(time)(time) PP (time)(time) PP (time)(time) PP

(1)

Project Management Project Management

Chapter 9 Chapter 9

Beni Asllani Beni Asllani University of Tennessee at Chattanooga University of Tennessee at Chattanooga

Operations Management - 6

^th

Edition Operations Management - 6

^th

Edition

Roberta Russell & Bernard W. Taylor, III

(2)

Lecture Outline Lecture Outline

Project Planning

Project Scheduling

Project Control

CPM/PERT

Probabilistic Activity Times

Microsoft Project

Project Crashing and Time-

Cost Trade-off

(3)

Project Management Process

Project

unique, one-time operational activity or effort

(4)

Project Management Process Project Management Process (cont.)

(cont.)

(5)

Project Management Process Project Management Process (cont.)

(cont.)

(6)

Project Elements Project Elements

Objective Objective

Scope Scope

Contract requirements Contract requirements

Schedules Schedules

Resources Resources

Personnel Personnel

Control Control

Risk and problem analysis Risk and problem analysis

(7)

Project Team and Project Manager

Project team Project team

made up of individuals from various areas made up of individuals from various areas and departments within a company

and departments within a company

and departments within a company and departments within a company

Matrix organization Matrix organization

a team structure with members from a team structure with members from functional areas, depending on skills functional areas, depending on skills required

required

Project manager Project manager

most important member of project team most important member of project team

(8)

Scope Statement and Work Scope Statement and Work Breakdown Structure

Breakdown Structure

Scope statement Scope statement

a document that provides an a document that provides an

understanding, justification, and expected understanding, justification, and expected understanding, justification, and expected understanding, justification, and expected result of a project

result of a project

Statement of work Statement of work

written description of objectives of a written description of objectives of a project

project

Work breakdown structure (WBS) Work breakdown structure (WBS)

breaks down a project into components, breaks down a project into components, subcomponents, activities, and tasks

subcomponents, activities, and tasks

(9)

Work Breakdown Structure for Computer Order Processing System Project

Work Breakdown Structure for Computer Order

Processing System Project

(10)

Organizational Organizational Breakdown

Breakdown

Structure (OBS) Structure (OBS)

a chart that a chart that shows which shows which

Responsibility Assignment Matrix Responsibility Assignment Matrix

shows which shows which organizational organizational units are

units are

responsible for responsible for work items

work items

Responsibility Responsibility Assignment Assignment Matrix (RAM) Matrix (RAM)

shows who is shows who is responsible for responsible for work in a

work in a

project

(11)

Global and Diversity Issues in Global and Diversity Issues in Project Management

Project Management

In existing global business environment, In existing global business environment, project teams are formed from different project teams are formed from different genders, cultures, ethnicities, etc.

genders, cultures, ethnicities, etc.

In global projects diversity among team In global projects diversity among team members can add an extra dimension to members can add an extra dimension to project planning

project planning

Cultural research and communication are Cultural research and communication are

important elements in planning process

(12)

Project Scheduling

Steps Steps

Define activities Define activities Sequence

Sequence

Techniques Techniques

Gantt chart Gantt chart CPM/PERT CPM/PERT

Sequence Sequence activities activities

Estimate time Estimate time

Develop schedule Develop schedule

CPM/PERT CPM/PERT

Microsoft Project Microsoft Project

(13)

Gantt Chart

Graph or bar chart with a bar for each project activity that shows passage of time

time

Provides visual display of project schedule

Slack

amount of time an activity can be delayed

without delaying the project

(14)

Design house and obtain financing

Lay foundation Order and receive materials

0

0 22 44 66 88 1010

Month Month

Example of Gantt Chart Example of Gantt Chart

receive materials Build house

Select paint

Select carpet

Finish work

Month Month 1

1 33 55 77 99

(15)

Project Control Project Control

Time management Time management

Cost management Cost management

Quality management Quality management

Performance management Performance management

Earned Value Analysis Earned Value Analysis

a standard procedure for numerically measuring a a standard procedure for numerically measuring a project’s progress, forecasting its completion date project’s progress, forecasting its completion date and cost and measuring schedule and budget

and cost and measuring schedule and budget variation

variation

Communication Communication

Enterprise project management Enterprise project management

(16)

