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Transactional process: Exchange of goods & money (simple process of buying) maximising leverage, reducing maverick spend, supplier

spend, supplier rationing and strategic Cost analysis: Process of analyzing each individual cost element (Direct
Every supply chain will be connected by a series of purchasing activities and each sourcing materials, direct labour, overheads, SGA, Profit margin) that makes up final price
point has a transaction Attributes to capture in spend analytics: 4W1H: who procured it? What was from supplier
Purchase requisition: Request for buy/placing an order for a buy procured? When and how often did we procure it? With whom did we procure it? Total cost analysis: Applies value equation = (quality + technology + service +
New competitive environment: Sophisticated customer base (more perf, lower How did we procure it? How much did we pay for it? cycle time) / price across multiple processes that span 2 or more firms across SC.
$), widely avail info sources, balance of power between buyers and suppliers, Conducting Spend Analysis: What did the biz spend its $ on over the past yr Price analysis is the easiest as it is the cheapest, followed by cost analysis (will need
greater levels of outsourcing (min)? Did it receive right amt of pdts and service given what it paid for them? to go into the company.( Total cost analysis as it is the hardest (information not
CSX Purchasing case: Which suppliers received majority of biz? - turn tactical to strategic (DA contracts) transparent nor forthcoming)
Challenges: △ing supply base (∵ ↓in # rail roads & consolidation of purchase) Did suppliers charge accurate price across all divisions vs PO requirements, Buy rates ≤ sell rates ≤ rack rates
Concern: Limited # of domestic supplier (∵ growth in shipments) contracts and SOWs? Which divisions spend their money on products and services Sell rates: sold to existing customers, Rack rates: Public info
Strategy: Develop more global perspective/strategic approach to sourcing, ↑ skill that were correctly budgeted for? Are there strategic outcome opportunities to Every supplier will not share buy rates (highly controlled, only few people know)
sets & attain status of Certified Professional in Supply Mgmt (CPSM) → Solution: combine volumes of spending from diff biz, standardize pdt req., reduce number of Historical cost reduction approaches: Value analysis (systematic analysis
Reorganised resources & form a team focused on developing current suppliers and suppliers, exploit mkt conditn for better pricing? that identifies and selects the best value alternatives for designs, materials,
↑ supply base (Mission: identify commodities with sourcing sensitivities and Spend Analysis scope processes and systems. It proceeds by repeatedly asking can the cost of this item or
step be reduced or eliminated, without diminishing the effectiveness, required
develop new or existing suppliers to meet needs of company)
quality or customer satisfaction), process improvements, standardisation,
Success e.g.: Development of new steel rail supplier from Eastern Europe.
improvements in efficiency using technology
Rationalising: Companies want to shrink their supply base
Places and focus of cost mgmt: Supplier integration, standardisation, value
Procurement = sourcing + purchasing 

engineering(modification of designs and systems according to VA), Design for
5Rs of purchasing:Getting right quality, qnty, time, price and from right
manufacturing → improves opportunity to use standard parts & techniques,
sourceImportance of purchasing:
leverage volumes and create opportunities for cost savings
1. Increases values and savings: Suppliers have substantial impact on firm’s
During product/service launch: Adopts more traditional cost-reduction
total cost (Dupont model). Suppliers help differentiate producers’ final G&S. In
approach, competitive bidding, negotiation, value analysis, volume leveraging,
manufacturing, purchased content is more than 55% of revenue (direct spend).
