ADVANCED DEVELOPMENT PLANNING AND PROJECT ANALYSIS
CASE STUDY 2
1997, Como had achieved partial success in implementing project management. Lead times were reduced by 10 percent rather than the target of 25–35 percent. Internal resources were reduced by only 5 percent. The reduction in prototype time and cost was 15 percent rather than the expected 30–35 percent.
Como’s automotive customers were not pleased with the slow progress and relatively immature performance of Como’s project management system. Change was taking place, but not fast enough to placate the customers. Como was on target according to its thirty-six month schedule to achieve some degree of excellence in project management, but would its customers be willing to wait another two years for completion, or should Como try to accelerate the schedule?
FORD INTRODUCES “CHUNK” MANAGEMENT
In the summer of 1997, Ford announced to its suppliers that it was establishing a “chunk” management system. All new vehicle metal structures would be divided into three or four major portions with each chosen supplier (i.e., chunk manager) responsible for all components within that portion of the vehicle. To reduce lead time at Ford and to gain supplier commitment, Ford announced that advanced placement of new work (i.e., chunk managers) would take place without competitive bidding. Target agreements on piece price, tooling cost, and lead time would be established and equitably negotiated later with value engineering work acknowledged.
Chunk managers would be selected based on superior project management capability, including program management skills, coordination responsibility, design feasibility, prototypes, tooling, testing, process sampling, and start of production for components and subassemblies. Chunk managers would function as the second-tier component suppliers and coordinate vehicle build for multiple, different vehicle projects at varied stages in the development–tool–launch process.
STRATEGIC REDIRECTION: 1997
Ford Motor Company stated that the selection of the chunk managers would not take place for another year. Unfortunately, Como’s plan to achieve excellence would not have been completed by then, and its chances to be awarded a chunk management slot were slim.
The automotive division of Como was now at a critical junction. Como’s management believed that the company could survive as a low-level supplier of parts, but its growth potential would be questionable. Chunk managers might find it cost-effective to become vertically integrated and produce for themselves the same components that Como manufactured. This could have devastating results for Como. This alternative was unacceptable.
The second alternative required that Como make it clear to Ford Motor Company that Como wished to be considered for a chunk manager contract. If Como were to be selected, then Como’s project management systems would have to:
● Provide greater coordination activities than previously anticipated
● Integrate concurrent engineering practices into the company’s existing methodology for project management
● Decentralize the organization so as to enhance the working relationship with the customers
● Plan for better resource allocation so as to achieve a higher level of efficiency
● Force proactive planning and decision-making
● Drive out waste and lower cost while improving on-time delivery
There were also serious risks if Como were to become a chunk manager. The company would be under substantially more pressure to meet cost and delivery targets. Most of its resources would have to be committed to complex coordination activities rather than new product development. Therefore, value-added activities for its customers would be diminished. Finally, if Como failed to live up to its customers’ expectations as a chunk manager, it might end up losing all automotive work.
The decision was made to inform Ford of Como’s interest in chunk management. Now Como realized that its original three-year plan for excellence in project management would have to be completed in eighteen months. The question on everyone’s mind was: “How?”
QUESTIONS
1. What was the driving force for excellence before the announcement of chunk management, and what is it now?
2. How can Como accelerate the learning process to achieve excellence in project management? What steps should management take based on its learning so far?
3. What are their chances for success? Justify your answer.
4. Should Como compete to become a chunk manager?
5. Can the decision to become a chunk supplier change the way Como performs strategic planning for project management?
6. Can the decision to become a chunk supplier cause an immediate change in Como’s singular methodology for project management?
7. If a singular methodology for project management already exists, then how difficult will it be to make major changes to the methodology and what type of resistance, if any, should management expect?