CPM/PERT CPM/PERT

Critical Path Method (CPM) Critical Path Method (CPM)

DuPont & Remington DuPont & Remington- -Rand (1956) Rand (1956)

Deterministic task times Deterministic task times

Activity Activity- -on on- -node network construction node network construction

Project Evaluation and Review Technique Project Evaluation and Review Technique (PERT)

(PERT)

US Navy, Booz, Allen & Hamilton US Navy, Booz, Allen & Hamilton

Multiple task time estimates; probabilistic Multiple task time estimates; probabilistic

Activity Activity- -on on- -arrow network construction arrow network construction

(17)

Project Network Project Network

Activity-on-node (AON)

nodes represent

activities, and arrows show precedence relationships

Node Node

Activity-on-arrow (AOA)

arrows represent

activities and nodes are events for points in time

Event

completion or beginning of an activity in a project

Dummy

two or more activities cannot share same start and end nodes

1 2 3

Branch

(18)

AOA Project Network for AOA Project Network for a House

a House

2

2 00 Lay

3

Lay

foundation foundation

Dummy Dummy

Finish Finish Build

Build 3

3

2

2 00 1 1

3 3 1

1 11

1

1 2 4 6

1

7

5

Design house Design house and obtain and obtain financing financing

Order and Order and receive receive materials materials

Finish Finish work work

Select Select carpet carpet Select

Select paint paint

Build Build house house

(19)

Concurrent Activities Concurrent Activities

2 3

Lay foundation

Lay foundation 3

Dummy Dummy Lay

Lay

foundation foundation

2 2 0 0

Order material Order material

(a)

(a) Incorrect precedence Incorrect precedence relationship

relationship

(b)

(b) Correct precedence Correct precedence relationship

relationship

4 2

Order material Order material

1

(20)

AON Network for House Building Project

2 2

4 3

7

Lay foundations Build house

Finish work

1 3

3 1 5

1 6 1

7 1 Start

Design house and obtain

financing

Order and receive

materials Select paint

Select carpet

(21)

1 3

2 2

4 3

3 6

7 1 Start

Critical Path

3 1 5

1 6 1

Critical path Critical path

Longest path Longest path

through a network through a network

Minimum project Minimum project completion time completion time

A:

A: 11--22--44--77

3 + 2 + 3 + 1 = 9 months 3 + 2 + 3 + 1 = 9 months B:

B: 11--22--55--66--77

3 + 2 + 1 + 1 + 1 = 8 months 3 + 2 + 1 + 1 + 1 = 8 months C:

C: 11--33--44--77

3 + 1 + 3 + 1 = 8 months 3 + 1 + 3 + 1 = 8 months D:

D: 11--33--55--66--77

3 + 1 + 1 + 1 + 1 = 7 months 3 + 1 + 1 + 1 + 1 = 7 months

(22)

Activity Start Times

2 2

4 3

7

Start at 5 months

Finish at 9 months

1 3

3 1 5

1 6 1

7

Start

1

Start at 3 months Start at 6 months

Finish

(23)

Node Configuration Node Configuration

Activity number Earliest start

Earliest finish

1 0 3

3 0 3

Activity duration Latest start

Latest finish

(24)

Activity Scheduling Activity Scheduling

Earliest start time (ES)

earliest time an activity can start

ES = maximum EF of immediate predecessors

Forward pass

starts at beginning of CPM/PERT network to determine earliest activity times

Earliest finish time (EF)

earliest time an activity can finish

earliest start time plus activity time

EF= ES + t

(25)

Earliest Activity Start and Earliest Activity Start and Finish Times

Finish Times

1 0 3

2 3 5

2 4 5 8

3

Start

Lay foundations

Build house

1 0 3

1 3 3 4

1 5 5 6

1 6 6 7

1 7 8 9

1

financing

Select pain

Select carpet

Finish work

Order and receive materials

(26)

Activity Scheduling (cont.) Activity Scheduling (cont.)