service contracts, focused on savings, linking longer pricing to extended contracts
Cost is made up of direct spend and indirect spend (overheads cost)
Nearly EOL: Supply management cannot ignore potential value of environmental
Purchased G&S can be grouped as: Raw materials, supplementary materials,
initiatives to remanufacture, recycle, refurbish → eliminates landfill costs
semi-manufactured materials, components, finished products, investment goods
or capital equipment, maintenance, repair and operating materials, services. Challenges in conducting: Difficulty in obtaining timely & accurate info on Strategic Cost mgmt process: Strategic cost mgmt → supply chain cross
2. Builds relationships and driving innovation: Traditional approach - mundane things (NET invoice line value, VAT Invoice line value, Invoice Document enterprise focus (joint effort)→ Value engineering/analysis, onsite supplier
bargain hard for price reductn, new approach - conduct joint cost reductn with count, PO Document Count, Supplier Count), Impact of M&A (diff. recording development, cross-enterprise cost improvement, joint brainstorming for cost
suppliers. Both buyer and supplier must benefit. Suppliers can contribute procedures, accounting systems, difficulty in translating data btw systems) improvement, supplier suggestion programs, supply chain compression
innovative ideas Typical spend analysis spreadsheet: sort data by commodity, find total spend Managing life cycle costs
3. Improves quality and reputation: Buyers focus on core competencies and by commodity, chart top 10 by desc. $ spend, find # of suppliers by commodity,
outsource non-core activities and materials. Supplier quality leads to product chart top 10 by desc. # of suppliers, find avg spend/supplier/commodity, apply
quality. Pareto analysis for opportunities
4. Reduces time-to-market: Includes suppliers early in product design process Delivery options for spend analysis: outsource (spend analysis service), in-
to take adv of their expertise → avg. 20% improvement on material costs, quality house (technology - RDBMS [oracle, SQL server, Access], Business intelligence
and product development time tools, MS Access, Excel), Buy in data (supplier cleansing, normalisation,
5. Manage supplier risk: Supplier risk is magnified by sourcing strategies (i.e. classification), Obtain data from your supply base (category specific data)
global/single sourcing, JIT Stock). Need to develop BCP’s to mitigate risks Conducting market research on suppliers: Understand purchase rqrmt
6. Generates economic impact: monthly ISM report on business is closely relative to biz unit obj, conduct thorough spend analysis (each commodity &
followed national economic indicator. Manufacturing and non manufacturing supplier, total expenditure as % of total spend), identify internal users, identify
components. Purchasing Manager’s Index (PMI) [>50: expanding economy, current suppliers, research supply mktplace, info required(total annual purchase
otherwise contracting] vol., interview with SH for forecast, external mkt research on key supplier, avail.
7. Contributes to competitive advantage: Leading indicator of health of capacity, tech trend, price data & trend, cost data & trend, tech rqrmt, envir. Issue,
economy. Growing recognition of supply management’s contribution to firm’s regulatory issue, other avail. Data) , Triangulation [explore, compare, contrast data
profitability. More supply managers are graduates. Increased # of supply managers from multiple source (trade journals, annual report, internet, books, trade
with certifications like CPS consultant, headlines, suppliers, investment report, industry analyst, other
source)], Porters 5 forces model, SWOT analysis, Supplier analysis (establish Recall Kraljic: Critical (cost analysis, collaborative cost reduction efforts
Supply management: strategic approach to plan for and acquire firm’s current focused on TC), Leverage (leverage preferred suppliers, price analysis using
and future needs through effectively managing supply base, utilising process benchmarks through industry databases, value chain analysis, supplier research)
Kraljic’s Purchasing portfolio analysis: (looks at purchasing turnover and market forces), routine (cost analysis-reverse pricing, standardise rqrmt),
orientation in conjunction with cross functional team to achieve organisational bottleneck (total delivered cost, automate to reduce purchasing involvement )
mission (ISM’s definition: identification, acquisition, access, positioning, mgmt of supplier base) recognize that diff products require diff supplier strategies and is
based on 2 variables: 1. Purchasing’s impact on the bottom line (profit Note: Cost analysis is for critical and routine while price analysis is for leverage and
resources and related capabilities an org. needs to attain its strategic objectives) bottleneck. Total cost analysis is used for everything
Strategic Role: Activities which have major long term impact on firm impact of given ss item measured against criteria i.e. cost of mat., total cost, vol.
