Copyright 2006 John Wiley & Sons, Inc. Beni Asllani University of Tennessee at Chattanooga Project Management Operations Management - 5 th Edition Chapter 9 Roberta Russell & Bernard W. Taylor, III

Copyright 2006 John Wiley & Sons, Inc.9-2 Lecture Outline   Project Planning   Project Scheduling   Project Control   CPM/PERT   Probabilistic Activity Times   Project Crashing and Time-Cost Trade-off

Copyright 2006 John Wiley & Sons, Inc.9-3 Characteristics of Projects  A unique, one-time activity or effort  Defined end product or result, with specific performance requirements, budget, and completion date  Usually require cross-functional teams, composed of people with different skills  Often involve uncertainty and risk

Copyright 2006 John Wiley & Sons, Inc.9-4 Examples of Projects  Construction or major renovations  Creating new computer software  Starting a new business  Designing and launching a new product or model  Evaluating a merger or acquisition  Designing new equipment  Selecting and installing new equipment or software  Writing a new human resources manual

Copyright 2006 John Wiley & Sons, Inc.9-5 Project Elements  Objective  Scope  Contract requirements  Schedules  Resources: equipment, materials, people  Managing people  Control  Risk and problem analysis

Copyright 2006 John Wiley & Sons, Inc.9-6 Project Manager  Leader of project team  Responsible for satisfactory completion of project Goals accomplished Goals accomplished Completed on time Completed on time Completed within budget Completed within budget Conformance quality Conformance quality

Copyright 2006 John Wiley & Sons, Inc.9-7 Project Team Organizations  Matrix organization: each team member reports to functional manager and to project manager. Team members work part-time on the project and spend the remaining time on their regular job.  Project management organization: Each team member works full-time on the project and reports to the project manager.

Copyright 2006 John Wiley & Sons, Inc.9-8 Project Management Process  Project planning  Project scheduling  Project control

Copyright 2006 John Wiley & Sons, Inc.9-9 Project Planning  Scope statement: specifies project objectives and expected results  Statement of work: describes the project in enough detail so that suppliers and contractors can submit bids May be divided into work packages for different project tasks May be divided into work packages for different project tasks Statements of work can also be prepared for team members or company departments Statements of work can also be prepared for team members or company departments

Copyright 2006 John Wiley & Sons, Inc.9-10 Project Planning (2)  Work breakdown structure (WBS) breaks down a project into components, subcomponents, activities, and tasks breaks down a project into components, subcomponents, activities, and tasks  Responsibility assignment matrix: shows who is responsible for various tasks in a project

Copyright 2006 John Wiley & Sons, Inc.9-11 Work Breakdown Structure for Computer Order Processing System Project

Copyright 2006 John Wiley & Sons, Inc.9-12 Work Breakdown Structure Details  Lowest level component for any branch is called a work package.  A work package should be defined so that it can be accomplished by an individual, department, team, contractor, supplier  Clear criteria for completion of each work package.

Copyright 2006 John Wiley & Sons, Inc.9-13  Organizational Breakdown Structure a chart that shows which organizational units are responsible for work items a chart that shows which organizational units are responsible for work items  Responsibility Assignment Matrix shows who is responsible for work in a project shows who is responsible for work in a project

Copyright 2006 John Wiley & Sons, Inc.9-14 Project Scheduling  Steps Define activities Define activities Sequence activities Sequence activities Estimate time Estimate time Develop schedule Develop schedule  Techniques Gantt chart Gantt chart CPM CPM PERT PERT Microsoft Project Microsoft Project

Copyright 2006 John Wiley & Sons, Inc.9-15 Gantt Chart   Graph or bar chart with a bar for each project activity that shows passage of time  Provides visual display of project schedule   Slack amount of time an activity can be delayed without delaying the project

Copyright 2006 John Wiley & Sons, Inc.9-16 |||||||||| Activity Design house and obtain financing Lay foundation Order and receive materials Build house Select paint Select carpet Finish work MonthMonth Example of Gantt Chart

Copyright 2006 John Wiley & Sons, Inc.9-17 Critical Path Method (CPM)  Critical path method (CPM) - inputs Activities from work breakdown structure Activities from work breakdown structure Precedence relationships among activities Precedence relationships among activities (what activities must be completed before other activities can be started) One time estimate for each activity (how long does it take to do the activity?) One time estimate for each activity (how long does it take to do the activity?)  Use CPM when activity times can be estimated accurately

Copyright 2006 John Wiley & Sons, Inc.9-18 Critical Path Method (2)  Critical path method (CPM) – outputs Project completion time Project completion time Start and end times for each activity Start and end times for each activity Critical path: activities that must be finished on time so that the project will be completed on time Critical path: activities that must be finished on time so that the project will be completed on time

