5.8 Project Management Chapter 37 HL - Only

Project Management Project Project Management A specific and temporary activity with a start and end date, clear goals, defined responsibilities and a budget. Project Management Using modern management techniques to carry out and complete a project and meet quality, time, and cost targets.

Types of Business Projects Setting up a new IT system Relocating company operations Installing machinery Developing and launching a new product Building a factory

What is project success? A successful project is planned and managed, costs determined, time allocated, problems dealt with, and the project concluded.

Consequence of project failure Financial penalties to be paid to customers Bad publicity for your company Loss of future business

Critical Path Analysis (CPA) Critical Path Analysis is a planning technique that identifies all tasks in a project, puts them in sequence and identifies the critical path for completion.

The Network Diagram The network diagram shows the logical sequence of activities and their dependencies – which identifies the critical path Critical path The sequence of activities that MUST be completed ON TIME for the whole project to be completed by the project end date.

The Process 1. Identify the project (build a factory) 2. Put the tasks in sequence and draw a network diagram 3. Add the time for each activity 4. Identify the critical path (those activities that must be finished on time for the project to be completed on time) 5. Use the network diagram as a tool to when problems occur

Constructing a CPA Install a new piece of equipment in 12 days A. Strip out old machine (3 days) B. Order new machine & receive (1 day) C. Prepare site for new machine (2 days) D. Assemble new machine (2 days) E. Install new machine (7 days) Critical Path Steps 1. Identify project 2. Put tasks in sequence 3. Add time 4. Identify critical path 5. Use a project guide Circles (node) indicates the end of each activity Arrows indicate activity B Order D Assemble E Install A Strip out C Prepare

Constructing a CPA Install a new piece of equipment in 12 days A. Strip out old machine (3 days) B. Order new machine & receive (1 day) C. Prepare site for new machine (2 days) D. Assemble new machine (2 days) E. Install new machine (7 days) Critical Path Steps 1. Identify project 2. Put tasks in sequence 3. Add time 4. Identify critical path 5. Use a project guide Circles (node) indicates the end of each activity Arrows indicate activity B Order D Assemble 1 day 2 days E Install A Strip out C Prepare 12 Days 3 days 2 days 7 days

Constructing a CPA Install a new piece of equipment in 12 days || A. Strip out old machine (3 days) B. Order new machine & receive (1 day) C. Prepare site for new machine (2 days) D. Assemble new machine (2 days) E. Install new machine (7 days) Critical Path Steps 1. Identify project 2. Put tasks in sequence 3. Add time 4. Identify critical path 5. Use a project guide || Critical Path Activities – these tasks must be completed ON TIME in order for the project to be completed on time B Order D Assemble 1 day 2 days These tasks can be completed simultaneously E Install A Strip out C Prepare || || || 12 Days 3 days 2 days 7 days

Constructing a CPA Install a new piece of equipment in 12 days A. Strip out old machine (3 days) B. Order new machine & receive (1 day) C. Prepare site for new machine (2 days) D. Assemble new machine (2 days) E. Install new machine (7 days) Critical Path Steps 1. Identify project 2. Put tasks in sequence 3. Add time 4. Identify critical path 5. Use a project guide Non-critical activities may have spare time – FLOAT TIME 3 Days B Order D Assemble Non-critical activities 1 day 2 days E Install A Strip out C Prepare Critical Path || || || 12 Days 3 days 2 days 7 days 5 Days

Calculating Critical Path Earliest Start Time (EST) Latest Finish Time (LFT) EST # LFT Earliest start time is the earliest time an activity can begin. It is calculated by adding the time in sequence taking into account the previous activity time. (Work from Left to Right) 1 B Order D Assemble 2 1 day 3 2 days 12 Days 3 12 5 E Install 5 1 3 C Prepare 4 A Strip out || || || 3 5 7 days 12 3 days 2 days Activity E cannot start before day 5 because C will not be finished.

Calculating Critical Path Earliest Start Time (EST) Latest Finish Time (LFT) EST # LFT Latest Finish Time is the latest time an activity can finish without delaying the whole project. (Work from Right to Left) The latest finish time for B is 3 days to allow 2 days for D and remain on time. 1 B Order 2 D Assemble 1 day 3 2 days 12 Days 3 12 5 E Install 5 1 3 C Prepare 4 A Strip out || || || 3 5 7 days 12 3 days 2 days Activity C must be complete by day 5 or the whole project will be delayed. NOTICE: EST & LFT are equal on critical path. Project duration is their total.

Calculating Float Time Total Float – time an activity can be delayed without delaying the whole project. Free Float – time an activity can be delayed without the delaying the start of the next activities. Total Float = LFT – Duration – EST How long can task D be delayed without delaying the whole project? LFT of D =5 Duration of D=2 EST of D = 1 5-2-1 = 2 Total Float 1 B Order 2 D Assemble 1 day 3 2 days 12 Days 3 12 5 E Install 5 1 3 C Prepare 4 A Strip out || || || 3 5 7 days 12 3 days 2 days Activity D can be delayed for 2 days without delaying the whole project.

Calculating Float Time Total Float – time an activity can be delayed without delaying the whole project. Free Float – time an activity can be delayed without the delaying the start of the next activities. Free Float = EST (next activity) – Duration – EST (this activity) How long can task D be delayed before delaying the task E? EST of E =5 Duration of D=2 EST of D = 1 5-2-1 = 2 Free Float 1 B Order 2 D Assemble 1 day 3 2 days 12 Days 3 12 5 E Install 5 1 3 C Prepare 4 A Strip out || || || 3 5 7 days 12 3 days 2 days Activity D can be delayed for 2 days without delaying task E.

Advantages of using networks Produces accurate delivery dates Calculating EST allows for the ordering of equipment and supplies using JIT strategies, maximizing working capital, and cash flows Calculating LFT allows the manager to monitor completion times to keep the project on-time Critical path information is useful for making decisions to keep the project on-time Critical path diagrams can be tracked using computer software Putting activities in sequential order forces managers to plan the project carefully Critical path planning can identify tasks in a project that can be done simultaneously – saving time and resources

Evaluation of CPA CPA cannot guarantee a successful project Requires skilled and motivated staff to implement Staff will feel committed if consulted during the CPA and planning New projects may require a considerable amount of “guesswork” because there is little prior knowledge