purchased) 2. Supply risk assoc. with purchase of specific item (measured Cost Analysis techniques: Cost based pricing model, product specification,
performance, must be aligned with overall mission and strategies of firm estimate supplier costs using reverse price analysis, break-even analysis
Managing supply base: work directly with suppliers to provide world class perf. against criteria i.e. ST & LT availability, # of potential suppliers, structure of ss
mkt) It further analyses 4 pdt category into: Cost based pricing model: Suppliers moving aware from price management to
Process approach: Collaborating with and coordinating other functional areas cost management. 3 common models:
as they pertain to suppliers. Move across functional area boundaries 1. Cost Markup Pricing Model: Estimate costs (direct spend +
Cross functional: Sharing info, suppliers seen as extension of buying firm overheads) and add markup % of cost for desired profit. Supplier must be
Purchasing managers are expected to do: supplier relationship management, clear if they want markup to be based on product cost or total cost. SP = CP
total cost analysis, purchasing strategies, supplier analysis, competitive market + (%)CP or = (1+x)CP
analysis, need for close collaboration with suppliers, need for close internal 2. Margin pricing model: Establish profit margin that is predetermined
coordination % of quoted price. Similar to cost markup pricing model except “markup”
Purchasing objectives: 1. Supply continuity assurance (Source products based on sale price. SP = CP/(1-x%)
services at right price from right source at the right specification that meets user 3. Rate of return pricing model: Desired profit on financial investment
needs for the right quantity and arrange for delivery and/or service perf at right (& learning curve effect) is added to estimated cost. Focus here is ROI rather
time to right internal customer) 2. Manage sourcing process efficiently and than cost
effectively 3. Develop supply base/supplier performance mgmt 4. Develop aligned Reverse Price Analysis = “Should cost” analysis: Can be used when
goals with internal stakeholders 5. Develop integrated purchasing strategies that supplier is reluctant to share its proprietary cost data .
support organisational goals and objectives - Decompose cost into basic components (DM, OL, OH, SGA, PM).
Elements of purchasing process: 1. Identify user requirements 2. Evaluate Techniques: internal engineering estimates, historical experience and
user needs efficiently and effectively 3. Identify suppliers to meet need 4. Develop judgement, review of public financial documents
agreements with suppliers 5. Develop purchase order mechanism 6. Ensure - Estimate components that make up supplier’s theoretical unit price (take
payment occurs promptly 7. Ascertain that need was effectively met 8. Drive from RFX)
continuous improvement Cost = Price - Profit
Procure to pay process: 1. Forecast and plan requirement 2. Need clarification/ Price often set by the market or by negotiations. Cost is impacted by
requisition 3. Supplier identification/selection 4. Approval/Contract/P.O underlying decisions i.e. cost drivers
Generation 5. Receive Material and documents 6. Settle, pay and measure Common terms in Should-cost pricing:
performance Net sales = Gross sales - Returns and discounts
Managing procure-to-pay process: Automation of all transactional activities Cost of goods sold (COGS) = Material + Direct labour + Factory overhead
incl. requistioning, RFX (RFI, RFP, RFQ), contract award, orders, approval, Gross Profit = Net sales - COGS
receipt, payment Strategy → Tactics → Actions
Operating expenses interest, miscellaneous expenses
Benefits of e-procurement: Virtual elimination of paperwork, reduced time Four basic supplier strategy
Profit before tax = Gross profit - operating and other expenses
between need recognition and order release and receipt, improved communication, Total cost of Ownership (TCO): Present value of all costs
reduced errors, reduced overhead costs, reduced purchase order and invoice associated with product/service/capital equipment incurred over
processing time product/service/equipment’s expected life → Allow buyer to identify
NSC Case: Procurement process: 1. Establishing needs (+ calculate and justify and measure costs beyond standard unit price, transportation when
EPV, adding a buffer to total value) 2. Determine Procurement approach (i.e. open evaluating suppliers’ proposals or performance.
tender) 3. Specify requirements (conduct mkt research, give accurate specs Cost and time intensive activity with 4 main parts: 1.
