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C HAP TE R 16

Project Manufacturing

According to Ralph Currier Davis in The Fundamentals of Top Management, a project is
“any undertaking that has definite, final objectives representing specified values to be
used in the satisfaction of some need or desire.” For a project manufacturer, this final
objective is a physical product that meets the requirements of the customer. The project
manufacturer builds products that are very low in volume and extremely high in variety.
It is not uncommon to build items that are one of a kind. At the other end of this pro-
duction spectrum are the process and repetitive manufacturers. The project manufactur-
ers also usually have a requirement to track costs to a top-level project. Projects may span
multiple years, and the cost collection must continue to aggregate at the very top project
level. Managing scope, time, and resources, including costs, is essential for the enterprise.
Project management adds a great deal of complexity for the material requirements
planning (MRP) system because the basic assumptions under all MRP engines is that all
materials and activities are scheduled on the critical path. The fundamentals behind pro-
ject management are that there is one critical path and that the slack time on the parallel
paths is used to balance capacity. The project manufacturer’s dilemma is, How should the
system plan the materials to support the activities not on the project’s critical path?
Should they be available at the early or late start date of the activity? When are resources
really required?
The standard logic of an MRP system assumes that if the part is the same for fit, form,
and function as is designated by the part number, it can be used anywhere that part num-
ber needs to go. The project manufacturer may purchase materials specific to a single pro-
ject that potentially could be used for multiple projects. The desire is to track the actual
costs of these materials to the top-level project. However, this is in direct conflict with the
standard costing process that is the default of most accounting systems. These complexi-
ties of material planning, scheduling, and overall costing highlight some of the project
manufacturer’s uniqueness. This chapter is not intended as a comprehensive reference in
project management but rather highlights the application of MRP to this environment.
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