En595 - 660 Intro to Project Management - Pickpocit

1 PROJECT SCOPE

The automated Picker Package On-Line Customer Inventory Transit Project is a fixed-price contract program awarded to Inventory Specialists Inc (ISI) by the OK.com Company. The overall goal of the program is to design, manufacture, test, and deliver a custom warehouse inventory picker that selects and packages products for shipment. The contract is fixed price, and has a total price of $9 million dollars, with a potential additional award fee of 3%, split 60/40 on schedule and performance. The program has a 12 month schedule, and must be in place prior to the 2019 black Friday shopping spree.

2 PROJECT OVERVIEW

The purpose of the PickPOCIT project is to design, produce, and demonstrate a prototype automated inventory picker and mailer for OK.com. This is a fixed price $9 million contract with a potential additional award fee of 3% split 60/40 based on schedule and performance. The prototype will be installed and demonstrated at OK.com’s Baltimore, MD location. If this project is a success then OK.com will purchase 50 PickPOCIT systems for each of its 50 warehouses around the United States and Canada, this would be a total of 2500 systems.

The software that is behind this project is ISI’s inventory management and software (IMS) that must be able to interface with OK.com’s AOT software. PickPOCIT must be able to process 200 orders a minute, utilize “first in, first out” logic to prepare an item for shipping within three minutes, have a mean time between repairs of 2500 hours and be ISO9000 compliant. Additionally, the package will ship via United States Postal Service (USPS) or drone. If the package weighs less than five pounds and the destination is within 15 miles of the shipping facility then the package will ship via drone, if it does not meet this criteria then it will ship via USPS. ISI must also provide training to OK.com employees on how to operate and maintain PickPOCIT.

The drone required to complete this project will be subcontracted because ISI does not have the capability of designing and building a drone in this rigid timeline. The project office will work closely with this subcontractor to ensure capability with the IMS and AOT software, and ensure that the drone is ready for sub-system integration testing in March 2019.

PickPOCIT must be completed and demonstrated to OK.com within 12 months in order to ensure that the 2500 additional PickPOCIT systems are ready for the “Black Friday” sales rush in 2020. In order to meet this rigid timeline there are several design reviews and tests that must be completed, such as the Preliminary Design Review in December 2018, the Critical Design Review in February 2019, and system installation occurring in May 2019. The project office consists of staff and engineers from throughout ISI that will provide subject matter expertise in all aspects of the project.

3 FINANCIAL SUMMARY

The contract awarded to ISI by OK.com is a $9 million fixed-price contract with a potential additional award fee of 3%, split 60/40 on schedule and performance. A budget has been baselined for this program based on based on the work breakdown structure (WBS) high level tasks. This budget is created with the $9-million-dollar contract in mind, and the award fee is not included in the overall budget. The budget is presented below.

WBS Number WBS Task Budgeted

1 Software $1,215,000.00

2 Stock Hardware Picker $1,215,000.00

3 Boxing/Labling Hardware $648,000.00

4 Drone Subcontract $810,000.00

5 System Integration and Test $972,000.00

6 Installation $810,000.00

7 Training $405,000.00

8 System Operational Test $729,000.00

9 Project Management $405,000.00

10 Quality Assurance $243,000.00

11 Documentation $162,000.00

Reserve $846,000.00

Total Allocation $8,460,000.00

Expected Profit $540,000.00

The total expected expenses for the PickPOCIT program are $7,614,000. A 10% reserve budget has been allocated to address any issues that may arise, bringing up the total financial allocation to $8,460,000. This leaves an expected profit of between $540,000 and $1,386,000 depending on the total amount of reserve used.

A bottoms-up method was used to generate estimates for WBS tasks with guidance from past ISI company performance and with the opinion of subject matter experts. Tasks were difficulties are expected, such as integration between the AOT and ISI software packages were allocated additional money in an effort to be better prepared for issues. Financial emphasis has also been placed on the early phases of the program to ensure that the initial design and development task are accomplished on schedule.

4 CONTRACTUAL ASPECT

OK.com has awarded a $9 million dollar fixed price contract to OK.com, with a potential additional award fee of 3%, split 60/40 on schedule and performance. OK.com has also flowed down several key requirements to ISI that the PickPOCIT system must be able to accomplish. OK.com is requiring that the IMS system be integrated with OK.com’s Automated Order Tracking system (AOT), which is already in use by the company. This AOT software produces an order output that acts as an input to the PickPOCIT system and initiates a packaging process. With this input, the PickPOCIT system must be able to determine whether the product is in inventory, and if it is it will be able to automatically retrieve it, box it, and prepare it for shipment. Furthermore, if the shipment is less than 5lbs in weight and the delivery address is less than 15 miles of the shipping facility, the package will be prepared for delivery with the use of a drone in less than 30 minutes. This drone will be subcontracted by ISI to Drone Delivery Systems inc.

These are based on the performance of previous iterations of the inventory management and software (IMS) systems developed by ISI, and are as follows:

• Take in and process 200 orders a minute

• Utilize first in/first out logic, locate, package, and prepare an order within three minutes

• Mean time between repairs no less than 2500 hours of continuous operation

The PickPOCIT system must be operational in OK.com’s Baltimore, MD warehouse within 12 months of program award. This is such that the system is available for the 2019 black Friday shipping rush. Once successful, OK.com expects to award ISI a second contract to produces 2500 total units in time for the 2020 black Friday shopping rush. Major milestones in the program were also defined in the contract and are as follows

Event Date

Contract Award August 31, 2018

Project Baseline 1 Month after award

SEMP (Systems Engineering Master Plan) 2 Month after award

TEMP (Test & Evaluation Master Plan) 3 Month after award

PDR (Preliminary Design Review) 4 Month after award

CDR (Critical Design Review) 6 Month after award

System Integration Tests 7 Month after award

Full System Demonstration Tests 8 Month after award

System Installation 9 Month after award

Operator and System Administrator Training 10 Month after award

Support Operational Test 11 Month after award

Contract Test Report and all Final Documentation 12 Month after award

5 ESTIMATE AT COMPLETION

An earned value management system has been implemented with the PickPOCIT program in order to track progress to completion, and to better anticipate any potential schedule slips or financial over runs. The figure below shows the PickPOCIT program’s progress to completion at the critical design review milestone.

Issues were encountered early on with the software integration between the IMS and AOT packages, necessitating the need for use of financial reserve. Issues were also encountered with the drone subcontract, which also required reserve in order to resolve the outstanding problems and maintain schedule. Use of this reserve was implemented successfully, and the tasks were completed on schedule but slightly over budget. As a result of both of these issues, some reserve was applied to the program management and the quality assurance tasks in order to better manage the issues to resolution. However, these overruns were somewhat offset by better than expected performance in the boxing/labeling hardware and stock hardware picker tasks. Heritage hardware and processes, as well as COTS parts were leveraged to produce subsystems that exceeded expectations and came in under budget and within schedule. The table below shows detailed information on financial and schedule performance

WBS Number WBS Task Budgeted Planned Cost BCWS ($) ACWP BCWP CPI

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