(technical [timeliness, design details] and non technical specification [additional Purchase price (Invoice amount paid to supplier (make sure PO cut
value add service] ), provide evaluation criteria and critical criteria which incl. price properly)) 2. Acquistion costs (Cost  of bringing product to buyer
competitiveness) 4. Source (publish tenders) 5. Evaluate (selecting based on VFM (incl. sourcing, INCOTERMS, taxes, freight) 3. Usage cost
principle) 6. Seek Approval (compute price competitiveness score, final APV (Conversion from Raw materials to Finished Goods and support costs
calculated)7. Contract (publish award notice) 8. Manage contract (warranty, maintenance, training, opportunity, downtime costs))
Integrative strategy development: Corporate strategies (definition of biz in 4. End of life cost (Net of amounts received/spent at salvage
(disposal, salvage, clean-up, liquidated damages))
Steps in conducting TCO analysis: 1. Map the procurement process
(needs discussion, sourcing, evaluating, assessment, selection, use,
EOL) and develop TCO category (needed in category mgmt) 2.
Determine cost elements for each category 3. Determine how each cost
element is to be measured (metrics) e.g. work/piece rates, learning
curve, etc) 4. Gather data and quantify costs (SAP, open source) 5.
Develop cost timeline (for length of life cycle) 6. Bring costs to present
value (NPV, cost of capital)
Other types of supplier strategies: Insourcing/outsourcing, supply base Factors to consider in TCO: use for evaluating larger purchases, obtain senior
optimisation, supply risk management, global sourcing, long term supplier mgmt buy-in, work in teams (usually cross-functional), focus on big costs first, then
relationships, early supplier design involvement, supplier development, total cost drill down to component level, obtain realistic estimate of life cycle (3 years, 5 years
of ownership, e-reverse auctions depending on industry), use as cost based decision making tool for in-house,
Purchasing chessboard: differentiates between the powers of dd and ss → basic outsourcing choices, consider all relevant costs in global sourcing throughout
purchasing strategies is developed (high ss, low dd: Change nature of dd, high ss, supply chain (TLC)
high dd: Seek joint advantage with supplier, low ss, low dd : manage spend, low ss, Collaborative Cost Management
high dd: Leverage competition among suppliers) When to use collaborative cost approach: not appropriate for all times,
which to participate, acquisition and allocation of resources to these biz units) →
3 levels of hierarchy: 4 basic strategies, 16 levers/approaches, 64 methods supplier contributes high levels of value-added, complex, customised items, for
Biz unit strategies (scope/boundaries of each biz and links with corporate strategy,
Similarities of purchasing chessboard and Kraljic: portfolio approach, strategies products requiring conversion from raw materials through supplier’s design, make
basis of competitive advantage) → Supply mgmt strategies (support desired
and most of the tools used (i.e. partnerships, re-specification, tenders) — only diff supplier more cost efficient and focused.
competitive biz-level strategy, how to complement other functional strategies → wording
Category/Sourcing strategies (how to purchase commodities to support higher level 2 methods:
Differences: Different views (product/profit & risk view VS Balance of power), 1. Target pricing/costing
strategies) Chessboard seems to be more price focused, even non critical items are handled
Translating objectives into procurement mgmt goals: Cost Reduction Used in NPD; use cost of new product as input to product design process
with much bigger effort, some tools (i.e. globalization, volume bundling) are Sale price - Profit = Allowable cost; “to be” or target cost of supplier
obj: Be low cost producer in industry (reduce mat. cost), reduce levels of inventory allocated to different sectors of portfolios, Kraljic 8-10 tools (too simplistic?) VS
required to supply internal customers (reduce raw mat. inventory) Technology/ Gap in cost(allowable cost - product cost) becomes cost reduction goal between
chessboard 64 tools (too complicated?) buyer & seller
new pet dvpt obj: Outsource non-core competency activities (qualify new
suppliers for all major services) Reduce pdt dvpt time (develop formal supplier Target price = price buyer wants to get from supplier (i.e. set by buyer)
integratn process manual) Supply base reductn obj: Reduce # of suppliers 2. Cost savings sharing
used, Joint problem solving with remaining suppliers (identify cost savings with Joint identification of supplier’s full cost
suppliers). Supply assurance obj: Assure uninterrupted supply from identified Sharing of continuous improvement benefits, profit is shared between B-S
suppliers (reduce cycle times on key parts) Quality obj: Increase quality of service Financial incentives for supplier to pursue cost reduction, invest in assets, have
and pdts (reduce avg defects on all material receipts) win-win
Category management: Interactive business process whereby buyers and sellers Supplier should improve operations over and beyond contract.