Latest start time (LS)

Latest time an activity can start without delaying critical path time

LS= LF - t

Latest finish time (LF)

latest time an activity can be completed without delaying critical path time

LF = minimum LS of immediate predecessors

Backward pass

Determines latest activity times by starting at the

end of CPM/PERT network and working forward

(27)

Latest Activity Start and Latest Activity Start and Finish Times

Finish Times

1 0 3

2 3 5

2 3 5 4 5 8

3 5 8

7 8 9

Start

Lay foundations

Build house

1 0 3

3 3 4

1 4 5 5 5 6

1 6 7

6 6 7

1 7 8

7 8 9

1 8 9

financing

Select pain

Select carpet

Finish work

Order and receive materials

(28)

0 0 0 0 5

5 5 5 5

5 5 5 3

3 3 3 3

3 3 3

*2

0 0 0 0 3

3 3 3 3

3 3 3 0

0 0 0 0

0 0 0

*1

Slack S Slack S EF

EF LF

LF ES

ES LS

LS Activity

Activity

Activity Slack Activity Slack

* Critical Path

0 0 0 0 9

9 9 9 9

9 9 9 8

8 8 8 8

8 8 8

*7

1 1 1 1 7

7 7 7 8

8 8 8 6

6 6 6 7

7 7 7 6

6 6 6

1 1 1 1 6

6 6 6 7

7 7 7 5

5 5 5 6

6 6 6 5

5 5 5

0 0 0 0 8

8 8 8 8

8 8 8 5

5 5 5 5

5 5 5

*4

1 1 1 1 4

4 4 4 5

5 5 5 3

3 3 3 4

4 4 4 3

3 3 3

0 0 0 0 5

5 5 5 5

5 5 5 3

3 3 3 3

3 3 3

*2

(29)

Probabilistic Time Estimates

Beta distribution

a probability distribution traditionally used in CPM/PERT

Mean (expected time):

Mean (expected time): tt = = a a + 4 + 4m m + + b b

a

a = optimistic estimate = optimistic estimate m

m = most likely time estimate = most likely time estimate b

b = pessimistic time estimate = pessimistic time estimate where

where

Mean (expected time):

Mean (expected time): tt = = a a + 4 + 4m m + + b b 6

6 Variance:

Variance: σ σ

²²

= = b b -- a a

6 6

2

(30)

Examples of Beta Distributions Examples of Beta Distributions

PP(time)(time)

a

a m m

tt b b

a

a m m tt b b

PP(time)(time)

Time Time

m m = = tt

Time Time

b b a

a

(31)

Project Network with Probabilistic Time Estimates: Example

Start

2

Finish

1

6,8,10

4

2,4,12

8

3,7,11

10 1,4,7 Equipment

installation

System development

Equipment testing and modification

Manual

System training

Final debugging

Start

2

Finish

3,6,9

3

1,3,5

5

2,3,4

6

3,4,5

7

2,2,2

3,7,11

9

2,4,6

1,4,7

11 1,10,13 Position

recruiting

Manual testing

Job Training

Orientation

System testing

System changeover

(32)

Activity Time Estimates Activity Time Estimates

1 1 6 6 8 8 10 10 8 8 0.44 0.44

2 2 3 3 6 6 9 9 6 6 1.00 1.00

TIME ESTIMATES (WKS)

TIME ESTIMATES (WKS) MEAN TIMEMEAN TIME VARIANCEVARIANCE ACTIVITY

ACTIVITY

a a m m b b tt б б

²²

2 2 3 3 6 6 9 9 6 6 1.00 1.00

3 3 1 1 3 3 5 5 3 3 0.44 0.44

4 4 2 2 4 4 12 12 5 5 2.78 2.78

5 5 2 2 3 3 4 4 3 3 0.11 0.11

6 6 3 3 4 4 5 5 4 4 0.11 0.11

7 7 2 2 2 2 2 2 2 2 0.00 0.00

8 8 3 3 7 7 11 11 7 7 1.78 1.78

9 9 2 2 4 4 6 6 4 4 0.44 0.44

10 10 1 1 4 4 7 7 4 4 1.00 1.00

11 11 1 1 10 10 13 13 9 9 4.00 4.00

(33)

