Chapter 9 Project Management

Copyright 2011 John Wiley & Sons, Inc. Lecture Outline Project Planning Project Scheduling Project Control CPM/PERT Probabilistic Activity Times Microsoft Project Project Crashing and Time-Cost Trade-off Copyright 2011 John Wiley & Sons, Inc.

Project Management Process unique, one-time operational activity or effort Copyright 2011 John Wiley & Sons, Inc.

Project Management Process Copyright 2011 John Wiley & Sons, Inc.

Project Management Process Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Project Elements Objective Scope Contract requirements Schedules Resources Personnel Control Risk and problem analysis Copyright 2011 John Wiley & Sons, Inc.

Project Team and Project Manager made up of individuals from various areas and departments within a company Matrix organization a team structure with members from functional areas, depending on skills required Project manager most important member of project team Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Scope Statement Scope statement a document that provides an understanding, justification, and expected result of a project Statement of work written description of objectives of a project Copyright 2011 John Wiley & Sons, Inc.

Work Breakdown Structure Work breakdown structure (WBS) Breaks a project into components, subcomponents, activities, and tasks Copyright 2011 John Wiley & Sons, Inc.

Work Breakdown Structure for Computer Order Processing System Project Copyright 2011 John Wiley & Sons, Inc.

Responsibility Assignment Matrix Organizational Breakdown Structure (OBS) a chart that shows which organizational units are responsible for work items Responsibility Assignment Matrix (RAM) shows who is responsible for work in a project Copyright 2011 John Wiley & Sons, Inc.

Responsibility Assignment Matrix Copyright 2011 John Wiley & Sons, Inc.

Global and Diversity Issues in Project Management Global project teams are formed from different genders, cultures, ethnicities, etc. Diversity among team members can add an extra dimension to project planning Cultural research and communication are important elements in the planning process Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Project Scheduling Steps Define activities Sequence activities Estimate time Develop schedule Techniques Gantt chart CPM/PERT Software Microsoft Project Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Gantt Chart Graph or bar chart Bars represent the time for each task Bars also indicate status of tasks Provides visual display of project schedule Slack amount of time an activity can be delayed without delaying the project Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Example of Gantt Chart | | | | | Activity Design house and obtain financing Lay foundation Order and receive materials Build house Select paint Select carpet Finish work 0 2 4 6 8 10 Month 1 3 5 7 9 Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Project Control Time management Cost management Performance management Earned Value Analysis – standard procedure to numerically measure a project’s progress forecast its completion date and cost measure schedule and budget variation Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Project Control Quality management Communication Enterprise project management Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. CPM/PERT Critical Path Method (CPM) DuPont & Remington-Rand Deterministic task times Activity-on-node network construction Project Evaluation and Review Technique (PERT) US Navy and Booz, Allen & Hamilton Probabilistic task time estimates Activity-on-arrow network construction Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Project Network Activity-on-node (AON) nodes represent activities arrows show precedence relationships Activity-on-arrow (AOA) arrows represent activities nodes are events for points in time Event completion or beginning of an activity in a project Branch Node 1 2 3 Copyright 2011 John Wiley & Sons, Inc.

AOA Project Network for a House 3 2 1 4 6 7 5 Lay foundation Design house and obtain financing Order and receive materials Dummy Finish work Select carpet Select paint Build house Copyright 2011 John Wiley & Sons, Inc.

Concurrent Activities Dummy two or more activities cannot share same start and end nodes 2 3 Lay foundation Order material (a) Incorrect precedence relationship (b) Correct precedence relationship 4 Dummy Lay foundation 1 Copyright 2011 John Wiley & Sons, Inc.

AON Network for House Building Project 1 3 2 4 5 6 7 Start Design house and obtain financing Order &receive materials Select paint Select carpet Lay foundation Build house Finish work Activity Number Activity Time Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Critical Path 1 3 2 4 5 6 7 Start A: 1-2-4-7 3 + 2 + 3 + 1 = 9 months B: 1-2-5-6-7 3 + 2 + 1 + 1 + 1 = 8 months C: 1-3-4-7 3 + 1 + 3 + 1 = 8 months D: 1-3-5-6-7 3 + 1 + 1 + 1 + 1 = 7 months Critical path Longest path through a network Minimum project completion time Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Activity Start Times 1 3 2 4 5 6 7 Start Start at 3 months Start at 6 months Start at 5 months Finish at 9 months Finish Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Node Configuration 1 3 Activity duration Activity number Earliest start Latest start Latest finish Earliest finish Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. 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 Copyright 2011 John Wiley & Sons, Inc.