work together in mutual cooperation to manage categories as strategic business Target cost based pricing: Agreement on supplier’s full cost (need visibility
units here), built upon higher degree of trust, information sharing, joint problem solving.
Job of category manager: Engage internal stakeholders and fully understand Identify and agree on: product volumes (esp volume variability), target product
their requirements, scan marketplace to understand market trends, cost drivers costs at diff points in time, quantifiable productivity and quality improvements
and risks, build a strategy that aligns stakeholder requirements with supply market Value Equation: 
 projections, asset base and rate of return requirements, when cost sharing savings
realities, conducts spend analysis From MHGP, Value = (Quality + Technology + Service + Cycle time)/Price starts and how calculated, Need to manage risks associated with target pricing (esp
Spend Analysis: Process of identifying, collecting, cleansing, enriching, Johansson perspective of value: V = (Quality * Service) / (Cost*Cycle time) volume variability and min. vol. guarantees)
classifying and analyzing expenditure (spend) data with the aim of reducing Price analysis: Process of comparing supplier price against external P
procurement costs, improving process efficiency, monitoring compliance, benchmarks w/o direct knowledge of supplier costs (focus on price only and not on
suppliers’ COP)
Elements of sustainable PMM: Green purchasing and inbound logistics, green be accomplished in order for the project to be completed, should state a set of
product design, clean production processes & waste management, Green outbound quality specifications that project needs to achieve)
and reverse logistics Project management triangle: Conflict between the 3 objectives
Strategy for successful closed loop business models: Take advantage of Reducing a project’s completion time: 1. Start the project early 2. Manage
knowledge obtained by examine used products, take advantage of the knowledge project scope 3. Crash activities 4. Overlap critical path activities
obtained and shared through multiple customer contacts , Make profits on the All these only work if applied to the critical path. Trying to overlap non-critical
service provided by products not on the products themselves → creates proper path activities will not reduce project completion time.
incentives for use-stage consumption, product life extension and end of life Organising a project: Defining the project (defining and negotiating the 3
solutions (i.e. rolls Royce airplane engines, Zipcar, carpeting, printing…) , flexible var. that make up the proj triangle), Planning the project (execution of work,
small scale manufacturing/service facilities close to customers to facilitate reverse apply the tools - dependency matrix, draw activity network , find critical path,
logistics for reuse, remanufacturing, recycling create Gantt chart) , identify person i/c of each activity and cfm that Gantt chart
Design for environment: is feasible), Controlling the project (tracking its progress i.e. tracking Gantt
Reduce material weight and volume in products and packaging which also saves on chart to check that all activities take place as planned)
transportation Impt to define a set of milestones that provide realistic picture of the progress of
Use materials with low environmental impact (low/no toxicity), low energy the project. Project should by carefully reviewed & progress should be carefully
content, recycled content, recyclable (i.e. can replace with virgin materials like evaluated relative to scope, budget and time
steel, aluminum, PET), renewable & biodegradable Dedicated project team: Proj team in which team members spen 100% of
Use clean production processes: fewer steps (design for manufacturing), energy their work time on proj
efficient, low additives/emissions, reduce waste, find outlets for by-products/waste, New product development:
green buildings Ensures new products or services supplied by organizations match the market
Optimise logistics and transportation: Avoid empty trucks, use sea to avoid air demand of those who are supposedly buying them Sales Forecast: Demand inventory for new product/service so that the company
Use suppliers that score high on design for environment Translate the opportunity into a new product or service that the organization then can either pre-produce the appropriate amount of inventory before the launch or
Reduce use-stage energy consumption (i.e environmental impact of coffee machine supplies and its customers demand. (Opportunity → create value → Innovation) put the necessary service capacity in place at the launch.