Activity Early, Late Times, Activity Early, Late Times, and Slack

and Slack

ACTIVITY

ACTIVITY tt б б

²²

ES ES EF EF LS LS LF LF S S

1 1 8 8 0.44 0.44 0 0 8 8 1 1 9 9 1 1 2

2 6 6 1.00 1.00 0 0 6 6 0 0 6 6 0 0 3

3 3 3 0.44 0.44 0 0 3 3 2 2 5 5 2 2 4

4 5 5 2.78 2.78 8 8 13 13 16 16 21 21 8 8

4 4 5 5 2.78 2.78 8 8 13 13 16 16 21 21 8 8 5

5 3 3 0.11 0.11 6 6 9 9 6 6 9 9 0 0 6

6 4 4 0.11 0.11 3 3 7 7 5 5 9 9 2 2 7

7 2 2 0.00 0.00 3 3 5 5 14 14 16 16 11 11 8

8 7 7 1.78 1.78 9 9 16 16 9 9 16 16 0 0 9

9 4 4 0.44 0.44 9 9 13 13 12 12 16 16 3 3 10

10 4 4 1.00 1.00 13 13 17 17 21 21 25 25 8 8 11

11 9 9 4.00 4.00 16 16 25 25 16 16 25 25 0 0

(34)

Start Finish

1 0

⁸

8 1 9

4 8

¹³

5 16 21

10

13

¹⁷

1 0 3 2 0

⁶

8 9

¹⁶

7 9 16

Critical Path

Earliest, Latest, and Slack Earliest, Latest, and Slack

3 0

³

3 2 5

6 3

⁷

4 5 9 7 3

⁵

2 14 16

9 9

¹³

4 12 16 6 0 6

5 6

⁹

3 6 9

7 9 16

11

16

₂₅

9 16 25

(35)

σ

²

= б

^{2 +}

б

²

+ б

²

+ б

²

Total project variance

σ

²

= б

₂^{2 +}

б

₅²

+ б

₈²

+ б

₁₁²

σ = 1.00 + 0.11 + 1.78 + 4.00

= 6.89 weeks

(36)

(37)

Probabilistic Network Analysis Probabilistic Network Analysis

Determine probability that project is Determine probability that project is completed within specified time

completed within specified time Z

Z = = x x -- µ µ σ σ

where where

µ

µ = = tt _p _p = project mean time = project mean time

σ

σ = = project standard deviation project standard deviation x

x = = proposed project time proposed project time Z

Z = = number of standard deviations number of standard deviations x x is from mean

is from mean Z

Z = = σ σ

(38)

Normal Distribution of Normal Distribution of Project Time

Project Time

Probability Probability

µ

µ = = tt

_p_p

x x Time Time

Z σ

(39)

Southern Textile Example Southern Textile Example

What is the probability that the project is completed What is the probability that the project is completed within 30 weeks?

within 30 weeks?

σ

²²

= 6.89 weeks = 6.89 weeks Z Z = = x x -- µ µ σ σ

PP((xx ≤≤ 30 weeks)30 weeks)

σ

²²

= 6.89 weeks = 6.89 weeks σ

σ ^{= 6.89} ^{= 6.89} σ

σ = 2.62 weeks = 2.62 weeks

Z Z = =

=

= 1.91

= 1.91 σ σ 30

30 -- 25 25 2.62 2.62

From Table A.1, (appendix A) a

From Table A.1, (appendix A) a Z Z score of 1.91 corresponds to a score of 1.91 corresponds to a probability of 0.4719. Thus

probability of 0.4719. Thus P P(30) = 0.4719 + 0.5000 = 0.9719 (30) = 0.4719 + 0.5000 = 0.9719

µ

µ= 25= 25 xx = 30= 30 Time (weeks)Time (weeks)

(40)

Southern Textile Example Southern Textile Example

P

P((xx ≤≤ 22 weeks)22 weeks)

What is the probability that the project is completed What is the probability that the project is completed within 22 weeks?

within 22 weeks?

σ

²²

= 6.89 weeks = 6.89 weeks σ

σ = 6.89 = 6.89

Z Z = =

=

= x

x -- µ µ σ σ 22

22 -- 25 25

µ

µ = 25= 25 Time Time (weeks) (weeks) x

x = 22= 22

σ

σ = 6.89 = 6.89 σ

σ = 2.62 weeks = 2.62 weeks

=

= --1.14 1.14 22

22 -- 25 25 2.62 2.62

From Table A.1 (appendix A) a

From Table A.1 (appendix A) a Z Z score of score of --1.14 corresponds to a 1.14 corresponds to a probability of 0.3729. Thus

probability of 0.3729. Thus P P(22) = 0.5000 (22) = 0.5000 -- 0.3729 = 0.1271 0.3729 = 0.1271

(41)

Microsoft Project Microsoft Project

Popular software package for project Popular software package for project management and CPM/PERT analysis management and CPM/PERT analysis

Relatively easy to use Relatively easy to use

(42)

Microsoft Project (cont.)