Earliest Activity Start and Finish Times Lay foundation Build house 2 3 5 4 5 8 2 3 Finish work 1 3 7 8 9 Start 1 1 Design house and obtain financing 6 6 7 3 3 4 1 1 5 5 6 Select carpet 1 Order and receive materials Select paint Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Activity Scheduling 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 Copyright 2011 John Wiley & Sons, Inc.

Latest Activity Start and Finish Times Lay foundation Build house 2 3 5 4 5 8 2 3 5 3 5 8 Finish work 1 3 7 8 9 Start 1 3 1 8 9 Design house and obtain financing 6 6 7 3 3 4 1 6 7 1 4 5 5 5 6 Select carpet 1 6 7 Order and receive materials Select paint Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Activity Slack * Critical Path 9 8 *7 1 7 6 5 *4 4 3 *2 *1 Slack S EF LF ES LS Activity Copyright 2011 John Wiley & Sons, Inc.

Probabilistic Time Estimates Beta distribution probability distribution traditionally used in CPM/PERT a = optimistic estimate m = most likely time estimate b = pessimistic time estimate where Mean (expected time): t = a + 4m + b 6 Variance: 2 = 2 b - a Copyright 2011 John Wiley & Sons, Inc.

Examples of Beta Distributions P(time) Time a m t b m = t Copyright 2011 John Wiley & Sons, Inc.

Project with Probabilistic Time Estimates Finish 2 3,6,9 3 1,3,5 1 6,8,10 5 2,3,4 6 3,4,5 4 2,4,12 7 2,2,2 8 3,7,11 9 2,4,6 10 1,4,7 11 1,10,13 Equipment installation System development Position recruiting Equipment testing and modification Manual testing Job Training Orientation System training System testing Final debugging System changeover Start Copyright 2011 John Wiley & Sons, Inc.

Activity Time Estimates 1 6 8 10 8 0.44 2 3 6 9 6 1.00 3 1 3 5 3 0.44 4 2 4 12 5 2.78 5 2 3 4 3 0.11 6 3 4 5 4 0.11 7 2 2 2 2 0.00 8 3 7 11 7 1.78 9 2 4 6 4 0.44 10 1 4 7 4 1.00 11 1 10 13 9 4.00 TIME ESTIMATES (WKS) MEAN TIME VARIANCE ACTIVITY a m b t б2 Copyright 2011 John Wiley & Sons, Inc.

Activity Early, Late Times & Slack ACTIVITY t б ES EF LS LF S 1 8 0.44 0 8 1 9 1 2 6 1.00 0 6 0 6 0 3 3 0.44 0 3 2 5 2 4 5 2.78 8 13 16 21 8 5 3 0.11 6 9 6 9 0 6 4 0.11 3 7 5 9 2 7 2 0.00 3 5 14 16 11 8 7 1.78 9 16 9 16 0 9 4 0.44 9 13 12 16 3 10 4 1.00 13 17 21 25 8 11 9 4.00 16 25 16 25 0 Copyright 2011 John Wiley & Sons, Inc.

Earliest, Latest, and Slack 1 8 9 3 2 5 4 13 16 21 6 7 14 12 10 17 11 25 Critical Path 2-5-8-11 Finish Start Copyright 2011 John Wiley & Sons, Inc.

Total Project Variance 2 = б22 + б52 + б82 + б112 = 1.00 + 0.11 + 1.78 + 4.00 = 6.89 weeks Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. CPM/PERT With OM Tools Copyright 2011 John Wiley & Sons, Inc.

Probabilistic Network Analysis Determine probability that project is completed within specified time where  = tp = project mean time  = project standard deviation x = proposed project time Z = number of standard deviations that x is from the mean Z = x -   Copyright 2011 John Wiley & Sons, Inc.