mostly occurs in the use phase) Innovation: Novel match between customer needs (the foundation of demand) When doing survey:
Reduce use-stage material consumption and emissions: Avoid leakage and solutions in the form of physical goods or services (the supply) → Create value 1. Identify customers in market segment relevant to innovation. Customers are
Extend product life: durability, easy, mistake proof, maintenance, repair, easy (Novelty can come either from customer need or from solution) asked to express their purchase intent (definitely buy, probably will, may or may
upgrade and refurbishment (use modularity) Opportunity: An idea — a new product or service at the embryonic state not, probably not definitely will not)
Consider and develop end-of-life solutions for products and packaging: Reuse, Each innovation horizon corresponds to a comparable degree of novelty. As we 2. Compute purchase probability
refurbish, remanufacture (i.e Xerox, Caterpillar), recycle (to replace virgin move to upper left of the figure, we increase novelty in customer needs (i.e. 3. Discount the purchase probability
materials), in support of reuse, refurbish, remanufacture, recycle (make products entering new markets = may be entirely new, customers currently not served yet). Purchase Probability = Cdefinite x Fraction “definitely buy” + Cprobably x
easy to disassemble, materials easy to separate, reduce # of materials), incinerate, As we move to the bottom right, we increase the novelty of the solution approach Fraction “probably buy” + … where C is a constant (i.e. if Cdefinite = 0.4 it means
biodegrade (solutions may not exist yet) that 40% who say they definitely will buy end up buying )
Project management Firms can innovate beyond creating new products and services 4. Predict sales Sale forecast = Market size x Awareness probability x
Project: temporary (non-repetitive) operation. Have a limited time frame, >1 Purchase probability
specific obj. And a temporary organizational structure
Activity time: Amt of time it takes the resource to complete the activity once it Cook Composites and Polymers Co. Learning objectives: Waste
has started to work on it management alternatives by turning waste into products is a form of recycling (can
Precedence relationship is used to described activities that are dependent on be alternative to waste reduction. As a result, one may even use more of this (waste)
each other (i.e. B requires completion of A — A is the predecessor of B and B is resource than before, turning (local) cost minimization into (global) profit
sequentially independent of A) maximisation problem.
Sequentially independent: A form of independence in which successor depends If a waste product can be sold at a profit, it will often have a positive impact on the
on predecessor (A is predecessor, B is the successor) environment because it replaces the production of new materials.
Such relationship can be summarized in a dependency matrix where each
column represents an activity that provides info (predecessor) and each row Walmart Case:
indicates activity that receives info (successor) How Walmart is deriving business value from its new strategy: price premium, cost
If there exist no relationship between the 2 activities, the activities are reduction, assurance of supply, creation of new revenue streams, right license to
independent of each other operate
Interdependent: A depends on B and B depends on A. When executing
interdependent activities, we have to carefully coordinate activities. Such
coordination take 2 forms:
1. Static: getting team members in
charge of interdependent activities tgt
and engaging them in a dialogue (an
attempt to understand obj. And
constraints of other activities when
executing your own activity)
2. Dynamic: iterating (going back and
forth) btw 2 interdependent activities

= concurrent engineering
(simultaneous execution of multiple
dvpt activities w/ strong emphasis on Product development process: A process that takes an opportunity as its
coordination) input and translates this into new product/service
The activity network The process includes needs identification, generation of product concepts,
Multiple approach to use graph to represent dependencies in project mgmt empirical validation of the concepts and a business analysis, involving a sales
Activity on node (AON): nodes correspond to proj activities and arrows forecast. Upstream from the product development process is the process of
correspond to precedence relationships (arrow go from predecessor to successor opportunity identification. Downstream of the product development process is the
activity) — similar to process flow [1. Create a node with activity name and actual productions, sales, and distribution of the product or service developed.