(43)

Microsoft Project (cont.) Microsoft Project (cont.)

(44)

Microsoft Project (cont.)

(45)

Microsoft Project (cont.) Microsoft Project (cont.)

(46)

Microsoft Project (cont.)

(47)

Microsoft Project (cont.) Microsoft Project (cont.)

(48)

PERT Analysis with PERT Analysis with Microsoft Project

Microsoft Project

(49)

PERT Analysis with PERT Analysis with

Microsoft Project (cont.) Microsoft Project (cont.)

(50)

PERT Analysis with PERT Analysis with

Microsoft Project (cont.)

(51)

Project Crashing

Crashing

reducing project time by expending additional resources

Crash time

an amount of time an activity is reduced

Crash cost

cost of reducing activity time

Goal Goal

reduce project duration at minimum cost

(52)

2 8

4

12

Project Network for Building a House

1

12

8

3 4 5

4 6 4

7

4

(53)

Normal Time and Cost Normal Time and Cost vs. Crash Time and Cost vs. Crash Time and Cost

$7,000 –

$6,000 –

$5,000 – Crashed activity

Crash cost

Slope = crash cost per week

$4,000 –

$3,000 –

$2,000 –

$1,000 –

– | | | | | | |

0 2 4 6 8 10 12 14 Weeks

Normal activity

Normal time Normal cost

Crash time

Slope = crash cost per week

(54)

Project Crashing: Example Project Crashing: Example

TOTAL TOTAL NORMAL

NORMAL CRASHCRASH ALLOWABLEALLOWABLE CRASHCRASH TIME

TIME TIMETIME NORMALNORMAL CRASHCRASH CRASH TIMECRASH TIME COST PERCOST PER ACTIVITY

ACTIVITY (WEEKS)(WEEKS) (WEEKS)(WEEKS) COSTCOST COSTCOST (WEEKS)(WEEKS) WEEKWEEK

1 1 12 12 7 7 $3,000 $3,000 $5,000 $5,000 5 5 $400 $400 1

1 12 12 7 7 $3,000 $3,000 $5,000 $5,000 5 5 $400 $400 2

2 8 8 5 5 2,000 2,000 3,500 3,500 3 3 500 500 3

3 4 4 3 3 4,000 4,000 7,000 7,000 1 1 3,000 3,000 4

4 12 12 9 9 50,000 50,000 71,000 71,000 3 3 7,000 7,000 5

5 4 4 1 1 500 500 1,100 1,100 3 3 200 200

6 6 4 4 1 1 500 500 1,100 1,100 3 3 200 200

7 7 4 4 3 3 15,000 15,000 22,000 22,000 1 1 7,000 7,000

$75,000

$75,000 $110,700 $110,700

(55)

1 12

2 8

3

4 5

4

6 4

7 4

$400

$500

$3000

$7000

$200

$200 12 $700

4

Project Duration:

36 weeks

FROM …

$500 $7000

1 7

2 8

3

4 5

4

6 4

7 4

$400

$500

$3000

$7000

$200

$200 12 $700

4

Project Duration:

31 weeks Additional Cost:

$2000

TO…

(56)

Crashing costs increase as project Crashing costs increase as project duration decreases

duration decreases

Indirect costs increase as project Indirect costs increase as project

Time

Time--Cost Relationship Cost Relationship

Indirect costs increase as project Indirect costs increase as project duration increases

duration increases

Reduce project length as long as Reduce project length as long as

crashing costs are less than indirect crashing costs are less than indirect costs

costs

(57)

Time

Time--Cost Tradeoff Cost Tradeoff

Cost ($)Cost ($)

Minimum cost = optimal project time Minimum cost = optimal project time

Total project cost Total project cost

Indirect cost Indirect cost

Cost ($)Cost ($)

Project duration Project duration Crashing

Crashing TimeTime

Direct cost Direct cost

(58)

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