewing inventory levels and discontinuing products that
are no longer in demand.
Overall, effective inventory management is critical to the success of any business that relies on inventory
to produce and sell products. By optimizing inventory levels and reducing waste, companies can improve
customer service, reduce costs, and increase efficiency and profitability.
Concepts of inventory
Inventory refers to the stock of goods that a company holds at any given point in time. There are several
key concepts related to inventory that are important to understand:
 1. Raw materials inventory: This refers to the stock of materials that a company has on hand to use
in the production process.
2. Work-in-progress inventory: This refers to the goods that are currently in the production process
but are not yet finished.
3. Finished goods inventory: This refers to the completed products that a company has on hand and
ready to sell.
4. Safety stock inventory: This is extra inventory that a company holds in order to ensure that it can
meet unexpected increases in demand or supply chain disruptions.
5. Economic order quantity: This refers to the optimal amount of inventory that a company should
order each time it replenishes its stock in order to minimize the costs associated with ordering and
holding inventory.
6. Just-in-time inventory: This is a system in which a company only orders inventory when it is
needed, rather than holding large amounts of inventory in stock.
7. ABC analysis: This is a technique used to classify inventory items based on their importance to the
company's operations. "A" items are typically the most important and valuable, while "C" items
are the least important and valuable.
8. Stockouts: This refers to situations in which a company runs out of inventory and is unable to meet
customer demand.
Overall, understanding these concepts is important for effective inventory management, as it allows
companies to optimize their inventory levels and ensure that they have the right amount of inventory on
hand at all times.
Types of Inventory
There are different types of inventory that companies may hold in their supply chains. Some of the most
common types of inventory include:
1. Raw materials inventory: This is the inventory of materials that are used in the production process
but have not yet been processed or converted into finished products.
2. Work-in-progress inventory: This is the inventory of partially completed products that are still
in the production process.
3. Finished goods inventory: This is the inventory of completed products that are ready to be sold
to customers.
4. Maintenance, repair, and operating (MRO) inventory: This is the inventory of items that are
necessary for the operation of a business, such as tools, supplies, and spare parts.
5. Pipeline inventory: This is inventory that is in transit between different locations in the supply
chain, such as from a supplier to a manufacturer.
6. Safety stock inventory: This is extra inventory that is held to protect against stockouts or
unexpected increases in demand.
7. Cycle inventory: This is the inventory that is needed to meet the demand during the replenishment
lead time.
Understanding the types of inventory is important for companies to effectively manage their inventory
levels and ensure that they have the right amount of inventory on hand at all times.
Classification of Inventory
Inventory can be classified into various categories based on different criteria. Some common
classifications of inventory include:
1. ABC Classification: This classification is based on the Pareto principle, which states that a small
percentage of items typically account for a large percentage of the value. In ABC classification,
inventory items are classified into three categories: A, B, and C. A items are the most important
and valuable, while C items are the least important and valuable.
2. Economic Order Quantity (EOQ) Classification: This classification is based on the economic
order quantity model, which calculates the optimal order quantity to minimize ordering and holding
costs. In this classification, inventory items are classified based on their demand, ordering cost,
and holding cost.
3. Perishability Classification: This classification is based on the perishability of the inventory
items. Perishable items such as food, medicines, and chemicals have a limited shelf life and require
special handling and storage.
4. Seasonal Classification: This classification is based on the demand patterns of the inventory items.
Items that have seasonal demand patterns such as Christmas decorations, summer clothes, and
winter sports equipment are classified as seasonal inventory.
5. Lead Time Classification: This classification is based on the lead time required to receive the
inventory items. Items that have longer lead times such as imported goods are classified as long
lead time inventory.
Understanding the classification of inventory can help companies make informed decisions about
inventory management and control, such as setting reorder points, safety stock levels, and inventory
turnover targets.
ABC, VED and FSN analysis
ABC, VED, and FSN analysis are common inventory management techniques used to classify inventory
items based on their characteristics and importance. Here is a brief overview of each analysis:
1. ABC Analysis: This analysis classifies inventory items based on their value and importance to the
business. A items are the most important and valuable, typically representing 10-20% of inventory
items but 70-80% of the total inventory value. B items are of medium importance, representing 30-
40% of items and 15-25% of inventory value. C items are of low importance, representing 50-60%
of items but only 5-10% of inventory value. ABC analysis helps businesses prioritize their
inventory management efforts and focus on the most important items.
2. VED Analysis: This analysis classifies inventory items based on their criticality to the business
operations. V items are vital and essential items that are necessary for the smooth functioning of
the business. E items are essential items that are important but not as critical as V items. D items
are desirable items that are useful but not critical or essential. VED analysis helps businesses
identify and prioritize the inventory items that are most critical to their operations.
 3. FSN Analysis: This analysis classifies inventory items based on their demand and usage. F items
are fast-moving items with high demand and turnover. S items are slow-moving items with low
demand and turnover. N items are non-moving items that have not been used or sold for a long
time. FSN analysis helps businesses identify and manage their inventory levels based on the
demand and usage patterns of the items.
By using these inventory analysis techniques, businesses can optimize their inventory levels and reduce
the risk of overstocking or stockouts.
Selective inventory management
Selective inventory management is a strategy that involves selectively managing certain inventory items
based on their importance or value to the business. This approach is often used when a business has a large
number of inventory items but limited resources to manage them all effectively.
Selective inventory management typically involves classifying inventory items based on their
characteristics and prioritizing their management accordingly. For example, high-value or critical items
may be managed more closely and monitored more frequently, while low-value or non-critical items may
be managed more loosely and monitored less frequently.