expected activity time 2. Draw the respective arrows out of each activity for each This process is sometimes iterative (“rework”) where 1 or several activities are
dependency] repeated one or multiple times
The Critical Path method Understanding user needs
Process mgmt: Direct attention to resource with lowest capacity - bottleneck A consumer’s utility function determines to what extent a consumer desire a
(activity with longest processing time) pdt/service. Has many input variables: user needs. Consists of 3 sub-dimension:
Project mgmt: What matters is not the individual activity times but the performance (driven by product features i.e. durability, battery life, screen
completion of the last activity (requires ALL activity to be completed) resolution), conformance (whether the product work as well as the manufacturer
Path: A sequence of nodes (activities) and (directional) arrows promise), and fit(affected by personal preference).
Every path can be assigned a duration by simply adding up the activity times of the There exists a hierarchy of needs associated with a product/service starting with
activities that constitute the path. a few high level needs (i.e. performance quality) which in turn consist of many low-
Critical Path: The path with the longest duration is the level needs (water-tightness) Top of this needs hierarchy: Primary need, Lower
critical path levels: Secondary & Tertiary needs.
Compute project duration:1. Start with activity that Kano Model: Consists of 1. Performance needs (needs that will lead to
has no info providing activity and label that activity as customer satisfaction when fulfilled and dissatisfaction when not=linear satisfiers)
start. Earliest start time (est) is 0. Earliest completion 2. Delighters (needs that will lead to customer satisfaction fulfilled but will not
time (ect) is the activity time of the activity. 2. Identify all lead to dissatisfaction when not) 3. Must-haves (needs that will not really drive
activities that can be initiated at this point. For a given customer satisfaction upward when fulfilled but could drive customer satisfaction
such activity i, compute EST as EST(Ai) = Max {ECT(Aj)} substantially downward when not fulfilled)
where Aj are all activities providing input to Ai. Comments: Latent needs: customers may not be aware of their needs when asked
3.Compute the earliest completion time of Ai as ECT(Ai) = EST(Ai) + Activity time about their needs and pref when they see it but once they see it, they love it =
(Ai) 4. Consider activity i as completed and identify any further activities that now delights in Kano Model. Some components can actually be classified in a different
can be initiated. Go back to step 2 category. Time drift: innovations diffuse and what once was a delight can soon be
Slack time: Amt of time an activity can be delayed without impacting the overall taken for granted (become must-haves)
completion time of a project (Determined based on late start schedule) We need to know our customers with intimacy that we understand their latent
Computation: Compute latest start time (LST) and latest completion time (LCT) for needs before they understand these themselves to gain competitive edge. Good
each activity such that the proj still completes on time. We do this by beginning product development starts with careful assessment of customer needs
with last activity and working our way backward through the proj until we reach 3 method of gathering customer needs: interviews, contextual observation,
the beginning LCT(last activity) = ECT(last activity) focus groups
LST (last activity) = LCT(last activity) - Activity time (last activity) Concept generalization: Process of generating large, diverse set of concepts as
LCT(Ai) = Min {LST(Aj) for which Aj is a successor of Ai} the foundation of the new product/service (user needs)
LST(Ai) = LCT(Ai) – Activity time (Ai) Product concept:Preliminary articulation of a solution for given set of user needs
Slack time = Latest start time - earliest start time = latest completion (what are the needs that concept fulfills well, how are we going to fulfill the needs)
time - Earliest completion time Prototype: Representation of the final product or service that allows the product
Note: LCT & LST are computed by going backward through the proj graph. Slack development team to predict how well a particular product concept might fulfill the
time of all activities on critical path is 0 customer needs. → Primitive as they can only approx. the fulfillment of the needs
Benefits of knowing slack time: 1. Potentially delay the start of activity (Prefer of real customers
