You Have Been Asked To Develop A Work Breakdown Structure ✓ Solved

You Have Been Asked To Develop A Work Breakdown Structure

You have been asked to develop a work breakdown structure for a project. How should you go about accomplishing this? Should the WBS be time-phased, department-phased, division-phased, or some combination? You have just been instructed to develop a schedule for introducing a new product into the marketplace. Below are the elements that must appear in your schedule. Arrange these elements into a work breakdown structure (down through level 3), and then draw the arrow diagram. You may feel free to add additional topics as necessary.

Production layout, Review plant costs, Market testing, Select distributors, Analyze selling cost, Lay out artwork, Analyze customer reactions, Approve artwork, Storage and shipping costs, Introduce at trade show, Select salespeople, Distribute to salespeople, Train salespeople, Establish billing procedure, Train distributors, Establish credit procedure, Literature to salespeople, Revise cost of production, Literature to distributors, Revise selling cost, Print literature, Approvals, Sales promotion, Review meetings, Sales manual, Final specifications, Trade advertising, Material requisitions. Should a PERT/CPM network become a means of understanding reports and schedules, or should it be vice versa? Should PERT networks follow the work breakdown structure?

Case study: Teloxy Engineering (A) Teloxy Engineering has received a one-time contract to design and build 10,000 units of a new product. During the proposal process, management felt that the new product could be designed and manufactured at a low cost. One of the ingredients necessary to build the product was a small component that could be purchased for $60 in the marketplace, including quantity discounts. Accordingly, management budgeted $650,000 for the purchasing and handling of 10,000 components plus scrap. During the design stage, your engineering team informs you that the final design will require a somewhat higher-grade component that sells for $72 with quantity discounts. The new price is substantially higher than you had budgeted for. This will create a cost overrun. You meet with your manufacturing team to see if it can manufacture the component at a cheaper price than buying it from the outside. Your manufacturing team informs you that it can produce a maximum of 10,000 units, just enough to fulfill your contract. The setup cost will be $100,000 and the raw material cost is $40 per component. Since Teloxy has never manufactured this product before, manufacturing expects the following defects: % defective probability of occurrence (%). All defective parts must be removed and repaired at a cost of $120 per part.

Questions: Using expected value, is it economically better to make or buy the component? Strategically thinking, why might management opt for other than the most economical choice? Teloxy Engineering (B) Your manufacturing team informs you that it has found a way to increase the size of the manufacturing run from 10,000 to 18,000 units, in increments of 2,000 units. However, the setup cost will be $150,000, and defects will cost the same $120 for removal and repair. Questions: Calculate the economic feasibility of make or buy. Should the probability of defects change if we produce 18,000 units as opposed to 10,000 units? Would your answer to question 1 change if Teloxy management believes that follow-on contracts will be forthcoming? What would happen if the probability of defects changes to 15 percent, 25 percent, 40 percent, 15 percent, and 5 percent due to learning-curve efficiencies?

Paper For Above Instructions

The development of a Work Breakdown Structure (WBS) is a critical step in project management, as it defines the scope and breakdown of a project into manageable components. To accomplish this effectively, you should consider multiple approaches including a time-phased, department-phased, or division-phased structure, or a combination of these methods, depending on project complexity and goals.

A time-phased WBS organizes tasks by timelines, which is particularly useful for projects where deadlines are crucial. This allows stakeholders to visualize task durations and monitor progress effectively. Conversely, a department-phased WBS might be more appropriate for projects that involve multiple teams, as it facilitates coordination among departments. A division-phased structure can apply to large projects with distinct functional areas. The optimal approach will depend on the specific project requirements and team structure.

To illustrate the process of creating a WBS for the product launch schedule described, the elements will be categorized systematically down to level 3:

  • Product Introduction
    • Planning
    • Market Research
    • Production Layout
    • Review Plant Costs
  • Production
  • Analyze Selling Costs
  • Material Requisitions
  • Layout Artwork
  • Distribution
  • Select Distributors
  • Train Salespeople

This structure ensures all aspects of the product introduction are covered, facilitating task delegation and accountability. Following the WBS, an arrow diagram can be drawn to represent the sequence and dependencies among these tasks, enhancing visual comprehension of the project flow.

Next, for the case study involving Teloxy Engineering, we must analyze the economic impact of producing or purchasing components, considering changes in production scale.

The cost of buying the components for 10,000 units amounts to:

Total Buy Cost = Cost per Component × Quantity = $72 × 10,000 = $720,000.

Considering a budget of $650,000, buying the components will create a $70,000 overrun.

On the other hand, if the manufacturing team produces the components in-house:

Setup Cost: $100,000

Material Cost: $40 × 10,000 = $400,000

Total Make Cost = Setup Cost + Material Cost = $100,000 + $400,000 = $500,000.

In this case, producing the component in-house is economically favorable, as it costs $500,000 compared to $720,000 for purchasing. However, all factors need assessment, including quality control and potential defects that may arise during production impacting overall costs due to repair.

Considering the probability of defects at the initial proposal, suppose it’s 5%. The expected cost of defects can be quantified:

Defect Cost = % Defective × Unit Cost of Repair × Number of Units = 0.05 × $120 × 10,000 = $60,000.

Overall, the total make cost now becomes $500,000 + $60,000 = $560,000. Even with defects, producing in-house remains cheaper than buying.

Strategically, reasons for management to opt for the buying decision could result from concerns over production delays, the reliability of in-house capabilities, or strategic partnerships with suppliers to simplify logistics.

If production capability increases to 18,000 units, we must also re-evaluate:

Setup Cost: $150,000

Material Cost for 18,000 = $40 × 18,000 = $720,000

Thus, Total Make Cost = $150,000 + $720,000 = $870,000.

As production scale increases, the likelihood of defects may decrease due to efficiency gains, but it remains uncertain whether a direct correlation exists at these scales. Management must consider all these dynamics, especially if they foresee follow-on contracts that could justify the initial cost outlay to build internal capabilities.

In summary, the decision to make or buy involves numerous factors beyond short-term economics. By adopting a proper WBS and assessing strategic implications, management may navigate these complexities more effectively.

References

  • Kerzner, H. (2017). Project Management: A Systems Approach to Planning, Scheduling, and Controlling. Wiley.
  • Schmidt, C. (2018). Work Breakdown Structures: A Guide for Project Management. Routledge.
  • Cleland, D. I., & Ireland, L. R. (2007). Project Management: Strategic Design and Implementation. McGraw-Hill.
  • PMI. (2021). A Guide to the Project Management Body of Knowledge (PMBOK® Guide). Project Management Institute.
  • Lock, D. (2013). Project Management. Gower Publishing, Ltd.
  • Meredith, J. R., & Mantel, S. J. (2017). Project Management: A Managerial Approach. Wiley.
  • Cohen, S. (2014). Making the Business Case for Work Breakdown Structures. International Journal of Project Management.
  • Harris, C. (2015). Cost Management: A Strategic Emphasis. Pearson.
  • Schwalbe, K. (2019). Information Technology Project Management. Cengage Learning.
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