Evergreen Foothills Winery I

Evergreen Foothills Winery IRonald E. DavisSan Jose State UniversityCase No. 28

BackgroundEvergreen Foothills Winery I is a family-owned business by John Rosatti. It is a wine business for the family for 10 years, and has now got the idea to make a limited amount of his wine available to the public by expanding his operation to a family run business.

Johns daughter Dana, who has recently aced her retail marketing course, points out that going public with wines is no simple matter. Since Dana is much more adept at computer tools than her father is, John asks her to work up a plan and a schedule for getting Evergreen Foothills to its grand opening day as soon as possible.

Part A. Questions1. Compute the means and variances for the activities given, using the PERT approximation formulas. (if your software has the capability, let the computer do this.)

Part A. No. 1. Solution

ActivityDescriptionOptimistic EstimateMost Likely EstimatePessimistic EstimateACountry permit application90145182BState Permits456075CFederal Permits306090DBuilding Permits90180210EBuilding Tasting Room506076FBuild cellar150180210GInstall Processing Equipment506076HFirst crush - white202122IFirst crush - red202122JCellaring whites506070KCellaring reds210240270LBottling Whites678MBottling Reds678NAging whites180210240OAging reds370415460PPromotional Campaign8090112QGrand Opening234

StartABCDEFGHIKMOJLNPFinishQ

Formulas

ActivityDescriptionMean ()VarianceACountry permit application142235.1111111BState Permits6025CFederal Permits60100DBuilding Permits170400EBuilding Tasting Room6118.77777778FBuild cellar180100GInstall Processing Equipment6118.77777778HFirst crush - white210.111111111IFirst crush - red210.111111111JCellaring whites6011.11111111KCellaring reds240100LBottling Whites70.111111111MBottling Reds70.111111111NAging whites210100OAging reds415225PPromotional Campaign9228.44444444QGrand Opening30.111111111

Part A. Questions2. Construct the PERT network and find the critical path(s), using mean durations. Assuming that the critical path will be the longest in actuality, what is the expected time to grand opening (project completion)? What is the standard deviation for project completion time? (Hint: Use the critical path with longer variance if there is a tie) (4 unknowns)

Part A. No. 2. Solutions

Mean duration (estimated duration)=o+m+p 3

Critical Path is the longest path through the project network

ActivityESDurationEFLSSlackLFOn Critical Path?StartA013913900139YesB139601991390199YesC139601991390199YesD1991603591990359YesE3596242112438841305NoF3591805393590539YesG539626015390601YesH601216226010622YesI622216436220643YesJ62260682934312994NoK6432408836430883YesL68276899943121001NoM88378908830890YesN68921089910013121211NoO890415130589001305YesP8999499312113121305NoQ130531308130501308Yes

ActivityDescriptionVarianceVariances of Critical PathsACountry permit application235.1111111235.1111235.1111BState Permits2525CFederal Permits100100DBuilding Permits400400400EBuilding Tasting Room18.77777778FBuild cellar100100100GInstall Processing Equipment18.7777777818.7777818.77778HFirst crush - white0.1111111110.1111110.111111IFirst crush - red0.1111111110.1111110.111111JCellaring whites11.11111111KCellaring reds100100100LBottling Whites0.111111111MBottling Reds0.1111111110.1111110.111111NAging whites100OAging reds225225225PPromotional Campaign28.44444444QGrand Opening0.1111111110.1111110.1111111104.3331179.333

PathLength (Project Duration)VarianceSTART-A-B-D-F-G-H-I-K-M-O-Q-FINISH1308 days1104.33START-A-C-D-F-G-H-I-K-M-O-Q-FINISH1308 days1179.33

Thus, the Critical Path is: START-A-C-D-F-G-H-I-K-M-O-Q-FINISH

StartABCDEFGHIKMOJLNPFinishQ

Standard deviation for project completion = time ( p - o ) 6

Standard deviation is just the square root of variance.

Thus,

Standard deviation= square root of 1179.33

= 34.34 days

Part A. Questions3.Use the normal single-path approximation to determine the 1%, 5%, 10%, 25%, 50%, 75%, 90%, 95%, and 99% fractiles for project completion. What is the estimated probability of completion within 1,350 days?

To get 1%

Find 1% Z to the table, then compute the unknownEg. .20= 1,350 n 34.34

Part A. No. 3. Solutions

Z= Due date Expected date of completion Standard deviation

Z= 1,350 days 1,308 days 34.34 daysZ= 1.22Thus, tracing the Z=1.22 value on the Table for Areas under the Standard Normal Curve, we find out that probability of the project being completed in 1,350 days is 88.88%.

Part A. Questions4. Suppose that 15 days are added to each of the times for the federal permits activity. a. Find the new critical path(s). Compare this result to the one you found in Question 1.

b. Determine the new probability for completion within 1,350 days. (Hint: The variances do not change. Only the mean time for federal permits changes.)

Part A. No. 4. Solutions

ActivityDescriptionESDurationEFLSSlackLFOn Critical Path?StartACounty permit application013913900139YesBState permits1396019915415214NoCFederal permits139752141390214YesDBuilding permits2141603742140374YesEBuild tasting room3746243612588841320NoFBuild cellar3741805543740554YesGInstall processing equipment554626165540616YesHFirst crush--white616216376160637YesIFirst crush--red637216586370658YesJCellaring whites637606979493121009NoKCellaring reds6582408986580898YesLBottling whites697770410093121016NoMBottling reds89879058980905YesNAging whites70421091410163121226NoOAging reds905415132090501320YesPPromotional Campaign91494100812263121320NoQGrand opening132031323132001323Yes

New Critical PathLength (Project Duration)VarianceSTART-A-C-D-F-G-H-I-K-M-O-Q-FINISH1308 days1179.33

In contrast to the result in Question 1, there is only 1 path in here, Critical Path is: START-A-C-D-F-G-H-I-K-M-O-Q-FINISH, still the same Critical Path.

Z= Due date Expected date of completion Standard deviation

Z= 1,350 days 1,323 days 34.34 daysZ= 0.78Thus, tracing the Z=0.78 value on the Table for Areas under the Standard Normal Curve, we find out that probability of the project being completed in 1,350 days is 78.23%.

Part A. Questions5. Suppose that Evergreen Foothills Winery can open before its red wines are ready. Eliminate all red wine activities and, using the original times, make all necessary changes to the project activity logic. The find the new critical path(s) and the new expected project completion time.

Part A. No. 5. Solutions

ActivityESDurationEFLSSlackLFOn Critical Path?StartACounty permit application013913900139YesBState permits1396019915415214NoCFederal permits139752141390214YesDBuilding permits2141603742140374YesEBuild tasting room374624369465721008NoFBuild cellar3741805543740554YesGInstall processing equipment554626165540616YesHFirst crush--white616216376160637YesJCellaring whites637606976370697YesLBottling whites69777046970704YesNAging whites7042109147040914YesPPromotional Campaign91494100891401008YesQGrand opening100831011100801011Yes

New Critical PathNew expected project completion timeSTART-A-C-D-F-G-H-J-L-N-P-Q-FINISH1,011 days

StartABCDEFGHJLNPFinishQ