Normal Distribution of Project Time  = tp Time x Z Probability Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Southern Textile What is probability that project is completed within 30 weeks?  2 = 6.89 weeks  = 6.89  = 2.62 weeks Z = = = 1.91 x -   30 - 25 2.62 From Table A.1, (appendix A) a Z score of 1.91 corresponds to a probability of 0.4719. Thus P(30) = 0.4719 + 0.5000 = 0.9719  = 25 Time (weeks) x = 30 P(x  30 weeks) Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Southern Textile What is probability that project is completed within 22 weeks?  2 = 6.89 weeks  = 6.89  = 2.62 weeks Z = = = -1.14 x -   22 - 25 2.62 From Table A.1, (appendix A) a Z score of 1.14 corresponds to a probability of 0.3729. Thus P(22) = 0.5000 - 0.3729 = 0.1271  = 25 Time (weeks) x = 22 P(x  22 weeks) = 0.1271 0.3729 Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Microsoft Project Popular software package for project management and CPM/PERT analysis Relatively easy to use Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Microsoft Project Click on “Tasks” First step; Start Date Copyright 2011 John Wiley & Sons, Inc.

Microsoft Project Precedence relationships Click on “Format” then ”Timescale” to scale Gantt chart. Gantt chart; click on “View” to activate Create precedence relationships; click on predecessor activity, then holding “Ctrl” Key, click on successor activity. Copyright 2011 John Wiley & Sons, Inc.

Microsoft Project Click on “View” then Network Diagram Critical path in red Copyright 2011 John Wiley & Sons, Inc.

Microsoft Project – Zoom View Copyright 2011 John Wiley & Sons, Inc.

Microsoft Project – Task Information Enter % completion Copyright 2011 John Wiley & Sons, Inc.

Microsoft Project – Degree of Completion Activities 1, 2 and 3 100% complete Black bars show degree of completion Copyright 2011 John Wiley & Sons, Inc.

PERT Analysis with Microsoft Project Click on PERT Entry Sheet to enter 3 time estimates Click on PERT calculator to compute activity duration Copyright 2011 John Wiley & Sons, Inc.

PERT Analysis with Microsoft Project Copyright 2011 John Wiley & Sons, Inc.

PERT Analysis with Microsoft Project Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. 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 reduce project duration at minimum cost Copyright 2011 John Wiley & Sons, Inc.

Project Network – Building a House 1 12 2 8 4 3 5 6 7 Copyright 2011 John Wiley & Sons, Inc.

Normal Time and Cost vs. Crash Time and Cost $7,000 – $6,000 – $5,000 – $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 Crashed activity Crash cost Slope = crash cost per week Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Project Crashing TOTAL NORMAL CRASH ALLOWABLE CRASH TIME TIME NORMAL CRASH CRASH TIME COST PER ACTIVITY (WEEKS) (WEEKS) COST COST (WEEKS) WEEK 1 12 7 $3,000 $5,000 5 $400 2 8 5 2,000 3,500 3 500 3 4 3 4,000 7,000 1 3,000 4 12 9 50,000 71,000 3 7,000 5 4 1 500 1,100 3 200 6 4 1 500 1,100 3 200 7 4 3 15,000 22,000 1 7,000 $75,000 $110,700 Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. 12 2 8 3 4 5 6 7 $400 $500 $3000 $7000 $200 FROM … Project Duration: 36 weeks 1 7 2 8 3 4 5 6 $400 $500 $3000 $7000 $200 12 TO… Project Duration: 31 weeks Additional Cost: $2000 Copyright 2011 John Wiley & Sons, Inc.

Time-Cost Relationship Crashing costs increase as project duration decreases Indirect costs increase as project duration increases Reduce project length as long as crashing costs are less than indirect costs Copyright 2011 John Wiley & Sons, Inc.

Time-Cost Tradeoff Minimum cost = optimal project time Project duration Crashing Time Minimum cost = optimal project time Total project cost Indirect cost Direct cost Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc. Copyright 2011 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein. Copyright 2011 John Wiley & Sons, Inc.