One approach to selective inventory management is to use the ABC analysis method. This involves
categorizing inventory items into three groups based on their importance or value to the business: A items,
which are high-value or high-importance items; B items, which are medium-value or medium-importance
items; and C items, which are low-value or low-importance items. A businesses can then focus its
inventory management efforts on the A and B items, while allowing the C items to be managed more
loosely.
Another approach to selective inventory management is to use a just-in-time (JIT) inventory system. This
involves closely managing the flow of inventory into and out of the business to ensure that inventory levels
remain low while still meeting customer demand. JIT inventory systems rely on accurate demand
forecasting and timely supply chain management to ensure that inventory is always available when needed,
without the need for excess inventory to be stored.
Overall, selective inventory management can help businesses optimize their inventory levels and reduce
the cost of carrying excess inventory, while still ensuring that critical items are managed effectively.
Inventory costs
Inventory costs are the costs associated with carrying and managing inventory, including both the direct
costs of acquiring and holding inventory and the indirect costs associated with lost opportunities, such as
lost sales or lost profits. There are several types of inventory costs:
1. Holding costs: These are the costs associated with storing inventory, such as warehouse rental
fees, utilities, insurance, and labor costs for handling and managing inventory.
2. Ordering costs: These are the costs associated with placing orders and receiving inventory, such
as purchase order processing, transportation costs, and inspection costs.
3. Shortage costs: These are the costs associated with running out of inventory, such as lost sales,
backorders, expedited shipping costs, and lost profits.
4. Obsolescence costs: These are the costs associated with inventory becoming obsolete, such as
write-offs, disposal costs, and lost opportunity costs.
 5. Quality costs: These are the costs associated with maintaining quality control over inventory, such
as inspection costs, rework costs, and warranty costs.
By understanding and analyzing these different types of inventory costs, businesses can make informed
decisions about how much inventory to carry and how to manage it most effectively. For example, a
business may choose to optimize inventory levels to minimize holding costs while still ensuring that
enough inventory is available to meet customer demand and minimize shortage costs.
Inventory models
Inventory models are mathematical models used to determine the optimal inventory level and reorder point
for a business to minimize costs associated with inventory management. There are several types of
inventory models:
1. Economic Order Quantity (EOQ) Model: The EOQ model calculates the optimal order quantity
that minimizes the sum of ordering costs and holding costs.
2. Reorder Point Model: The reorder point model calculates the minimum inventory level at which
an order must be placed to avoid running out of stock.
3. Just-In-Time (JIT) Model: The JIT model is a lean inventory model that aims to minimize
inventory levels and costs by ordering materials and products only when needed.
4. Safety Stock Model: The safety stock model calculates the amount of safety stock that must be
held to ensure that the desired service level is met.
5. Periodic Review Model: The periodic review model involves setting a fixed review period during
which inventory levels are checked and replenished if necessary.
Each of these inventory models has its own advantages and limitations, and the choice of model depends
on factors such as the type of business, the demand for products or services, the lead time for ordering,
and the cost of holding inventory. By using an appropriate inventory model, businesses can optimize their
inventory management and reduce costs associated with inventory.
Economic Order Quantity (EOQ)
EOQ stands for Economic Order Quantity, which is a mathematical formula used to determine the optimal
quantity of inventory to order at one time. The EOQ model considers two main costs associated with
inventory: ordering costs and holding costs. Ordering costs include expenses related to ordering, such as
processing, shipping, and receiving. Holding costs include expenses related to holding inventory, such as
storage, insurance, and capital tied up in inventory.
The EOQ model calculates the optimal order quantity that minimizes the total cost of ordering and holding
inventory. The formula for EOQ is:
EOQ = √(2DS/H)
Where: D = annual demand for the product S = cost of placing an order H = holding cost per unit per year
The EOQ model assumes that demand is constant, ordering and holding costs are known and constant, and
that orders are received all at once. While these assumptions may not always be true in practice, the EOQ
model provides a useful starting point for inventory management.
safety stocks, Reorder point, Quantity discounts
By using the EOQ model, businesses can determine the most cost-effective quantity to order, which helps
to minimize inventory costs, reduce waste, and optimize supply chain management.
Safety Stocks, Reorder Point, Quantity Discounts
Safety stocks, reorder point, and quantity discounts are all important concepts related to inventory
management.
• Safety stocks refer to the extra inventory that a business holds in order to avoid stockouts or
shortages. This additional inventory acts as a buffer to account for any unexpected increases in
demand or delays in supply. The level of safety stock a business holds depends on several factors,
such as the variability of demand and lead time, and the level of service the business wishes to
provide to its customers.
• The reorder point is the inventory level at which a business should place an order to replenish its
inventory. It is calculated based on the lead time and demand during that lead time, as well as the
desired level of safety stock. The reorder point is important because it helps to ensure that a
business always has enough inventory on hand to meet customer demand while minimizing the
risk of stockouts.
• Quantity discounts are offered by suppliers to incentivize businesses to order larger quantities of a
product. These discounts can be in the form of lower unit prices or reduced shipping costs. When
deciding whether to take advantage of a quantity discount, businesses need to consider the tradeoff
between the cost savings from the discount and the increased holding costs associated with holding
more inventory.
Effective management of safety stocks, reorder points, and quantity discounts can help businesses optimize
their inventory levels, minimize stockouts, reduce costs, and improve overall supply chain management.