Copyright 2006 John Wiley & Sons, Inc.9-19 Project Evaluation and Review Technique (PERT)  Project evaluation and review technique (PERT) – inputs Activities from work breakdown structure Activities from work breakdown structure Precedence relationships among activities Precedence relationships among activities 3 time estimates for each activity 3 time estimates for each activity  Use PERT when activity times are hard to estimate (example: new technology)

Copyright 2006 John Wiley & Sons, Inc.9-20 Project Evaluation and Review Technique (2)  Project evaluation and review technique (PERT) – outputs Estimated start and end dates for each activity Estimated start and end dates for each activity Normal distribution for project completion date Normal distribution for project completion date Probability of finishing the project by the mean date = 50% Probability of finishing the project by the mean date = 50% Standard deviation Standard deviation Can compute probability of finishing project by the due date Can compute probability of finishing project by the due date

Copyright 2006 John Wiley & Sons, Inc.9-21 Project Control  Time management: keeping the project on schedule by shifting resources to critical activities If it is necessary to pay overtime or use a more expensive resource, then project costs will increase. If it is necessary to pay overtime or use a more expensive resource, then project costs will increase.  Cost management  Quality management

Copyright 2006 John Wiley & Sons, Inc.9-22 Project Control  Performance measurement Earned Value Analysis Earned Value Analysis a standard procedure for numerically measuring a project’s progress, forecasting its completion date and cost and measuring schedule and budget variation a standard procedure for numerically measuring a project’s progress, forecasting its completion date and cost and measuring schedule and budget variation  Communication  Enterprise project management: simultaneous management of multiple projects and required resources

Copyright 2006 John Wiley & Sons, Inc.9-23 Project Network   Activity-on-node (AON) nodes represent activities, and arrows show precedence relationships Branch Node

Copyright 2006 John Wiley & Sons, Inc.9-24 AON Network for House Building Project Start Design house and obtain financing Order and receive materials Select paint Select carpet Lay foundations Build house Finish work

Copyright 2006 John Wiley & Sons, Inc.9-25 Paths  A path is a route through a network that begins at the first activity and ends at the last activity.  The length of a path is the sum of times for the activities on the path.  The critical path is the longest path in a network (path with highest length) There may be more than one critical path. There may be more than one critical path.  In PERT and CPM, the greatest amount of management attention is focused on activities on the critical path.

Copyright 2006 John Wiley & Sons, Inc Start Critical Path  Critical path Longest path through a network Longest path through a network Minimum project completion time Minimum project completion time A: = 9 months B: = 8 months C: = 8 months D: = 7 months

Copyright 2006 John Wiley & Sons, Inc.9-27 |||||||||| Activity Design house and obtain financing Lay foundation Order and receive materials Build house Select paint Select carpet Finish work MonthMonth Early Finish Schedule

Copyright 2006 John Wiley & Sons, Inc.9-28 Node Configuration Activity number Activity duration Earliest start Latest start Earliest finish Latest finish

Copyright 2006 John Wiley & Sons, Inc.9-29 Forward Pass   Start at the beginning of CPM/PERT network to determine the earliest activity times   Earliest Start Time (ES) earliest time an activity can start ES = maximum EF of immediate predecessors   Earliest finish time (EF) earliest time an activity can finish earliest start time plus activity time EF= ES + t

Copyright 2006 John Wiley & Sons, Inc.9-30 Earliest Activity Start and Finish Times Start Design house and obtain financing Select paint Lay foundations Select carpet Build house Finish work Order and receive materials

Copyright 2006 John Wiley & Sons, Inc.9-31 Backward Pass   Determines latest activity times by starting at the end of CPM/PERT network and working forward   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 LS = minimum LS of immediate predecessors

Copyright 2006 John Wiley & Sons, Inc.9-32 Latest Activity Start and Finish Times Start Design house and obtain financing Select paint Lay foundations Select carpet Build house Finish work Order and receive materials

Copyright 2006 John Wiley & Sons, Inc.9-33 Slack  Slack = EF – ES = LF – LS  Activities on the critical path have zero slack.  Non-critical activities have positive slack.

Copyright 2006 John Wiley & Sons, Inc.9-34 * Critical Path *7* *4* *2* *1*1 Slack S EF LF ES LS Activity Activity Slack

Copyright 2006 John Wiley & Sons, Inc.9-35 Schedules  Early start schedule: each activity is scheduled to start on its ES date.  Late start schedule: each activity is scheduled to start on LS date.  Scheduling for non-critical activities may depend on when resources are needed for other projects.