Sharp Printing, AG (Case Study)

Three years ago the Sharp Printing (SP) strategic management group set a goal of

having a color laser printer available for the consumer and small business market

for less than $200. A few months later the senior management met off-site to discuss the new product. The results of this meeting were a set of general technical

specifications along with major deliverables, a product launch date, and a cost

estimate based on prior experience.

Shortly afterward, a meeting was arranged for middle management explaining

the project goals, major responsibilities, the project start date, and importance of

meeting the product launch date within the cost estimate. Members of all departments

involved attended the meeting. Excitement was high. Although everyone

saw the risks as high, the promised rewards for the company and the personnel

were emblazoned in their minds. A few participants questioned the legitimacy of

the project duration and cost estimates. A couple of R&D people were worried

about the technology required to produce the high-quality product for less than

$200. But given the excitement of the moment, everyone agreed the project was

worth doing and doable. The color laser printer project was to have the highest

project priority in the company.

Lauren was selected to be the project manager. She had 15 years of experience

in printer design and manufacture, which included successful management of

several projects related to printers for commercial markets. Since she was one of

those uncomfortable with the project cost and time estimates, she felt getting

good bottom-up time and cost estimates for the deliverables was her first concern.

She quickly had a meeting with the significant stakeholders to create a WBS

identifying the work packages and organizational unit responsible for implementing

the work packages. Lauren stressed she wanted time and cost estimates

from those who would do the work or were the most knowledgeable, if possible.

Getting estimates from more than one source was encouraged. Estimates were

due in two weeks.

The compiled estimates were placed in the WBS/OBS. The corresponding cost

estimate seemed to be in error. The cost estimate was $1,250,000 over the senior

management estimate; this represents about a 20 percent overrun! The time estimate

from the developed project network was only four months over the top management

time estimate. Another meeting was scheduled with the significant

stakeholders to check the estimates and to brainstorm for alternative solutions;

the cost and time estimates appeared to be reasonable. Some of the suggestions

for the brainstorming session are listed below.

Change scope.

Outsource technology design.

Use the priority matrix (found in Chapter 4) to get top management to clarify

their priorities.

Partner with another organization or build a research consortium to share costs

and to share the newly developed technology and production methods.

Cancel the project.

Commission a break-even study for the laser printer.

Very little in the way of concrete savings was identified, although there was

consensus that time could be compressed to the market launch date, but at

additional costs.

Lauren met with the marketing (Connor), production (Kim), and design (Gage)

managers who yielded some ideas for cutting costs, but nothing significant enough

to have a large impact. Gage remarked, I wouldnt want to be the one to deliver the message to top management that their cost estimate is $1,250,000 off! Good

luck, Lauren.

1. At this point, what would you do if you were the project manager?

2. Was top management acting correctly in developing an estimate?

3. What estimating techniques should be used for a mission critical project such

as this?