NutriStar Energy, Inc. 10 S. Shafer development phase, a project owner, that will be you, is chosen The following case to oversee all four phases of the project and given a budget to develop a plan. The outcome of the concept development phase consists of just a rough plan, feasibility estimates for the project. approach for borh completion time and cost as well as a and a rough schedule. Also, a justification for the project and a simulated solution for time variability and then also for both budget for the next phase will be needed." time and cost variability. The student should better under. "In the plan definition phase, the project owner selects and stand the risk of projects running late and overbudget after works with a project manager to oversee the activities associated this exercise. with this phase. Plan definition consists of four major activities Wesley James had recently arrived in Boston from Man- that are completed more or less concurrently: (1) defining the chester, UK for a position as Project Owner at NutriStar project scope. (2) developing a broad schedule of activities, (3) Energy, Inc. He was now meeting with Ava Smith, President developing detailed cost estimates, and (4) developing a plan for of NutriStar, to discuss his upcoming duties and responsi- staffing. The outputs of this phase are combined into a detailed bilities associated with their latest product, the Nutri-Sports plan and proposal for management specifying how much the Energy Bar. project will cost, how long it will take, and what the deliverAs Ava explained: "NutriStar produces a line of vitamins ables are." and nutritional supplements. We recently introduced our Nutri- "If the project gets management's approval and provides the Sports Energy Bar, which is based on new scientific findings appropriations, the project progresses to the third phase, design about the proper balance of macronutrients in the body. Fortu- and construction. This phase consists of four major activities: nately, the energy bar has quickly become popular among elite (1) detailed engineering, (2) mobilization of the construction athletes and others who focus on eating an optimal balance of employees, (3) procurement of production equipment, and (4) macronutrients. One distinguishing feature of the Nutri-Sports construction of the facility. Typically, the detailed engineering Energy Bar is that each bar contains 50 milligrams of cicosa- and the mobilization of the construction employees are done pentaenoic acid (EPA), a substance strongly linked to reducing concurrently. Once these activities are completed, construction the risk of cancer but found in only a few foods, such as salmon. of the facility and procurement of the production equipment are We were able to include EPA in our sports bars because we had done concurrently. The outcome of this phase is the physical previously developed and patented a process to refine EPA for construction of the facility." our line of fish-oil capsules." "The final phase, start-up and turnover, consists of four "Because of the success of the Nutri-Sports Energy Bar major activities: pre-start-up inspection of the facility, recruitin the United States, we are considering offering it in Latin ing and training the workforce, solving start-up problems, and America. With our domestic facility currently operating at determining optimal operating parameters (called centerlining). capacity, we have decided to investigate the option of adding Once the pre-start-up inspection is completed, the workforce is approximately 10,000 square feet of production space to our recruited and trained at the same time that start-up problems facility in Latin America, at a cost of \$5.1 million." are solved. Centerlining is initiated upon the completion of "This is where you come in, Wesley. The project to expand these activities. The desired outcome of this phase is a facility the Latin American facility involves four major phases: (1) operating at design requirements." concept development, (2) definition of the plan, (3) design and "The cost to complete an activity depends on both the construction, and (4) start-up and turnover. During the concept amount of time required to complete the task and the cost rate of performing the activity, 1 have compiled two tables here for -Copyright S. Shafer. you. Table A provides optimistic, most likely, and pessimistic Three Time Estimates for NutriStar Production Facility Expansion Project Threp Cost Rate Fetimatoe for NutriCtun Dmaluntina Ewatte.. D. time estimates for the major activities. Table B provides simi- 3. Develop histograms for both the project completion time lar estimates for the cost rates to complete the activities. Like and the cost to complete the project. What do these histotime estimates, the cost rate to complete the facility expansion grams tell you? project can vary for a number of reasons such as using more or 4. Using the results of your simulation analysis, calculate the less expensive resources, price changes in labor and materials, the need to outsource work that was expected to be performed probability that the project can be completed within 30 months. in-house, and so on. According to the data in Tables A and B. What is the probability that the project will take longer than Concept Development is expected to cost $24,000,12 months at 40 months? What is the probability that the project will take $2,000/ month." between 30 and 40 months? What is the probability the project "Well, that's it Wesley! We're glad to have you on board and will cost $5.1 million or less to complete? The probability the look forward to working with you. Do you have any questions?" project will cost between $5 and $6 million to complete? 5. Modify your simulation model to determine the probability that Questions the path you expected to be the critical path actually was the 1. Draw a network diagram for this project. Identify which path critical path? What are the managerial implications of this? you expect to be the critical path and its expected comple- 6. Simulate the completion of this project 1,000 times assumtion time. Which paths are most likely to threaten this path in ing that the activity times follow a triangular distribution and terms of becoming critical? 2. Simulate the completion of this project 1,000 times assuming the mean and standard deviation of the project completion that activity times follow a triangular distribution and that time and project cost. How do these results compare to the the cost rates are known with certainty and equal to the most results you obtained in Question 2? likely cost rate. Estimate the mean and standard deviation of 7. Would you expect there to be a relationship between the durathe project completion time and the project cost. How does tion of an activity and the cost rate to complete the activity? the time compare to your previous answer based solely on the If so, how could your simulation model be modified to reflect critical path? this relationship