later start > earlier start as starting an activity is often associated with spending Levels of fidelity of a prototype: 1. Low (Rough representations of final
money i.e. renting equipment, hiring ppl) 2. Accommodate availability of solution, fast and cheap to make) 2. High (almost perfect representation and give
resources: internal & external resource may not always be avail. When we need so very accurate prediction of real customer response, expensive)
slack time allow us to adjust schedule without compromising completion time 3. As product developt process unfolds, fidelity tends to increase
Insights and understanding about project dynamics: help direct attn when the Decomposition: Breaking down problem into smaller, manageable sub problems
project is executed by knowing which activity has little slack and solving these subproblems first (divide and conquer)
The Gantt chart: timeline with activities included as horizontal bars (most Attribute based decomposition: Focus on a subset of attributes of a new
commonly used visualization for project timelines) Does not capture dependencies product/service and try to generate a concept that performs well on these
of activities attributes, even at the risk of performing poorly on others
Common to include: critical path (choose different colour), important Customer value curve: Graphic depiction of a new product’s relative performance
dependencies (drawing arrow from end of activity to beginning of successor), slack across the key attributes comparing it with existing offerings in the market
time (extend bars) User interaction based decomposition: Decomposing the activities user go
Uncertainty in activity times and iteration: Duration of many actives can through and picking one of it to generate concepts (useful in service setting: service
vary considerably with initial prediction, typically not in desired direction (taking blueprint)
longer than expected) → random activity time → later completion time of Service blueprint: Breaks up the flow of activities required to serve customer in
project diag., distinguishes which activities are done by customers alone, which are done
Variation in activity time will not average itself out. When some activities are with interaction with customer and which are done by us alone
completed early and others are completed late, project will be delayed Concept selection: Prioritisation of concepts (choosing the best + eliminating to
Iteration & Rework: When project activities are interdependent, oftentimes, create # of high fidelity pdt concept) [need to consider need fulfillment, feasibility,
iterations are required. Such iterations are typically for product development and wow factor — compare the most promising concept along this 3 dimensions using
innovation projects where problem solving can a more organic, iterative process. It selection matrix]
is often referred to as rework. Rapid Validation/Experimentation
Rework: Repetition of activities or an extra set of activities that have to be Lean startup/pretotyping: Product development process that rapidly iterates with
completed by a defective flow unit in order to be restored to a good flow unit real customers using simple and inexpensive prototypes
Unknown unknowns (unk-unks): Uncertainties in a project that the proj Development team evaluate attractiveness of product concepts based on true
mgmt is not yet aware of. It lies in the nature of many high-uncertainty projects purchase decisions that customers make i.e. pdt team selling product or service
that they will not be completed. Timely abandonment often is the goal as it avoids pretending it is ready for use tho the pdt still requires several mth of dvpt
escalation of costs. Often, a useful exercise is simply to list all variables in the Minimum viable product: A prototype of a new pdt/service that allows the
project that are currently not known and look for activities that would help resolve team to collect the max amt of learning about customer preference with least amt of
these unknowns effort
Discovery driven planning: Attempting to spend as little as possible to learn Common forms: 1. The fake door: offering sth you dont have yet 2. Fake back
enough to decide whether to move forward with the project. → help resolve some end: once have customer order at hand, would order from existing retailer and
uncertainties and identify new ones pretend pdt came to their warehouse 3. Impersonator: Prototype created using
Project Management Objectives: Not just completing proj on time, but also mostly parts or system elements from an existing pdt/service 4. One night stand:
project cost (plannintg on how to spend money) and scope (determines what must Test sthfor a limited time only i.e. setting up tent/koisk and building a temporary